Mail Stop 6010
October 24, 2005
Chung-Lun Yang, Chief Executive Officer
ACL Semiconductors Inc.
B24-B27, 1/F., Block B
Proficient Industrial Centre
6 Wang Kwun Road
Kowloon, Hong Kong
Re: ACL Semiconductors Inc.
Form 10-K for the fiscal year ended December 31, 2004
Forms 10-Q for March 31 and June 30, 2005
File No. 0-50140
Dear Mr. Yang:
We have reviewed your filings and have the following
comments.
We have limited our review to only your financial statements and
related disclosures, and do not intend to expand our review to
other
portions of your documents. Where indicated, we think you should
revise your documents in response to these comments in all future
filings with the Commission. If you disagree, we will consider
your
explanation as to why our comment is inapplicable or a revision is
unnecessary. Please be as detailed as necessary in your
explanation.
In some of our comments, we may ask you to provide us with
information so we may better understand your disclosure. After
reviewing this information, we may raise additional comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or on any other
aspect
of our review. Feel free to call us at the telephone numbers
listed
at the end of this letter.
Mr. Chung-Lun Yang
ACL Semiconductors Inc.
October 24, 2005
Page 2
Form 10-K for the fiscal year ended December 31, 2004
Selected Financial Data, page 14
1. Please revise in future filings to present data for ACL
Semiconductor and its predecessor Atlantic Components Ltd for the
five fiscal years required by Instruction 2 to Item 301 of
Regulation
S-K.
Management`s Discussion and Analysis, page 16
Results of Operations, page 18
2. In future filings, please expand to include a discussion of the
significant related party transactions disclosed in Note 10 to the
financial statements and the impact that these have on results of
operations, cost of sales, gross profit and operating expenses, if
material. Since the related party transactions are material
please
consider the need to discuss these separately if the prices,
margins
and expenses are different for these sales.
3. In addition, we see on pages 32 through 35 that you have sales
and
purchases of inventory from the same affiliates. Please tell us
the
nature of the inventory you purchased from these affiliates and
whether this represents any repurchases or returns of the previous
sales.
4. Tell us and discuss the specific reasons for the significant
decrease in gross profit in future filings. Explain the
"aggressive
pricing strategy" and the impact that this is expected to have on
future operations.
Liquidity and Capital Resources, page 22
5. Please tell us and expand in future filings to discuss the
nature
and purpose of the transactions with City Royal. We see that these
loans have no interest. Please tell us whether interest was
imputed
in the financial statements, if material. In addition, tell us
whether the loan with DahSing was repaid.
6. In future filings, explain your dependency on Samsung, and the
constraint this places on the long-term continuation of your
business.
Mr. Chung-Lun Yang
ACL Semiconductors Inc.
October 24, 2005
Page 3
Significant Deficiencies in Disclosures Controls and Procedures or
Internal Controls, page 28
7. Please tell us the specific significant transactions that were
incorrectly calculated or recorded that resulted in the
significant
deficiencies in your disclosures controls and procedures. Explain
the
adjustments made and remedial efforts to correct these matters.
Financial Statements
Report of Independent Registered Public Accounting Firm, page F-1
8. We see that your audit report was signed by an audit firm based
in
Irvine, California. Please tell us (1) where the majority of your
revenues are earned, (2) where the majority of your assets are
located, (3) where your management and accounting records are
located
and (4) where the majority of the audit work is conducted. We may
have further comments.
Statements of Operations, page F-4
9. We read the significant related-party transactions affecting
each
component of your operations in Note 10 and on pages 32 through
35.
Please revise in future filings to present separately the related
party transactions on the face of your financial statements, if
material. Please see the requirement in Rule 4-08(k) of Regulation
S-
X.
10. We read on page 18 that you recorded the "fair value" of
shares
issued to consultants as merger costs. Please explain to us, and
disclose in future filings, how these shares were valued and
clarify
the assumptions and methodologies used in the valuations.
Statements of Cash Flows, page F-5
11. We see that loans/repayments from stockholders and
proceeds/repayments of lines of credit and notes payable are
presented "net." In future filings, please present these amounts
gross or tell us how your presentation conforms to FAS 95.
Mr. Chung-Lun Yang
ACL Semiconductors Inc.
October 24, 2005
Page 4
Note (1) Organization and Summary of Significant Accounting
Policies,
Page F-7
Organization and Basis of Presentation
12. Please tell us the nature of the $2.7 million merger costs
paid
to certain financial advisors. Explain the services performed by
the
financial advisors and tell us whether they were related parties.
13. Please tell us and clarify in future filings, whether the
$1million deposit for the acquisition of Classic Electronics was
paid
as indicated on F-8. We see the disclosure on page F-6 that this
has
been reclassified from trade accounts receivable in the statements
of
cash flows for 2003. Explain whether this deposit is refundable.
In
addition, tell us when you expect this acquisition to be
consummated.
Revenue Recognition, page F-10
14. Tell us more details of the discounts and price adjustments
referenced in Note (1) and the related accounting treatment.
Inventories, page F-10
15. In future filings, clarify your accounting for excess capacity
which is referenced on page 26.
Segment Reporting, page F-12
16. Please present in future filings the disclosures for sales and
assets by geographic areas required by paragraph 38 of SFAS 131,
if
material.
Note (10) Related Party Transactions, page F-23
17. We see the volume of transactions with each of your affiliates
in
Note 10 and on pages 32 through 35. Please tell us about the
nature
of the significant transactions with these affiliates. Explain
whether you are the primary beneficiary of any of these entities.
Provide your analyses that indicates how you comply with FIN 46R.
Mr. Chung-Lun Yang
ACL Semiconductors Inc.
October 24, 2005
Page 5
As appropriate, please respond to these comments within 10
business days or tell us when you will provide us with a response.
Please furnish a response letter that keys your responses to our
comments and provides the requested information. Confirm that you
will comply with these comments in all future filings with the
Commission. Detailed response letters greatly facilitate our
review.
Please understand that we may have additional comments after
reviewing your responses to our comments and the requested
information.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filing reviewed by the staff to
be
certain that the filing includes all information required under
the
Securities Exchange Act of 1934 and that they have provided all
information investors require for an informed decision. Since the
company and its management are in possession of all facts relating
to
a company`s disclosure, they are responsible for the accuracy and
adequacy of the disclosures they have made.
In connection with responding to our comments, please
provide,
in writing, a statement from the company acknowledging that
* the company is responsible for the adequacy and accuracy of the
disclosure in the filing;
* staff comments or changes to disclosure in response to staff
comments do not foreclose the Commission from taking any action
with
respect to the filing; and
* the company may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
In addition, please be advised that the Division of Enforcement
has
access to all information you provide to the staff of the Division
of
Corporation Finance in our review of your filing or in response to
our comments on your filing.
You may contact Jeanne Bennett at (202) 551-3606, or me at
(202) 551-3676, if you have questions regarding our comments. In
our
absence you may contact Martin F. James, Senior Assistant Chief
Accountant at (202) 551-3671.
Sincerely,
Brian R. Cascio
Accounting Branch Chief,
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