PROSPECTUS
WORLDWIDE MANUFACTURING USA, INC.
This Prospectus relates to the offer and sale of 3,100,000 shares of our common
stock by the selling stockholders identified in this Prospectus at a price of
$.40 per share. The common stock is not listed on any national securities
exchange or any other trading market. Our operations are limited to the State of
California and the People's Republic of China.
INVESTING IN OUR COMMON STOCK INVOLVES SUBSTANTIAL RISKS, AND INVESTORS SHOULD
NOT BUY THESE SHARES UNLESS THEY CAN AFFORD TO LOSE THEIR ENTIRE INVESTMENT.
PLEASE SEE "RISK FACTORS" BEGINNING ON PAGE 5 TO READ ABOUT ALL MATERIAL
FACTORS YOU SHOULD CONSIDER BEFORE BUYING SHARES OF OUR COMMON STOCK.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF
THESE SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THE PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
This Prospectus will not be used before the effective date of the registration
statement.
The selling shareholders in the distribution of the common stock may be deemed
to be underwriters within the meaning of the 1933 Act and any commissions or
discounts given may be regarded as underwriting commissions or discounts under
the 1933 Act. No broker-dealers have been engaged by Worldwide. There has been
no prior involvement of a broker-dealer in this offering. If a broker-dealer is
added, Worldwide will file a post-effective amendment to include the information
required concerning the addition of a broker-dealer. Furthermore, such
broker-dealer must seek and obtain clearance of the underwriting compensation
and arrangements from the NASD Corporate Finance Department.
The date of this Prospectus is March 29, 2004
TABLE OF CONTENTS
Page
SUMMARY 3
The Company 3
The Offering 4
Summary Financial Information 5
RISK FACTORS 5
USE OF PROCEEDS 9
DETERMINATION OF OFFERING PRICE 9
SELLING SECURITY HOLDERS 9
PLAN OF DISTRIBUTION 12
LEGAL PROCEEDINGS 13
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS 13
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT 15
DESCRIPTION OF SECURITIES 16
INTEREST OF NAMED EXPERTS AND COUNSEL 16
EXPERTS 17
DISCLOSURE OF COMMISSION POSITION OF INDEMNIFICATION FOR
SECURITIES ACT LIABILITIES 17
DESCRIPTION OF BUSINESS 17
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS 25
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 29
MARKET FOR COMMON STOCK AND RELATED STOCKHOLDER MATTERS 31
EXECUTIVE COMPENSATION 31
TRANSFER AGENT 33
AVAILABLE INFORMATION 33
LEGAL MATTERS 33
FINANCIAL STATEMENTS 34
Until ________________, all dealers that effect transactions in these
securities, whether or not participating in this offering, may be required to
deliver a prospectus. This is in addition to the dealers' obligations to deliver
a prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
2
SUMMARY
This Summary highlights selected information from elsewhere in this Prospectus.
It is not complete and may not contain all of the information that is important
to you. To understand this offering fully, you should read the entire Prospectus
carefully, including the financial statements and the related notes to those
statements included in this Prospectus.
The Company
Worldwide Manufacturing USA, Inc. ("we," "us," "our," "Worldwide"), was
incorporated under the laws of the State of Colorado on March 17, 2000, under
the name of Tabatha III, Inc. We changed our name to Worldwide Manufacturing
USA, Inc. on November 3, 2003. We were formed as a "blind pool" or "blank check"
company whose business plan was to seek to acquire a business opportunity
through completion of a merger, exchange of stock, or other similar type of
transaction. In furtherance of our business plan, we voluntarily elected to
become subject to the periodic reporting obligations of the Securities Exchange
Act of 1934 by filing a registration statement on Form 10SB.
Prior to September 30, 2003, our only business activities were the
organizational activities described above, including registration under the
Securities Exchange Act of 1934, and efforts to locate a suitable business
opportunity for acquisition. On September 30, 2003, we completed the business
acquisition process by acquiring all of the issued and outstanding common stock
of Worldwide Manufacturing USA, Inc., a California corporation ("Worldwide USA")
theretofore owned by Jimmy and Mindy Wang, in a share exchange transaction. We
issued 27,900,000 shares in the share exchange transaction for 100% or 10,000 of
the issued and outstanding shares of Worldwide USA's common stock. As a result
of the share exchange transaction, Worldwide USA became our wholly-owned
subsidiary.
The former stockholders of Worldwide USA acquired 93% of our issued and
outstanding common stock as a result of completion of the share exchange
transaction. Therefore, although Worldwide USA became our wholly-owned
subsidiary, the transaction was accounted for as a recapitalization of Worldwide
USA, whereby Worldwide USA is deemed to be the accounting acquirer and is deemed
to have adopted our capital structure.
All operating activities are carried out through Worldwide USA as our
wholly-owned subsidiary, and Worldwide USA's wholly-owned subsidiary, Shanghai
Intech Electro-Mechanical Products Co., Ltd. ("Intech"). Worldwide is an
engineering firm specializing in manufacturing, and Worldwide contracts with
factories in China to produce its varied goods. Intech employs (30) thirty
engineers in Shanghai. As an engineering firm, Intech provides technical
advisory, design, delivery material procurement and manufacturing quality
control services to companies in the United States seeking to manufacture or
3
purchase components from the manufacture or purchase components from
manufacturers in China. As a contract manufacturer, Worldwide does not
manufacture customer parts, but subcontracts to factories that produce these
parts. Worldwide's role is to ensure that the parts meet specifications and
quality standards imposed by our customers Worldwide does not have operations
throughout the world, but only in the state of California and the Peoples
Republic of China. Unless otherwise indicated, all references in this
registration statement to "Worldwide" include the public company parent,
Worldwide Manufacturing USA, Inc. (formerly Tabatha III, Inc.), its subsidiary,
Worldwide Manufacturing USA, Inc. (a California corporation referred to in this
prospectus as Worldwide USA), and its wholly-owned subsidiary, Shanghai Intech
Electro-Mechanical Products Co., Ltd.
Our address is 1142 Cherry Street, San Bruno, California 94066, and our
telephone number is (650) 794-9888 and our fax number is (650) 794-9887.
The Offering
The selling shareholders are offering up to 3,100,000 Common Stock Offered
shares of common stock at a price of $.40 per share. The selling shareholders
will determine when they will sell their shares.
Common Stock outstanding We currently have a total of
30,000,000 shares of common stock issued
and outstanding.
Use of Proceeds We will not receive any of
the proceeds from sale of shares of
common stock offered by the selling
shareholders.
No trading market Our common stock is not
listed on any national securities
exchange, the NASDAQ stock market or
the OTC Bulletin Board and there is no
current underwriting arrangement in
connection with this offering. There
is no trading symbol for the common
stock.
Determination of offering price Since we made the decision to file a
registration statement on behalf of
the selling shareholders, we also
established the offering price of $.40
per share on behalf of the selling
shareholders. The offering price
was arbitrarily determined and
has no relationship to our
assets, earnings, book value or
any other generally accepted
criteria of value.
4
Summary Financial Information
The following table sets forth summary financial data derived from our financial
statements. This data should be read in conjunction with the financial
statements, related notes and other financial information included in this
prospectus.
Period Ended Fiscal Year Ended Fiscal Year Ended
September 30, 2003 December 31, 2002 December 31, 2001
------------------ ----------------- -----------------
(unaudited)
Sales, net $4,650,067 $ 4,434,213 $ 3,551,656
Cost of goods sold 3,227,240 2,560,193 2,048,748
Operating Expenses $ 1,030,161 1,440,720 1,347,537
Net Profit from Operations $ 388,416 $ 4 25,542 $ 161,930
Balance Sheet Data
Total Assets $ 2,342,951 $ 1,443,162 $ 1,251,079
Total Liabilities 1,857,948 1,113,114 1,154,145
Stockholders' Equity 485,003 330,048 96,934
Earnings Per Share (1) .01 .01 .01
(1) Earnings per share have been calculated by dividing net profit from
operations by 30,000,000, or the number of shares outstanding.
RISK FACTORS
THE SHARES OFFERED HEREBY ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF RISK
INCLUDING THE COMPREHENSIVE DISCUSSION OF
5
MATERIAL RISK FACTORS DESCRIBED BELOW.
EACH PROSPECTIVE INVESTOR SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS
INHERENT IN AND AFFECTING THE BUSINESS OF THE COMPANY AND THIS OFFERING BEFORE
MAKING AN INVESTMENT DECISION.
1. Resale of our securities may be difficult because there is no current market
for our securities and it is possible that no market will develop.
There is no current public market for our securities, and no assurance that
such a public market will develop in the future. Even in the event that such a
public market does develop, there is no assurance that it will be maintained or
that it will be sufficiently active or liquid to allow shareholders to easily
dispose of their shares.
2. Because we work under short term contracts, it is
very difficult to forecast our operational and cash needs.
Contract manufacturing service providers must provide increasingly rapid product
turnaround for their customers. We generally do not obtain firm long-term
purchase commitments from our customers. Customers may cancel their orders,
change production quantities, or delay production because of consumer demand or
technological changes; however, we are often obligated to expend significant
amounts for retooling or other start-up costs of manufacturing. Any costs due to
cancellations, reductions, customer returns and/or delays by a significant
customer or by a group of customers might not be recoverable. The loss could be
greater than our projected profit on the contract, resulting a net loss for the
contract. The short-term nature of our customers' commitments and the
possibility of rapid changes in demand for their products reduces our ability to
estimate accurately future customer requirements. On occasion, customers may
require rapid increases in production, which can stress our resources and reduce
margins. Although we have several manufacturing facilities in China that we do
business with, there can be no assurances we will have sufficient capacity at
any given time to meet our customers demands. We could lose orders or fail to
complete orders in a timely manner. In addition because many of our costs and
operating expenses are relatively fixed, any reduction in customer demand can
adversely affect our gross margins and operating income.
3. A few customers and contract manufacturers account for a large percentage of
our business. Therefore, the loss of any one customer or contract manufacturers
could reduce our sales significantly or impede our ability to comply with our
manufacturing contracts, respectively.
Historically, our three largest customers, Joslyn Sunbank, Shanghai Opel and
Teleflex Electrical, accounted for approximately 35% of consolidated net sales
in the year ending 2002 compared to approximately 34% in the year ending 2001.
Our two largest contract manufacturers, Shanghai Xinli Trading Co., Ltd., and
Ningbo Hengda Metal Products Co., Ltd., accounted for 54% of manufacturing
production in the year ending 2002 and 69% in year ending 2001, respectively.
The loss of any one customer could significantly
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reduce our sales. The loss of
one contract manufacturer could cause delays in our performance of contracts or
reduce our gross margin if the substitute manufacturer could not deliver on time
or at the same contract price.
4. Taxing authorities could modify our tax exemptions or challenge our tax
allocations and require us to pay more taxes.
Our operations are predominantly located in China, where tax incentives have
been extended to encourage foreign investment. Our effective tax rate could
increase if these tax incentives are not renewed upon expiration or tax rates
applicable to us are increased. Substantially all of the customers' products
manufactured by factories we employ in China are sold to customers based in
United States. Tax authorities in jurisdictions in United States could challenge
the manner in which profits are allocated between US and Chinese subsidiaries,
and if we do not prevail in any such challenge we will be required to pay more
taxes.
5. Unforeseen changes in suppliers can result in losses of tooling deposits
and other preproduction costs.
In most cases the tool, die, or mold from which a part is made is owned by the
supplier, and is designed for the specific customer. We require our customers to
provide a non-refundable down payment to cover tooling costs, including
pre-production machine set up costs. In the event that a supplier is unable to
fulfill its production agreements with us, management believes that other
suppliers can be found. However, a change in suppliers would cause a delay in
the production process and could result in loss of tooling deposits and other
supplier advances, causing Worldwide to not comply with the timely delivery
requirements of our contract with our customer, and loss of tooling deposits
will reduce our gross margin on the contract.
6. Doing business in China is subject to legal risks and political and economic
changes over which we have no control.
Under its current leadership, the Chinese government has been pursuing economic
reform policies. Changes in these policies or political instability could affect
our ability to operate, to repatriate funds from China, or increase our costs of
doing business or our tax rate. Even though the United States has granted most
favored nation status to China, this could be revoked or retaliatory tariffs
could make the import of our products prohibitively expensive. The Chinese
government could change its policies toward private enterprise or even
nationalize or expropriate private enterprises, which could result in the total
loss of our investment in that country.
We periodically enter into agreements governed by Chinese law. Unlike the
United States, China has a civil law system based on written statutes in which
judicial decisions have little precedential value. The Chinese government has
enacted some laws and regulations dealing with matters such as corporate
organization and governance, foreign investment, commerce, taxation and trade.
However, the government's experience in implementing, interpreting and enforcing
these recently enacted laws and regulations
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is limited, and our ability to
enforce commercial claims or to resolve commercial disputes is uncertain.
Furthermore, enforcement of the laws and regulations may be subject to the
exercise of considerable discretion by agencies of the Chinese government, and
forces unrelated to the legal merits of a particular matter or dispute may
influence their determination. These uncertainties mean that we cannot rely on
legal protections to ensure that suppliers honor their contracts with us. If we
suffer a loss because of breach of contract by a Chinese supplier, we might not
be able to recover the loss.
7. Currency fluctuations can cause us significant losses.
Some of our costs such as payroll, material and equipment costs are denominated
in Chinese Renminbi. Changes in the exchange rate between the Renmimbi and the
U.S. dollar will affect our costs of sales and operating margins. Presently,
China's currency is not freely convertible and thus fluctuations in the value of
this currency have not had a significant impact on operations. Some interests in
the United States and other nations believe that a revaluation of the Renmimbi
is overdue, and any revaluation would increase our manufacturing costs relative
to the rest of the world and reduce our sales.
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USE OF PROCEEDS
We will not receive any of the proceeds from sale of shares by the selling
shareholders.
DETERMINATION OF OFFERING PRICE
Since we made the decision to file a registration statement on behalf of the
selling shareholders, we also established the offering price of $.40 per share.
This price was arbitrarily selected and does not have any relationship to any
established criteria such as book value or current earnings per share. The
offering price we set for our common stock was not based on past earnings, nor
is it indicative of the current market value of the assets which we own.
SELLING SECURITY HOLDERS
This Prospectus relates to the offer and sale of 3,100,000 shares of our common
stock by the selling stockholders identified in this Prospectus at a price of
$.40 per share. The selling stockholders will determine when they will sell
their shares.
The following table sets forth information concerning the selling security
holders including:
- - the number of shares owned by each selling security holder prior to
this offering;
- - the total number of shares that are to be offered for each selling
security holder;
- - the total number of shares of common stock that will be owned by
each selling security holder upon
completion of the offering, and
- - the percentage of common stock that will be owned by each selling
security holder upon completion of the offering if all of the offered
shares are sold by the selling security holders.
Other than the relationships described below, none of the selling shareholders
has any material relationship with us or with our predecessors or affiliates. To
our knowledge, none of the selling security holders is a broker-dealer or an
associated person of a broker-dealer, except as stated below.
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Total number Percentage
of shares owned by each
Shares owned Shares to that will be selling security
Name of prior be offered owned upon holder upon
Selling to this pursuant to completion of completion of
Security Holder offering this offering the offering the offering
1 Gabriela Bahena 5,000 5000 0 0
2 James Ballard(1) 20,000 20000 0 0
3 Mary Ballard(1) 20,000 20,000 0 0
4 Donald Gillmore 150,000 150,000 0 0
5 James Hansen 50,000 50,000 0 0
6 Gerald Harty 50,000 50,000 0 0
7 Phillip Junot 20,000 20,000 0 0
8 Tom Kloppel 30,000 30,000 0 0
9 David Latham 10,000 10,000 0 0
10 Teresa McClaran 10,000 10,000 0 0
11 Steve Millenson 20,000 20,000 0 0
12 Lilton Nancy 40,000 40,000 0 0
13 Virginia Nihart 10,000 10,000 0 0
14 Michael Oday 10,000 10,000 0 0
15 Carl Ormond 10,000 10,000 0 0
16 Nancy Richardson 2,500 2.500 0 0
17 Charles Siefert 40,000 40,000 0 0
18 Mary Siefert 10,000 10,000 0 0
19 Marissa Sinclair 25,000 25,000 0 0
20 Karen Slusher 2,500 2,500 0 0
21 Diane Smith 10,000 10,000 0 0
22 Marie Smith 50,000 50,000 0 0
23 Michael Sprinkle 2,500 2,500 0 0
24 Taliaferrro Taylor 10,000 10,000 0 0
25 Betty Turner 2,500 2,500 0 0
26 Rosabelle White 5,000 5,000 0 0
27 Katherine Wiley 10,000 10,000 0 0
28 Steven Wostenberg 5,000 5,000 0 0
29 Carolyn & Karl Ziegler 20,000 20,000 0 0
30 Yolanda Ziegler 2,500 2,500 0 0
31 Kip Pedrie(2) 75,000 75,000 0 0
32 Bob Smith(3) 200,000 200,000 0 0
33 John Ballard(4) 847,500 847,500 0 0
34 Diane Thelen(5) 275,000 275,000 0 0
35 Gloria Constantin 50,000 50,000 0 0
36 Jimmy Wang(6) 13,950,000 500,000 13,450,000 45%
37 Mindy Wang(7) 13,950,000 500,000 13,450,000 45%
Total 30,000,000 3,100,000 26,900,000 90%
(1) James Ballard and Mary Ballard are husband and wife. James
Ballard is the brother of John Ballard,
Worldwide's Chief Financial Officer.
(2) Kip Pedrie is a broker-dealer with Terra Nova Institutional, where
Mr. Pedrie invests funds of large
institutions into various stocks and mutual funds. Mr. Pedrie was
also a director of Tabatha III (the
predecessor to Worldwide). He resigned in March of 2003. Terra
Nova Institutional will not make a
market in the common stock of Worldwide and is not participating in
the offering. Mr. Pedrie acquired
his shares in the ordinary course of business. At the time of
purchase by Mr. Pedrie, he had no
agreements or understandings, directly or indirectly, with any person
to distribute the securities.
(3) Bob Smith was a founder of Tabatha III, and its president and director
from inception until his resignation on September 30, 2003.
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(4) John Ballard has been the Chief Financial Officer and Director of
Worldwide since September, 2003.
(5) Diane Thelen was a founder of Tabatha III, and its secretary/treasurer
and director from inception until
her resignation on September 30, 2003
(6) Jimmy Wang is the President and CEO of Worldwide.
(7) Mindy Wang is the Controller of Worldwide.
All of the securities were sold for cash were offered and sold through the
officers and directors of the Company in reliance upon exemptions from
registration either under Section 4(2) of the Securities Act or under Section
3(b) of the Securities Act of 1933 and Rule 505 of Regulation D. The securities
sold for consideration other than cash were offered and sold in reliance upon
exemptions from registration under Section 4(2) of the Securities Act of 1933.
All such transactions were private offerings made without general solicitation.
Purchasers signed a subscription agreement acknowledging that they were
purchasing shares for their own account and acknowledging that the securities
were not registered under the Securities Act of 1933 and cannot be sold unless
they are registered or unless an exemption is available. In addition, a
restrictive legend was placed on all share certificates representing the shares.
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PLAN OF DISTRIBUTION
This prospectus covers the resale by selling stockholders of shares of our
common stock that they have already purchased from us. The offering price will
be $.40 per share for the duration of the offering. This fixed price has no
basis in the company's operating results or revenues. It was arrived
arbitrarily. The selling stockholders may sell their shares of common stock
either directly or through a broker-dealer in one or more of the following kinds
of transactions: (i) transactions in over-the-counter market; (ii) transactions
on a stock exchange that lists our common stock; or (iii) transactions
negotiated between selling stockholders and purchasers, or otherwise.
Broker-dealers may charge commissions to both selling stockholders selling
common stock and purchasers buying shares sold by a selling stockholder. Neither
we nor the selling stockholders can presently estimate the amount of such
compensation. The maximum commission or discount to be received by any NASD
member or independent broker-dealer will not be greater than eight (8) percent
for the sale of any shares. We know of no existing arrangements between
the selling
stockholders and any other stockholder, broker, dealer, underwriter or agent
relating to the sale or distribution of the shares. The selling stockholders and
any underwriters, broker-dealers or agents that participate in the distribution
of securities may be deemed to be "underwriters" within the meaning of the
Securities Act, and any profit on the sale of such securities and any discounts,
commissions, concessions or other compensation received by any such underwriter,
broker-dealer or agent may be deemed to be underwriting discounts and
commissions under the Securities Act.
To the extent required by laws, regulations or agreements we have made, we will
file a prospectus supplement during the time the selling stockholders are
offering or selling shares covered by this prospectus in order to add or correct
important information about the plan of distribution for the shares and in
accordance with our obligation to file post-effective amendments to the
prospectus as required by Item 512 of Regulation S-B. In addition to any other
applicable laws or regulations, selling stockholders must comply with
regulations relating to distributions by selling stockholders, including
Regulation M under the Securities Exchange Act of 1934. Regulation M prohibits
selling stockholders from offering to purchase and purchasing our common stock
at certain periods of time surrounding their sales of shares of our common stock
under this prospectus.
Some states may require that registration, exemption from registration or
notification requirements be met before selling stockholders may sell their
common stock. Some states may also require selling stockholders to sell their
common stock only through broker-dealers. We have not yet filed for registration
or exemption in any state. Selling shareholders will be provided with a list of
states where the sales by them of common stock have been exempted or registered.
We will not receive any proceeds from the sale of the shares by the selling
stockholders pursuant to this prospectus. Shares issued prior to the merger were
blank check shares, and as such, can only be offered through a registered
offering. The estimated offering
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expense is expected to be $30,100, all of which
will be paid by Worldwide and none by the selling shareholders. Offers or sales
of the shares have not been registered or qualified under the laws of any
country other than the United States. To comply with certain states' securities
laws, if applicable, the shares will be offered or sold in such jurisdictions
only through registered or licensed brokers or dealers. There can be no
assurance that the selling stockholders will sell any or all of the shares
offered by them hereunder. Kip Pedrie, a selling shareholder, is a registered
representative of Terra Nova Institutional. Terra Nova Institutional will not
make a market in the common stock of Worldwide and is not participating in the
offering. There is no current trading market for the shares and there can be no
assurances that a trading market will develop, or, if such a trading market does
develop, that it will be sustained. In the event a trading market does develop
for our Shares, it will at least initially be subject to rules adopted by the
Securities and Exchange Commission that regulate broker-dealer practices in
connection with transactions in "penny stocks." Penny stocks are generally
equity securities with a price of less than $5.00, except for securities
registered on certain national securities exchanges or quoted on the NASDAQ
system, provided that current price and volume information with respect to
transactions in those securities is provided by the exchange or system. Since
the shares are offered at $.40 and the common stock will not be listed on NASDAQ
or any national securities exchange, the common stock will be deemed a "penny
stock." The penny stock rules require a broker-dealer, prior to a transaction in
a penny stock not otherwise exempt from those rules, to make a special written
determination that the penny stock is a suitable investment for the purchaser
and to receive the purchaser's written acknowledgment of the receipt of a risk
disclosure statement, a written agreement to transactions involving penny
stocks, and a signed and dated copy of a written suitably statement. These
disclosure requirements may have the effect of reducing the trading activity in
the secondary market for our stock as long as it is subject to the penny stock
rules. In addition, holders of our shares may have difficulty selling those
shares because our common stock will probably be subject to the penny stock
rules.
LEGAL PROCEEDINGS
We are not a party to any pending legal proceedings, and no such proceedings are
known to be contemplated. None of our directors, officers or affiliates, and no
owner of record or beneficial owner of more than five percent (5%) of our
securities, or any associate of any such director, officer or security holder is
a party adverse to us or has a material interest adverse to us in reference to
pending litigation.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The names and ages and titles of our Executive Officers and Directors as of the
date of this Prospectus is as follows:
Name Age Position
Jimmy Wang 48 CEO President, and Chairman
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Mindy Wang 46 Secretary, Treasurer, and a Director
John Ballard 45 Chief Financial Officer
The directors named above serve for one-year terms until their successors are
elected or they are re-elected at the annual stockholders' meeting. Officers
hold their positions at the pleasure of the board of directors, absent any
employment agreement, of which none currently exists or is contemplated. There
is no arrangement or understanding between any of the directors or officers of
the Company and any other person pursuant to which any director or officer was
or is to be selected as a director or officer, and there is no arrangement, plan
or understanding as to whether non-management shareholders will exercise their
voting rights to continue to elect the current directors to the Company's board.
There are also no arrangements, agreements or understandings between
non-management shareholders and management under which non-management
shareholders may directly or indirectly participate in or influence the
management of the Company's affairs.
Biographical Information
Jimmy Wang, President and Chief Executive Officer
Jimmy Wang has over twelve years experience in a wide range of componen
manufacturing. From 1996 to the
present, Mr. Wang has been President, CEO and director of Worldwide
Manufacturing USA, Inc. (California). He
became President, CEO and Chairman of the Colorado holding company of the
same name on September 30, 2003. From
1990 to 1995, Mr. Wang was the Sales Manager for MP World Manufacturing, Inc.
From September 1993 to May 1996
Mr. Wang and Mindy Wang operated a sole proprietorship under the name Worldwide
Manufacturing USA. In 1996, Mr.
Wang incorporated Worldwide Manufacturing USA, Inc. In 1990, Mr. Wang
earned a Masters Degree in Applied
Economics from the University of Minnesota, and in 1982 received a Bachelors
of Science Degree in Economics from
the Shanghai Institute of Foreign Trade. Mr. Wang is the husband of Mindy Wang.
Mindy Wang, Secretary and Treasurer
Mindy Wang has over twelve years of accounting and financial management
experience with Technology Power and Worldwide Manufacturing. From 1996 to the
present, Ms. Wang has been controller and Director of Worldwide Manufacturing
USA, Inc. In September 1996, Ms. Wang founded, with her husband, Worldwide
Manufacturing USA, Inc. She became Controller and Director of the Colorado
holding company of the same name on September 30, 2003. From 1991 to 1993 she
was an accountant with Technology Power. The business of Technology Power was
assembling personal computers for retail and business customers. From September
1993 to May 1996 Mr. Wang and Mindy Wang operated a sole proprietorship under
the name Worldwide Manufacturing USA. Ms. Wang earned the equivalent of a
Bachelors Degree in International Business from the University of California at
the Los Angeles Institute of
14
Economics and Management in Beijing and attended
the Master's program of the Business Education of the University of Minnesota.
Ms. Wang is the wife of Jimmy Wang.
John Ballard, Chief Financial Officer
John Ballard became Chief Financial Officer of Worldwide and its California
operating subsidiary in September 30, 2003. John Ballard has more than fifteen
years of business management, project management, and accounting experience.
From January 2002 to the present, Mr. Ballard has been a financial consultant
and director of Reveal Systems, Inc., a software development company and
internet provider based in Longmont, Colorado. Mr. Ballard was the Chief
Financial Officer of Call Solutions Inc., a publicly traded company, from
October 1999 to November 2002. Call Solutions was in the business of opening
call centers. Mr. Ballard, from 1997-1999 owned and operated food operations,
Cookies N Kreme and Lincoln Street Cafe in the Denver Metropolitan Area. In 1993
Mr. Ballard retired and he traveled until 1997. From 1988 to 1993, Mr. Ballard
was Chief Financial Officer for Apple Sundries, Inc., a Denver retail chain.
Since 1999, Mr. Ballard has been a major shareholder, owning 10% or more, and a
consultant in five blank check companies, Tabatha I, Inc., Tabatha II, Inc.,
Tabatha III, Inc. (Worldwide's predecessor), Tabatha IV, Inc., and Tabatha V,
Inc. Mr. Ballard holds a Bachelor of Science Degree in Management and Marketing
from the University of Colorado where he graduated Magna Cum Laude. Mr. Ballard
also holds a Masters of Business in Administration from Regis University.
There are no other significant employees. None of the directors serves as a
director for any other reporting company.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of the date of this prospectus statement, the
number of shares owned of record and beneficially by executive officers,
directors and persons who hold 5% or more of the Company's Common Stock. Also
included are the shares held by all executive officers and directors as a group.
(1) (2) (3) (4)
Name and Amount and
Address of Nature of
Title of Beneficial Beneficial Percent of
Class Owner Owner Class
Common Stock Jimmy Wang (1) (2) 27,900,000 (3) 93.0%
Worldwide Manufacturing USA, Inc.
1142 Cherry Street
San Bruno, California 94066
15
Common Stock Mindy Wang (1) (2) 27,900,000 (3) 93.0%
Worldwide Manufacturing USA, Inc.
1142 Cherry Street
San Bruno, California 94066
Common Stock John Ballard (2) 847,500 2.8%
6175 W. Hinsdale Pl.
Littleton, CO 80128
All officers and directors as a group (3 in number) 28,747,500 95.8%
(1) The person listed is a director of the Company.
(2) The person listed is an officer of the Company.
(3) Jimmy and Mindy Wang are husband and wife. Each holds directly
13,950,000 shares, but is deemed to
beneficially own the shares owned by the other.
DESCRIPTION OF SECURITIES
Common Stock
Our Articles of Incorporation authorize the issuance of 100,000,000 shares of
Common Stock at no par value, of which 30,000,000 shares are currently issued
and outstanding. Each record holder of our common stock is entitled to one vote
for each share held on all matters properly submitted to the stockholders for
their vote. The Articles of Incorporation do not permit cumulative voting for
the election of directors.
Holders of outstanding shares of our common stock are entitled to such
dividends as may be declared from time to time by the Board of Directors out of
legally available funds; and, in the event of liquidation, dissolution or
winding up our affairs, holders are entitled to receive, ratably, our net assets
which are available to stockholders after distribution is made to the preferred
stockholders, if any, who are given preferred rights upon liquidation. Holders
of outstanding shares of common stock have no preemptive, conversion or
redemptive rights.
Preferred Stock
The Articles of Incorporation authorize the issuance of up to 10,000,000 shares
of preferred stock, no par value, which may be issued in one or more series at
the discretion of the Board of Directors. There is no preferred stock currently
issued or outstanding.
INTEREST OF NAMED EXPERTS AND COUNSEL
No expert or counsel named in this prospectus as having prepared or certified
any part of this prospectus or having given an opinion upon the validity of the
securities being registered or upon other legal matters in connection with the
registration or offering of the common stock was employed on a contingency basis
or had, or is to receive, in connection with the offering, a substantial
interest, directly or indirectly, in the
16
registrant or any part of its
subsidiaries. Nor was any such person connected with the registrant or any of
its subsidiaries as a promoter, managing or principal underwriter, voting
trustee, director, officer or employee.
EXPERTS
The consolidated financial statements of Worldwide Manufacturing USA, Inc.,
which include the balance sheets as of December 31, 2002 and 2001, and the
related statements of operations, stockholders' deficiency and cash flows for
the years ended December 31, 2002 and 2001 included in this prospectus have been
audited by Comiskey & Company, P.C., independent certified public accountants,
given on the authority of that firm as experts in accounting and auditing.
DISCLOSURE OF COMMISSION POSITION OF INDEMNIFICATION FOR SECURITIES ACT
LIABILITIES
As permitted by Colorado law, the Company's Articles of Incorporation provide
that the Company will indemnify its directors and officers against expenses and
liabilities they incur to defend, settle, or satisfy any civil or criminal
action brought against them on account of their being, or having been, Company
directors or officers unless, in any such action, they are adjudged to have
acted with gross negligence or willful misconduct.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers or persons controlling the Company
pursuant to the foregoing provisions, the Company has been informed that, in the
opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in that Act and is, therefore, unenforceable.
DESCRIPTION OF BUSINESS
Background
Worldwide was incorporated under the laws of the State of Colorado on March 17,
2000, under the name of Tabatha III, Inc. We changed our name to Worldwide
Manufacturing USA, Inc. on November 3, 2003. We were formed as a "blind pool" or
"blank check" company whose business plan was to seek to acquire a business
opportunity through completion of a merger, exchange of stock, or other similar
type of transaction. In furtherance of our business plan, we voluntarily elected
to become subject to the periodic reporting obligations of the Securities
Exchange Act of 1934 by filing a registration statement on Form 10SB.
Prior to our identification of Worldwide Manufacturing USA, Inc., a
privately-held California corporation, ("Worldwide USA") as an acquisition
target, our only business activities were the organizational activities
described above, including registration
17
under the Securities Exchange Act of
1934, and efforts to locate a suitable business opportunity for acquisition.
On September 30, 2003, we acquired all of the issued and outstanding common
stock of Worldwide USA in a share exchange transaction. We issued 27,900,000
shares in the share exchange transaction for 100% or 10,000 of the issued and
outstanding shares of Worldwide USA's common stock. As a result of the share
exchange transaction, Worldwide USA became our wholly-owned subsidiary.
The former stockholders of Worldwide USA acquired 93% of our issued and
outstanding common stock as a result of completion of the share exchange
transaction. Therefore, although Worldwide USA became our wholly-owned
subsidiary, the transaction was accounted for as a recapitalization of Worldwide
USA, whereby Worldwide USA is deemed to be the accounting acquirer and is deemed
to have adopted our capital structure. No finder's fee was laid to any person in
connection with the transaction.
All operating activities are carried out through Worldwide USA as our
wholly-owned subsidiary, and Worldwide USA's wholly-owned subsidiary, Shanghai
Intech Electro-Mechanical Products Co., Ltd. ("Intech"). Intech was incorporated
as a United States subsidiary doing business in China, registered in the city of
Shanghai, China in 1997. Worldwide is an engineering firm specializing in
manufacturing, and Worldwide contracts with factories in China to produce its
varied goods. Intech employs (30) thirty engineers in Shanghai. As an
engineering firm, Intech provides technical advisory, design, delivery material
procurement and manufacturing quality control services to companies in the
United States seeking to manufacture or purchase components from the manufacture
or purchase components from manufacturers in China. Worldwide does not have
operations throughout the world, but only in the state of California and the
Peoples Republic of China.
General
Incorporated in California in 1996, Worldwide Manufacturing USA, Inc. is an
engineering firm specializing in manufacturing and contract manufacturing. Its
products are manufactured in factories in China. A contract manufacturer locates
factories capable of producing customer parts according to desired
specifications and quality standards imposed by the customer. The contract
manufacturer hires subcontractors (factories) that provide the plant, equipment,
manufacturing working capital and factory labor. Worldwide provides sales,
management, production control and technical support. Worldwide's goal is to
timely deliver high quality components at manufacturing costs that are at least
fifty percent (50%) less than what Worldwide's customers would pay for similar
parts in the United States. As a contract manufacturer, Worldwide does not
manufacture customer parts, but subcontracts to factories that produces these
parts. Worldwide's role is to ensure that the parts meet specifications and
quality standards imposed by our customers. Worldwide does not have operations
throughout the world,
18
but only in the state of California and the Peoples
Republic of China. Worldwide's website address is www.wwmusa.com.
Worldwide provides its services to several companies in the United States,
primarily in the aerospace, automotive, and electronics industries. Although
Worldwide initially focused on manufacturing components for the high tech
industry, Worldwide's CEO, Jimmy Wang, realizes that through Worldwide's
business model, the company has the ability to arrange for the manufacture of
products, parts, and components for a broad number of industries. Worldwide
currently arranges for the manufacture of components and products for a wide
variety of customers.
Worldwide sells to its customers under purchase orders which it receives from
time to time. We do not have long term contracts with any customers. As a
result, it is difficult to forecast revenues, and planning for future operations
is also difficult. Because many of our costs and operating expenses are fixed,
any unforeseen reduction in purchase orders can affect our gross margin and
operating income.
In order to ensure a consistently high-quality product, it is imperative for a
company in the contract manufacturing business to have a local quality control
team. The team's responsibility is to institute quality control procedures that
ensure the quality of products from start to finish.
Through Worldwide's wholly-owned subsidiary in Shanghai, Intech
Electro-Mechanical Products Co., Ltd. (hereinafter, "Intech"), Worldwide employs
thirty (30) staff engineers. As an engineering firm, Intech provides technical
advice, design, delivery, material procurement, and manufacturing quality
control services to companies in the United States seeking to manufacture or
purchase components from manufacturers in China. The quality control procedures
used by Intech and Worldwide are described below from start to finish:
After receiving a request for parts from a customer, one of Intech's material
engineers will first study the material and then contact the customer's engineer
to get an idea of the application of that part in order to decide if the
material can be purchased from a Chinese material supplier opposed to United
States suppliers, which are more expensive. If permission is given, that
engineer will provide the customer's engineer with all the chemical and physical
data of the Chinese material, which is closest in features to that of the
material called for by the drawing for approval. After the material issue is
resolved, one of our electronics or mechanical or fiber optic engineers will
study the drawing and contact the customer's engineers to get an idea of the
application for that part in order to propose some kind of engineering changes
for the purpose of low cost production. Our price proposal will not be made
until all the technical questions are answered. In many cases, our first
proposal includes two alternative prices and deliveries from which a customer
may choose. These price schedules include an "A," and "B," with a "C" pricing as
a variation of the "A" and "B" price schedule. Price A is 100% based on the
request for proposal with no modifications. Usually the price is higher and
delivery time is longer. American materials costs, plus
19
internal shipping costs
are usually much higher than the cost of Chinese material and also takes a
longer time for the Chinese factory to receive it. Generally, price A does not
offer enough incentives for a customer to produce these parts using offshore
manufacturing.
Price B is based on the proposal with our suggested engineering and material
changes. Price B is lower in price and the lead time is shorter. Price B is the
price using materials from suppliers in China which are cheaper than United
States' suppliers for the same material, as well as Worldwide's engineers in the
design process. Price C is the final price and it is a compromise by the
customer regarding its quality of materials used, whether the supplier is
located (China or United States) and the engineering design, whether it is
designed by our engineers where the cost is less, or by an outside engineering
firm.
In most cases, the customer accepts our partial suggestions for engineering and
material changes; therefore, we re-quote with a "C" price and delivery proposal
which falls between the "A" and "B" price structures.
If we are successful with obtaining that order, our engineer writes the
production and inspection procedures with all the considerations based on the
information from the initial contacts with the customer's engineers. Shanghai
Intech Electro-Mechanical Products Co., Ltd., the subsidiary of Worldwide
Manufacturing, will compel the manufacturer to follow the procedures through a
three-stage on-site inspection process and two incentive programs, both of which
are described below. The purposes of the following inspection procedures are to
ensure that the customer receives quality parts. There is no extra charge to the
customer for having these quality control procedures. Worldwide institutes these
procedures on behalf of our customers and in order to better compete with other
contract manufacturers. By providing high quality parts, it allows Worldwide to
attract and retain contract manufacturing orders from our customers. As a
contract manufacturer, Worldwide does not manufacture customer parts, but
subcontracts to factories that produce these parts. Worldwide's role is to
ensure that the parts meet specifications and quality standards imposed by our
customer.
Our customer agrees to pay a certain price per unit manufactured and delivered
in accordance with the purchase order. Worldwide's per-unit price from the
subcontractor is lower, and the difference represents our gross margin. Since we
do not separately charge the customer for our engineering advice, we only are
paid in connection with orders placed by the customer.
Material Audit (Inspection One)
Inspection one usually occurs during the first week after an order is issued to
a factory. Intech's material engineer goes to that factory and conducts an
on-site inspection. Other than a visual inspection, he/she will check both
chemical and physical data on the material certificate. If that material comes
from a reliable supplier, such as Dupont, GE, Corning, etc., he/she just takes
the certificate and accepts it as if it were our certificate. Otherwise, our
material engineer will re-inspect the material to make sure the
20
chemical,
physical and tensile strength data are in conformity with the specifications.
Only with the signature of our material engineer, may the material be released
to the production line for manufacturing.
In-Process Inspection (Inspection Two)
The second inspection happens usually during the second or third week after an
order is issued to a factory. Without notifying the factory, our process
engineer walks directly into the production line to make sure the factory is
following our procedures. He/she measures and inspects the parts to ensure that
the procedures and quality instructions are being followed. If any problem is
found, our engineer has the power to stop the production and assist the factory
in solving the procedural or quality issue to a complete resolution. Only with
the signature of our onsite process engineer may the factory operator continue
with the production.
In-process inspection also serves the purpose of delivery control. If a process
engineer finds a serious problem, which may delay the completion of an order on
time, he/she will immediately notify Worldwide's California office for emergency
actions. After contacting the customer, the California office usually gives one
of the following instructions to our Shanghai office:
- - the customer accepts the postponed date from the factory;
- - the customer allows a few dates in the production cycle to be delayed,
but does not accept our proposed delivery date. In this case, our
Shanghai office either requests the factory to work overtime to finish
the order on time, or switches from ocean shipping to air shipping or
from air shipping to UPS express at our cost.
- - the customer does not approve a delay. In this case, we will require
the factory to run production at full capacity regardless of the cost
and change the shipping method from ocean to air or from air to UPS to
meet the schedule. If all the efforts are exhausted and we still
cannot finish that order, we will ship a partial order on time and
make up the difference in the shortest time frame possible.
Final Inspection (Inspection Three)
When the Shanghai office is informed by a factory that production and
inspections are completed, our inspection engineer goes to that factory with
quality inspection tools. If a factory does not have the required equipment for
an inspection, our inspector will open the boxes in the factory to take a random
sample and return to Shanghai with selected samples to our own facility for
inspection. The following is a typical inspection method for lots from 3,000 to
10,000 pieces.
We take 200 samples from evenly scattered boxes, and if the inspector finds one
piece defective, he will sample another 200 pieces. The lot will be rejected if
a defective piece is found in the second sampling. The average rate of rejection
due to defects for both a first and second sampling is five percent. Worldwide's
quality control
21
experience has helped us establish the following incentive
programs to motivate the factories to obtain our quality and time requirements.
Three Percent Incentive or Penalty Agreement with Manufacturers
(Incentive Program One)
To encourage a factory to effectively control quality on their own, we signed an
agreement with most of the factories producing our parts for either receiving
103% or 97% of the originally determined payment amount from Worldwide's
Shanghai office. If a lot costs $100,000 for Worldwide to buy and that lot is
rejected with proof by our inspector during the first inspection, the payment
will be reduced by 3%. The factory is going to receive a payment of $97,000.00
from Worldwide even if that lot is finally accepted after it has been re-worked.
Otherwise, if the first inspection is passed, the payment to the factory is
$103,000.00 instead of $100,000.00. So the difference is 3% ($3,000.00), which
is considered by Chinese factories as a large enough incentive to provide the
necessary quality control.
Incentive Rewarding Program With Worldwide Inspectors (Incentive Program Two)
The base salaries of our inspectors are very low compared to the base salaries
of inspectors in the United States. About 70% of our inspectors' income is
derived from incentive programs. If the lot is rejected by Worldwide's inspector
during the first inspection, the inspecting engineer will get one-third of the
$3,000.00, or $1,000.00. Even if the inspection he/she conducts is passed during
the first inspection, he/she will get a half of a percent of the value of that
shipment, as long as the shipment is eventually accepted by the customer.
Our practice has proven the above quality control procedures to be very
effective. This has allowed our rejection rates for the last few years to be
less than two percent
Other than rigid quality controls and incentive programs, another important
factor in attracting customers from the United States is the Kanban program. The
Kanban program is an inventory system that stocks at least one month's supply of
inventory needed to manufacture ordered parts. Thus, if Worldwide receives a
contract with a scheduled six months or more of deliveries, we will stock at
least one month's inventory in the California warehouse or a warehouse that is
close to the customer's facility so a twenty-four hour delivery turn around may
be accomplished. This process of stocking at least one month's worth of
inventory is maintained until the entire contract is completed. We have won many
new customers as a result of the Kanban inventory program. Using Kanban
inventory controls at our California warehouse, and in some cases, at the
warehouses located close to the customers' facilities, allows us to help
customers meet challenges with working capital returns, and the need to have
supply products necessary to complete manufacturing of those parts in a shorter
period of time.
22
Worldwide manages the entire production of its customers' products or
components. Worldwide's engineers maintain the highest levels of quality by
supervising all aspects of the manufacturing process. Worldwide's engineers
write the production and inspection procedures, obtain the materials, audit and
perform all of the in-progress and final inspections.
To fulfill customers' orders, Worldwide engages subcontractors located around
the Shanghai area of China. Worldwide receives a fifty percent (50%) down
payment from its customers for tooling necessary to produce the desired parts.
This money for tooling is paid to the factory in China selected to produce the
customer's order. Once the order for the customer is produced and accepted by
the customer, the customer is billed for the rest of the tooling as well as for
the parts. The customer has sixty (60) days to mail the full payment to
Worldwide. All of Worldwide's active subcontractors have received the
International Standard Organization-9000 certification. ISO-9000 certifications
are certificates issued by the International Manufacturing Board that rates the
quality of manufacturers on the basis of that factory producing consistent
quality parts. These certifications are issued to each factory after its
management receives the prerequisite training.
The unique business relationships between Worldwide and its subcontractors allow
Worldwide to offer its customers' lower manufacturing costs, and at the same
time maintain high standards of quality and meet delivery schedules.
Worldwide's success stems from the following factors:
Worldwide has a wide range of manufacturing capability as a result of
- - being able to handle almost everything in the hardware category of the hi-tech
industry;
- - providing engineering services, and
- - the ability to coordinate and plan for complete turnkey assemblies.
Worldwide's quality control is highly effective as a result of:
- - setting inspection criterion for manufacturers;
- - conducting material auditing, in process inspection, and the final inspection;
- - signing three percent incentive and penalty agreements with manufacturers, and
- - providing incentive-reward packages to Worldwide's quality control employees.
Worldwide's quick turn-around time compared with other offshore suppliers is
ensured by:
- - committing 60-75 days for completing difficult tooling and two-to-six weeks
for easy tooling;
- - committing 30-60 days for first delivery, and seven days for
the deliveries afterwards;
23
- - inspectors tracking production progress, and
- - signing three percent incentive and penalty agreements with manufacturers
Worldwide's pricing is competitive.
Worldwide offers:
- - significant flexibility towards customers' needs;
- - it hires local people to inspect the quality of the parts;
- - it arranges Kanban inventory for 24-hour delivery;
- - it responds quickly to customer questions and concerns.
Additionally, Worldwide has a customer reception office at its Shanghai
subsidiary which makes arrangements for its customers' airline tickets and
hotels at a discounted rate, along with providing local transportation and
language interpretation.
Worldwide is able to provide its customers with the considerable cost advantages
while eliminating the disadvantages of quality and delivery issues frequently
experienced by companies which have direct contracts with manufacturers in
China.
Since Worldwide primarily employs engineers and engages a broad variety of
subcontractors, Worldwide is able to manufacture parts for a broad range of
industries. As demand for manufacturing slows for a particular product, industry
or sector, Worldwide is able to remain flexible as a result of its being in a
position to pursue opportunities to manufacture other products. Even as the
United States' economy slowed down, from 2001 to 2002, Worldwide realized over
20% growth in net sales. Net sales in 2001 were $3,551,656 compared to
$4,434,213 in 2002. Net profit improved from $161,930 in 2001 to $425,542 in
2002, representing a 38% increase in profits.
There are no special governmental regulations or governmental approvals with
respect to our business.
Suppliers and Customers
Worldwide's largest suppliers are Shanghai Xinli Trading Company Ltd. and
Ningbo Hengda Metal Products Co. Ltd.
accounted for 50% or 709,504 of the total materials purchased by Worldwide
for the period ending September 30,
2003. In the year ending December 31, 2002 these material purchases accounted
for 50% or 1,382,504 or 54% of our
manufacturing supplies. As of December 31, 2001 these suppliers accounted
for 69% or 1,413,636 of the materials
purchased by Worldwide. The customers listed below represented approximately
39% of Worldwide's revenues both in
2002 and nine months ending September 30, 2003. Worldwide Manufacturing
has no agreements with any of these
suppliers."
Amount of
Sales Nine Amount of
24
Name of Months Ending % of Sales % of
Customer 09/30/03 Sales 2002 Sales
Joselyn Manufacturing
Co., LLC 990,620 17.8 753,816 17.1
Joslyn Sunbank, Inc. 525,697 9.5 339,079 9.2
Radio Waves Corp.
Smith Industry) 374,866 6.7 310,394 7.1
Teleflex Elctrical, Inc. 325,616 5.9 266,052 6.3
Competition
Worldwide strives to ensure quality and provide low cost to customers so that it
can remain competitive. The contract manufacturing service industry remains as a
strongly competitive industry. There are hundreds of companies, many larger than
Worldwide, that have substantially greater manufacturing, financial, research
and development, engineering and marketing resources. Worldwide Manufacturing is
a small competitor in this multi billion dollar industry. If overall demand for
contract manufacturing services should decrease, this could result in
substantial pricing pressure which would negatively affect revenue and net
profit for Worldwide.
Employees
Worldwide currently employs fifty six employees, including 30 staff engineers
and 13 administrative personnel at Worldwide's wholly owned subsidiary Intech in
Shanghi, China. The remaining 13 employees work at the California office in San
Bruno. Five of these employees are in sales with the remaining eight employees
working in support and administrative roles. All employees are full time.
Properties
On May 1, 2003, Worldwide entered into a 60 month lease for 6825 square feet of
office/ warehouse space located at 1142 Cherry Avenue in San Bruno, California.
The rent per month is $6893.25 with rent increasing three percent each year with
the last year's rent of the lease being $7758.41. The Company has office/
warehouse space located in Shanghai, China. On June 1, 2001, Shanghai Intech
Electro-Mechanical entered into a lease for $2,690 per month for approximately
1,800 square feet of rentable space. The term of this lease expires May 31, 2004
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS DISCLAIMER
REGARDING FORWARD LOOKING STATEMENTS
25
Certain statements in this prospectus which are not statements of historical
fact are what are known as "forward-looking statements," which are basically
statements about the future. For that reason, these statements involve risk and
uncertainty since no one can accurately predict the future. Words such as
"plans," "intends," "hopes," "seeks," "anticipates," "expects, "and the like,
often identify such forward looking statements, but are not the only indication
that a statement is a forward-looking statement. Such forward-looking statements
include statements concerning our plans and objectives with respect to our
present and future operations, and statements which express or imply that such
present and future operations will or may produce revenues, income or profits.
In evaluating these forward-looking statements, you should consider various
factors, including those described in this prospectus under the heading "Risk
Factors" beginning on page 4. These and other factors may cause our actual
results to differ materially from any forward- looking statement. We caution you
not to place undue reliance on these forward-looking statements. Although we
base these forward-looking statements on our expectations, assumptions, and
projections about future events, actual events and results may differ
materially, and our expectations, assumptions, and projections may prove to be
inaccurate. The forward-looking statements speak only as of the date hereof, and
we expressly disclaim any obligation to publicly release the results of any
revisions to these forward-looking statements to reflect events or circumstances
after the date of this filing.
FINANCIAL CONDITION
As of September 30, 2003, the current assets of Worldwide were $1,503,912
compared to current assets in year ending December 31, 2002 of $1,038,475. This
represents an increase of $465,437 or approximately 45%. The increase in current
assets was the result of increases in accounts receivables of $506,642 due to an
increase in customer orders. Current assets increased $192,274 or 23% from
December 31, 2001 to December 31, 2002. The current assets on December 31, 2002
were $1,038,475 compared to $846,201 on December 31, 2001. This increase was
primarily the result of inventory increasing from $0 to $112,898 due to
management's decision to establish inventory to create a faster turn-around for
customer orders.
Current liabilities at September 30, 2003 totaled $1,681,762 compared with
$963,114 at December 31, 2002. This represents an increase of $718,648 or 75%
increase in current liabilities due primarily to increases reflecting
fluctuations in trade accounts payable and short-term borrowing. On December 31,
2002 current liabilities were $963,114, and on December 31, 2001 current
liabilities were $1,054,145, or a decrease of $91,031, or 8% due to decreases in
accrued expenses.
Total assets were $2,342,951 at September 30, 2003 as compared with $1,443,162
on December 31, 2002. This increase of $900,789 or 62% was the result of the
acquisition of fixed assets for Intech in Shanghai, China of approximately
$400,000 in the first quarter of 2003 and the increase in current assets as
described above. On December 31, 2002, total assets were $1,443,162 compared to
total assets of $1,251,079 on
26
December 31, 2001. This is an increase of $192,083
or 15%. This was the result of increases in inventory of $112,898 as described
above, as well as an increase in equipment of $14,894.
RESULTS OF OPERATIONS
Net sales for the nine months ending September 30, 2003 to September 30, 2002
increased $1,580,547, or approximately 51%. Net profit for the nine months
ending September 30, 2003 was $388,416 compared to $373,757 for September 30,
2002. The increase of $14,659 or 4% was due to higher sales in nine months
ending September 30, 2003, offset by the decrease in gross margin for the nine
months ended September 30, 2003. Gross profit increased slightly by $14,158,
from $1,407,869 (46% of sales) for the nine months ended September 30, 2002 to
$1,422,827, (31% of sales) for the nine months ended September 30, 2003. The
profit margin decreased due to a single sale representing approximately 10% of
the period's volume at a 10% margin as a result of price competition in the
market. This sale was made to Grinn Semiconductor in the first quarter of 2003.
In hopes of attracting more lucrative contracts from Grinn Semiconductors,
Worldwide's management provided a bid with a 10% profit margin in order to
obtain the business. At this time there was considerable weakness in the
semiconductor industry and competition was intense with profit margins of
approximately 10%-12%. Since that time, profit margins have increased and there
has been a rebound in the semiconductor industry. It is not anticipated that
gross profit margin will decline in the future. The Company continues to
concentrate on obtaining orders that will provide a targeted 40% plus gross
margin, similar to that experienced in the years ending 2002 and 2001. Gross
margins in those periods were 43% and 42% respectively.
The costs of goods sold for the nine months ending September 30, 2003 was
$3,227,240 compared to $1,662,580 for the nine months ended Spetember 30, 2002.
This increase of $1,564,660, or 94%, was the result of higher sales as well as
the sale to Grinn Semiconductor as described above where only a 10% profit
margin was realized. Net profit in September 30, 2003 was $388,416 compared to
$425,542 or a decrease of $37,126 or 8% due to the sale to Grinn Semiconductor.
The general and administrative expenses for the nine months ending September 30,
2003 was $1,030,161 compared to $1,021,881 for the nine months ending September
30, 2002. The increase of $8,280 or 1% was due to increased personnel costs and
expenses associated with the Company becoming a public company.
For the year ended December 31, 2002 cost of goods sold was $2,560,193 compared
to cost of goods sold of $2,048,748 in the year ended December 31, 2001, an
increase of $511,445 or 25%, due to the increase in sales of $882,557 or 25%
from sales of $4,434,213 on December 31, 2002 compared to sales of $3,551,656 on
December 31, 2001.
27
Net profit on December 31, 2002 was $425,542 compared to net profit of $161,930
on December 31, 2001 or an increase of net profit of $263,612 or a 163%. This
increase in net profit was the result of the increase in sales of $511,445 as
described above.
Net sales for the year ended December 31, 2002 increased $882,557 over the year
December 31, 2001, an increase of 25%. Gross profit increased accordingly, from
$ 1,502,908 in 2001 to $1,874,020 in 2002, an increase of 25%. This was offset
slightly by an increase of $93,183 in general and administrative expenses,
resulting in an increase in net income of $263,612 for 2002 as compared with
2001. The general and administrative expenses for December 31, 2002 were
$1,440,720 compared to $1,347,537 in December 31, 2001 or an increase of $93,183
or 7%. This increase was the result of an increase in sales of $882,557 from
December 31, 2002 versus December 31, 2001. Additional personnel were hired to
handle the increase in administrative work.
Net profits were also affected by an increase of $8,280 in general and
administrative expenses for the nine months September 30, 2003 as compared with
September 30, 2002. These general and administrative costs include increased
personnel costs and expenses associated with the Company becoming a public
company. Upon consummation of the stock transfer and exchange with Tabatha III,
effective September 30, 2003, the election by Worldwide Manufacturing USA, Inc.
to be taxed at the shareholder level was terminated. The termination of the
Company's S election will affect profitability and result in increased
liabilities in future periods as compared with the historical financial
statements, since federal and state income tax will become a corporate expense.
There will be a lesser impact on net equity in future periods since the
historical financial statements include dividend distributions taken by the
Company's shareholders to offset income taxes attributable to corporate earnings
taxed on their personal returns.
LIQUIDITY
If a significant increase in demand for our products should arise, Worldwide has
established a $250,000 line of credit with Citibank. Under the terms of a
revolving credit agreement with Citibank dated March 5, 2002, Worldwide may
borrow up to $250,000 at 1.5% above the Bank's prime interest rate through March
5, 2004 (5.5% at March 10, 2004). The balance on the line of credit on March 10,
2004 is zero. There is an annual fee of $1,250. Funds from these borrowing may
be used for any purpose. The revolving line of credit is secured by all assets
of Worldwide Manufacturing USA, Inc., and guaranteed by its officers. The amount
borrowed as of September 30, 2003 was $38,685 at an interest rate of 5.5%. At
September 30, 2003, $211,315 was available on this line of credit. In addition,
net profits of the Company will be used in order to provide capital for the
expansion of inventory held for the convenience of customers, and for acquiring
additional equipment, if needed.
The Company also has an unsecured credit line with Key Bank accruing interest at
6% through November 18, 2003. The amount of the unsecured line of credit was
$50,000. Worldwide did not renew this line of credit and repaid Key Bank in full
on September 30, 2003.
28
Worldwide from time to time borrows money from Jimmy and Mindy Wang. On June 30,
2003, Jimmy and Mindy Wang loaned Worldwide $174,751 for operating capital for
June 30, 2003. This Promissory Note accrues interest at the rate of six percent
per year, with a due date of June 30, 2005. This note was paid in full as of
September 30, 2003. Jimmy and Mindy Wang are under no legal obligation to loan
monies to Worldwide, and there exists no agreement for a revolving line of
credit between Jimmy and Mindy Wang and the Company.
Operating cash flows declined from December 2001 to December 2002. This is
primarily attributable to management's decision to build up an inventory of
frequently ordered parts for certain of its larger customers. Worldwide also
experienced an increase in accounts receivable attributable to a large customer
not paying for a significant December shipment until the first week of 2003. The
month of December 2002 also saw increased purchases from three of Worldwide's
major customers as a result of marketing incentives. To the extent that it is
possible for Worldwide to delay, without penalty , the payments of certain
vendors, Worldwide will do so in order to compensate for cash flow trends in
receivables and inventory. Additionally, Worldwide has lines of credit from a
bank and has received short term working capital loans from its officers as
necessary.
During the nine month periods ending September 30, 2003, net cash provided by
operations was $175,237, as compared with $152,978 used in the comparative
period of 2002. During the fiscal years ending December 31, 2002 and 2001, net
cash provided by operations was $63,729 and $393,290, respectively. This
reflects Worldwide's increased volume resulting in larger receivables and
payables and an overall increase in inventory levels in 2003. Worldwide has
funded this through increased payment terms with its vendors.
PLAN OF OPERATION
Worldwide is presently exploring doing joint ventures with factories in China.
Only preliminary discussions have taken place with several factories; however,
no agreements, commitments or further discussions have taken place.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
From time to time, Jimmy and Mindy Wang may loan money to Worldwide. The Wangs
loaned $174,751 on June 30, 2003 for operating capital. As of September 30,
2003, the total outstanding and unpaid on such loans was $ 0 and at December 31,
2002 it was $54,000, plus interest at 6%. As of the date of this prospectus no
additional monies had been loaned. This note was from Jimmy and Mindy Wang,
President and Secretary, respectively. Jimmy and Mindy Wang are husband and
wife.
At December 31, 2002, the Company is obligated in the amount of $150,000 to
Jimmy and Mindy Wang pursuant to a deferred compensation agreement applicable to
the years
29
2000, 2001 and 2002. As of the date of this prospectus this amount has
been paid down $10,000, resulting in a balance of $140,000. The deferred
compensation obligation is payable December 31, 2005, plus accrued and unpaid
interest at 10%. As of the date of this prospectus, no additional amounts are
owed to the Wangs.
Robert Smith, then President of Tabatha III, Diane Thelen, then Secretary and
Treasurer of Tabatha III and John Ballard, a major shareholder of Tabatha III
owning more than 10% of Tabatha III, are the founders and promoters of the blank
check company (Tabatha III, Inc.). The above individuals purchased 300,000
shares for cash of $.005 per share and were issued 2,700,000 shares, or $13,500,
for services on or about March 17, 2000, at the time Tabatha III, Inc. was
incorporated under the laws of Colorado.
On June 15, 2003, there were two issuances of stock for services in the amount
of 799,500 shares at $0.005, or $3862.50, to Diane Thelen and John Ballard then
officers and directors of Tabatha III. The shares were issued under the terms of
consulting agreements dated June 1, 2003, pursuant to which Tabatha III engaged
John Ballard and Diane Thelen as consultants to assist in the structuring and
negotiations for a target company suitable to be merged into Tabatha III. The
value of these services was $3,862.50.
It was also agreed in the consulting agreements that each consultant would be
required to pay their own traveling expenses; however, when the Share Exchange
Agreemnt was executed, these consulting agreements were mutally cancelled by
Tabatha III, John Ballard and Diane Thelen. Pursuant to the Share Exchange
Agreement dated September 30, 2003, Tabatha III issued 27,900,000 shares of its
common stock to Jimmy and Mindy Wang in exchange for 100% or 10,000 shares of
the outstanding shares of Worldwide. This issuance of 27,900,000 shares
represented 93% of Tabatha III's outstanding shares.
Under the terms of the Share Exchange Agreement, Tabatha III was to have
outstanding 2,100,000 shares, or 7% of the outstanding shares post acquisition.
Since prior to the Share Exchange Agreement Tabatha III had 10,762,000 shares
outstanding, cetain control persons, officers and directors of Tabatha III who
included John Ballard, Diane Thelen and Robert Smith voluntarily surrendered
8,662,000 shares as of September 30, 2003. As part of this surrender of common
stock, John Ballard and Diane Thelen agreed to cancel the 799,500 shares
issuable under the June 1, 2003 consulting agreements. The services provided by
John Ballard and Diane Thelen to Tabatha III were donated to the company.
Additionally John Ballard paid all travel expenses from his personal resources,
as well as a $3,000 for legal services to a non-affiliated law firm for the
review of the Share Exchange Agreement. The directors, officers and control
persons of Tabatha III cancelled their shares without any additional
consideration being paid to them in order to avoid effecting a reverse stock
split and reducing the shares held by non-control shareholders of Tabatha III
for the best interests of such shareholders.
On December 4, 2000, Kip Pedrie, then a director of Tabatha III, was issued
warrants to purchase 2,660,000 shares of common stock at $.05 per share. On
March 23, 2003 Kip
30
Pedrie resigned from the Board of Directors of Tabatha III
due to increase job and family responsibilities. He voluntarily cancelled these
warrants since he could not fulfill his duties to Tabatha III.
MARKET FOR COMMON STOCK AND RELATED STOCKHOLDER MATTERS
There is no established market for our shares. Our stock is not yet quoted on
the OTC Bulletin Board or on any other public market and we have not applied for
listing or quotation on any public market.
We currently have a total of 30,000,000 shares outstanding, all of which
constitute "restricted securities" as that term is defined in Rule 144 under the
Securities Act of 1933. A total of 210,000 of our presently issued and
outstanding shares which consist of shares held by persons who were shareholders
of Tabatha III Inc., prior to the date of completion of the share exchange
transaction with Worldwide, Inc., may currently be eligible for resale in
accordance with the provisions of Rule 144 by virtue of having been held for the
required minimum holding period of one year. However, a recent SEC
interpretation indicated that, in certain circumstances, Rule 144 is not
available for resales of shares which were originally issued to promoters or
affiliates of blank check companies. To this extent the holders of these shares
may not rely on Rule 144 to make resales, such shares may be offered and sold
only pursuant to an effective registration statement.
On December 4, 2000, Kip Pedrie, a previous director of Tabatha III, was issued
warrants to purchase 2,660,000 shares of common stock at $.05 per share. On
March 23, 2003 Kip Pedrie resigned from the Board of Directors of Tabatha III
due to increase job and family responsibilities. He voluntarily cancelled his
warrants since he could not fulfill his duties to Tabatha III.
As of September 30, 2003, there are 37 shareholders of record of Worldwide'
common stock. There are no preferred shares of stock issued or outstanding
warrants. No dividends have been paid by Tabatha III, Worldwide Manufacturing,
USA, Inc., or Intech to date. Worldwide does not expect to pay dividends in the
forseeable future.
EXECUTIVE COMPENSATION
Worldwide USA pays annual salaries of $60,000 to Jimmy Wang, President, $36,000
to Mindy Wang, Controller, and beginning in September, 2003, an annual salary of
$24,000 will be paid to John Ballard, Chief Financial Officer. Stock awards and
options will be decided by the Board of Directors at a later date based on
fiscal 2003 financial performance. There are no employment agreements between
the Worldwide and its officers and directors.
Presently, no board member, officer, director or employee has any stock options.
There are no retirement plans in place.
31
Summary Compensation Table
Annual Securities
Principal Other Stock Underlying LTIP Other
Name Position Year Salary Bonus Compensation Awards Options Payouts Comp.
Jimmy Wang President, CEO 2000 $42,000 0 $102,836(1) 0 0 0 $25,000(2)
Jimmy Wang President, CEO 2001 $60,000 0 $127,342(1) 0 0 0 $25,000(2)
Jimmy Wang President, CEO 2002 $55,000 0 $103,953(1) 0 0 0 $25,000(2)
Jimmy Wang President, CEO 2003 $60,000 0 $124,346(1) 0 0 0 $0
Mindy Wang Secretary, Treasurer2000 $36,000 0 $102,836(1) 0 0 0 $25,000(2)
Mindy Wang Controller 2001 $36,000 0 $127,342(1) 0 0 0 $25,000(2)
Mindy Wang Secretary, Treasurer2002 $36,000 0 $103,953(1) 0 0 0 $25,000(2)
Mindy Wang Secretary, Treasurer2003 $36,000 0 $124,346(1) 0 0 0 $0
John Ballard Chief Financial Officer2003 $10,000 0 $0(1) 0 0 0 $0(3)
(1) Distributions of S-Corporation income and interest on deferred
compensation arrangement.
(2) Deferred compensation accrued for the year, payable in 2005. In
the periods from fiscal year 2000 to
2002 it was a Worldwide USA policy to provide $25,000 to each member
of the Board of Directors of Worldwide for the additional
responsibilities and duties as board members. As of September 30, 2003
with the transition from a Subchapter S Corporation to a C Corporation
it was decided by management of Worldwide USA that $25,000 per year in
compensation will no longer be given to board members.
(3) John Ballard received compensation from Worldwide only in 2003.
There are no non-competition agreements with any of Worldwide's employees.
32
TRANSFER AGENT
The Company's Transfer Agent is Computershare Trust Company, Inc., 350 Indiana
Street, Suite 800, Golden, Colorado 80401.
AVAILABLE INFORMATION
We are subject to the reporting requirements of the Exchange Act and the rules
and regulations promulgated thereunder, and, therefore, we file reports,
information statements or other information with the Securities and Exchange
Commission. This prospectus is part of a Registration Statement which we filed
with the Securities and Exchange Commission in accordance with its rules and
regulations. Copies of the registration statement, including the exhibits to the
Registration Statement and other material that is not included herein, may be
inspected, without charge, at the Public Reference Section of the Commission at
Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, DC 20549. Copies
of such materials may be obtained at prescribed rates from the Public Reference
Section of the Commission at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, DC 20549. Information on the operation of the Public Reference Room
may be obtained by calling the Commission at 1-800-SEC-0330. In addition, the
Commission maintains a site on the World Wide Web at http://www.sec.gov that
contains reports, information and information statements and other information
regarding registrants that file electronically with the Commission.
LEGAL MATTERS
The legal issuance of the shares being offered by this prospectus has been
passed upon by the law firm of Hand & Hand, a professional corporation, Dana
Point, California.
33
FINANCIAL STATEMENTS
INDEX TO FINANCIAL STATEMENTS
WORLDWIDE MANUFACTURING USA, INC. AND SUBSIDIARY
Audited Financial Statements for the Years Ended December 31, 2002 and 2001:
Report of Independent Public Accountants 35
Consolidated Balance Sheets 36
Consolidated Income Statements 38
Consolidated Statements of Cash Flow 40
Notes to Consolidated Financial Statements 42
Unaudited Financial Statements for the
nine month period ended September 30, 2003 and 2002:
Consolidated Balance Sheet (Unaudited) 50
September 30, 2003 Consolidated Income Statements (Unaudited) for
the three and nine month periods ended
September 30, 2003 and 2002 51
Consolidated Statements of Cash Flows (Unaudited) for the
nine months ended September 30, 2003 and 2002 52
Notes to financial statements 53
34
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors and Stockholders of
Worldwide Manufacturing USA, Inc.
San Bruno, CA
We have audited the accompanying consolidated balance sheets of Worldwide
Manufacturing USA, Inc. as of December 31, 2002 and 2001, and the related
consolidated statements of income and cash flows for each of the years then
ended. 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 audit. We conducted our audit in accordance with
auditing standards generally accepted in the United States of America. 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
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion. In our
opinion, the financial statements referred to above present fairly, in all
material respects, the consolidated financial position of Worldwide
Manufacturing USA, Inc. as of December 31, 2002 and 2001, and the results of its
operations and its cash flows for each of the years then ended in conformity
with accounting principles generally accepted in the United States of America.
Denver, Colorado August 29, 2003
/s/ Comiskey & Company
PROFESSIONAL CORPORATION
35
Worldwide Manufacturing USA Inc. and Subsidiary
CONSOLIDATED BALANCE SHEET
December 31, 2002 and 2001
ASSETS 2002 2001
---- ----
CURRENT ASSETS
Cash & cash equivalents $ 215,332 $ 378,226
Accounts receivable 677,868 451,710
Inventories 112,898 -
Other current assets 32,377 16,265
------- ------
Total Current Assets 1,038,475 846,201
INVESTMENTS AND LONG-TERM RECEIVABLES
Advances to suppliers 111,594 130,000
Other long term receivables 169,565 166,244
-------- -------
281,159 296,244
Total Property and Equipment (net) 123,528 108,634
-------- -------
Total Assets $ 1,443,162 $ 1,251,079
------------ -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable to shareholders $ 54,000 $ -
Lines of credit 57,255 99,983
Accounts payable 816,008 685,053
Accrued expenses 35,851 123,145
Other current liabilities - 145,964
-- -------
Total Current Liabilities 963,114 1,054,145
LONG-TERM LIABILITIES - Deferred compensation payable 150,000 100,000
36
STOCKHOLDERS' EQUITY
Common stock, no par value, 100,000 shares authorized,
10,000 shares issued and outstanding 34,871 34,871
Additional paid-in capital - -
Retained earnings 295,177 62,063
-------- ------
Total Stockholders' Equity 330,048 96,934
-------- ------
Total Liabilities and Stockholders' Equity $ 1,443,162 $ 1,251,079
------------ -----------
The accompanying notes are an integral part of the financial statements.
37
Worldwide Manufacturing USA Inc. and Subsidiary
CONSOLIDATED INCOME STATEMENTS
For the years ended December 31, 2002 and 2001
2002 2001
----- ----
Net sales $ 4,434,213 $ 3,551,656
Cost of goods sold 2,560,193 2,048,748
---------- ---------
Gross profit 1,874,020 1,502,908
Other operating revenue 929 -
---- -
1,894,849 1,502,908
Operating expenses
General & administrative 1,440,720 1,347,537
---------- ---------
1,440,720 1,347,537
Operating income(loss) 454,129 155,371
Financial income (expenses)
Interest income 3,868 21,724
Interest expense (17,144) (18,790)
Government grant 4,589 3,625
------ -----
(8,687) > 6,559
------- ------
Net Income (loss) 425,542 161,930
Retained earnings
Balance, beginning of period 62,063 139,054
Less shareholder distributions 192,428 238,921
-------- -------
Balance, end of period $ 295, 177 $ 62,063
---------- --------
38
The accompanying notes are an integral part of the financial statements.
39
Worldwide Manufacturing USA Inc. and Subsidiary
CONSOLIDATED STATEMENTS OF CASH FLOW
For the years ended December 31, 2002 and 2001
2002 2001
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 425,542 $ 161,930
Adjustments to reconcile net income (loss) to net
cash flows from operating activities
Loss on disposal of fixed assets 3,381 724
Depreciation 27,167 19,328
(Increase) decrease in accounts receivable (211,053) (120,530)
(Increase) decrease in prepaid assets (16,112) (7,850)
(Increase) decrease in inventories (112,898) -
Increase (decrease) in accounts payable 180,960 116,516
Increase (decrease) in other accrued liabilities (87,659) 173,124
Increase (decrease) in other liabilities (145,964) 50,000
--------- ------
Net cash flows from operating activities 63,729 393,290
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of fixed assets 45,467 91,975
------- ------
Net cash flows from investing activities 45,467 91,975
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from notes payable and credit lines 11,272 ( 6,825)
Shareholder withdrawals (192,428) (238,921)
--------- ---------
Net cash flows from financing activities (181,156) (245,746)
--------- ---------
NET INCREASE (DECREASE) IN CASH (162,869) 55,569
CASH AT BEGINNING OF YEAR 378,201 322,657
-------- -------
CASH AT END OF YEAR $ 215,332 $ 378,226
---------- ---------
Supplemental Disclosures
Cash Paid During the Year for:
Interest $ 15,453 $ 17,824
--------- --------
The accompanying notes are an integral part of the
financial statements.
40
Worldwide Manufacturing USA, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2002 and 2001
1. Description of Business and Summary of Significant Accounting Policies
Description of Business
Worldwide Manufacturing USA, Inc., a California corporation is a manufacturing
engineering firm and international contract manufacturer, using factories in
China. Worldwide provides services to several companies in the U.S., primarily
the aerospace, automotive, and electronics industries. Worldwide employs thirty
staff engineers through its wholly-owned subsidiary, Shanghai Intech
Electro-Mechanical Products Co, Ltd. ("Intech"). Intech provides technical
advisory, design, delivery, material procurement, and manufacturing quality
control services. Worldwide used its engineers to write the production and
inspection procedures, manages the production process, conducts quality control
audits and in-progress and final inspections of the customers' products.
Principles of Consolidation The accompanying financial statements include
Worldwide Manufacturing USA, Inc. and its wholly-owned subsidiary, Intech.
Intercompany transactions have been eliminated in consolidation.
Property,Equipment and Depreciation Buildings and equipment are capitalized at
historical
cost, and are depreciated over the useful lives of the property and equipment as
follows:
Buildings 25 years
Land improvements 20 years
Industrial Equipment 15 years
Furniture and fixtures 10 years
Vehicles 6 years
Electronic equipment/computers 5 years
42
Repairs and Maintenance
Repairs and maintenance of a routine nature are charged as incurred to periodic
income, while those which extend or improve the life of existing assets are
capitalized. Inventory Inventory, consisting of raw materials, work in process
and finished goods inventory of manufactured products, is
stated at the lower of cost or market on a first-in, first-out basis.
Revenue Recognition
Recognition of Revenue - Income from sales of goods is recognized when the
orders are completed and shipped, provided that collection of the resulting
receivable is reasonably assured. Substantially all of the Company's goods are
shipped F.O.B. shipping point. Amounts billed to customers are recorded as sales
while the shipping costs are included in cost of sales. The Company's return
policy on defective parts is as follows: Custom parts may only be exchanged for
replacement parts within 30 days of the invoice. Catalogue parts, which can be
resold, may be exchanged for replacement parts or for a refund. Revenue from
non-refundable customer tooling deposits is recognized when the materials are
shipped or when the deposit is forfeited, whichever is earlier.
Advertising Costs
Costs associated with advertising are expensed in the year incurred
Income Taxes
The shareholders of the Company have elected for it to be taxed as
a "Subchapter S" corporation, consequently, no income taxes are recorded in the
financial statements.
Intangibles
Patent costs and other identifiable
intangibles are capitalized, and are amortized over useful lives of generally 15
years or less. Effective in 2001, Goodwill is not amortized, but is assessed for
impairment annually.
Research and Development
Research and development costs are expensed as incurred.
43
Cash and Equivalents
For purposes of the statement of cash flows, the Company considered all highly
liquid debt instruments purchased with an initial period of three months or less
to be cash equivalents. Non-cash Equity Transactions Shares of other equity
instruments issued for non-cash consideration will be recorded at the fair value
of the consideration received, or at the value of the stock given, considered in
reference to contemporaneous cash sales of stock.
Foreign Currency Transactions and Translation
Transaction gains and losses result from a change in exchange rates between the
functional currency and the currency in which a foreign currency transaction is
denominated. They represent an increase or decrease in (a) the actual functional
current cash flows realized upon settlement of foreign currency transactions and
(b) the expected functional currency cash flows on unsettled foreign currency
transactions. All transaction gains and losses are included in other income or
expense. For all years presented, sales to customers were primarily denominated
in U.S. dollars.
Assets and liabilities of Shanghai Intech Electro-Mechanical
Products Co, Ltd. are translated into the US dollar at the prevailing exchange
rate in effect at each period end. Revenue and expenses are translated into the
US dollar at the average exchange rate during the reporting period. Contributed
capital is translated into the US dollar at the historical exchange rate when
capital was injected. Any difference resulting from using the current rate,
historical rate and average rate in determination of retained earnings is
accounted for as a translation adjustment and reported as part of comprehensive
income or loss in the equity section. Translation gains and losses have not been
material in any year.
Fair Value of Financial Instruments
Unless otherwise
indicated, the fair value of all reported assets and liabilities which represent
financial instruments (none of which are held for trading purposes) approximate
the carrying values of such instruments.
Estimates in Financial Statements
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect reported amounts. The more significant
estimates include: useful lives and residual values for fixed assets, fair
market values for inventory, goodwill and intangible impairment tests, reserves
for warranty, returns, and product liability losses, and credit losses.
44
2.
Nature of Operations, Risks, and Uncertainties
Significant Concentrations
The
Company has the following concentrations of business with customers and
suppliers constituting greater than 10% of the Company's gross sales and
purchasing volume:
2002 2001
---- ----
Customer A 15% 23%
Customer B 14% 0%
Customer C 6% 11%
Vendor A 39% 49%
Vendor B 15% 20%
The Company's customers in the aerospace,
telecommunications, automotive, and electronics industries comprised the
majority of its sales in 2002 and 2001. These four industries counted for 68%
and 80% of the Company's sales, respectively, in 2002 and 2001.
As part of the
production process, the Company may be required by its suppliers to advance
funds for tooling and other pre-production costs. Such tooling is in most cases
owned by the suppliers, and is of value primarily for the specific needs of the
Company's customers. The Company in turn requires its customers to provide a
non-refundable down payment to cover such start up costs. In the event that a
supplier is unable to fulfill its production agreements with the Company,
management believes that other suppliers can be found for the Company's
products. However, a change in suppliers would cause a delay in the production
process, and could result in loss of tooling deposits and other supplier
advances, which could negatively affect the Company's operating results.
3.
Accounts and Notes Receivable
The following is a summary of receivables at December 31,
2002 2001
---- ----
Trade Accounts $677,868 $ 451,710
Advances to Suppliers 111,594 130,000
Refundable GST taxes 169,565 166,244
At December 31, 2002 and 2001, accounts receivable in the amounts of $669,414
and $493,952 respectively, were
pledged as collateral in connection with bank loans.
45
As more fully described in Note 2, the Company from time to time advances funds
to suppliers under short- term agreements. The loans are generally unsecured and
may carry interest at the prevailing market rate for short-term instruments.
These receivables are pledged as collateral for the Company's bank loans.
The
Company sells its goods and services internationally, although the majority of
its revenue derives from customers in the United States. As such, the Company is
susceptible to credit risk on accounts and notes receivable from customers in
that region. Additionally, a significant portion of the company's U.S. customers
consists of entities in the aerospace industry, which has proven to be sensitive
to swings in the economic cycle. Generally, the Company does not obtain security
from its customers in support of accounts receivable.
4. Property and Equipment
The following is a summary of property and equipment at cost, less accumulated
depreciation:
2002 2001
---- ----
Vehicles 93,168 75,392
Furniture & fixtures 4,496 4,496
Equipment 69,777 55,991
Software 14,298 14,298
Other 1,165 1,165
Less: Accumulated depreciation (59,376) (42,708)
------- --------
Total $ 123,528 $ 108,634
Depreciation expense charged to operations was $27,167
and $19,376 in 2002 and 2001, respectively.
5. Notes Payable and Long-term Debt
Under the terms of a revolving credit agreement with a bank dated March 5, 2002,
the Company may borrow up to $250,000 at 1.5% above the bank's prime interest
rate through March 5, 2004 (5.75% at December 31, 2002.) Funds from these
borrowings may be used for any purpose. The revolving line of credit is secured
by all assets of Worldwide Manufacturing USA, Inc. and guaranteed by its
officers. At December 31, 2002, $242,745 was available on this line of credit.
The Company also has an unsecured credit line with a bank totaling $50,000,
which was fully drawn with none available at December 31, 2002.
46
6. Lease
The
Company leases its office space and certain vehicles and equipment under
non-cancelable operating leases. The office lease requires increasing annual
payments plus a share of operating costs. Minimum future rental payments under
non-cancelable operating leases having remain terms in excess of one year as of
December 31, 2002 for each of the net five years and in the aggregate are:
Amount
2003 $ 52,611
2004 77,323
2005 74,040
2006 75,184
2007 68,463
Subsequent to 2007 23,045
Total minimum future rental payments $ 370,666
7. Pensions
The Company established SEP plan for the benefit of all full time employees.
Contributions to the plan are
limited to a statutory amount per employee. Pension expense was $0 and $20,000
for 2002 and 2001, respectively.
8. Related Party Transactions
From time to time, the Company receives loans from its shareholders. As of
December 31, 2002, the balance due to
the shareholders was $54,000. The loan is unsecured and due on demand.
At December 31, 2002, the Company is obligated in the amount of $150,000 to its
shareholders pursuant to a deferred compensation agreement applicable to the
years 2000, 2001 and 2002. The deferred compensation obligation is payable
December 31, 2005, plus accrued and unpaid interest at 10%.
The Company's
officers are guarantors on the line of credit.
9. Subsequent Events
In 2003, the
Company received loans from its shareholders in the amount of $180,751 and
$40,000 in February and March 2003, respectively. These amounts were used to pay
accounts payable to vendors, as well as for general operating purposes, and have
since been repaid.
47
Subsequent to year-end, the Company incurred installment debt
to finance the acquisition of equipment totaling $36,736.
10. Newly Issued
Accounting Pronouncements
In June 2002, the FASB issued SFAS 146 "Accounting for
Costs Associated with Exit or Disposal Activities," effective for exit or
disposal activities that are initiated after December 31, 2002. Under SFAS 146,
a liability for the cost associated with an exit or disposal activity is
recognized when the liability is incurred. Under prior guidance, a liability for
such costs could be recognized at the date of commitment to an exit plan. The
provisions of SFAS No. 146 are required to be applied prospectively after the
adoption date to newly initiated exit activities, and may affect the timing of
recognizing future restructuring costs, as well as the amounts recognized.
Adoption of SFAS 145 is not expected to have a material impact on the Company's
consolidated financial statements.
In November 2002, the FASB issued FASB
Interpretation No. 45 ("FIN 45"), Guarantor's Accounting and Disclosure
requirements for Guarantees, Including Indirect Guarantees of Indebtedness of
Others." FIN 45 requires that a liability be recorded in the guarantor's balance
sheet upon issuance of a guarantee. In addition, FIN 45 requires disclosures
about the guarantees that an entity has issued, including a roll-forward of the
entity's product warranty liabilities. Adoption of FIN 45 did not have a
material impact on the Company's consolidated financial statements.
In December
2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based Compensation,
Transition and Disclosure." SFAS 148 provides alternative methods of transition
for a voluntary change to the fair value based method of accounting for
stock-based employee compensation. SFAS 148 also requires that disclosures of
the pro forma effect of using the fair value method of accounting for
stock-based employee compensation be displayed more prominently and in a tabular
format. Additionally, SFAS 148 requires disclosure of the pro forma effect in
interim financial statements. The transition and annual disclosure requirements
of SFAS 148 are effective for fiscal years ending after December 15, 2002. The
Company has no reportable stock-based compensation agreements in place at
December 31, 2002.
In January 2003, the FASB issued Interpretation No. 46 ("FIN
46"), Consolidation of Variable Interest Entities, an Interpretation of ARB No.
51. FIN 46 requires certain variable interest entities to be consolidated by the
primary beneficiary of the entity if the equity investors in the entity do not
have the characteristics of a controlling financial interest or do not have
sufficient equity at risk for the entity to finance its activities without
additional subordinated financial support from other parties. FIN 46 is
effective for all new variable interest entities created or acquired after
January 31, 2003. For variable interest entities created or acquired prior to
February 1, 2003, the provision of FIN 46 must be applied for the first interim
or annual period beginning after June 15, 2003. The Company is currently
evaluating potential effect of FIN 46 on its operating results and financial
position.
48
11. Segment Information The Company's operations are classified into
two principal reportable segments that provide different products or services.
Worldwide Manufacturing USA, Inc. purchases and sells manufactured goods from
China procured by its subsidiary, Intech. Intech provides technical advisory,
design, delivery, material procurement, and manufacturing quality control
services. Separate management of each segment is required because each business
unit is subject to different marketing, production, and technology strategies,
and because of the geographic location of each entity.
Segmental Data - 2002
Reportable Segments
(amounts in thousands)
WWMUSA Intech Total
External revenue $ 4,392 $ 42 $ 4,434
Intersegment revenue - 1,388 1,388
Interest income 4 - 4
Interest expense 15 2 17
Depreciation 10 17 27
Net profit (loss) 461 (16) 425(1)
Assets
Expenditures for long-lived assets - 33 33
(1) Intercompany profit was eliminated in consolidation.
49
Worldwide Manufacturing USA Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEET
September 30, 2003
(Unaudited)
ASSETS
CURRENT ASSETS
Cash & cash equivalents $ 42,965
Accounts receivable 1,184,510
Inventories 234,054
Other current assets 42,383
---------- ------
Total Current Assets 1,503,912
INVESTMENTS AND LONG-TERM RECEIVABLES
Advances to suppliers 44,233
Other long-term receivables 251,379
295,612
Total Property and Equipment 543,427
-------- -------
Total Assets $ 2,342,951
= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Lines of credit 46,168
Current maturities of installment debt 7,144
Accounts payable 1,327,981
Accrued expenses 38,706
Other current liabilities 261,763
-------- -------
Total Current Liabilities 1,681,762
Long-term debt, less current maturities 26,186
Deferred compensation payable 150,000
STOCKHOLDERS' EQUITY
Common stock, no par value; 100,000,000 shares authorized;
30,000,000 shares issued and outstanding 34,871
Retained earnings 450,132
Total Stockholders' Equity 485,003
Total Liabilities and Stockholders' Equity $ 2,342,951
= =============
50
Worldwide Manufacturing USA Inc. and Subsidiaries
CONSOLIDATED INCOME STATEMENTS For
the three and nine months ended September 30, 2003
and 2002
(Unaudited)
For the three months ended For the nine months ended
2003 2002 2003 2002
Net sales $ 2,103,730 $ 891,605 $ 4,650,067 $ 3,069,520
Cost of goods sold 1,419,008 503,531 3,227,240 1,662,580
------------------------------------------------------------------------
Gross profit 684,722 388,074 1,422,827 1,406,940
Other operating revenue
- - - 929
-- -- -- ---
388,074 1,422,827 1,407,869
----------- ------------------------------------------------------
684,722
Operating expenses
General & administrative 408,158 1,030,161 1,021,881
----------- ------------------------------------------------------
340,977
408,158 1,030,161 1,021,881
----------- ------------------------------------------------------
340,977
-------
Operating income(loss)
343,745 (20,084) 392,666 385,988
-------- -------- -------- -------
Financial income (expenses)
Interest income 2,000 1,262 11,711 3,180
Interest expense
(5,756) (5,672) (15,961) (15,411)
------- ------- -------- --------
(3,756) (4,410) (4,250) (12,231)
------- ------- ------- --------
Net Income (loss) 339,989 (24,494) 388,416 373,757
Retained Earnings
Balance, beginning of period 335,850 459,537 295,177 62,063
Less shareholder distributions
225,707 82,031 233,461 82,808
-------- ------- -------- ------
Balance, end of period $ 450,132 $ 353,012 $ 450,132 $ 353,012
=================== ====================================================
Earnings per share - basic $ $ $ $
= =============== ============== ============== =
0.01 (0.00) 0.01 0.01
===== ====== ===== ====
Weighted average shares outstanding (1) 30,000,000 30,000,000 30,000,000 30,000,000
(1) gives effect to acquisition by Tabatha III on September 30, 2003.
51
Worldwide Manufacturing USA Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOW
For the nine months ended September 30, 2003 and 2002
(Unaudited)
2003 2002
---- ----
Cash Flows From Operating Activities
Net income $ 388,416 $ 373,757
Adjustments to reconcile net income to net
cash provided (used) by operating activities
Depreciation 39,515 23,721
(Increase) decrease in accounts receivable (775,166) (95,986)
(Increase) decrease in notes receivable 61,590 18,406
(Increase) decrease in installment debt 7,145
-
(Increase) decrease in prepaid assets (8,558) (26,462)
(Increase) decrease in inventories (121,156) (78,813)
Increase (decrease) in accounts payable 579,509 (229,589)
Increase (decrease) in other accrued liabilities (138,012)
----------------- ------ ---------
3,942
Net Cash Provided (Used) by Operating Activities 175,237 (152,978)
Cash Flows From Investing Activities
Purchases of fixed assets (34,241)
(75,242)
Net Cash Provided (Used) by Investing Activities (75,242) (34,241)
Cash Flows From Financing Activities
Proceeds from long-term debt 26,187
-
Line of credit (35,566)
-
Repayment of short-term debt (65,088) 0
Shareholders distributions (233,461) (82,808)
----------------------------- --------
Net Cash Provided (Used) by Financing Activities (272,362) 19,126
------------------------------ ------
NET INCREASE (DECREASE) IN CASH (172,367) (168,093)
CASH AND CASH EQUIVALENTS BEGINNING OF PERIOD 215,332 378,226
---------------------------- -------
CASH AND CASH EQUIVALENTS END OF PERIOD $ 42,965 $ 210,133
====================== =============
Supplemental Disclosures
Cash Paid During the Year for:
Interest $ 15,961 $ 15,411
====================== =============
52
Worldwide Manufacturing USA, Inc. and Subsidiaries
NOTES TO FINANCIAL STATEMENTS
September 30, 2003
(unaudited)
1. Management's Representation of Interim Financial Information
- --------------------------------------------------------------------------------
The accompanying financial statements have been prepared by Worldwide
Manufacturing USA, Inc. without audit
pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting
principles have been condensed or omitted as allowed by such rules and
regulations, and management believes that
the disclosures are adequate to make the information presented not
misleading. These financial statements
include all of the adjustments which, in the opinion of management,
are necessary to a fair presentation of
financial position and results of operations. All such adjustments are of a
normal and recurring nature. These
financial statements should be read in conjunction with the audited financial
statements at December 31, 2002 as filed in the Company's 8-K filed with the
Commission on October 14, 2003.
2. Share Exchange Transaction
- --------------------------------------------------------------------------------
On September 30, 2003, the Company, formerly known as Tabatha III, Inc.,
acquired all of the issued and outstanding common stock of Worldwide
Manufacturing USA, Inc. ("Worldwide USA"), a privately held operating company,
in a share exchange transaction. The Company issued 27,900,000 shares in the
share exchange transaction for 100% or 10,000 of the issued and outstanding
shares of Worldwide USA's common stock. As a result of the share exchange
transaction, Worldwide USA became a wholly-owned subsidiary of the Company. The
parent company, Tabatha III, Inc., changed its name to Worldwide Manufacturing
USA, Inc. in November 2003. The Company issued 27,900,000 shares of common
stock to acquire Worldwide. Immediately prior to the acquisition, 10,762,000
shares of stock had been outstanding, and as part of the acquisition
agreement, certain shareholders of Tabatha III agreed to surrender for can-
cellation a total of $8,662,000 common shares held by them. Total shares
outstanding after the Worldwide acquisition were 30,000,000.
The former stockholders of Worldwide USA acquired a majority of our issued and
outstanding common stock as a result of completion of the share exchange
transaction. Therefore, although Worldwide USA became our wholly-owned
subsidiary, the transaction was accounted for as a recapitalization of
Worldwide USA, whereby Worldwide USA is deemed to be the accounting acquirer
and is deemed to have adopted our capital structure. Likewise, the Company will
adopt the fiscal reporting year of the accounting acquirer, which is December
31. The accompanying financial statements reflect the financial position and
operating results of Worldwide USA for all periods presented.
53
Segment Information
Segmental Data - 9 months ended September 30, 2003
Reportable Segments
(amounts in thousands)
WWMUSA Intech Total
External revenue $ 4,641 $ 9 $ 4,650
Intersegment revenue - 1,994 1,994
Interest income 12 - 12
Interest expense 14 2 16
Depreciation 10 29 39
Net profit (loss) 347 62 388(1)
Assets
Expenditures for
long-lived assets 44 31 75
Segmental Data - 9 months ended September 30, 2002
Reportable Segments
(amounts in thousands)
WWMUSA Intech Total
External revenue $ 3,042 $ 27 $ 3,069
Intersegment revenue - 1,087 1,087
Interest income 3 - 3
Interest expense 14 1 15
Depreciation 7 16 23
Net profit (loss) 373 - 373(2)
Assets
Expenditures for
long-lived assets 11 23 34
(2) Less than $1,000 in intercompany profit was eliminated in consolidation.
54