INDEPENDENT AUDITORS' REPORT
TO: THE PARTNERS OF:
ARABIAN RECAB FOR TRADING CO. LTD.
(A Saudi limited Liability Company)
We have reviewed the accompanying balance sheet of ARABIAN RECAB FOR TRADING CO.
LTD. (a Saudi limited liability company) as of September 30, 2005 and the
related statements of income, changes in partners' equity and cash flows for the
ninth months period then ended. These interim financial statements are the
responsibility of the Company's management and were presented to us with all the
information and explanations which we requested.
Our review was accordance with the Interim Financial Reporting Standard issued
by the Statements on Standards for Accounting and Review Services. A review
consists principally of applying analytical procedures to financial data and
making inquiries of persons responsible for financial and accounting matters. It
is substantially less in scope than an audit conducted in accordance with
generally accepted auditing standards, the objective of which is the expression
of an opinion regarding the financial statements taken as a whole. Accordingly,
we do not express such an opinion.
Based on our limited review, we are not aware of any material modifications that
should be made to the accompanying interim financial statements for the period
ended September 30, 2005 to be in conformity with generally accepted accounting
standards.
AlAzem, AlSudairy & AlNemer
Certified Public Accountants
Affiliate of Horwath International
Abdullah M. Alazem
License No. 335
4 Dhul-Qa'ada 1426H (December 6, 2005)
Riyadh, Saudi Arabia
ARABIAN RECAB FOR TRADING CO. LTD.
(A Saudi limited Liability Company)
BALANCE SHEET (UNAUDITED)
SEPTEMBER 30, 2005
(U.S Dollars)
ASSETS
30/09/2005
------------
Current Assets:
Cash and bank balances 72,106
Accounts receivable, net (Note 3) 12,546,055
Inventory (Note 2b) 1,320,650
Prepayments and other assets (Note 4) 3,195,163
------------
Total current assets 17,133,974
Due from Affiliates, net (Note 5) 6,566,109
Investment in Affiliated Companies (Notes 2c and 6) 176,267
Deferred Installment interest, net (Notes 2d and 7) 5,321,789
Property and Equipment, net (Notes 2e and 8a) 11,759,010
Project Under Progress (Note 10) 514,892
------------
41,472,041
LIABILITIES AND PARTNERS' EQUITY
Current Liabilities:
Short terms Note payable (Note 11) 8,655,857
Accounts payable 6,307,075
Accrued expenses and other liabilities (Note 12) 2,955,550
------------
Total current liabilities 17,918,482
Long terms Note payable (Note 11) 10,328,282
End of Service Benefits (Note 2g) 488,829
------------
Total liabilities 28,735,593
------------
Partners' Equity:
Capital (Note 13) 10,666,667
Statutory reserve (Note 14) 106,667
Retained earnings 1,963,114
------------
Total partners' equity 12,736,448
------------
41,472,041
============
The accompanying notes are an integral part of these financial statements
ARABIAN RECAB FOR TRADING CO. LTD.
(A Saudi limited Liability Company)
STATEMENT OF INCOME (UNAUDITED)
FOR THE PERIOD ENDED SEPTEMBER 30, 2005
(U.S Dollars)
From 1/1/2005
To 30/9/2005
---------------
Revenue (Notes 2h and 15) 13,063,234
Costs of revenue (10,017,391)
Gross income 3,045,843
Selling and marketing expenses (Notes 2i and 16) (1,096,025)
General and administrative expenses (Notes 2i and 17) (913,732)
Amortization of deferred installment (240,458)
Other income, net (Note 2h) 76,315
---------------
Net income for the period 871,943
===============
The accompanying notes are an integral part of these financial statements
ARABIAN RECAB FOR TRADING CO. LTD.
(A Saudi limited Liability Company)
STATEMENT OF CHANGES IN PARTNERS' EQUITY (UNAUDITED)
FOR THE PERIOD ENDED SEPTEMBER 30, 2005
(U.S Dollars)
From 1/1/2005
To 30/9/2005
---------------
Capital
Beginning of the period 213,333
Capital increase 10,453,334
---------------
End of the period 10,666,667
---------------
Statutory reserve 106,667
Retained earnings:
Beginning of the period 1,091,171
Net income for the period 871,943
---------------
End of the period 1,963,114
---------------
Total Partners' Equity 12,736,448
===============
The accompanying notes are an integral part of these financial statements
ARABIAN RECAB FOR TRADING CO. LTD.
(A Saudi limited Liability Company)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR PERIOD ENDED SEPTEMBER 30, 2005
(U.S Dollars)
1. GENERAL
Arabian Recab for Trading Co. Ltd. is a limited liability company
operating in the Kingdom of Saudi Arabia under Commercial Registration No.
1010150978 issued in Riyadh and dated 18/5/1419H (Corresponding to
9/9/1998).
The accompanying financial statements represent the combined financial
statements as of December 31,2003 as follows:
o Building Materials Division operating under Commercial Registration
No. 1010150978 issued in Riyadh and dated 18/5/1419H (Corresponding
to 9/9/1998), to practice the whole sale and retail trading in motor
vehicles, spare parts, heavy equipment and its spare parts,
maintenance of the heavy equipment, buying land to construct up
buildings for investment purposes through selling or renting these
building, general construction activities of roads, water, sewage,
dams, electro-mechanical works, ornamentation, decoration and
general buildings constructions
o Transportation Division (Ministrial license No. 68 dated 28/3/1420H
Corresponding to 12/7/1999), to practice school transportation.
(Ministrial license No. 2532 dated 4/3/1421H Corresponding to
7/6/2000), to practice land transport of goods and belongings. And
operating under Sub Commercial Registration No. 1010150978/003
issued in Riyadh and dated 12/7/1421H (Corresponding to 10/10/2000).
o Trading Branch operating under Commercial Registration No.
1010150978/005 issued in Riyadh (Traffic department letter No.
7/2/7/5262 dated 28/10/1421H Corresponding to 23/1/2001), to
practice buying and selling of motor vehicles, trucks, and
equipment.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The interim financial statements are prepared in accordance with generally
accepted accounting principles in Saudi Arabia and the Interim Financial
Reporting Standard and the same accounting principles used to prepare the
yearly financial statements.. The following is a summary of Company's
significant accounting policies:
a) Accounting Convention --
These accompanying financial statement have been prepared under the
historical cost convention using accrual basis and going concern
concept.
b) Inventory --
Inventories are stated at the lower of cost or estimated net
realizable value. Cost is arrived at using the weighted average
method. Appropriate provision is made for obsolete and slow moving
inventories, if any.
c) Investments in Affiliated Companies --
Investments in Affiliated Companies represent owner's investment of
50% and above for using equity method, accounted based on the last
financial statements for these companies.
d) Deferred Installment interest expenses-
Deferred Installment interest expenses are amortized using the
straight-line method with percentage 10 % annually.
e) Property and equipment --
Property and equipment are stated at cost net of accumulated
depreciation. Depreciation is computed using the straight-line
method over the estimated useful lives of the assets based on the
following annual percentage rates:
Heavy equipments 5 - 15%
Transportation vehicles 10%
Buses 10 - 25%
Machinery and equipment 7.5 - 20%
Decoration 3 - 15%
Motor vehicles 10 - 25%
Furniture and fixtures 2.5 - 20%
Electrical equipments and Computers 20%
Air conditions 10 - 20%
Office equipment 10 - 25%
Prefabricated houses 10%
Tools 25%
Advertising signs 20%
Communication equipments 20%
f) Preoperating expenses -
Preoperating expenses represent various costs incurred during the
period from the formation of the company until operation date.
Preoperating expenses are amortized using the straight-line method
with percentage between 6.67 - 20 % annually.
g) End of service benefits --
Benefits payable to the employees of the Company's at the end of
their services are provided for in accordance with the guidelines
set by the Saudi Arabian Labor Law.
h) Revenue recognition --
Revenue is recognized when freight policies are signed upon
satisfactory completion of contract services to customers. Other
income is recorded when earned.
i) Expenses --
Selling and distribution expenses comprise of the costs of selling
and distributing the products of the Company. Other expenses are
classified as General and administrative expenses, which include all
direct and indirect expenses that are not related to the cost of
sales in accordance to the generally accepted accounting principles.
Expenses are allocated to general and administrative expenses and
cost of sales, if any, using fixed basis.
j) Zakat -
Under the Zakat regulations of the Kingdom of Saudi Arabia, Zakat is
the obligation of the Company. Estimated Zakat is provided for in
the accompanying financial statements and charged to the statement
of income.
k) Translation of foreign currencies --
The accompanying financial statements are denominated in U.S
Dollars. Appropriate exchange rates have been used to translate
transactions or balances denominated in foreign currencies. There
were no material exchange gains or losses incurred during the year.
3. ADJUSTMENTS RELATED TO THE PERIOD
The company management has prepared all the adjustments needed to present
fairly, the financial position and the results of its operations, but the
results of its operations for the period ended September 30, 2005 does not
give an accurate measuring for actual result related to the period
operation's.
4. SIGNIFICANT EVENTS AFFECTING THE ACCOMPANYING INTERIM FINANCIAL STATEMENTS
a) Capital injection -
The paid up capital as of September 30, 2005 shows an increase of
U.S Dollars 10,453,334 as compared to December 31, 2004. The amount
was transferred Partners' current account balances to capital
account, accordingly all legal approval under process.