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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-KA
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of report (date of earliest event reported):
March 31, 2006
March 31, 2006
SUN NEW MEDIA INC.
(Exact name of registrant as specified in its charter)
Minnesota | 000-26347 | 410985135 | ||
(State or other jurisdiction of incorporation) | (Commission File No.) | (I.R.S. Employer Identification No.) |
P.O. Box 297
1142 South Diamond Bar Boulevard
Diamond Bar, California 91765
(Address of principal executive offices)
1142 South Diamond Bar Boulevard
Diamond Bar, California 91765
(Address of principal executive offices)
Registrant’s telephone number, including area code:
1-888-865-0901 ext. 322
1-888-865-0901 ext. 322
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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Item 2.01 Completion of Acquisition or Disposition of Assets
Sale and Purchase Agreement to Acquire Lifestyle Magazines Publishing Pte. Ltd
On March 31, 2006, pursuant to a Sale and Purchase Agreement dated February 14, 2006 (the “Lifestyle Purchase Agreement”) by and between Sun New Media, Inc. (the “Company”) and United Home Limited (“United Home”), the Company acquired a 100% controlling interest in Lifestyle Magazines Publishing Pte. Ltd (“Lifestyle Magazine”).
SNMI acquired 100% of Lifestyle Magazine’s outstanding shares for HK$29,000,000 (about US$3.74 million) and satisfied the payment through the issuance of 978,406 shares of the Company’s common stock.
Incorporated in Singapore, Lifestyle Magazine is one of Southeast Asia’s leading publishers of lifestyle and special interest magazines. It brings to the Company six popular magazine titles: New Man, Home Concepts, Space, Today’s Parents, Se Xiang Wei, and Pregnancy Guide.
The Lifestyle Purchase Agreement is attached hereto as Exhibit 2.1.
Sale and Purchase Agreement to Acquire China Sport Television Production Ltd
On March 31, 2006, pursuant to a Sale and Purchase Agreement dated February 13, 2006 (the “CSTV Purchase Agreement”) by and between Sun New Media, Inc. (the “Company”) and China Entertainment Sport Ltd, the Company acquired a 100% controlling interest in China Sport TV Productions Ltd (“CSTV”).
SNMI acquired 100% of the outstanding capital stock of CSTV in exchange for the issuance of 460,526 shares of the Company’s common stock.
CSTV is incorporated in the British Virgin Islands and is engaged in the business of sports television production and broadcasting in China.
The CSTV Purchase Agreement is attached hereto as Exhibit 2.2.
Item 3.02 UNREGISTERED SALES OF EQUITY SECURITIES
In connection with the transaction contemplated by the Lifestyle Purchase Agreement described in Item 2.01 of this Current Report on Form 8-K, within 30 days of March 31, 2006, the Company shall issue to United Home an aggregate of 978,406 shares of its common stock at US$3.80 per share in connection with the acquisition of Lifestyle Magazine.
In connection with the transaction contemplated by the CSTV Purchase Agreement described in Item 2.01 of this Current Report on Form 8-K, within 30 days of March 31, 2006, the Company shall issue to China Entertainment Sport Ltd 460, 526 shares of its common stock at US$3.80 per share in connection with the acquisition of CSTV.
All of the foregoing issuances were made by the Registrant pursuant to the exemption from registration provided under Regulation S of the Securities Act of 1933, as amended.
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ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS
(a)Financial Statements of Business Acquired
(i) CSTV
The Financial Statements of CSTV will not be submitted in this 8K/A because the related acquisition is not deemed a “significant acquisition”. It is not deemed a significant for the following reasons:
(1) | Sun New Media’s share of the total assets of CSTV divided by Sun New Media ‘s total assets (consolidated with CSTV) as of March 31, 2006 was less than 20%; | |
(2) | Sun New Media’s share of the income from continuing operations from CSTV divided by Sun New Media’s income from continuing operations (consolidated with CSTV) for the year ended March 31, 2006 was less than 20%; |
(ii) Lifestyle Magazine
Lifestyle Magazine’s financial year-end is December 31st.
Lifestyle Magazine’s audited financial statements for the financial years ended December 31, 2004 and December 31, 2005 immediately follow:
Lifestyle Magazines Publishing Pte. Ltd.
Financial Statements
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Lifestyle Magazines Publishing Pte. Ltd.
Financial Statements
Financial Statements
Contents
Page(s) | ||||
Report of Independent Registered Public Accounting Firm | 4 | |||
Balance Sheets | 5 | |||
Statements of Operations | 6 | |||
Statements of Stockholder’s Equity (Deficit) | 7 | |||
Statements of Cash Flows | 8 | |||
Notes to Financial Statements | 9 |
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
Lifestyle Magazines Publishing Pte. Ltd.
Lifestyle Magazines Publishing Pte. Ltd.
We have audited the accompanying balance sheets of Lifestyle Magazines Publishing Pte. Ltd. as of December 31, 2004 and 2005 and the related statements of operations, stockholders’ equity (deficit) and cash flows for each of the two years ended December 31, 2005. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Lifestyle Magazines Publishing Pte. Ltd. as of December 31, 2004 and 2005 and the results of its operations and its cash flows for each of the two years ended December 31, 2005 in conformity with accounting principles generally accepted in the United States of America.
PKF
Certified Public Accountants
Hong Kong
July 3, 2006
Certified Public Accountants
Hong Kong
July 3, 2006
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Lifestyle Magazines Publishing Pte. Ltd.
Balance Sheets
Balance Sheets
As of | As of | |||||||
December 31, | December 31, | |||||||
2005 | 2004 | |||||||
US$ | US$ | |||||||
ASSETS | ||||||||
Current assets | ||||||||
Cash and cash equivalents | 10,608 | 78,970 | ||||||
Accounts receivable (net of allowance of doubtful debts of US$70,968 in 2005 and US$41,657 in 2004) (Note 5) | 590,276 | 738,615 | ||||||
Other receivable and prepayments | 74,585 | 152,778 | ||||||
Work-in-progress | 96,188 | 84,589 | ||||||
Total current assets | 771,657 | 1,054,952 | ||||||
Equipment (Note 3) | 13,550 | 26,732 | ||||||
Total assets | 785,207 | 1,081,684 | ||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||
Current liabilities | ||||||||
Accounts payable | 489,792 | 395,561 | ||||||
Other payable and accruals | 197,396 | 282,128 | ||||||
Deferred subscription revenue | 67,514 | 67,507 | ||||||
Factoring loans (Note 5) | 203,213 | 343,651 | ||||||
Total liabilities | 957,915 | 1,088,847 | ||||||
Stockholder’s equity (deficit) | ||||||||
Common stock : US$0.612 par value — 6,000,000 shares authorized — 2,152,000 shares issued and outstanding | 1,317,013 | 1,317,013 | ||||||
Accumulated other comprehensive income | 125 | — | ||||||
Accumulated deficit | (1,489,846 | ) | (1,324,176 | ) | ||||
Total stockholders’ equity (deficit) | (172,708 | ) | (7,163 | ) | ||||
Total liabilities and stockholders’ equity (deficit) | 785,207 | 1,081,684 | ||||||
The accompanying notes are an integral part of these financial statements.
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Lifestyle Magazines Publishing Pte. Ltd.
Statements of Operations
Statements of Operations
Year ended December 31, | Year ended December 31, | |||||||
2005 | 2004 | |||||||
US$ | US$ | |||||||
Revenue (Note 2) | 1,578,915 | 2,460,168 | ||||||
Other income | 10,561 | 48,163 | ||||||
Expenses | ||||||||
Printing direct costs | 473,088 | 782,777 | ||||||
Staff costs | 573,446 | 879,569 | ||||||
Depreciation | 12,716 | 29,865 | ||||||
Management fee | — | 58,502 | ||||||
Interest expenses | 27,211 | 26,786 | ||||||
Other operating expenses | 668,685 | 1,250,235 | ||||||
1,755,146 | 3,027,734 | |||||||
Loss before income tax | (165,670 | ) | (519,403 | ) | ||||
Income tax (Note 4) | — | — | ||||||
Net loss | (165,670 | ) | (519,403 | ) | ||||
Net loss per share — Basic and diluted (Note 6) | (0.08 | ) | (0.24 | ) | ||||
The accompanying notes are an integral part of these financial statements.
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Lifestyle Magazines Publishing Pte. Ltd.
Statements of Stockholders’ Equity (Deficit)
Statements of Stockholders’ Equity (Deficit)
Common stock | Accumulated | |||||||||||||||||||
other | ||||||||||||||||||||
No. of | comprehensive | Accumulated | ||||||||||||||||||
shares | Amount | income | deficit | Total | ||||||||||||||||
US$ | US$ | US$ | US$ | |||||||||||||||||
Balance, January 1, 2004 | 2,152,000 | 1,317,013 | — | (804,773 | ) | 512,240 | ||||||||||||||
Net loss | — | — | — | (519,403 | ) | (519,403 | ) | |||||||||||||
Balance, December 31, 2004 | 2,152,000 | 1,317,013 | — | (1,324,176 | ) | (7,163 | ) | |||||||||||||
Foreign currency translation adjustments | — | — | 125 | — | 125 | |||||||||||||||
Net loss | — | — | — | (165,670 | ) | (165,670 | ) | |||||||||||||
(165,545 | ) | |||||||||||||||||||
Balance, December 31, 2005 | 2,152,000 | 1,317,013 | 125 | (1,489,846 | ) | (172,708 | ) | |||||||||||||
The accompanying notes are an integral part of these financial statements.
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Lifestyle Magazines Publishing Pte. Ltd.
Statements of Cash Flows
Statements of Cash Flows
Year ended | Year ended | |||||||
December 31, | December 31, | |||||||
2005 | 2004 | |||||||
US$ | US$ | |||||||
Cash flows from operating activities | ||||||||
Net loss | (165,670 | ) | (519,403 | ) | ||||
Adjustments to reconcile net loss to net cash provided by/ (used in) operating activities | ||||||||
Depreciation | 12,716 | 29,865 | ||||||
Gain on disposal of equipment | (6,675 | ) | — | |||||
Provision of doubtful accounts | 30,055 | 52,040 | ||||||
Changes in assets and liabilities | ||||||||
Accounts receivable | 105,446 | (187,716 | ) | |||||
Other receivable and prepayments | 75,538 | 201,874 | ||||||
Work-in-progress | (13,069 | ) | 87,622 | |||||
Amounts due from former related companies | — | 413,122 | ||||||
Accounts payable | 101,106 | (174,230 | ) | |||||
Other payable and accruals | (79,550 | ) | (99,974 | ) | ||||
Amount due to former holding company | — | (18,600 | ) | |||||
Amount due to former related companies | — | (68,946 | ) | |||||
Deferred subscription revenue | 1,180 | (50,213 | ) | |||||
Net cash provided by / (used in) operating activities | 61,077 | (334,559 | ) | |||||
Cash flows from investing activities | ||||||||
Acquisition of equipment | — | (24,110 | ) | |||||
Proceeds from disposal of equipment | 6,675 | — | ||||||
Net cash provided by / (used in) investing activities | 6,675 | (24,110 | ) | |||||
Cash flows from financing activities | ||||||||
New factoring loans | — | 343,651 | ||||||
Repayment of factoring loans | (134,465 | ) | 0 | |||||
Repayment of capital lease obligations | — | (2,881 | ) | |||||
Net cash (used in)/ provided by financing activities | (134,465 | ) | 340,770 | |||||
Effect of foreign currency translation on cash and cash equivalents | (1,649 | ) | — | |||||
Net decrease in cash and cash equivalents | (68,362 | ) | (17,899 | ) | ||||
Cash and cash equivalents, beginning of the year | 78,970 | 96,869 | ||||||
Cash and cash equivalents, end of the year | 10,608 | 78,970 | ||||||
Supplemental cash flow information | ||||||||
— Interest paid | 27,211 | 26,786 | ||||||
— Income taxes | — | — | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
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Lifestyle Magazines Publishing Pte. Ltd.
Notes to Financial Statements
Notes to Financial Statements
1. | ORGANIZATION AND NATURE OF BUSINESS | |
Lifestyle Magazines Publishing Pte. Ltd. (formerly known as Panpac Lifestyle Magazines Pte Ltd. and referred to as the “Company” thereafter) was incorporated in Singapore on December 3, 1993 as a limited liability company. The Company has an authorized share capital of Singapore Dollars (“SGD”) 6,000,000 consisting of common stock of 6,000,000 shares with par value of SGD1 each. The paid-up capital is SGD2,152,000 consisting of common stock of 2,152,000 shares with par value of SGD1 each. | ||
The Company is principally engaged in the publishing and sale of magazines and periodicals. There have been no significant changes in the nature of these activities during the reporting periods. | ||
On December 31, 2004, the Company’s formerly holding company, Sun Business Network Ltd. (formerly known as Panpac Media Group Limited), a company incorporated in Singapore, disposed of its entire interest in the Company to Sky Win Advertising Group Limited, a company incorporated in British Virgin Islands. | ||
Thereafter, the Company became a wholly-owned subsidiary of Sky Win Advertising Group Limited, which was its ultimate holding company as of December 31, 2004 and 2005 respectively. | ||
2. | BASIS OF PRESENTATION | |
These financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”). | ||
A summary of the Company’s significant accounting policies is as follows: |
(a) | Use of estimates | ||
The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the amounts reported in the accompanying financial statements and related disclosures. Although these estimates are based on management’s best knowledge of current events and action that the Company may take in the future, actual results could differ from these estimates. | |||
(b) | Foreign currency translation | ||
The Company uses SGD as its functional currency. Transactions denominated in currencies other than SGD are translated into SGD at the applicable rates of exchange prevailing at the dates of the transactions. Monetary assets and liabilities denominated in other currencies are translated into SGD at rates of exchange prevailing at the balance sheet date. Exchange gains or losses arising from foreign currency transactions are included in the determination of net income/loss for the respective period. |
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Lifestyle Magazines Publishing Pte. Ltd.
Notes to Financial Statements
Notes to Financial Statements
2. | BASIS OF PRESENTATION (CONT’D) |
(b) | Foreign currency translation (cont’d) | ||
For financial reporting purposes, the financial statements of the Company which are prepared using its functional currency have been translated into United States dollars (“US$”). Assets and liabilities are translated at the exchange rates at the balance sheet dates, revenue and expenses are translated at the average exchange rates and stockholders’ equity (deficit) is translated at historical exchange rates. Any translation adjustments resulting are not included in determining net income/loss but are included in “Accumulated other comprehensive income/loss”, a component of stockholders’ equity (deficit). The exchange rates in effect as at December 31, 2005 and 2004 were SGD1 for US$1.664 and US$1.634 respectively. There is no significant fluctuation in exchange rate for the conversion of SGD to US$ after the balance sheet date. | |||
(c) | Equipment | ||
Equipment is stated at cost less accumulated depreciation. Cost represents the purchase price of the asset and other costs incurred to bring the asset into its existing use. Depreciation is computed on the straight-line basis over the following estimated useful lives: |
Years | ||||
Computers | 3 | |||
Office equipment | 5 | |||
Furniture and fittings | 5 | |||
Renovations | 5 | |||
Motor vehicles | 5 |
(d) | Impairment of long-lived assets | ||
Long-lived assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. The Company recognizes impairment of long-lived assets in the event that the net book values of such assets exceed the future undiscounted cashflows attributable to such assets. During the reporting periods, the Company has not identified any indicators that would require testing for impairment. | |||
(e) | Concentration of credit risk | ||
Financial instruments that potentially subject the Company to significant concentrations of credit risk consist of cash and cash equivalents and accounts receivable. As of December 31, 2004 and 2005, substantially all of the Company’s cash and cash equivalents were held by major banks located in Singapore of which the Company’s management believes are of high credit quality. With respect to accounts receivable, the Company extends credit based on an evaluation of the customer’s financial condition and without requiring collateral. The Company conducts periodic reviews of its customers’ financial condition and customer payment practices to minimize collection risk on accounts receivable. |
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Lifestyle Magazines Publishing Pte. Ltd.
Notes to Financial Statements
Notes to Financial Statements
2. | BASIS OF PRESENTATION (CONT’D) |
(f) | Allowance of doubtful accounts | ||
The Company establishes an allowance for doubtful accounts based on management’s assessment of the collectibility of accounts receivable. A considerable amount of judgment is required in assessing the realization of these receivable, including the current creditworthiness of each customer and the related ageing analysis. | |||
Based on the above assessment, during the reporting periods, the management established the specific provisioning policy, which is considered to be adequate, for the potentially uncollectible amounts as follows :- |
Specific | ||||
provision | ||||
Age of debts | percentage | |||
Over 6 months but within 1 year | 50 | % | ||
Over 1 year | 100 | % |
Bad debts are written off when identified. The Company extends unsecured credit to customers ranging from one to two months in the normal course of business. The Company does not accrue interest on accounts receivable. | |||
(g) | Work-in-progress | ||
Work-in-progress represents the costs incurred in the production of magazines that have not been launched at the end of financial year. | |||
(h) | Cash and cash equivalents | ||
Cash equivalents are highly liquid investments and have maturities of three months or less at the date of purchase. As of December 31, 2004 and 2005, the cash and cash equivalents were denominated in SGD and are freely convertible into foreign currencies. | |||
(i) | Financial instruments | ||
The carrying amounts of the Company’s financial instruments including cash and cash equivalents, accounts receivable and payable, and other receivable and payable approximate their fair values due to the short-term maturity of the instruments. The carrying values of factoring loans approximate their fair values because the applicable interest rates approximate current market rates. | |||
It is the management’s opinion that the company is not exposed to significant interest, price, credit or foreign currency risks arising from these financial instruments. |
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Lifestyle Magazines Publishing Pte. Ltd.
Notes to Financial Statements
Notes to Financial Statements
2. | BASIS OF PRESENTATION (CONT’D) |
(j) | Income taxes | ||
The Company follows the liability method of accounting for income taxes in accordance with SFAS No. 109 “Accounting for Income Taxes”. Under this method, future tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax balances. Future tax assets and liabilities are measured using enacted or substantially enacted tax rates expected to apply to the taxable income in the years in which those differences are expected to be recovered or settled. The effect on future tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the date of enactment or substantive enactment. A valuation allowance is provided for deferred tax assets if it is more likely than not that the Company will not realize the future benefit, or if the future deductibility is uncertain. | |||
(k) | Revenue recognition | ||
Income from circulation of magazines and periodicals is recognized upon delivery of goods and acceptance by the customers. | |||
Income from advertisements is recognized on the date of publication. Subscription income is amortized on a straight-line basis over the period of the subscription. | |||
(l) | New accounting pronouncements | ||
In December 2004, the FASB issued SFAS No. 123R “Share-Based Payment” (“SFAS 123R”), which revises SFAS No. 123, “Accounting for Stock Based Compensation”, and superceded APB 25. Among other items, SFAS 123R eliminates the use of APB 25 and the intrinsic value method of accounting, and requires companies to recognize in the financial statements the cost of employee services received in exchange for awards of equity instruments, based on the grant-date fair value of those awards. This cost is to be recognized over the period during which an employee is required to provide service in exchange for the award (typically the vesting period). SFAS 123R also requires that benefits associated with tax deductions in excess of recognized compensation cost be reported as a financing cash flow, rather than as an operating cash flow as required under current literature. | |||
SFAS 123R permits companies to adopt its requirement using either a “modified prospective” method, or a ‘“modified retrospective” method. | |||
Under the “modified prospective” method, compensation cost is recognized in the financial statements beginning with the effective date, based on the requirements of SFAS 123R for all share-based awards granted or modified after that date, and based on the requirements of SFAS 123 for all unvested awards granted prior to the effective date of SFAS 123R. Under the “modified retrospective” method, the requirements are the same as under the “modified prospective” method, but this method also permits entities to restate financial statements of previous periods based on proforma disclosures made in accordance with SFAS 123. |
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Lifestyle Magazines Publishing Pte. Ltd.
Notes to Financial Statements
Notes to Financial Statements
2. | BASIS OF PRESENTATION (CONT’D) |
(l) | New accounting pronouncements (cont’d) | ||
In May 2005, the FASB issued Statement No.154, “Accounting Changes and Error Corrections”. This Statement replaces APB Opinion No.20, “Accounting Changes”, and FASB Statement No.3, “Reporting Accounting Changes in Interim Financial Statements”, and changes the requirements for the accounting for and reporting of a change in accounting principle. This Statement requires retrospective application to prior periods’ financial statements of changes in accounting principle, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change. When it is impracticable to determine the period-specific effects of an accounting change on one or more individual prior periods presented, this Statement requires that the new accounting principle be applied to the balances of assets and liabilities as of the beginning of the earliest period for which retrospective application is practicable and that a corresponding adjustment be made to the opening balance of retained earnings (or other appropriate components of equity or net assets in the statement of financial position) for that period rater than being reported in an income statement. When it is impracticable to determine the cumulative effect of applying a change in accounting principle to all prior periods, this Statement requires that the new accounting principle be applied as if it were adopted prospectively from the earliest date practicable. | |||
In addition, this Statement requires that retrospective application of a change in accounting principle be limited to the direct effects of the change. Indirect effects of a change in accounting principle should be recognized in the period of the accounting change. | |||
This Statement also requires that a change in depreciation, amortization, or depleting method for long-lived, nonfinancial assets be accounted for as a change in accounting estimate effected by a change in accounting principle. | |||
In November 2005, the FASB issued FSP Nos. FAS 115-1 and 124-1, “The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments”. This FSP addresses the determination as to when an investment is considered impaired, whether the impairment is ‘other-than-temporary’, and the measurement of an impairment loss. The investment is impaired if the fair value is less than cost. The impairment is ‘other-than-temporary’ for equity securities and debt securities that can contractually be prepaid or otherwise settled in such a way that the investor would not recover substantially all of its cost. If ‘other-than-temporary’, an impairment loss shall be recognized in earnings equal to the difference between the investment’s cost and its fair value. The guidance in this FSP is effective in reporting periods beginning after December 15, 2005. | |||
The Company does not anticipate the adoption of these standards will have a material impact on these consolidated financial statements. |
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Lifestyle Magazines Publishing Pte. Ltd.
Notes to Financial Statements
Notes to Financial Statements
3. | EQUIPMENT, NET | |
Plant and equipment is summarized as follows: |
As of | As of | |||||||
December 31, | December 31, | |||||||
2005 | 2004 | |||||||
US$ | US$ | |||||||
Computers | 97,264 | 98,989 | ||||||
Office equipment | 103,535 | 105,372 | ||||||
Furniture and fittings | 10,458 | 10,643 | ||||||
Renovation | 2,856 | 2,907 | ||||||
Motor vehicle | — | 31,002 | ||||||
214,113 | 248,913 | |||||||
Accumulated depreciation | (200,563 | ) | (222,181 | ) | ||||
Equipment, net | 13,550 | 26,732 | ||||||
During the year ended December 31, 2005, equipment with zero carrying value was disposed of at a consideration of US$6,675, resulting in gain on disposal of same amount. There was no disposal of equipment in the year ended December 31, 2004. | ||
4. | INCOME TAX | |
No provision for income tax is made as the Company had no assessable profits throughout the reporting periods. | ||
A reconciliation of income tax at Singapore domestic statutory rate of 20% is as follows: |
As of | As of | |||||||
December 31, | December 31, | |||||||
2005 | 2004 | |||||||
US$ | US$ | |||||||
Loss before income tax | (165,670 | ) | (519,403 | ) | ||||
Expected benefits at the applicable tax rates | (33,134 | ) | (103,881 | ) | ||||
Expenses not deductible for tax purposes | — | 5,194 | ||||||
Valuation allowances | 33,134 | 98,687 | ||||||
Income taxes | — | — | ||||||
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Lifestyle Magazines Publishing Pte. Ltd.
Notes to Financial Statements
Notes to Financial Statements
4. | INCOME TAX (CONT’D) | |
The components of deferred taxes at the balance sheet dates are: |
As of | As of | |||||||
December 31, | December 31, | |||||||
2005 | 2004 | |||||||
US$ | US$ | |||||||
Tax losses and capital allowances | 682,823 | 649,689 | ||||||
Less : Valuation allowance | (682,823 | ) | (649,689 | ) | ||||
— | — | |||||||
At December 31, 2005 and 2004, the Company had tax losses and capital allowance amounting to US$3,414,115 and US$3,248,445 respectively. These losses can be used to offset against future taxable profits, subject to agreement with Income Tax Authorities and compliance with certain provisions of the Singapore Income Tax act. | ||
5. | FACTORING LOANS | |
The factoring loans were obtained from a finance company under a factoring facility. Interest is charged at 1.5% per annum above the prevailing Singapore Inter-Bank offer rate for both reporting periods. These loans are secured by a guarantee given by Sun Business Network Ltd, a former holding company, and the floating charge over the Company’s accounts receivable of US$191,409 and US$320,874 as of December 31, 2005 and 2004 respectively. The Company did not pay any fee in consideration for Sun Business Network Ltd to provide the aforementioned guarantee. | ||
6. | NET LOSS PER SHARE — BASIC AND DILUTED | |
The basic and diluted net loss per share is calculated using the net loss and the weighted average number of common stock outstanding during the reporting periods. The Company has no dilutive instruments and accordingly, the basic and diluted net loss per share are the same. |
Year ended | Year ended | |||||||
December 31, | December 31, | |||||||
2005 | 2004 | |||||||
Net loss | US$ | (165,670 | ) | US$ | (519,403 | ) | ||
Weighted average number of common stock outstanding | 2,152,000 | 2,152,000 | ||||||
Net loss per share — Basic and diluted | US$ | (0.08 | ) | US$ | (0.24 | ) | ||
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Lifestyle Magazines Publishing Pte. Ltd.
Notes to Financial Statements
Notes to Financial Statements
7. | ACCUMULATED OTHER COMPREHENSIVE INCOME |
Foreign | ||||
currency | ||||
translation | ||||
adjustments | ||||
US$ | ||||
Exchange differences arising from the translation of the Company’s financial statements | 125 | |||
Balance, December 31, 2005 | 125 | |||
8. | PENSION PLANS | |
The Company has a defined contribution plan for all its qualified employees in Singapore. The only obligation of the Company with respect to the retirement scheme is to make the required contributions under the plan. No forfeited contribution is available to reduce the contribution payable in the future years. The contributions to the plans were charged to the statement of operations. The Company contributed US$65,027 and US$90,312 for the year ended December 31, 2005 and 2004 respectively. | ||
9. | RELATED PARTY TRANSACTIONS | |
In addition to the transactions disclosed elsewhere in these financial statements, the Company had the following material transactions with its related parties during the year ended December 31, 2004 :- |
US$ | ||||
Amount due from former holding company included in accounts receivable | 171,121 | |||
Amounts due from former fellow subsidiaries included in accounts receivable | 4,314 | |||
Advertising, editorial origination and design income received from several former fellow subsidiaries | 46,610 | |||
Circulation charge paid to a former fellow subsidiary | 66,099 | |||
Management fee paid to a former holding company | 58,502 | |||
The abovementioned former holding company and fellow subsidiaries referred to Sun Business Network Ltd. and its subsidiaries, of which Sun Business Network Ltd. disposed of its entire interest in the Company to another company on December 31, 2004. The above transactions were entered into in the normal course of business and on normal commercial terms. | ||
The Company had no significant transactions with its related parties during the year ended December 31, 2005. |
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Lifestyle Magazines Publishing Pte. Ltd.
Notes to Financial Statements
Notes to Financial Statements
10. | POST BALANCE SHEET EVENTS | |
Subsequent to the balance sheet date, the Company’s shareholder entered into an agreement with United Home Limited (“UHL”) to dispose of all its entire interest in the Company to UHL. | ||
After that, UHL entered into an agreement with Sun New Media, Inc. (“SNMD”) to dispose of all its entire interest in the Company to SNMD. The transaction was completed on March 31, 2006. | ||
(b) | Pro Forma Financial Statements | |
(i) | CSTV | |
For the reasons mentioned above in Item 9.01(a)(i), the Pro Forma Financial Statements of CSTV will not be submitted. | ||
(ii) | Lifestyle Magazines | |
The acquisition of all the issued and outstanding shares of Lifestyle Magazines is described as a “purchase acquisition”. | ||
The accompanying pro forma condensed consolidated financial statements are provided for informational purposes only. The Pro Forma Consolidated Balance Sheet and Pro Forma Combined Statement of Operations are unaudited and are not necessarily indicative of the consolidated financial position which actually would have occurred if the above transaction had been consummated on March 31,, nor does it purport to present the operating results that would be achieved for future periods. You should read the accompanying pro forma condensed consolidated financial statements and the related notes in conjunction with the audited and unaudited financial statements included elsewhere in Form 8-K and the Registrant’s latest Form 10-KSB filed on June 30, 2006. | ||
The Unaudited Pro-Forma Consolidated Financial Statement reflect financial information which gives pro-forma effect to the acquisition of all the outstanding common shares of Lifestyle Magazines in exchange for 978,406 shares of common stock of the Company. | ||
The acquisition is to be recorded as a purchase acquisition. The Pro Forma Consolidated Balance Sheet included herein reflects the use of the purchase method of accounting for the above transaction. Such financial information has been prepared from, and should be read in conjunction with, the historical financial statements and notes thereto included elsewhere in this Form 8-K. | ||
Unaudited Pro Forma Consolidated Balance Sheet | ||
The Pro-Forma Consolidated Balance Sheet gives effect to the above transaction as if it occurred on March 31, 2006. | ||
Unaudited Pro Forma Consolidated Statement of Operations | ||
The Pro-Forma Combined Statement of Operations give effect to the above transaction as if it occurred on the earliest date of the period presented, i.e., June 6, 2005. |
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SUN NEW MEDIA INC
UNAUDITED PRO-FORMA CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 2006
UNAUDITED PRO-FORMA CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 2006
Lifestyle | ||||||||||||||||
SNMD | Magazines | |||||||||||||||
(as at Mar 31, | (as at Dec 31, | Pro-forma | ||||||||||||||
2006) | 2005) | Adjustments | Consolidated | |||||||||||||
US$ | US$ | US$ | US$ | |||||||||||||
ASSETS | ||||||||||||||||
Current Assets | ||||||||||||||||
Cash and bank balances | 1,373,715 | 10,608 | — | 1,384,323 | ||||||||||||
Accounts receivable, net | 415,735 | 590,276 | — | 1,006,011 | ||||||||||||
Other receivable, deposits and prepayments | 466,396 | 74,585 | — | 540,981 | ||||||||||||
Inventories | 85,346 | 96,188 | — | 181,534 | ||||||||||||
Marketable securities | 8,140,377 | — | — | 8,140,377 | ||||||||||||
Amounts due from stockholders | 292,106 | — | — | 292,106 | ||||||||||||
Amounts due from related parties | 892,699 | — | — | 892,699 | ||||||||||||
Total current assets | 11,666,374 | 771,657 | 12,438,031 | |||||||||||||
Investment in associated company | 24,987 | — | — | 24,987 | ||||||||||||
Goodwill and intangible assets | 61,794,537 | — | 2,562,308 | (2) | 64,356,845 | |||||||||||
Plant and equipment | 2,205,536 | 13,550 | — | 2,219,086 | ||||||||||||
Clearing broker deposit | 36,980 | — | — | 36,980 | ||||||||||||
Total Assets | 75,728,414 | 785,207 | 2,562,308 | 79,075,929 | ||||||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||||||
Current Liabilities | ||||||||||||||||
Accounts payable | 987,238 | 489,792 | — | 1,477,030 | ||||||||||||
Other payables and accruals | 6,928,098 | 264,910 | — | 7,193,008 | ||||||||||||
Amounts due to related parties | 489,122 | — | — | 489,122 | ||||||||||||
Factoring loan | 233,043 | 203,213 | — | 436,256 | ||||||||||||
Total current liabilities | 8,637,501 | 957,915 | — | 9,595,416 | ||||||||||||
Convertible notes | 2,816,000 | — | — | 2,816,000 | ||||||||||||
Discount on warrants | (2,393,052 | ) | — | — | (2,393,052 | ) | ||||||||||
STOCKHOLDERS’ EQUITY | ||||||||||||||||
Capital stock | 985,927 | 1,317,013 | (1,317,013 | )(1) | 995,711 | |||||||||||
9,784 | (1) | |||||||||||||||
Additional paid-in capital | 81,942,502 | — | 2,379,816 | (1) | 84,322,318 | |||||||||||
Accumulated other comprehensive income | 1,920 | 125 | (125 | ) | 1,920 | |||||||||||
Accumulated deficit | (16,160,864 | ) | (1,489,846 | ) | 1,489,846 | (1) | (16,160,864 | ) | ||||||||
Minority interest | (101,520 | ) | — | — | (101,520 | ) | ||||||||||
Total stockholder’s equity (deficit) | 66,667,965 | (172,708 | ) | 2,562,308 | 69,057,565 | |||||||||||
Total liabilities and stockholders’ equity (deficit) | 75,728,414 | 785,207 | 2,562,308 | 79,075,929 | ||||||||||||
SUN NEW MEDIA INC.
NOTES TO THE UNAUDITED PRO-FORMA CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 2006
NOTES TO THE UNAUDITED PRO-FORMA CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 2006
1. | The acquisition of Lifestyle Magazines has been accounted for as a purchase acquisition. SNMD issued 978,406 shares for the acquisition of Lifestyle Magazines. | |
2. | Intangible assets represent 7 magazine titles and magazine archives in accordance with Statement of Financial Standards No. 141 (“SFAS 141”), Business Combinations. |
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SUN NEW MEDIA INC.
UNAUDITED PRO-FORMA CONSOLIDATED STATEMENT OF OPERATIONS
UNAUDITED PRO-FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(Audited) | ||||||||||||
Lifestyle | ||||||||||||
SNMD | Magazines | |||||||||||
Jun 6, 2005 to | Jan 1, 2005 to | Pro-forma | ||||||||||
Mar 31, 2006 | Dec 31, 2005 | Consolidated | ||||||||||
US$ | US$ | |||||||||||
(Note 1) | ||||||||||||
REVENUES | 429,531 | 1,578,915 | 2,008,446 | |||||||||
Cost of revenues | 263,786 | 919,240 | 1,183,026 | |||||||||
Gross Profit | 165,745 | 659,675 | 825,420 | |||||||||
OPERATING EXPENSES | ||||||||||||
General and administrative | 1,146,785 | 823,190 | 1,969,975 | |||||||||
Depreciation and amortization | 6,767 | 12,716 | 19,483 | |||||||||
Finders’ fee | 55,000 | — | 55,000 | |||||||||
Stock-based compensation | 9,654,099 | — | 9,654,099 | |||||||||
Consulting and professional fees | 1,021,410 | — | 1,021,410 | |||||||||
Impairment loss on marketable securities | 1,456,221 | — | 1,456,221 | |||||||||
Total operating expenses | 13,340,282 | 835,906 | 14,176,188 | |||||||||
Operating loss | (13,174,537 | ) | (176,231 | ) | (13,350,768 | ) | ||||||
Interest income | 637 | — | 637 | |||||||||
Interest expense, BCF | (2,676,441 | ) | — | (2,676,441 | ) | |||||||
Interest expense, warrant valuation | (110,053 | ) | — | (110,053 | ) | |||||||
Other income | 37,590 | 10,561 | 48,151 | |||||||||
Loss before income taxes | (15,922,804 | ) | (165,670 | ) | (16,088,474 | ) | ||||||
Income tax expenses | — | — | — | |||||||||
Net Loss | (15,922,804 | ) | (165,670 | ) | (16,088,474 | ) | ||||||
Loss per share: | ||||||||||||
Weighted average number of shares outstanding | ||||||||||||
Basic and diluted | 55,596,172 | 55,596,172 | ||||||||||
Net loss per share of common stock | ||||||||||||
Basic and diluted | (0.29 | ) | (0.29 | ) | ||||||||
SUN NEW MEDIA INC.
NOTES TO THE PRO-FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
NOTES TO THE PRO-FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
1. | No proforma adjustment is required. |
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(d) | Exhibits |
Exhibit No. | Description | |||
2.1 | Sale and Purchase Agreement for the Acquisition of Lifestyle Magazines Publishing Ltd, dated February 14, 2006 (incorporated herein by reference from the registrant’s current report on Form 8-K filed on February 17, 2006) | |||
2.2 | Sale and Purchase Agreement for the Acquisition of China Sport TV Production Ltd, dated February 13, 2006 (incorporated herein by reference from the registrant’s current report on Form 8-K filed on February 17, 2006) | |||
23.1 | Consent of PKF |
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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.
Date: August 7, 2006
SUN NEW MEDIA INC. | ||||
By: | /s/ Frank Zhao | |||
Frank Zhao | ||||
Chief Financial Officer | ||||
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Exhibit List
Exhibit No. | Description | |||
2.1 | Sale and Purchase Agreement for the Acquisition of Lifestyle Magazines Publishing Ltd, dated February 14, 2006 (incorporated herein by reference from the registrant’s current report on Form 8-K filed on February 17, 2006) | |||
2.2 | Sale and Purchase Agreement for the Acquisition of China Sport TV Production Ltd, dated February 13, 2006 (incorporated herein by reference from the registrant’s current report on Form 8-K filed on February 17, 2006) | |||
23.1 | Consent of PKF |