UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): April 4, 2007
CHINA DIGITAL MEDIA CORPORATION
(Exact Name of Registrant as Specified in Charter)
Nevada
(State or Other Jurisdiction of Incorporation)
000-30212
(Commission File Number)
13-3422912
(I.R.S. Employer Identification No.)
2505-06, 25/F, Stelux House, 698 Prince Edward Road East,
Kowloon, Hong Kong
(Address of Principal Executive Offices)
(011) 852-2390-8600
(Registrant's Telephone Number, Including Area Code)
This Current Report on Form 8-K is filed by China Digital Media Corporation, a Nevada corporation (the “Company”), in connection with the item set forth below.
ITEM 4.02. Non-Reliance on Previously Issued Financial Statements or a Related Audit Report or Completed Interim Review.
On March 20, 2007, the Company filed a Form 8-K indicating the reason and the Company’s decision to restate the financial statements for the year ended December 31, 2005, and for the fiscal quarters ended September 30, 2005, March 31, 2006, June 30, 2006, and September 30, 2006.
The restated financial statements for the year ended December 31, 2005 has been included in the Company’s Form 10-KSB dated March 23, 2007. The restated financial statements (unaudited) for the fiscal quarters ended September 30, 2005, March 31, 2006, June 30, 2006, and September 30, 2006 are attached herewith this Form 8-K.
ITEM 9.01 Financial Statements and Exhibits
99.1 Restated financial statements for the fiscal quarters ended September 30, 2005, March 31, 2006, June 30, 2006, and September 30, 2006.
2
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
CHINA DIGITAL MEDIA CORPORATION | |||
Date: April 4, 2007 | By: | /s/ Benedict W.T. Li | |
Benedict W.T. Li Chief Financial Officer |
3
CHINA DIGITAL MEDIA CORPORATION AND SUBSIDIARIES | ||||||||||
CONSOLIDATED BALANCE SHEETS (UNAUDITED) | ||||||||||
AS OF SEPTEMBER 30, 2005 | ||||||||||
ASSETS | As previously | |||||||||
reported | Adjustments | Restated | ||||||||
CURRENT ASSETS | ||||||||||
Cash and cash equivalents | $ | 849,726 | 849,726 | |||||||
Accounts receivable, net of allowances | 3,531,952 | 3,531,952 | ||||||||
Inventories | 679,610 | (178,169 | ) | 501,441 | ||||||
Other receivables and prepaid expenses | 202,659 | 202,659 | ||||||||
Deposits paid to a supplier | 107,349 | 107,349 | ||||||||
Total Current Assets | 5,371,296 | (178,169 | ) | 5,193,127 | ||||||
INTANGIBLE ASSETS | 392,521 | 392,521 | ||||||||
INVESTMENTS IN TELEVISION SERIES, NET | 850,938 | 850,938 | ||||||||
PROPERTY AND EQUIPMENT, NET | 8,945,144 | (1,302,699 | ) | 7,642,445 | ||||||
TOTAL ASSETS | $ | 15,559,899 | (1,480,868 | ) | 14,079,031 | |||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||||
CURRENT LIABILITIES | ||||||||||
Accounts payable | $ | 4,675,818 | 4,675,818 | |||||||
Other payables and accrued liabilities | 186,044 | 186,044 | ||||||||
Advertising revenue received in advance | 126,039 | 126,039 | ||||||||
Due to a related company | 173,551 | 173,551 | ||||||||
Due to a stockholder | 66,425 | 66,425 | ||||||||
Value added taxes payable | 47,354 | 47,354 | ||||||||
Income tax payable | 317,197 | 317,197 | ||||||||
Total Current Liabilities | 5,592,428 | 0 | 5,592,428 | |||||||
COMMITMENTS AND CONTINGENCIES | 0 | |||||||||
MINORITY INTERESTS | 20,411 | 20,411 | ||||||||
STOCKHOLDERS' EQUITY | ||||||||||
Series A convertible preferred stock ($0.001 par value, 40,000,000 shares | ||||||||||
authorized,1,875,000 shares issued and outstanding as of | ||||||||||
September 30, 2005) | 1,875 | 1,875 | ||||||||
Common stock ($0.001 par value, 500,000,000 shares authorized, | ||||||||||
30,087,468 shares issued and outstanding at September 30, 2005) | 30,088 | 30,088 | ||||||||
Additional paid-in capital | 3,657,887 | 3,657,887 | ||||||||
Retained earnings | 6,253,308 | �� | (1,480,868 | ) | 4,772,440 | |||||
Accumulated other comprehensive loss | 3,902 | 3,902 | ||||||||
Total Stockholders' Equity | 9,947,060 | (1,480,868 | ) | 8,466,192 | ||||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 15,559,899 | (1,480,868 | ) | 14,079,031 |
4
CHINA DIGITAL MEDIA CORPORATION AND SUBSIDIARIES | |||||||||||||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS AND | |||||||||||||||||||
COMPREHNSIVE INCOME (UNAUDITED) | |||||||||||||||||||
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2005 | |||||||||||||||||||
For the three months ended | For the nine months ended | ||||||||||||||||||
September 30, 2005 | September 30, 2005 | ||||||||||||||||||
As previously | As previously | ||||||||||||||||||
reported | Adjustments | Restated | reported | Adjustments | Restated | ||||||||||||||
NET SALES | |||||||||||||||||||
Revenues from digitalization of television signals, | |||||||||||||||||||
television advertising sales and | |||||||||||||||||||
software development | $ | 2,170,918 | 2,170,918 | 3,870,460 | 3,870,460 | ||||||||||||||
Government grant received | 314,569 | 314,569 | 919,310 | 919,310 | |||||||||||||||
2,485,487 | 0 | 2,485,487 | 4,789,770 | 0 | 4,789,770 | ||||||||||||||
COST OF SALES | |||||||||||||||||||
Cost of Sales | (465,860 | ) | 133,328 | (332,532 | ) | (666,524 | ) | 133,328 | (533,196 | ) | |||||||||
Depreciation - digitalization of television signals | - | (162,545 | ) | (162,545 | ) | - | (709,221 | ) | (709,221 | ) | |||||||||
GROSS PROFIT | 2,019,627 | (29,217 | ) | 1,990,410 | 4,123,246 | (575,893 | ) | 3,547,353 | |||||||||||
OPERATING EXPENSES | |||||||||||||||||||
Selling, general and administrative expenses | (314,535 | ) | (314,535 | ) | (720,388 | ) | (720,388 | ) | |||||||||||
Depreciation and amortization | (353,461 | ) | 343,246 | (10,215 | ) | (907,672 | ) | 889,922 | (17,750 | ) | |||||||||
Total Operating Expenses | (667,996 | ) | 343,246 | (324,750 | ) | (1,628,060 | ) | 889,922 | (738,138 | ) | |||||||||
INCOME FROM OPERATION | 1,351,631 | 314,029 | 1,665,660 | 2,495,186 | 314,029 | 2,809,215 | |||||||||||||
OTHER INCOME (EXPENSES) | |||||||||||||||||||
Interest income | 268,142 | 268,142 | 268,091 | 268,091 | |||||||||||||||
Volume discounts earned | 1,826,868 | (1,794,897 | ) | 31,971 | 1,826,868 | (1,794,897 | ) | 31,971 | |||||||||||
Interest expenses | (5,554 | ) | (5,554 | ) | (5,554 | ) | (5,554 | ) | |||||||||||
Total Other Income (Expenses), net | 2,089,456 | (1,794,897 | ) | 294,559 | 2,089,405 | (1,794,897 | ) | 294,508 | |||||||||||
NET INCOME BEFORE TAXES AND MINORITY INTERESTS | 3,441,087 | (1,480,868 | ) | 1,960,219 | 4,584,591 | (1,480,868 | ) | 3,103,723 | |||||||||||
Minority interests | 36 | 36 | 36 | 36 | |||||||||||||||
NET INCOME | $ | 3,441,123 | (1,480,868 | ) | 1,960,255 | 4,584,627 | (1,480,868 | ) | 3,103,759 | ||||||||||
OTHER COMPREHENSIVE INCOME (LOSS) | |||||||||||||||||||
Foreign currency translation gain(loss) | 3,902 | 3,902 | 3,902 | 3,902 | |||||||||||||||
COMPREHENSIVE INCOME | $ | 3,445,025 | (1,480,868 | ) | 1,964,157 | 4,588,529 | (1,480,868 | ) | 3,107,661 | ||||||||||
Net income per share-basic - two classes method | $ | 0.11 | (0.05 | ) | 0.06 | 0.17 | (0.06 | ) | 0.11 | ||||||||||
Net income per share-diluted | $ | 0.01 | (0.01 | ) | 0.00 | 0.01 | 0.01 | ||||||||||||
Weighted average number of shares outstanding during the year - basic | 30,087,468 | 30,087,468 | 27,572,851 | 27,572,851 | |||||||||||||||
Weighted average number of shares outstanding during the year- diluted | 405,087,468 | 405,087,468 | 403,683,962 | 403,683,962 |
5
CHINA DIGITAL MEDIA CORPORATION AND SUBSIDIARIES | ||||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) | ||||||||||
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2005 | ||||||||||
As previously | ||||||||||
reported | Adjustments | Restated | ||||||||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||||
Net income | $ | 4,584,627 | (1,480,868 | ) | 3,103,759 | |||||
Adjusted to reconcile net income to cash provided | ||||||||||
by operating activities: | ||||||||||
Depreciation | 907,672 | (180,701 | ) | 726,971 | ||||||
Interest expense | 5,554 | 5,554 | ||||||||
Accounts receivable | (3,216,071 | ) | (3,216,071 | ) | ||||||
Other receivables and prepaid expenses | (2,704,175 | ) | (2,704,175 | ) | ||||||
Inventories | (51,083 | ) | 178,169 | 127,086 | ||||||
Deposits paid to a supplier | (107,349 | ) | (107,349 | ) | ||||||
Due from a director | 36,022 | 36,022 | ||||||||
Accounts payable | (64,819 | ) | (64,819 | ) | ||||||
Other payables and accrued liabilities | 2,554,605 | 2,554,605 | ||||||||
Advertising revenue received in advance | 126,039 | 126,039 | ||||||||
Due to a related company | 293,241 | 293,241 | ||||||||
Due to a stockholder | 384,908 | 384,908 | ||||||||
Value added taxes payable | 21,450 | 21,450 | ||||||||
Net cash provided by operating activities | 2,770,621 | (1,483,400 | ) | 1,287,221 | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||||
Investments in affiliates | (200,221 | ) | (200,221 | ) | ||||||
Purchase of property and equipment | (4,268,264 | ) | 1,483,400 | (2,784,864 | ) | |||||
Net cash used in investing activities | (4,468,485 | ) | 1,483,400 | (2,985,085 | ) | |||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||||
Proceeds from issuance of common stock | 2,387,662 | 2,387,662 | ||||||||
Net cash provided by financing activities | 2,387,662 | 0 | 2,387,662 | |||||||
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS | 689,798 | 0 | 689,798 | |||||||
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR | 159,928 | 159,928 | ||||||||
CASH AND CASH EQUIVALENTS AT END OF YEAR | $ | 849,726 | 0 | 849,726 |
6
CHINA DIGITAL MEDIA CORPORATION AND SUBSIDIARIES | ||||||||||
CONSOLIDATED BALANCE SHEETS (UNAUDITED) | ||||||||||
AS OF MARCH 31, 2006 | ||||||||||
ASSETS | As previously | |||||||||
reported | Adjustments | Restated | ||||||||
CURRENT ASSETS | ||||||||||
Cash and cash equivalents | $ | 1,521,682 | 1,521,682 | |||||||
Accounts receivable, net of allowances | 4,807,758 | 4,807,758 | ||||||||
Inventories | 297,658 | (15,820 | ) | 281,838 | ||||||
Deposit on investments | 323,064 | 323,064 | ||||||||
Other receivable and prepaid expenses | 806,450 | 806,450 | ||||||||
Total Current Assets | 7,756,612 | (15,820 | ) | 7,740,791 | ||||||
INTANGIBLE ASSETS | 392,521 | 392,521 | ||||||||
INVESTMENTS IN TELEVISION SERIES, NET | 661,391 | 661,391 | ||||||||
PROPERTY AND EQUIPMENT, NET | 10,773,248 | (1,282,402 | ) | 9,490,845 | ||||||
TOTAL ASSETS | $ | 19,583,771 | (1,298,223 | ) | 18,285,548 | |||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||||
CURRENT LIABILITIES | ||||||||||
Accounts payable | $ | 4,995,152 | 4,995,152 | |||||||
Other payables and accrued liabilities | 80,436 | 80,436 | ||||||||
Due to a director | 107,414 | 107,414 | ||||||||
Due to a related company | 129,337 | 129,337 | ||||||||
Value added taxes payable | 39,125 | 39,125 | ||||||||
Income tax payable | 2,182,669 | (428,414 | ) | 1,754,255 | ||||||
Total Current Liabilities | 7,534,132 | (428,414 | ) | 7,105,718 | ||||||
COMMITMENTS AND CONTINGENCIES | 0 | |||||||||
MINORITY INTERESTS | 22,330 | 22,330 | ||||||||
STOCKHOLDERS' EQUITY | ||||||||||
Series A convertible preferred stock ($0.001 par value, 40,000,000 shares | ||||||||||
authorized,1,875,000 shares issued and outstanding as of | ||||||||||
March 31, 2006) | 1,875 | 1,875 | ||||||||
Common stock ($0.001 par value, 500,000,000 shares authorized, | ||||||||||
31,687,365 shares issued and outstanding as of March 31, 2006) | 31,687 | 31,687 | ||||||||
Additional paid-in capital | 5,863,532 | 5,863,532 | ||||||||
Deferred stock compensation | (33,433 | ) | (33,433 | ) | ||||||
Retained earnings | ||||||||||
Unappropriated | 5,202,712 | (926,526 | ) | 4,276,186 | ||||||
Appropriated | 956,343 | 56,718 | 1,013,061 | |||||||
Accumulated other comprehensive loss | 4,594 | 4,594 | ||||||||
Total Stockholders' Equity | 12,027,309 | (869,809 | ) | 11,157,501 | ||||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 19,583,771 | (1,298,223 | ) | 18,285,548 |
7
CHINA DIGITAL MEDIA CORPORATION AND SUBSIDIARIES | ||||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS AND | ||||||||||
COMPREHNSIVE INCOME (UNAUDITED) | ||||||||||
FOR THE THREE MONTHS ENDED MARCH 31, 2006 | ||||||||||
For the three months ended | ||||||||||
March 31, 2006 | ||||||||||
As previously | ||||||||||
reported | Adjustments | Restated | ||||||||
NET SALES | ||||||||||
Revenue from digitalization of television signals | $ | 1,455,371 | 1,455,371 | |||||||
Revenue from television advertising | 1,732,033 | 1,732,033 | ||||||||
Revenue from software development | 22,851 | 22,851 | ||||||||
Revenue from investments in television series | 174,629 | 174,629 | ||||||||
Government grant received | 311,837 | 311,837 | ||||||||
3,696,721 | 0 | 3,696,721 | ||||||||
COST OF SALES | ||||||||||
Cost of Sales | (1,935,864 | ) | 4,317 | (1,931,546 | ) | |||||
Depreciation - digitalization of television signals | - | (474,723 | ) | (474,723 | ) | |||||
GROSS PROFIT | 1,760,857 | (470,406 | ) | 1,290,451 | ||||||
OPERATING EXPENSES | ||||||||||
Selling, general and administrative expenses | (551,850 | ) | (551,850 | ) | ||||||
Depreciation and amortization | (578,048 | ) | 555,059 | (22,989 | ) | |||||
Total Operating Expenses | (1,129,897 | ) | 555,059 | (574,838 | ) | |||||
INCOME FROM OPERATION | 630,960 | 84,653 | 715,613 | |||||||
OTHER INCOME (EXPENSES) | ||||||||||
Interest income | 17,252 | 17,252 | ||||||||
Other income | 77,947 | 77,947 | ||||||||
Interest paid to related companies and directors | (1,777 | ) | (1,777 | ) | ||||||
Total Other Income (Expenses), net | 93,421 | 0 | 93,421 | |||||||
NET INCOME BEFORE TAXES AND MINORITY INTERESTS | 724,381 | 84,653 | 809,034 | |||||||
Income tax expense | (285,559 | ) | (27,935 | ) | (313,494 | ) | ||||
Minority interests | 5,727 | 5,727 | ||||||||
NET INCOME | $ | 444,549 | 56,718 | 501,267 | ||||||
OTHER COMPREHENSIVE INCOME (LOSS) | ||||||||||
Foreign currency translation gain(loss) | 43,300 | 43,300 | ||||||||
COMPREHENSIVE INCOME | $ | 487,849 | 56,718 | 544,567 | ||||||
Net income per share-basic - two classes method | $ | 0.01 | 0.01 | 0.02 | ||||||
Net income per share-diluted | $ | 0.01 | 0.01 | |||||||
Weighted average number of shares outstanding during the year - basic | 30,906,343 | 30,906,343 | ||||||||
Weighted average number of shares outstanding during the year- diluted | 40,339,795 | 40,339,795 |
8
CHINA DIGITAL MEDIA CORPORATION AND SUBSIDIARIES | ||||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) | ||||||||||
FOR THE THREE MONTHS ENDED MARCH 31, 2006 | ||||||||||
As previously | ||||||||||
reported | Adjustments | Restated | ||||||||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||||
Net income | $ | 444,549 | 56,718 | 501,267 | ||||||
Adjusted to reconcile net income to cash provided | ||||||||||
by operating activities: | ||||||||||
Amortization - cost of sales | 109,724 | 109,724 | ||||||||
Depreciation | 578,048 | (80,336 | ) | 497,712 | ||||||
Stock issued for services | 17,000 | 17,000 | ||||||||
Minority interests | (5,727 | ) | (5,727 | ) | ||||||
Changes in operating assets and liabilities | ||||||||||
(Increase) decrease in: | ||||||||||
Accounts receivable | (363,671 | ) | (363,671 | ) | ||||||
Other receivables and prepaid expenses | (55,859 | ) | (55,859 | ) | ||||||
Inventories | 128,369 | (4,317 | ) | 124,052 | ||||||
Increase (decrease) in: | ||||||||||
Accounts payable | 771,813 | 771,813 | ||||||||
Other payables and accrued liabilities | (210,220 | ) | (210,220 | ) | ||||||
Due to a related company | 18,356 | 18,356 | ||||||||
Income tax payable | 331,112 | 27,935 | 359,047 | |||||||
Net cash provided by operating activities | 1,763,494 | 0 | 1,763,494 | |||||||
CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||||
Investments in affiliates | (323,064 | ) | (323,064 | ) | ||||||
Purchase of property and equipment | (1,457,460 | ) | (1,457,460 | ) | ||||||
Net cash used in investing activities | (1,780,523 | ) | 0 | (1,780,523 | ) | |||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||||
Proceeds from stock issuance in private placement | 387,500 | 387,500 | ||||||||
Net cash provided by financing activities | 387,500 | 0 | 387,500 | |||||||
EFFECT OF EXCHANGE RATE ON CASH | 27,299 | 27,299 | ||||||||
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS | 397,770 | 0 | 397,770 | |||||||
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR | 1,123,912 | 1,123,912 | ||||||||
CASH AND CASH EQUIVALENTS AT END OF YEAR | $ | 1,521,682 | 0 | 1,521,682 |
9
CHINA DIGITAL MEDIA CORPORATION AND SUBSIDIARIES | ||||||||||
CONSOLIDATED BALANCE SHEETS (UNAUDITED) | ||||||||||
AS OF JUNE 30, 2006 | ||||||||||
ASSETS | As previously | |||||||||
reported | Adjustments | Restated | ||||||||
CURRENT ASSETS | ||||||||||
Cash and cash equivalents | $ | 472,466 | 472,466 | |||||||
Accounts receivable, net of allowances | 7,435,979 | 7,435,979 | ||||||||
Inventories | 1,159,396 | (14,228 | ) | 1,145,168 | ||||||
Due from a related company | 89,744 | 89,744 | ||||||||
Other receivable and prepaid expenses | 1,111,117 | 1,111,117 | ||||||||
Total Current Assets | 10,268,702 | (14,228 | ) | 10,254,474 | ||||||
INTANGIBLE ASSETS | 394,901 | 394,901 | ||||||||
INVESTMENTS IN TELEVISION SERIES, NET | 662,871 | 662,871 | ||||||||
INVESTMENTS IN AFFILIATES | 177,947 | 177,947 | ||||||||
PROPERTY AND EQUIPMENT, NET | 13,546,813 | (1,201,522 | ) | 12,345,291 | ||||||
TOTAL ASSETS | $ | 25,051,234 | (1,215,750 | ) | 23,835,484 | |||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||||
CURRENT LIABILITIES | ||||||||||
Accounts payable | $ | 8,740,539 | 8,740,539 | |||||||
Other payables and accrued liabilities | 292,996 | 292,996 | ||||||||
Due to a director | 76,957 | 76,957 | ||||||||
Due to a stockholder | 199,922 | 199,922 | ||||||||
Due to a related company | 161,769 | 161,769 | ||||||||
Value added taxes payable | 78,350 | 78,350 | ||||||||
Income tax payable | 2,542,306 | (401,198 | ) | 2,141,108 | ||||||
Total Current Liabilities | 12,092,839 | (401,198 | ) | 11,691,641 | ||||||
COMMITMENTS AND CONTINGENCIES | 0 | |||||||||
MINORITY INTERESTS | 130,651 | 130,651 | ||||||||
STOCKHOLDERS' EQUITY | ||||||||||
Series A convertible preferred stock ($0.001 par value, 40,000,000 shares | ||||||||||
authorized,1,875,000 shares issued and outstanding as of | ||||||||||
June 30, 2006) | 1,875 | 1,875 | ||||||||
Common stock ($0.001 par value, 500,000,000 shares authorized, | ||||||||||
31,727,365 shares issued and outstanding as of June 30, 2006) | 31,727 | 31,727 | ||||||||
Additional paid-in capital | 5,909,892 | 5,909,892 | ||||||||
Deferred stock compensation | (39,633 | ) | (39,633 | ) | ||||||
Retained earnings | ||||||||||
Unappropriated | 6,005,886 | (926,526 | ) | 5,079,360 | ||||||
Appropriated | 956,343 | 111,975 | 1,068,318 | |||||||
Accumulated other comprehensive loss | (38,346 | ) | (38,346 | ) | ||||||
Total Stockholders' Equity | 12,827,744 | (814,551 | ) | 12,013,193 | ||||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 25,051,234 | (1,215,749 | ) | 23,835,485 |
10
CHINA DIGITAL MEDIA CORPORATION AND SUBSIDIARIES | |||||||||||||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS AND | |||||||||||||||||||
COMPREHNSIVE INCOME (UNAUDITED) | |||||||||||||||||||
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2006 | |||||||||||||||||||
For the three months ended | For the six months ended | ||||||||||||||||||
June 30, 2006 | June 30, 2006 | ||||||||||||||||||
As previously | As previously | ||||||||||||||||||
reported | Adjustments | Restated | reported | Adjustments | Restated | ||||||||||||||
NET SALES | |||||||||||||||||||
Revenue from digitalization of television signals | $ | 2,151,935 | 2,151,935 | 3,607,306 | 3,607,306 | ||||||||||||||
Revenue from television advertising | 1,994,673 | 1,994,673 | 3,726,706 | 3,726,706 | |||||||||||||||
Revenue from software development | 10,372 | 10,372 | 33,223 | 33,223 | |||||||||||||||
Revenue from investments in television series | 391 | 391 | 175,020 | 175,020 | |||||||||||||||
Government grant received | 313,233 | 313,233 | 625,070 | 625,070 | |||||||||||||||
4,470,604 | 0 | 4,470,604 | 8,167,325 | 0 | 8,167,325 | ||||||||||||||
COST OF SALES | |||||||||||||||||||
Cost of Sales | (2,010,149 | ) | 1,593 | (2,008,556 | ) | (3,946,013 | ) | 5,910 | (3,940,103 | ) | |||||||||
Depreciation - digitalization of television signals | - | (262,366 | ) | (262,366 | ) | - | (728,706 | ) | (728,706 | ) | |||||||||
GROSS PROFIT | 2,460,455 | (260,773 | ) | 2,199,682 | 4,221,312 | (722,796 | ) | 3,498,516 | |||||||||||
OPERATING EXPENSES | |||||||||||||||||||
Selling, general and administrative expenses | (652,092 | ) | (652,092 | ) | (1,203,941 | ) | (1,203,941 | ) | |||||||||||
Depreciation and amortization | (683,372 | ) | 343,246 | (340,126 | ) | (1,261,420 | ) | 889,922 | (371,498 | ) | |||||||||
Total Operating Expenses | (1,335,464 | ) | 343,246 | (992,218 | ) | (2,465,361 | ) | 889,922 | (1,575,439 | ) | |||||||||
INCOME FROM OPERATION | 1,124,991 | 82,473 | 1,207,464 | 1,755,951 | 167,126 | 1,923,077 | |||||||||||||
OTHER INCOME (EXPENSES) | |||||||||||||||||||
Equity loss of affiliates | (1,402 | ) | (1,402 | ) | (1,402 | ) | (1,402 | ) | |||||||||||
Interest income | 8,266 | 8,266 | 25,518 | 25,518 | |||||||||||||||
Other income | 174 | 174 | 78,121 | 78,121 | |||||||||||||||
Interest paid to related companies and directors | (4,657 | ) | (4,657 | ) | (6,434 | ) | (6,434 | ) | |||||||||||
Total Other Income (Expenses), net | 2,381 | 0 | 2,381 | 95,803 | 0 | 95,803 | |||||||||||||
NET INCOME BEFORE TAXES AND MINORITY INTERESTS | 1,127,372 | 82,473 | 1,209,845 | 1,851,754 | 167,126 | 2,018,880 | |||||||||||||
Income tax expense | (355,392 | ) | (27,216 | ) | (382,608 | ) | (640,951 | ) | (55,151 | ) | (696,102 | ) | |||||||
Minority interests | 14,193 | 14,193 | 19,920 | 19,920 | |||||||||||||||
NET INCOME | $ | 786,173 | 55,257 | 841,430 | 1,230,723 | 111,975 | 1,342,698 | ||||||||||||
OTHER COMPREHENSIVE INCOME (LOSS) | |||||||||||||||||||
Foreign currency translation gain(loss) | (42,940 | ) | (42,940 | ) | 360 | 360 | |||||||||||||
COMPREHENSIVE INCOME | $ | 743,233 | 55,257 | 798,490 | 1,231,083 | 111,975 | 1,343,058 | ||||||||||||
Net income per share-basic - two classes method | $ | 0.02 | 0.01 | 0.03 | 0.04 | 0.04 | |||||||||||||
Net income per share-diluted | $ | 0.02 | 0.02 | 0.03 | 0.03 | ||||||||||||||
Weighted average number of shares outstanding during the year - basic | 31,700,698 | 31,700,698 | 31,332,747 | 31,332,747 | |||||||||||||||
Weighted average number of shares outstanding during the year- diluted | 41,075,698 | 41,075,698 | 40,707,747 | 40,707,747 |
11
CHINA DIGITAL MEDIA CORPORATION AND SUBSIDIARIES | ||||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) | ||||||||||
FOR THE SIX MONTHS ENDED JUNE 30, 2006 | ||||||||||
As previously | ||||||||||
reported | Adjustments | Restated | ||||||||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||||
Net income | $ | 1,230,723 | 111,975 | 1,342,698 | ||||||
Adjusted to reconcile net income to cash provided | ||||||||||
by operating activities: | ||||||||||
Equity loss of affiliate | 1,402 | 1,402 | ||||||||
Amortization - cost of sales | 108,244 | 108,244 | ||||||||
Depreciation | 1,261,420 | (161,216 | ) | 1,100,204 | ||||||
Stock issued for services | 60,200 | 60,200 | ||||||||
Minority interests | (19,920 | ) | (19,920 | ) | ||||||
Changes in operating assets and liabilities | ||||||||||
(Increase) decrease in: | ||||||||||
Accounts receivable | (2,991,892 | ) | (2,991,892 | ) | ||||||
Other receivables and prepaid expenses | (360,527 | ) | (360,527 | ) | ||||||
Inventories | (733,369 | ) | (5,910 | ) | (739,279 | ) | ||||
Due from a related company | (89,744 | ) | (89,744 | ) | ||||||
Increase (decrease) in: | ||||||||||
Due to a director | - | - | ||||||||
Due to a stockholder | 71,238 | 71,238 | ||||||||
Due to related parties | 20,332 | 20,332 | ||||||||
Accounts payable | 4,514,200 | 4,514,200 | ||||||||
Other payables and accrued liabilities | 2,340 | 2,340 | ||||||||
Value added tax and other taxes payable | 62,020 | 62,020 | ||||||||
Income tax payable | 667,954 | 55,151 | 723,105 | |||||||
0 | ||||||||||
Net cash provided by operating activities | 3,804,621 | 0 | 3,804,621 | |||||||
CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||||
Investments in affiliates | (179,350 | ) | (179,350 | ) | ||||||
Purchase of property and equipment | (4,858,352 | ) | (4,858,352 | ) | ||||||
Net cash used in investing activities | (5,037,702 | ) | 0 | (5,037,702 | ) | |||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||||
Proceeds from stock issuance in private placement | 387,500 | 387,500 | ||||||||
Investments from a minority stockholder | 122,514 | 122,514 | ||||||||
Loan from a related company | 128,684 | 128,684 | ||||||||
Net cash provided by financing activities | 638,698 | 0 | 638,698 | |||||||
EFFECT OF EXCHANGE RATE ON CASH | (57,063 | ) | (57,063 | ) | ||||||
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS | (651,446 | ) | 0 | (651,446 | ) | |||||
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR | 1,123,912 | 1,123,912 | ||||||||
CASH AND CASH EQUIVALENTS AT END OF YEAR | $ | 472,466 | 0 | 472,466 |
12
CHINA DIGITAL MEDIA CORPORATION AND SUBSIDIARIES | ||||||||||
CONSOLIDATED BALANCE SHEETS (UNAUDITED) | ||||||||||
AS OF SEPTEMBER 30, 2006 | ||||||||||
ASSETS | As previously | |||||||||
reported | Adjustments | Restated | ||||||||
CURRENT ASSETS | ||||||||||
Cash and cash equivalents | $ | 250,021 | 250,021 | |||||||
Accounts receivable, net of allowances | 9,609,477 | 9,609,477 | ||||||||
Inventories | 516,020 | (5,936 | ) | 510,084 | ||||||
Other receivable and prepaid expenses | 1,455,791 | 1,455,791 | ||||||||
Total Current Assets | 11,831,309 | (5,936 | ) | 11,825,373 | ||||||
INTANGIBLE ASSETS | 392,521 | 392,521 | ||||||||
INVESTMENTS IN TELEVISION SERIES, NET | 610,223 | 610,223 | ||||||||
INVESTMENTS IN AFFILIATES | 321,979 | 321,979 | ||||||||
PROPERTY AND EQUIPMENT, NET | 13,358,246 | (1,121,852 | ) | 12,236,394 | ||||||
TOTAL ASSETS | $ | 26,514,278 | (1,127,788 | ) | 25,386,490 | |||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||||
CURRENT LIABILITIES | ||||||||||
Notes payable | $ | 1,100,000 | 1,100,000 | |||||||
Accounts payable | 7,688,868 | 7,688,868 | ||||||||
Other payables and accrued liabilities | 1,287,199 | 1,287,199 | ||||||||
Due to a director | 84,472 | 84,472 | ||||||||
Due to a related company | 92,792 | 92,792 | ||||||||
Value added taxes payable | 8,640 | 8,640 | ||||||||
Income tax payable | 2,726,397 | (372,170 | ) | 2,354,227 | ||||||
Total Current Liabilities | 12,988,368 | (372,170 | ) | 12,616,198 | ||||||
COMMITMENTS AND CONTINGENCIES | 0 | |||||||||
MINORITY INTERESTS | 87,249 | 87,249 | ||||||||
STOCKHOLDERS' EQUITY | ||||||||||
Series A convertible preferred stock ($0.001 par value, 40,000,000 shares | ||||||||||
authorized,1,875,000 shares issued and outstanding as of | ||||||||||
September 30, 2006) | 1,875 | 1,875 | ||||||||
Common stock ($0.001 par value, 500,000,000 shares authorized, | ||||||||||
31,757,365 shares issued and outstanding as of September 30, 2006) | 31,757 | 31,757 | ||||||||
Additional paid-in capital | 5,939,862 | 5,939,862 | ||||||||
Deferred stock compensation | (1,333 | ) | (1,333 | ) | ||||||
Retained earnings | ||||||||||
Unappropriated | 6,597,226 | (926,526 | ) | 5,670,700 | ||||||
Appropriated | 956,343 | 170,908 | 1,127,251 | |||||||
Accumulated other comprehensive loss | (87,069 | ) | (87,069 | ) | ||||||
Total Stockholders' Equity | 13,438,661 | (755,618 | ) | 12,683,043 | ||||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 26,514,278 | (1,127,788 | ) | 25,386,490 |
13
CHINA DIGITAL MEDIA CORPORATION AND SUBSIDIARIES | |||||||||||||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS AND | |||||||||||||||||||
COMPREHNSIVE INCOME (UNAUDITED) | |||||||||||||||||||
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2006 | |||||||||||||||||||
For the three months ended | For the six months ended | ||||||||||||||||||
June 30, 2006 | June 30, 2006 | ||||||||||||||||||
As previously | As previously | ||||||||||||||||||
reported | Adjustments | Restated | reported | Adjustments | Restated | ||||||||||||||
NET SALES | |||||||||||||||||||
Revenue from digitalization of television signals | $ | 1,906,869 | 1,906,869 | 5,592,296 | 5,592,296 | ||||||||||||||
Revenue from television advertising | 2,090,339 | 2,090,339 | 5,817,045 | 5,817,045 | |||||||||||||||
Revenue from software development | 8,284 | 8,284 | 41,507 | 41,507 | |||||||||||||||
Revenue from investments in television series | 90,510 | 90,510 | 265,530 | 265,530 | |||||||||||||||
Government grant received | 323,252 | 323,252 | 948,322 | 948,322 | |||||||||||||||
4,419,255 | 0 | 4,419,255 | 12,664,700 | 0 | 12,664,700 | ||||||||||||||
COST OF SALES | |||||||||||||||||||
Cost of Sales | (2,046,513 | ) | 7,081 | (2,039,432 | ) | (5,992,526 | ) | 12,991 | (5,979,535 | ) | |||||||||
Depreciation - digitalization of television signals | (753,779 | ) | 80,880 | (672,899 | ) | (1,980,385 | ) | 242,096 | (1,738,289 | ) | |||||||||
GROSS PROFIT | 1,618,962 | 87,961 | 1,706,923 | 4,691,789 | 255,087 | 4,946,876 | |||||||||||||
OPERATING EXPENSES | |||||||||||||||||||
Selling, general and administrative expenses | (852,992 | ) | (852,992 | ) | (2,056,933 | ) | (2,056,933 | ) | |||||||||||
Depreciation and amortization | (48,183 | ) | (48,183 | ) | (82,997 | ) | (82,997 | ) | |||||||||||
Total Operating Expenses | (901,175 | ) | 0 | (901,175 | ) | (2,139,930 | ) | 0 | (2,139,930 | ) | |||||||||
INCOME FROM OPERATION | 717,787 | 87,961 | 805,748 | 2,551,859 | 255,087 | 2,806,946 | |||||||||||||
OTHER INCOME (EXPENSES) | |||||||||||||||||||
Equity loss of affiliates | 253 | 253 | (1,149 | ) | (1,149 | ) | |||||||||||||
Interest income | 968 | 968 | 2,632 | 2,632 | |||||||||||||||
Other income | 1,900 | 1,900 | 25,753 | 25,753 | |||||||||||||||
Interest expenses | (4,948 | ) | (4,948 | ) | (4,948 | ) | (4,948 | ) | |||||||||||
Interest paid to related companies and directors | (5,663 | ) | (5,663 | ) | (12,097 | ) | (12,097 | ) | |||||||||||
Total Other Income (Expenses), net | (7,491 | ) | 0 | (7,491 | ) | 10,191 | 0 | 10,191 | |||||||||||
NET INCOME BEFORE TAXES AND MINORITY INTERESTS | 710,296 | 87,961 | 798,257 | 2,562,050 | 255,087 | 2,817,137 | |||||||||||||
Income tax expense | (162,358 | ) | (29,027 | ) | (191,385 | ) | (803,309 | ) | (84,179 | ) | (887,488 | ) | |||||||
Minority interests | 43,402 | 43,402 | 63,322 | 63,322 | |||||||||||||||
NET INCOME | $ | 591,340 | 58,934 | 650,274 | 1,822,063 | 170,908 | 1,992,971 | ||||||||||||
OTHER COMPREHENSIVE INCOME (LOSS) | |||||||||||||||||||
Foreign currency translation gain(loss) | (48,723 | ) | (48,723 | ) | (48,363 | ) | (48,363 | ) | |||||||||||
COMPREHENSIVE INCOME | $ | 542,617 | 58,934 | 601,551 | 1,773,700 | 170,908 | 1,944,608 | ||||||||||||
Net income per share-basic - two classes method | $ | 0.02 | 0.02 | 0.05 | 0.01 | 0.06 | |||||||||||||
Net income per share-diluted | $ | 0.01 | 0.01 | 0.02 | 0.04 | 0.01 | 0.05 | ||||||||||||
Weighted average number of shares outstanding during the year - basic | 31,748,365 | 31,748,365 | 31,471,286 | 31,471,286 | |||||||||||||||
Weighted average number of shares outstanding during the year- diluted | 41,220,139 | 41,220,139 | 40,878,544 | 40,878,544 |
14
CHINA DIGITAL MEDIA CORPORATION AND SUBSIDIARIES | ||||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) | ||||||||||
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2006 | ||||||||||
As previously | ||||||||||
reported | Adjustments | Restated | ||||||||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||||
Net income | $ | 1,822,063 | 170,908 | 1,992,971 | ||||||
Adjusted to reconcile net income to cash provided | ||||||||||
by operating activities: | ||||||||||
Equity loss of affiliate | 1,149 | 1,149 | ||||||||
Amortization - cost of sales | 160,892 | 160,892 | ||||||||
Depreciation-cost of sales | 1,980,385 | 1,980,385 | ||||||||
Depreciation | 82,997 | (242,096 | ) | (159,099 | ) | |||||
Stock issued for services | 128,500 | 128,500 | ||||||||
Minority interests | (63,322 | ) | (63,322 | ) | ||||||
Changes in operating assets and liabilities | ||||||||||
(Increase) decrease in: | ||||||||||
Accounts receivable | (5,165,390 | ) | (5,165,390 | ) | ||||||
Other receivables and prepaid expenses | (705,200 | ) | (705,200 | ) | ||||||
Inventories | (89,993 | ) | (12,991 | ) | (102,984 | ) | ||||
Increase (decrease) in: | ||||||||||
Due to a stockholder | ||||||||||
Due to related parties | (125,602 | ) | (125,602 | ) | ||||||
Accounts payable | 3,462,529 | 3,462,529 | ||||||||
Other payables and accrued liabilities | 996,543 | 996,543 | ||||||||
Value added tax and other taxes payable | (7,690 | ) | (7,690 | ) | ||||||
Income tax payable | 852,045 | 84,179 | 936,224 | |||||||
Net cash provided by operating activities | 3,329,906 | 0 | 3,329,906 | |||||||
CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||||
Investments in affiliates | (323,128 | ) | (323,128 | ) | ||||||
Purchase of property and equipment | (5,590,817 | ) | (5,590,817 | ) | ||||||
Net cash used in investing activities | (5,913,945 | ) | 0 | (5,913,945 | ) | |||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||||
Proceeds from stock issuance in private placement | 387,500 | 387,500 | ||||||||
Investments from a minority stockholder | 122,514 | 122,514 | ||||||||
Proceeds from convertible debentures | 1,100,000 | 1,100,000 | ||||||||
Due to a director | 84,472 | 84,472 | ||||||||
Net cash provided by financing activities | 1,694,486 | 0 | 1,694,486 | |||||||
EFFECT OF EXCHANGE RATE ON CASH | 14,662 | 14,662 | ||||||||
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS | (874,891 | ) | 0 | (874,891 | ) | |||||
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR | 1,124,912 | 1,124,912 | ||||||||
CASH AND CASH EQUIVALENTS AT END OF YEAR | $ | 250,021 | 0 | 250,021 |
15