UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
_____________________
FORM
8-K/A
(Amendment
No. 1)
_____________________
CURRENT
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
COMMISSION
FILE NO.: 0-13337
Date
of Report: May 4, 2009
ADVANCED
BATTERY TECHNOLOGIES, INC.
|
(Exact
name of registrant as specified in its charter)
|
|
|
|
|
Delaware
|
22-2497491
|
(State
of other jurisdiction of
|
(IRS
Employer
|
incorporation
or organization
|
Identification
No.)
|
|
|
|
|
15
West 39
th
Street, Suite 14A, New York, New York
|
10018
|
(Address
of principal executive offices)
|
(Zip
Code)
|
|
|
|
|
212-391-2752
|
(Registrant’s
telephone number including area
code)
|
Check the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions:
□
Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
□
Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
□
Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
□
Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
This
amendment is being filed in order (a) to disclose the supplemental amendment
dated April 28, 2009 to the Share Purchase Agreement and (b) to include the
financial statements.
Item
2.01
|
Completion
of Acquisition of Assets
|
Item
3.02
|
Unregistered
Sale of Equity Securities
|
On April
28, 2009, Advanced Battery Technologies, Inc. (the “Company” or
“ABAT”), through Cashtech Investment Limited, a wholly-owned subsidiary of ABAT,
entered into a Share Purchase Agreement (“Agreement”) with the shareholders of
Wuxi Angell Autocycle Co., Ltd. (“Wuxi Angell”). Pursuant to the Agreement, ABAT
agreed to acquire a 100% ownership interest in the registered capital of Wuxi
Angell. The registered capital was purchased from Wuxi
Baoshiyun Autocycle Co., Ltd. and Bao Jin (“Sellers”), who are not affiliated
with Advanced Battery Technologies or its subsidiaries. In exchange
for the equity in Wuxi Angell, ABAT agreed to pay US$3,640,000 and 70 million
Chinese Renminbi (approx. $10,248,902) in cash. In addition, Advanced
Battery Technologies, Inc. issued three million shares of its common stock to
the sellers.
On the
same day, a Supplemental Agreement was also signed by the parties, specifically
indicating that the cash payments of US$3,640,000 and RMB 70,000,000 shall be
exclusively used to satisfy liabilities of Wuxi Angell that existed prior to the
date of the Agreement. Accordingly, the actual consideration given by
ABAT for the acquisition of Wuxi Angell was the 3,000,000
shares of ABAT’s common stock issued to the Sellers.
The
acquisition was completed on May 4, 2009.
Wuxi
Angell, founded in 2002, develops and manufactures various types of electric
vehicles, including electric bicycles, electric scooters, and various electric
sports utility vehicles. Wuxi Angell has been a customer of Advanced
Battery Technologies for several years, and has been involved with Advanced
Battery Technologies in developing state-of-the-art battery-powered
vehicles.
In order
to facilitate the purchase of Wuxi Angell, Zhiguo Fu, the Chairman of Advanced
Battery Technologies, previously agreed to purchase one million shares of
Advanced Battery common stock from Bao Jin, one of the previous owners of Wuxi
Angell. The purchase was completed on May 4, with Mr. Fu paying to
Bao Jin the market price for the shares on that date.
Item
9.01 Financial
Statements and Exhibits
Financial
Statements
Unaudited
Financial Statements of Wuxi Angell Autocycle Co., Ltd. for the three month
periods ended March 31, 2009 and 2008
Audited
Financial Statements of Wuxi Angell Autocycle Co., Ltd. for the years ended
December 31, 2008 and 2007.
Pro Forma
Financial Statements of Advanced Battery Technologies, Inc.
Exhibits
10-a
|
Share
Purchase Agreement dated April 2009 among Wuxi Baoshiyun Autocycle Co.,
Ltd., Bao Jin, Cashtech Investment Limited and Advanced Battery
Technologies, Inc. – filed as an exhibit to the Current Report on Form 8-K
dated April 28, 2009 and filed on April 30, 2009, and incorporated herein
by reference.
|
10-b
|
Share
Purchase Supplemental Agreement dated April 28 2009 among Wuxi Baoshiyun
Autocycle Co., Ltd., Bao Jin, Cashtech Investment Limited and Advanced
Battery Technologies, Inc.
|
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
|
ADVANCED
BATTERY TECHNOLOGIES, INC.
|
Dated:
July 20, 2009
|
By:
|
/s/ Fu
Zhiguo
|
|
|
Fu
Zhiguo, Chief Executive Officer
|
|
|
|
WUXI
ANGELL AUTOCYCLE CO., LTD.
INDEX
TO FINANCIAL STATEMENTS
Financial
Statements for the Three Month Periods Ended
|
March
31, 2009 and 2008
|
Balance
Sheet as of March 31, 2009 (Unaudited)
|
F-2
|
Statements
of Operation for the three months ended March 31, 2009 and 2008
(Unaudited)
|
F-3
|
Statements
of Cash Flows for the three months ended March 31, 2009 and 2008
(Unaudited)
|
F-4
|
Notes
to Financial Statements (Unaudited)
|
F-5-17
|
|
|
Financial
Statements for the Years Ended
|
|
December
31, 2008 and 2007
|
|
Report
of Independent Registered Public Accounting Firm
|
F-18
|
Balance
Sheets as of December 31, 2008 and 2007
|
F-19
|
Statements
of Operation for the years ended December 31, 2008 and
2007
|
F-20
|
Statements
of Shareholder’s Equity for the years
ended
December 31, 2008 and 2007
|
F-21
|
Statements
of Cash Flows for the years ended December 31, 2008 and
2007
|
F-22
|
Notes
to Financial Statements
|
F-23-36
|
|
|
ADVANCED
BATTERY TECHNOLOGIES, INC.
|
INDEX
TO UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL
STATEMENTS
|
|
|
Introduction
to Unaudited Pro Forma Condensed Combined Financial
Statements
|
F-37
|
Unaudited
Pro Forma Condensed Combined Balance Sheet- March 31, 2009
|
F-38
|
Unaudited
Pro Forma Condensed Combined Statement of Income for the three
months
ended March 31, 2009
|
F-39
|
Unaudited
Pro Forma Condensed Combined Statement of Income for the year
ended
December 31, 2008
|
F-40
|
Notes
to Unaudited Pro Forma Condensed Combined Financial
Statements
|
F-41-42
|
WUXI ANGELL AUTOCYCLE, CO.,
LTD
|
|
BALANCE
SHEET
|
|
(UNAUDITED)
|
|
|
|
|
|
|
|
March 31,
2009
|
|
ASSETS
|
|
|
|
|
|
CURRENT
ASSETS
|
|
|
|
Cash & cash
equivalents
|
|
$
|
193,603
|
|
Accounts receivable, net of
allowance for doubtful accounts
|
|
|
632,090
|
|
Other receivables, net of
allowance
|
|
|
62,947
|
|
Loan to related
parties
|
|
|
731,923
|
|
Inventory
|
|
|
1,377,852
|
|
Advances to suppliers, net of
allowance
|
|
|
1,824,498
|
|
|
|
|
|
|
Total current
assets
|
|
|
4,822,912
|
|
|
|
|
|
|
PROPERTY AND EQUIPMENT,
NET
|
|
|
19,575,484
|
|
|
|
|
|
|
INTANGIBLE ASSET,
NET
|
|
|
5,999,893
|
|
|
|
|
|
|
TOTAL
ASSETS
|
|
$
|
30,398,289
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS'
EQUITY
|
|
|
|
|
|
|
CURRENT
LIABILITIES
|
|
|
|
|
Accounts
payable
|
|
$
|
6,216,585
|
|
Advances from
customers
|
|
|
1,313,928
|
|
Short term bank
loans
|
|
|
7,316,295
|
|
Advance from
investor
|
|
|
3,814,946
|
|
Loan payable-
other
|
|
|
1,862,601
|
|
Accrued expenses and other current
liabilities
|
|
|
206,260
|
|
|
|
|
|
|
Total current
liabilities
|
|
|
20,730,614
|
|
|
|
|
|
|
TOTAL
LIABILITIES
|
|
|
20,730,614
|
|
|
|
|
|
|
SHAREHOLDERS'
EQUITY
|
|
|
|
|
Registered capital
|
|
|
5,082,315
|
|
Additional paid in
capital
|
|
|
2,292,512
|
|
Accumulated other comprehensive
income
|
|
|
3,154,660
|
|
Retained earnings
(loss)
|
|
|
(861,811
|
)
|
Total shareholders'
equity
|
|
|
9,667,676
|
|
|
|
|
|
|
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY
|
|
$
|
30,398,289
|
|
The
accompanying notes are an integral part of these financial statements
WUXI
ANGELL AUTOCYCLE, CO., LTD
|
|
STATEMENTS
OF OPERATIONS
|
|
(UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
For
The Three Months Ended March
31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
sales
|
|
$
|
749,092
|
|
|
$
|
2,697,485
|
|
|
|
|
|
|
|
|
|
|
Cost
of goods sold
|
|
|
(636,339
|
)
|
|
|
(1,895,432
|
)
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
|
|
112,753
|
|
|
|
802,053
|
|
|
|
|
|
|
|
|
|
|
Selling
, general and administrative
expenses
|
|
|
(957,210
|
)
|
|
|
(311,806
|
)
|
|
|
|
|
|
|
|
|
|
Income
(Loss) from operations
|
|
|
(844,457
|
)
|
|
|
490,247
|
|
|
|
|
|
|
|
|
|
|
Other
income (expenses):
|
|
|
|
|
|
|
|
|
Interest
income (expenses)
|
|
|
(177,587
|
)
|
|
|
(127,263
|
)
|
Other
expenses
|
|
|
-
|
|
|
|
(27,733
|
)
|
|
|
|
|
|
|
|
|
|
Total
other income (expenses)
|
|
|
(177,587
|
)
|
|
|
(154,996
|
)
|
|
|
|
|
|
|
|
|
|
Income
(Loss) before income taxes
|
|
|
(1,022,044
|
)
|
|
|
335,251
|
|
|
|
|
|
|
|
|
|
|
Income
taxes
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Net
Income (loss)
|
|
|
(1,022,044
|
)
|
|
|
335,251
|
|
|
|
|
|
|
|
|
|
|
Other
comprehensive income
|
|
|
|
|
|
|
|
|
Foreign
currency translation gain
(loss)
|
|
|
(33,855
|
)
|
|
|
746,230
|
|
|
|
|
|
|
|
|
|
|
Comprehensive
Income (loss)
|
|
$
|
(1,055,899
|
)
|
|
$
|
1,081,482
|
|
|
|
|
|
|
|
|
|
|
Basic
and diluted earnings (loss) per common
share
|
|
|
(0.02
|
)
|
|
|
0.01
|
|
|
|
|
|
|
|
|
|
|
Weighted
average number of common
shares
|
|
|
40,997,103
|
|
|
|
40,997,103
|
|
The accompanying notes are an integral part of
these financial statements
WUXI
ANGELL AUTOCYCLE, CO., LTD
STATEMENTS
OF CASH FLOWS
(
UNAUDITED)
|
|
For
The Three Months Ended March 31,
|
|
|
|
2009
|
|
|
2008
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
Net
income (loss)
|
|
$
|
(1,022,044
|
)
|
|
$
|
335,251
|
|
Adjustments
to reconcile net income to net cash
provided
by (used in) operating
activities:
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
386,571
|
|
|
|
412,932
|
|
Bad
debts
|
|
|
662,553
|
|
|
|
-
|
|
(Increase)
decrease in current assets:
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
(494,602
|
)
|
|
|
401,583
|
|
Loan
to shareholders and related parties
|
|
|
(771,650
|
)
|
|
|
(531,271
|
)
|
Other
receivables
|
|
|
-
|
|
|
|
(416
|
)
|
Inventory
|
|
|
21,404
|
|
|
|
(909,364
|
)
|
Advance
to suppliers
|
|
|
(125,654
|
)
|
|
|
(1,119,457
|
)
|
|
|
|
|
|
|
|
|
|
Increase
(decrease) in current liabilities:
|
|
|
|
|
|
|
|
|
Accounts
payables
|
|
|
(2,208,210
|
)
|
|
|
1,188,337
|
|
Advances
from customers
|
|
|
(166,017
|
)
|
|
|
1,144,503
|
|
Accured
expense and other liabilities
|
|
|
(423,121
|
)
|
|
|
(212,662
|
)
|
|
|
|
|
|
|
|
|
|
Net
cash provided by (used in) operating
activities
|
|
|
(4,140,770
|
)
|
|
|
709,437
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Acquisition
of property & equipment
|
|
|
(256
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Net
cash used in investing activities
|
|
|
(256
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Repayment
of short term loans
|
|
|
-
|
|
|
|
(1,396,215
|
)
|
Proceeds
from related party loans
|
|
|
-
|
|
|
|
1,384,938
|
|
Proceeds
from investor advance
|
|
|
804,364
|
|
|
|
-
|
|
Loan
proceeds from other source
|
|
|
(7,314
|
)
|
|
|
466,336
|
|
|
|
|
|
|
|
|
|
|
Net
cash provided by (used in) financing
activities
|
|
|
797,050
|
|
|
|
455,059
|
|
|
|
|
|
|
|
|
|
|
EFFECT
OF EXCHANGE RATE CHANGE ON CASH & CASH
EQUIVALENTS
|
|
|
(6,905
|
)
|
|
|
77,059
|
|
|
|
|
|
|
|
|
|
|
NET
INCREASE (DECREASE) IN CASH & CASH
EQUIVALENTS
|
|
|
(3,350,882
|
)
|
|
|
1,241,555
|
|
|
|
|
|
|
|
|
|
|
CASH
& CASH EQUIVALENTS, BEGINNING OF PERIOD
|
|
|
3,544,485
|
|
|
|
1,209,551
|
|
|
|
|
|
|
|
|
|
|
CASH
& CASH EQUIVALENTS, END OF PERIOD
|
|
$
|
193,603
|
|
|
$
|
2,451,106
|
|
|
|
|
|
|
|
|
|
|
Supplemental
Cash flow data:
|
|
|
|
|
|
|
|
|
Income
tax paid
|
|
$
|
-
|
|
|
$
|
-
|
|
Interest
paid
|
|
$
|
-
|
|
|
$
|
12,252
|
|
The accompanying notes are an integral part of
these financial statements
W
UXI ANGELL AUTOCYCLE CO.,
LTD
NOTES TO FINANCIAL
STATEMENTS
MARCH 31, 2009 AND
2
008
(UNAUDITED)
1.
ORGANIZATION AND BASIS OF PRESENTATION
Wuxi
Angell Autocycle, Co., Ltd. ("Wuxi Angell" or the "Company"), a
Sino-foreign joint venture
organize
d under the laws of
The People
’
s Republic of China (“
PRC
”
),
was incorporated in the
Jiangsu Province of the PRC in December 2002.
The
Company is engaged in design, manufacture and distribution of various types of
electric vehicles, including electric bicycles, electric scooters and electric
recreational vehicles, etc.
The accompanying
financial statements of the Company have
been prepared in accordance with generally accepted accounting principles in the
United States of
America
(“US
GAAP”).
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use
of estimates
In
preparing the financial statements in conformity with accounting principles
generally accepted in the United States of America, the management makes
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the dates of
the financial statements, as well as the reported amounts of revenues and
expenses during the reporting periods. Significant estimates required to be made
by the management include, but are not limited to, the recoverability of
long-lived assets and the valuation of accounts receivable and inventories.
Actual results could differ from those estimates.
Cash and cash
equivalents
For
purposes of the statement of cash flow, the Company considers all highly liquid
investments with an original maturity of three months or less to be cash
equivalents.
Accounts
receivable
Accounts
receivables are stated at net realizable value. Any allowance for doubtful
accounts is established based on the management’s assessment of the
recoverability of accounts and other receivables.
Management regularly reviews the
composition of accounts receivable and analyzes historical bad debts, customer
concentrations, customer credit worthiness, current economic trends and changes
in customer payment patterns to evaluate the collectability of accounts
receivable and the adequacy of the allowance.
The allowance for
accounts receivable
amounted to $776,639 as of
March 31, 2009
.
W
UXI ANGELL AUTOCYCLE CO.,
LTD
NOTES TO FINANCIAL
STATEMENTS
MARCH 31, 2009 AND
2
008
(UNAUDITED)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Inventor
y
Inventories
are stated at the lower of cost or market. Cost is determined on a weighted
average method. Cost of work in progress and finished goods comprises direct
material, direct production cost and an allocated portion of production
overheads. Management compares the cost of inventory with the market value and
an allowance is made for writing down the inventory to its market value, if
lower.
Revenue
recognition
The
Company's revenue recognition policies are in compliance with Securities and
Exchange Commission (“SEC”) Staff Accounting Bulletin (“SAB”)
104. Sales revenue is recognized at the date of shipment to customers
when a formal arrangement exists, the price is fixed or determinable, the
delivery is completed, no other significant obligations of the Company exist and
collectability is reasonably assured. Payments received before all of
the relevant criteria for revenue recognition are recorded as advances from
customers.
There
were no sales returns and allowances for the three months ended March 31, 2009,
and 2008. The Company does not provide unconditional right of return, price
protection or any other concessions to its customers.
Property, plant and
equipment
Property, plant and equipment are stated
at cost less accumulated depreci
ation and amortization. Maintenance,
repairs and betterments, including replacement of minor items, are charged to
expense; major additions to physical properties are capitalized. Depreciation
and amortization are provided using the straight-line method (
a
fter taking into account their
respective estimated residual values) over the estimated useful lives of the
assets as follows:
Buildings and
improvements
|
20 years
|
Machinery, equipment and motor
vehicles
|
5-10
years
|
Construction in
progress
Construction in progress represents
buildings and machinery under construction, which is stated at cost and is not
depreciated. Cost comprises the direct costs of construction. Construction in
progress is reclassified to the appropriate category of proper
t
y, plant and equipment when completed
and ready for use.
W
UXI ANGELL AUTOCYCLE CO.,
LTD
NOTES TO FINANCIAL
STATEMENTS
MARCH 31, 2009 AND
2
008
(UNAUDITED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (Continued)
Impairment of long-lived
assets
Long-lived assets, which include
property, plant and equipment and intangible assets, are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recovera
ble.
Concentration
of credit risk
Financial
instruments that potentially subject the Company to significant concentrations
of credit risk consist of cash and cash equivalents and accounts and other
receivables. As of March 31, 2009, substantially most of the Company's cash and
cash equivalents were held by major banks located in the PRC which the Company's
management believes are of high credit quality. With respect to accounts
receivable, the Company extends credit based on an evaluation of the customer's
financial condition and without requiring collateral. The Company conducts
periodic reviews of its customers' financial condition and customer payment
practices to minimize collection risk on accounts receivable.
Foreign
currency translation
The
functional currency of the Company is the Chinese Renminbi (“RMB”). For
financial reporting purposes, RMB has been translated into United States dollars
("USD") as the reporting currency. Assets and liabilities are translated at the
exchange rate in effect at the balance sheet date. Income statement accounts are
translated at the average rate of exchange prevailing for the period. Capital
accounts are translated at their historical exchange rates when the capital
transaction occurred. Translation adjustments arising from the use of different
exchange rates from period to period are included as a component of
stockholders' equity as "Accumulated other comprehensive income". Gains and
losses resulting from foreign currency translation are included in accumulated
other comprehensive income.
Income
Tax
The
Company utilizes Statement of Financial Accounting Standards (SFAS) No. 109,
“Accounting for Income Taxes, ” which requires the recognition of deferred tax
assets and liabilities for the expected future tax consequences of events that
have been included in the financial statements or tax returns. Under this
method, deferred income taxes are recognized for the tax consequences in future
years of differences between the tax bases of assets and liabilities and their
financial reporting amounts at each period end based on enacted tax laws and
statutory tax rates applicable to the periods in which the differences are
expected to affect taxable income. Valuation allowances are established, when
necessary, to reduce deferred tax assets to the amount expected to be
realized.
W
UXI ANGELL AUTOCYCLE CO.,
LTD
NOTES TO FINANCIAL
STATEMENTS
MARCH 31, 2009 AND
2
008
(UNAUDITED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (Continued)
Comprehensive Income
(loss)
Comprehensive income
(loss)
is defined to include changes in equity
except those resulting from investments by owners and distributions to owners.
Among other disclosures, items that are required to be recognized under current
accounting standards as components of comprehensive income
(loss)
are required to be reported in a
financial statement that is presented with the same prominence as other
financial statements. Comprehensive income
(loss)
includes net income
(loss)
and the foreign currency translation
gain, net of tax.
Basic
and Diluted Earnings (Loss) per Share
Earnings
(Loss) per share are calculated in accordance with the SFAS 128, “Earnings per
share”. Basic net earnings (loss) per share are based upon the weighted average
number of common shares outstanding, but excluding shares issued as compensation
that have not yet vested. Diluted net earnings per share are based on the
assumption that all dilutive convertible shares and stock options were converted
or exercised, and that all unvested shares have vested. Dilution is
computed by applying the treasury stock
method. Under this method, options and warrants are assumed to be exercised at
the beginning of the period (or at the time of issuance, if later), and as if
funds obtained thereby were used to purchase common stock at the average market
price during the period.
Recently
Issued Accounting Standards
On October 10, 2008, the FASB issued FSP
157-3, “Determining the Fair Value of a Financial Asset When the Market for That
Asset Is Not Active,” which clarifies the application of SFAS 157 in a market
that is not active and provides an example to illustrate key considerations in
determining the fair value of a financial asset when the market for that
financial asset is not active. FSP 157-3 became effective on October 10, 2008,
and its adoption did not have a material impact on our financial position or
results.
In June 2008, the FASB issued FASB Staff
Position on Emerging Issues Task Force Issue 03-6, “Determining Whether
Instruments Granted in Share-Based Payment Transactions Are Participating
Securities” (“FSP EITF 03-6-1”). FSP EITF 03-6-1 states that unvested
share-based payment awards that contain nonforfeitable rights to dividends or
dividend equivalents (whether paid or unpaid) are participating securities and
shall be included in the computation of earnings per share (“EPS”) pursuant to
the two-class method. FSP EITF 03-6-1 is effective for financial statements
issued for fiscal years beginning after December 15, 2008, and interim
periods within those years. All prior-period EPS data presented shall be
adjusted retrospectively (including interim financial statements, summaries of
earnings, and selected financial data) to conform with the provisions of FSP
EITF 03-6-1.
The adoption
of this FSP EITF 03-6-1 did not have a material effect on the Company’s
financial position.
W
UXI ANGELL AUTOCYCLE CO.,
LTD
NOTES TO FINANCIAL
STATEMENTS
MARCH 31, 2009 AND
2
008
(UNAUDITED)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (Continued)
In June 2008, the FASB ratified
EITF 07-5, “Determining Whether an Instrument (or Embedded Feature) is
Indexed to an Entity’s Own Stock”. EITF 07-5 addresses how an entity should
evaluate whether an instrument or embedded feature is indexed to its own stock,
carrying forward the guidance in EITF 01-6 and superseding EITF 01-6.
Other issues addressed in EITF 07-5 include addressing situations where the
currency of the linked instrument differs from the host instrument and how to
account for market-based employee stock options. EITF 07-5 is effective for
fiscal years beginning after December 15, 2008 and early adoption is not
permitted. The Company has evaluated this statement and estimated that it is not
expected to have an impact on its financial position and results of
operations.
In May 2008, the FASB issued SFAS No.
163, “Accounting for Financial Guarantee Insurance Contracts – an interpretation
of FASB Statement No. 60.” SFAS 163 requires that an insurance enterprise
recognize a claim liability prior to an event of default (insured event) when
there is evidence that credit deterioration has occurred in an insured financial
obligation. This Statement also clarifies how Statement 60 applies to
financial guarantee insurance contracts, including the recognition and
measurement to be used to account for premium revenue and claim liabilities.
Those clarifications will increase comparability in financial reporting of
financial guarantee insurance contracts by insurance enterprises. This Statement
requires expanded disclosures about financial guarantee insurance contracts. The
accounting and disclosure requirements of the Statement will improve the quality
of information provided to users of financial statements. SFAS 163 will be
effective for financial statements issued for fiscal years beginning after
December 15, 2008. The Company does not expect the adoption of SFAS 163
will have a material impact on its financial condition or results of
operation.
In April 2008, FASB Staff Position
No. 142-3, Determination of the Useful Life of Intangible Assets (“FSP
142-3”) was issued. This standard amends the factors that should be considered
in developing renewal or extension assumptions used to determine the useful life
of a recognized intangible asset under FASB Statement No. 142, Goodwill and
Other Intangible Assets. FSP 142-3 is effective for financial statements issued
for fiscal years beginning after December 15, 2008, and interim periods
within those fiscal years. Early adoption is prohibited. The Company has not
determined the impact on its financial statements of this accounting
standard.
W
UXI ANGELL AUTOCYCLE CO.,
LTD
NOTES TO FINANCIAL
STATEMENTS
MARCH 31, 2009 AND
2
008
(UNAUDITED)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (Continued)
In March 2008, the FASB issued Statement
of Financial Accounting Standards (“SFAS”) No. 161, Disclosures about
Derivative Instruments and Hedging Activities, an amendment of FASB Statement
No. 133, which requires additional disclosures about the objectives of the
derivative instruments and hedging activities, the method of accounting for such
instruments under SFAS No. 133 and its related interpretations, and a
tabular disclosure of the effects of such instruments and related hedged items
on our financial position, financial performance, and cash flows. SFAS
No. 161 is effective beginning January 1, 2009. The Company does
not
expect the adoption of
SFAS 161
will have a
material impact on its financial condition or results of
operation.
3.
INVENTORY
Inventory
consists of the following at March 31, 2009:
Raw
Materials
|
|
$
|
955,602
|
|
Finished
goods
|
|
|
422,250
|
|
Total
|
|
$
|
1,377,852
|
|
There
were no allowances recorded for the three months ended March 31,
2009.
4.
LOAN TO RELATED PARTIES
The
Company occasionally provides loans to related companies and individuals in the
normal course of business. These loans are usually free of interest and due upon
demand. As of March 31, 2009, the Company had outstanding loans of $731,923 made
to its principal officer.
5.
PROPERTY, PLANT AND EQUIPMENT, NET
Property,
plant and equipment consist of the following at March 31, 2009:
Building
and improvements
|
|
$
|
19,302,351
|
|
Machinery
and equipment
|
|
|
5,662,841
|
|
Motor
Vehicles
|
|
|
206,762
|
|
|
|
|
25,171,954
|
|
less:
Accumulated Depreciation
|
|
|
(5,596,470
|
)
|
|
|
|
|
|
Total
property, plant and equipment, net
|
|
$
|
19,575,484
|
|
W
UXI ANGELL AUTOCYCLE CO.,
LTD
NOTES TO FINANCIAL
STATEMENTS
MARCH 31, 2009 AND
2
008
(UNAUDITED)
5.
PROPERTY, PLANT AND EQUIPMENT, NET (Continued)
Property,
plant and equipment are stated at cost less accumulated depreciation.
Depreciation expense for the three months ended March 31, 2009, 2008 was
$352,724 and $380,577, respectively.
6.
INTANGIBLE ASSET
Intangible
asset consists of only land use right as of March 31, 2009. All land in the
People’s Republic of China is government owned and cannot be sold to any
individual or company. However, the government grants the user a “land use
right” to use the land. Wuxi Angell leases two pieces of land per real estate
contracts from the PRC Government for a period from July 2003 to July 2053 and
from September 2002 to June 2057 respectively, on which the office and
production facilities of Wuxi Angell are situated.
Right to
use land is stated at cost less accumulated amortization.
The Company amortizes the
rights to use land over a 5
0 year period. The Company evaluates
intangible assets for impairment, at least on an annual basis and whenever
events or chang
es in
circumstances indicate that the carrying value may not be recoverable from its
estimated future cash flows. Recov
erability of intangible assets and
other long-lived assets is
measured by comparing their net book value to the related projected
undisco
unted cash flows
from these assets, considering a number of factors including past operating
results, budgets, economic projections, market trends and product development
cycles. If the net book value of the asset exceeds the related undiscounted cash
flo
w
s, the asset is considered impaired, and
a second test is performed to measure the amount of impairment loss. As of
March 31
, 2009
, no impairment of intangible assets has
been recorded.
Net
intangible asset at March 31, 2009 was as follows:
Rights
to use land
|
|
$
|
6,781,904
|
|
|
|
|
|
|
Less:
accumulated amortization
|
|
|
(782,011
|
)
|
|
|
|
|
|
Total
Intangible Asset, Net
|
|
$
|
5,999,893
|
|
Amortization
expense
was
$33,847 and
$
32,355
for the
three months ended March
31, 2009 and 2008, respectively.
W
UXI ANGELL AUTOCYCLE CO.,
LTD
NOTES TO FINANCIAL
STATEMENTS
MARCH 31, 2009 AND
2
008
(UNAUDITED)
6.
INTANGIBLE ASSET (Continued)
Based
upon current assumptions, the Company expects that the land use right will be
amortized over the next five years according to the following
schedule:
|
|
As of March
31,
|
|
2010
|
|
$
|
133,422
|
|
2011
|
|
|
133,422
|
|
2012
|
|
|
133,422
|
|
2013
|
|
|
133,422
|
|
2014
|
|
|
133,422
|
|
Thereafter
|
|
|
5,332,783
|
|
|
|
$
|
5,999,893
|
|
7.
SHORT TERM BANK LOANS
The
short-term loan includes the following at March 31, 2009:
a) Loan payable to Huaxia
Bank
|
|
|
|
from 01/01/08 to
09/21/08,
|
|
|
|
a fixed interest rate of 0.5475%
per month
|
|
$
|
2,926,518
|
|
|
|
|
|
|
b) Loan payable to Huaxia
Bank
|
|
|
|
|
from 01/01/08 to
09/21/08,
|
|
|
|
|
a fixed interest rate of 0.6225%
per month
|
|
|
4,389,777
|
|
|
|
|
|
|
Total
|
|
$
|
7,316,295
|
|
The
short-term bank loans are secured by plant and equipment and land use rights of
the Company. As of March 31, 2009, both loans are past due. The Company was
negotiating to renew the loans. The bank increased the interest rate to 0.809%
per month for both loans. As of the date of this report, the loans are still
outstanding and past due.
8.
ADVANCES FROM CUSTOMERS
Advances
from customers represent prepayments made by customers for product sales. The
Company records these prepayments as advances from customers when the payments
are received in advance of shipments and reclassify them to sales once shipments
are made. Advances from customers as of March 31, 2009 amounted to $
1,313,928.
W
UXI ANGELL AUTOCYCLE CO.,
LTD
NOTES TO FINANCIAL
STATEMENTS
MARCH 31, 2009 AND
2
008
(UNAUDITED)
9.
ADVANCE FROM INVESTOR
As of
March
31
, 2009, the Company received a
total amount of $3, 814,946 from Advanced Battery Technologies, Inc. as the
investment advance. As agreed by both parties, this advance, along with other
future cash investment, will be used to pay off Wuxi Angell’s existing debts
(See note 17).
10.
LOAN PAYABLE TO OTHERS
The
Company receives loans from other non-related companies and individuals as a
normal business practice in China. As of March 31, 2009, the Company owed
$1,862,601 to non-related companies and individuals. These loans are
intended to be free of interest and due upon demand.
11.
INCOME TAXES
Under the Income Tax Laws of the PRC,
the Company is generally subject to tax at a statutory rate of 25% and was,
until January 2008, subject to tax at a statutory rate of 33% (30% state income
taxes plus 3% local income taxes) on its taxable income.
On March 16, 2007, National People’s
Congress passed a new corporate income tax law, which was effective on January
1, 2
008. This new corporate
income tax unifies the corporate income tax rate to 25%, and includes cost
deductions and tax incentive policies for both domestic and foreign-invested
enterprises in
China
.
Due to the net loss incurred and loss
carry-forwards available from pervious years, no income tax expense accrued for
the three months ended March 31, 2009 and 2008.
The net operating loss carry-forwards
may be available to reduce future years’ taxable income and will expire in 2013.
Management believes that the realization of the benefits arising from these
losses appear to be uncertain due to possible future losses. Accordingly, the
Company has provided a 1
00%
valuation allowance at March 31, 2009
for the temporary differences related to
loss carry-forwards. Management reviews this valuation allowance periodically
and makes adjustments as warranted.
W
UXI ANGELL AUTOCYCLE CO.,
LTD
NOTES TO FINANCIAL
STATEMENTS
MARCH 31, 2009 AND
2
008
(UNAUDITED)
11.
INCOME TAXES
(Continued)
The tax effects of temporary differences
that give rise to the Company’s net de
ferred tax assets as of March 31,
2009
are as
follows:
Deferred
tax assets:
|
|
|
|
Net
operating loss carry forward
|
|
$
|
1,474,975
|
|
Less:
valuation allowance
|
|
|
(1,474,975
|
)
|
|
|
|
|
|
Net
deferred tax assets
|
|
$
|
-
|
|
1
2
. STOCKHOLDERS’
EQUITY
The Company’s
original
registered capital
was
$3,300,000
.
In 2007, the Company’s shareholders
contributed
$1,782,315 in
cash and increased its registered capital to $5,052,315. In addition, one of the
shareholders contributed
equipment
s
and machinery
that were valued at RMB11,078,800
(approximately $1,219,243) in 2006 and
RMB 7,850,000
(approximately
$1,073,269
)
in 2007
to the Company
to expand its
manufacturing
capacity.
The
industry practice in PRC does not require the issuance of stock certificates to
the shareholders, nor a third party transfer agent to maintain the records. For
the purpose of financial reporting, the Company elected to designate one (1)
common share for each RMB contributed. Accordingly, there were total 40,997,103
shares issued and outstanding as March 31, 2009.
13. CONCENTRATION
OF RISKS
Four major customers accounted for 79%
of the net revenue for the three months ended March 31,
2009,
with each customer individually
accounting for 32%, 19%, 19% and 9%, respectively. Five major customers
accounted for 72% of the net revenue for the three months ended March 31, 2008,
with each customer individually accounting for 20%, 20%, 13%, 9% and 9%,
respectively.
Two major vendors provided 87% of the
Company’s purchases of raw materials for the
three months
ended March 31, 2009,
with each customer individually
accounting for 65% and 22%, respectively
.
One major vendor provided 73.3% of the
Company’s purchase of raw materials for the three months ended March 31,
2008.
W
UXI ANGELL AUTOCYCLE CO.,
LTD
NOTES TO FINANCIAL
STATEMENTS
MARCH 31, 2009 AND
2
008
(UNAUDITED)
14.
COMMITMENTS AND CONTINGENCIES
The
Company periodically provides off-balance guarantees on various debt obligations
(such as bank loans and bank acceptance notes) and other commitments such as
letter of credit on behalf of certain related parties. The Company would be
required to perform on these guarantees in the event of default by the
guaranteed parties. No material loss is anticipated by reason of such agreements
and guarantees.
At March
31, 2009, all previous off-balance guarantees made by the Company have expired
and the Company does not provide any additional guarantee to any related or
non-related parties.
The
Company’s operations in the PRC are subject to specific considerations and
significant risks not typically associated with companies in the North America
and Western Europe. These include risks associated with, among others, the
political, economic and legal environments and foreign currency exchange. The
Company’s results may be adversely affected by changes in governmental policies
with respect to laws and regulations, anti-inflationary measures, currency
conversion and remittance abroad, and rates and methods of taxation, among other
things.
The
Company’s sales, purchases and expenses transactions are denominated in RMB and
all of the Company’s assets and liabilities are also denominated in RMB. The RMB
is not freely convertible into foreign currencies under the current law. In
China, foreign exchange transactions are required by law to be transacted only
by authorized financial institutions at exchange rates set by the People’s Bank
of China, the central bank of China. Remittances in currencies other than RMB
may require certain supporting documentation in order to affect the
remittance.
15.
LEGAL PROCEEDINGS
From time to time, the Company becomes
involved in various lawsuits and legal proceedings which arise in the ordinary
course of business.
As of March 31, 2009, the Company was
involved in the following major lawsuits or arbitrary
actions:
In May 2008
, an action was filed against the
Company by
Wuxi Lide Auto
Parts Co., Ltd. (“Wuxi Lide”) in Wuxi
District
Court
, seeking specific perf
ormance of the Company's unpaid
debts
plus accrued interests and penalties in
the total amount of RMB 12,400,000 (approximately $1,823,529). The Court issued
a judgment to settle the claim against the Company and in favor of Wuxi Lide.
The Company was ordered to pay the total amount claimed plus
court costs and attorney’s fees in the
form of monthly installment payment of RMB1,300,000 (approximately $191,175) per
month through July 2009.
As of March 31, 2009, no payment has
been made by the Company yet.
W
UXI ANGELL AUTOCYCLE CO.,
LTD
NOTES TO FINANCIAL
STATEMENTS
MARCH 31, 2009 AND
2
008
(UNAUDITED)
15.
LEGAL PROCEEDINGS (Continued)
In
September 2008, Jiansu Sanjiang Disheng Electric Machinery Co., Ltd. filed a
lawsuit at Wuxi Sub-district Court of High-Tech Industrial Park, demanding
specific performance of the Company’s unpaid debts plus accrued interests. The
Company was ordered to pay a total amount of RMB1,024,524 (approximately
$150,665), in addition to the applicable court costs. As of March 31, 2009, the
Company has not made any payments on this claim.
In March
2008, an arbitrary action was filed by Huaren Construction Group Co. with China
Economic and Trade Arbitration Commission, Wuxi Branch for the dispute of
certain construction payments owed by the Company. On June 24, 2008, an
arbitrary judgment was issued against the Company and the Company was ordered to
pay a total amount of RMB4,000,000 (approximately $588,235), of which,
approximately $441,176 was to be paid within twenty (20) days of the judgment
date and remaining to be paid on or before September 30, 2008. As of March 31,
2009, the Company has not made any payments on this claim. Both parties are
still under negotiation on when the payments can be made.
In June
2008, an action was filed against the Company by Mr. Jinyu Zhu in Wuxi
Sub-district Court of High-Tech Industrial Park, demanding the payment of unpaid
debts of RMB1,000,000 (approximately $147,058) by the Company. A judgment order
was issued against the Company for an immediate payment of the claimed amount
plus court costs. As of March 31, 2009, the entire amount has not been paid by
the Company.
In July
2008, an action was filed against the Company by Wuxi Longbiap Electronics Co.,
Ltd. in Wuxi Sub-district Court of High-Tech Industrial Park, seeking specific
performance of the Company’s unpaid debts of RMB341,514 (approximately $50,222).
A judgment order was issued against the Company for an immediate payment of the
claimed amount plus court costs. As of March 31, 2009, the entire amount has not
been paid by the Company.
In
September 2008, another action was filed against the Company by Jiande City Five
Star Automobile Co., Ltd. in Wuxi Sub-district Court of High-Tech Industrial
Park, seeking specific performance of the Company’s unpaid debts of RMB303,720
(approximately $44,665). A judgment order was issued against the Company for an
immediate payment of the claimed amount plus court costs. As of March 31, 2009,
the entire amount has not been paid by the Company.
W
UXI ANGELL AUTOCYCLE CO.,
LTD
NOTES TO FINANCIAL
STATEMENTS
MARCH 31, 2009 AND
2
008
(UNAUDITED)
16.
GOING CONCERN
The accompanying
financial statements have been prepared
in accordance with accounting principles generally accepted in the
United States of America
, which contemplate continuation of the
Company as
a going concern.
The Company has sustained recurring losses for the three months ended March 31,
2009, and its net working capital remained at a negative amount of $15,907,702
at March 31, 2009.
These
factors raise substantial doubt about its ability to continue as a going
concern.
In November 2008, the Company started
the process of negotiating a business combination with an outside
company.
As of the date of this report, the
acquisition of the Company by Advanced Battery Technologies, Inc. was
successfully completed (See note 17).
Presently, the Company
is under a new management team and has
formulated and is in the process of implementing its new business plan intended
to develop steady revenues and income, as well as reducing expenses in the areas
of operations. The Company
cannot ascertain the eventual success of
management’s plan with any deg
ree of certainty. Success of these
plans
is contingent upon a
number of factors and the Company does not represent tha
t any or all of those
objectives will occur
. The
accompanying
financial
statements do not include any adjustments that might result from the eventual
outcome of the risks and uncertainties described above.
17.
SUBSEQUENT EVENT
On April
28, 2009, the shareholders of the Company entered into a Share Purchase
Agreement (“Agreement”) and a subsequent addendum to the Agreement, with
Cashtech Investment Limited (“Cashtech”), a wholly-owned subsidiary of Advanced
Battery Technologies, Inc (“ABAT”), a public-traded company listed on NASDAQ.
Pursuant to the Agreement and the applicable addendum, Cashtech agrees to
acquire 100% interest of Wuxi Angell for: 1) 3,000,000 shares of ABAT’s common
stocks; 2) Cash payments of US$3,640,000 and RMB70,0000.000 (approx.
$10,248,902). Based on the subsequent addendum, all of the cash payments shall
be used to satisfy various outstanding debts of Wuxi Angell existed prior to the
date of the Agreement. The acquisition was consummated on May 4, 2009.
Accordingly, the final consideration paid for the acquisition of the net assets
of Wuxi Angell is 3,000,000 shares of ABAT’s common stock, valued at the market
price for those shares on May 4, 2009, the date of the acquisition. Following
the acquisition by ABAT, Wuxi Angell was renamed to Wuxi Zhongqiang Autocycle
Co. Ltd.
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board
of Directors and Shareholders of
Wuxi Angell Autocycle Co.,
Ltd
We have
audited the accompanying balance sheets of
Wuxi Angell Autocycle Co., Ltd (the
“Company”)
as of December 31, 2008 and 2007 and the related statements of
income and other comprehensive income, changes in shareholders’ equity, and cash
flows for the years ended December 31, 2008 and 2007. These financial statements
are the responsibility of the Company’s management. Our responsibility is to
express an opinion on these financial statements based on our
audits.
We
conducted our audits in accordance with standards established by the Public
Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audits to obtain reasonable assurance about
whether the financial statements are free of material misstatement. The Company
is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audits included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Company’s internal control
over financial reporting. Accordingly, we express no such opinion. 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 audits provide a reasonable basis
for our opinion.
In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of
Wuxi Angell Autocycle Co., Ltd
as
of December 31, 2008 and 2007 and the results of its operations, changes in
shareholders’ equity, and cash flows for the years ended December 31, 2008 and
2007 in conformity with accounting principles generally accepted in the United
States of America.
The accompanying
financial statements have been prepared
assuming the Company will continue as a going concern. As discussed
in Note 16 to the
financial statements, the Company did
not generate sufficient cash flows from revenues during the year
s
ended December 31, 2008
and 2007
, to fund its operations. Also at
December 31, 2008, the Company had negative ne
t working capital of
$15,282,212
. These matters raise
substantial doubt about the Company’s ability to continue as a going concern.
Management’s plan in regard to these matt
ers is also described in Note 16. The
financial statements do not
include any adjustments that might result from the outcome of this
uncertainty.
/S/Bagell
Josephs, Levine & Company, LLC
Bagell
Josephs, Levine & Company, LLC
Marlton,
New Jersey
July 8,
2009
WUXI ANGELL AUTOCYCLE, CO.,
LTD
|
|
BALANCE
SHEETS
|
|
|
|
|
|
|
|
|
|
|
As of December
31,
|
|
|
|
2008
|
|
|
2007
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
ASSETS
|
|
|
|
|
|
|
Cash & cash
equivalents
|
|
$
|
3,544,485
|
|
|
$
|
1,209,551
|
|
Accounts
receivable, net of allowance of $739,895 as of December 31,
2008
and $647,464 as of December 31,
2007
|
|
|
175,645
|
|
|
|
2,770,461
|
|
Other receivables, net of
allowance
|
|
|
171,966
|
|
|
|
-
|
|
Inventory
|
|
|
1,401,632
|
|
|
|
1,306,067
|
|
Advances to suppliers, net of
allowance
|
|
|
2,178,567
|
|
|
|
28,375
|
|
Total current
assets
|
|
|
7,472,296
|
|
|
|
5,314,454
|
|
|
|
|
|
|
|
|
|
|
PROPERTY AND EQUIPMENT,
NET
|
|
|
19,961,815
|
|
|
|
19,964,347
|
|
|
|
|
|
|
|
|
|
|
INTANGIBLE ASSET,
net
|
|
|
6,043,972
|
|
|
|
5,764,477
|
|
|
|
|
|
|
|
|
|
|
TOTAL
ASSETS
|
|
$
|
33,478,083
|
|
|
$
|
31,043,278
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS'
EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
8,439,671
|
|
|
$
|
8,065,768
|
|
Advances from
customers
|
|
|
1,482,497
|
|
|
|
169,233
|
|
Short term bank
loans
|
|
|
7,328,692
|
|
|
|
8,203,333
|
|
Advance from
investor
|
|
|
3,000,000
|
|
|
|
-
|
|
Loan from related
parties
|
|
|
-
|
|
|
|
673,276
|
|
Loan payable-
other
|
|
|
1,873,085
|
|
|
|
-
|
|
Accrued expenses and other current
liabilities
|
|
|
630,563
|
|
|
|
402,733
|
|
Total current
liabilities
|
|
|
22,754,508
|
|
|
|
17,514,344
|
|
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES
|
|
|
22,754,508
|
|
|
|
17,514,344
|
|
|
|
|
|
|
|
|
|
|
COMMITMENT
AND CONTINGENCIES
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
SHAREHOLDERS'
EQUITY
|
|
|
|
|
|
|
|
|
Registered capital
|
|
|
5,082,315
|
|
|
|
5,082,315
|
|
Additional paid in
capital
|
|
|
2,292,512
|
|
|
|
2,292,512
|
|
Accumulated other comprehensive
income
|
|
|
2,501,592
|
|
|
|
1,579,815
|
|
Retained
earnings
|
|
|
847,155
|
|
|
|
4,574,292
|
|
Total shareholders'
equity
|
|
|
10,723,575
|
|
|
|
13,528,934
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY
|
|
$
|
33,478,083
|
|
|
$
|
31,043,278
|
|
The
accompanying notes are an integral part of these financial statements
WUXI ANGELL AUTOCYCLE, CO.,
LTD
|
|
STATEMENTS OF
OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For The Years Ended December
31,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
9,332,105
|
|
|
$
|
5,874,137
|
|
|
|
|
|
|
|
|
|
|
Cost of goods
sold
|
|
|
(8,455,682
|
)
|
|
|
(4,527,146
|
)
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
|
|
876,423
|
|
|
|
1,346,991
|
|
|
|
|
|
|
|
|
|
|
Selling , general and
administrative expenses
|
|
|
(2,882,947
|
)
|
|
|
(1,708,854
|
)
|
|
|
|
|
|
|
|
|
|
Research and Development
expenses
|
|
|
(411,700
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Loss from
operations
|
|
|
(2,418,224
|
)
|
|
|
(361,863
|
)
|
|
|
|
|
|
|
|
|
|
Other income
(expenses):
|
|
|
|
|
|
|
|
|
Interest income
(expenses)
|
|
|
(1,093,197
|
)
|
|
|
(767,082
|
)
|
Other income
(expenses)
|
|
|
(215,715
|
)
|
|
|
2,421
|
|
Other
expenses-Penalty
|
|
|
-
|
|
|
|
(24,196
|
)
|
|
|
|
|
|
|
|
|
|
Total other income
(expenses)
|
|
|
(1,308,912
|
)
|
|
|
(788,856
|
)
|
|
|
|
|
|
|
|
|
|
Loss before income
taxes
|
|
|
(3,727,136
|
)
|
|
|
(1,150,719
|
)
|
|
|
|
|
|
|
|
|
|
Income
taxes
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(3,727,136
|
)
|
|
$
|
(1,150,719
|
)
|
|
|
|
|
|
|
|
|
|
Other comprehensive
item
|
|
|
|
|
|
|
|
|
Foreign currency translation
gain
|
|
|
921,776
|
|
|
|
799,834
|
|
|
|
|
|
|
|
|
|
|
Comprehensive Income
(loss)
|
|
$
|
(2,805,360
|
)
|
|
$
|
(350,885
|
)
|
|
|
|
|
|
|
|
|
|
Basic and diluted earnings (loss)
per common share
|
|
|
(0.09
|
)
|
|
|
(0.03
|
)
|
|
|
|
|
|
|
|
|
|
Weighted average number of common
shares
|
|
|
40,997,103
|
|
|
|
35,897,933
|
|
The
accompanying notes are an integral part of these financial statements
WUXI ANGELL AUTOCYCLE, CO.,
LTD
|
|
STATEMENTS OF SHAREHOLDERS'
EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Registered capital
|
|
|
Additional paid in
capital
|
|
|
Other comprehensive
income
|
|
|
Retained
Earnings
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31,
2006
|
|
|
3,300,000
|
|
|
|
1,219,243
|
|
|
|
779,982
|
|
|
|
5,725,011
|
|
|
|
11,024,234
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capial
contributions
|
|
|
1,782,315
|
|
|
|
1,073,269
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,855,584
|
|
Net loss for the
year
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
|
|
(1,150,719
|
)
|
|
|
(1,150,719
|
)
|
Foreign currency translation
gain
|
|
|
-
|
|
|
|
|
|
|
|
799,834
|
|
|
|
-
|
|
|
|
5,835,287
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31,
2007
|
|
|
5,082,315
|
|
|
|
2,292,512
|
|
|
|
6,615,268
|
|
|
|
4,574,292
|
|
|
|
18,564,387
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
contributions
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Net loss for the
year
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
|
|
(3,727,136
|
)
|
|
|
(3,727,136
|
)
|
Foreign currency translation
gain
|
|
|
-
|
|
|
|
|
|
|
|
921,776
|
|
|
|
-
|
|
|
|
(4,113,677
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31,
2008
|
|
$
|
5,082,315
|
|
|
|
2,292,512
|
|
|
|
2,501,592
|
|
|
|
847,155
|
|
|
|
10,723,575
|
|
The accompanying notes are an integral part of
these financial statements
WUXI ANGELL AUTOCYCLE, CO.,
LTD
|
|
STATEMENTS OF CASH
FLOWS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For The Years Ended December
31,
|
|
|
|
2008
|
|
|
2007
|
|
CASH FLOWS FROM OPERATING
ACTIVITIES:
|
|
|
|
|
|
|
Net loss
|
|
$
|
(3,727,136
|
)
|
|
$
|
(1,150,719
|
)
|
Adjustments to reconcile net
income to net cash
used in operating
activities:
|
|
|
|
|
|
|
|
|
Gain on disposal of fixed
assets
|
|
|
(51,358
|
)
|
|
|
-
|
|
Depreciation and
amortization
|
|
|
1,526,594
|
|
|
|
1,516,162
|
|
Bad debts
|
|
|
166,438
|
|
|
|
(318
|
)
|
(Increase) decrease in current
assets:
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
2,699,178
|
|
|
|
1,485,244
|
|
Note
receivable
|
|
|
-
|
|
|
|
6,564
|
|
Loan to shareholders and related
parties
|
|
|
-
|
|
|
|
3,560,822
|
|
Other
receivables
|
|
|
(177,758
|
)
|
|
|
251,145
|
|
Other
receivables
|
|
|
-
|
|
|
|
|
|
Inventory
|
|
|
(1,429
|
)
|
|
|
1,858,189
|
|
Advance to
suppliers
|
|
|
(2,222,069
|
)
|
|
|
449,767
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in current
liabilities:
|
|
|
|
|
|
|
|
|
Accounts
payables
|
|
|
(203,551
|
)
|
|
|
(7,522,258
|
)
|
Advances from
customers
|
|
|
1,277,645
|
|
|
|
(3,981
|
)
|
Note
payable
|
|
|
-
|
|
|
|
(4,338,865
|
)
|
Accrued expense and other
liabilities
|
|
|
195,231
|
|
|
|
262,396
|
|
|
|
|
|
|
|
|
|
|
Net cash used in operating
activities
|
|
|
(518,213
|
)
|
|
|
(3,625,853
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING
ACTIVITIES:
|
|
|
|
|
|
|
|
|
Acquisition of intangible
assets
|
|
|
-
|
|
|
|
(60,560
|
)
|
Acquisition of property &
equipment
|
|
|
-
|
|
|
|
(581,232
|
)
|
Sale of property &
equipment
|
|
|
73,317
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in)
investing activities
|
|
|
73,317
|
|
|
|
(641,792
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING
ACTIVITIES:
|
|
|
|
|
|
|
|
|
Capital
contributions
|
|
|
-
|
|
|
|
1,782,315
|
|
Proceeds from investor
advance
|
|
|
3,000,000
|
|
|
|
|
|
Repayment of short term bank
loans
|
|
|
(1,439,349
|
)
|
|
|
(2,481,227
|
)
|
Proceeds from related party
loans
|
|
|
(708,794
|
)
|
|
|
646,485
|
|
Loan proceeds from other
sources
|
|
|
1,839,362
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in)
financing activities
|
|
|
2,691,218
|
|
|
|
(52,427
|
)
|
|
|
|
|
|
|
|
|
|
EFFECT OF EXCHANGE RATE CHANGE ON
CASH & CASH EQUIVALENTS
|
|
|
88,611
|
|
|
|
202,524
|
|
|
|
|
|
|
|
|
|
|
NET INCREASE (DECREASE) IN CASH
& CASH EQUIVALENTS
|
|
|
2,334,934
|
|
|
|
(4,117,548
|
)
|
|
|
|
|
|
|
|
|
|
CASH & CASH EQUIVALENTS,
BEGINNING OF YEAR
|
|
|
1,209,551
|
|
|
|
5,327,099
|
|
|
|
|
|
|
|
|
|
|
CASH & CASH EQUIVALENTS, END
OF YEAR
|
|
$
|
3,544,485
|
|
|
$
|
1,209,551
|
|
|
|
|
|
|
|
|
|
|
Supplemental Cash flow
data:
|
|
|
|
|
|
|
|
|
Income tax
paid
|
|
$
|
-
|
|
|
$
|
-
|
|
Interest
paid
|
|
$
|
(1,093,197
|
)
|
|
$
|
(767,082
|
)
|
|
|
|
|
|
|
|
|
|
Non-cash financing and investing
activities
|
|
|
|
|
|
|
|
|
Capital contribution in the form
of equipments and machinery
|
|
$
|
-
|
|
|
$
|
1,073,269
|
|
The accompanying notes are an integral part of
these financial statements
W
UXI ANGELL AUTOCYCLE CO.,
LTD
NOTES TO FINANCIAL
STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 2008
AND
2007
1.
ORGANIZATION AND BASIS OF PRESENTATION
Wuxi
Angell Autocycle, Co., Ltd ("Wuxi Angell" or the "Company"), a
Sino-foreign joint venture organized
under the laws of The People
’
s Republic of China (“
PRC
”
),
was incorporated in the
Jiangsu Province of the PRC in December 2002.
The
Company is engaged in design, manufacture and distribution of various types of
electric vehicles, including electric bicycles, electric scooters and electric
recreational vehicles, etc.
The accompanying
financial statements of the Company have
been prepared in accordance with generally accepted accounting principles in the
United States of
America
(“US
GAAP”).
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use
of estimates
In
preparing the financial statements in conformity with accounting principles
generally accepted in the United States of America, the management makes
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the dates of
the financial statements, as well as the reported amounts of revenues and
expenses during the reporting periods. Significant estimates required to be made
by the management include, but are not limited to, the recoverability of
long-lived assets and the valuation of accounts receivable and inventories.
Actual results could differ from those estimates.
Cash and cash
equivalents
For
purposes of the statement of cash flow, the Company considers all highly liquid
investments with an original maturity of three months or less to be cash
equivalents.
Accounts receivable
Accounts
receivables are stated at net realizable value. Any allowance for doubtful
accounts is established based on the management’s assessment of the
recoverability of accounts and other receivables.
Management regularly reviews the
composition of accounts receivable and analyzes historical bad debts, customer
concentrations, customer credit worthiness, current economic trends and changes
in customer payment patterns to evaluate the collectability of accounts
receivable and the adequacy of the allowance.
The allowance for
accounts receivable
amounted to
$
739,895
and $647,464
as of
December 31, 2008
and
2007
,
respectively.
W
UXI ANGELL AUTOCYCLE CO.,
LTD
NOTES TO FINANCIAL
STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 2008
AND
2007
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Inventor
y
Inventory
is stated at the lower of cost or market. Cost is determined on a weighted
average method. Cost of work in progress and finished goods comprises direct
material, direct production cost and an allocated portion of production
overheads. Management compares the cost of inventory with the market value and
an allowance is made for writing down the inventory to its market value, if
lower.
Revenue
recognition
The
Company's revenue recognition policies are in compliance with Securities and
Exchange Commission (“SEC”) Staff Accounting Bulletin (“SAB”)
104. Sales revenue is recognized at the date of shipment to customers
when a formal arrangement exists, the price is fixed or determinable, the
delivery is completed, no other significant obligations of the Company exist and
collectability is reasonably assured. Payments received before all of
the relevant criteria for revenue recognition are recorded as advances from
customers.
There
were no sales returns and allowances for the years ended December 31, 2008, and
2007. The Company does not provide unconditional right of return, price
protection or any other concessions to its customers.
Property, plant and
equipment
Property, plant and equipment are stated
at cost less accumulated depreciation and amortization. Maintenance, repairs and
betterments, including replacement of minor items, are charged to expense;
ma
jor additions to physical
properties are capitalized. Depreciation and amortization are provided using the
straight-line method (after taking into account their respective estimated
residual values) over the estimated useful lives of the assets as
follows
:
Buildings and
improvements
|
20 years
|
Machinery, equipment and motor
vehicles
|
5-10
years
|
Construction in
progress
Construction in progress represents
buildings and machinery under construction, which is stated at cost and is not
depreciated. Cost comprises the direct costs of construction. Construction in
progress is reclassified to the appropriate category of proper
t
y, plant and equipment when completed
and ready for use.
W
UXI ANGELL AUTOCYCLE CO.,
LTD
NOTES TO FINANCIAL
STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 2008
AND
2007
2. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (Continued)
Impairment of long-lived
asse
ts
Long-lived assets, which include
property, plant and equipment and intangible assets, are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable.
Concentration
of credit risk
Financial
instruments that potentially subject the Company to significant concentrations
of credit risk consist of cash and cash equivalents and accounts and other
receivables. As of December 31, 2008, substantially most of the Company's cash
and cash equivalents were held by major banks located in the PRC which the
Company's management believes are of high credit quality. With respect to
accounts receivable, the Company extends credit based on an evaluation of the
customer's financial condition and without requiring collateral. The Company
conducts periodic reviews of its customers' financial condition and customer
payment practices to minimize collection risk on accounts
receivable.
Foreign
currency translation
The
functional currency of the Company is the Chinese Renminbi (“RMB”). For
financial reporting purposes, RMB has been translated into United States dollars
("USD") as the reporting currency. Assets and liabilities are translated at the
exchange rate in effect at the balance sheet date. Income statement accounts are
translated at the average rate of exchange prevailing for the period. Capital
accounts are translated at their historical exchange rates when the capital
transaction occurred. Translation adjustments arising from the use of different
exchange rates from period to period are included as a component of
stockholders' equity as "Accumulated other comprehensive income". Gains and
losses resulting from foreign currency translation are included in accumulated
other comprehensive income.
Research and development
costs
Research and development
costs are expensed as
incurred
. These costs
consist of cost
for a
research project
Jiangsu
University
contracted with the Company in
2008
. For the
years
ended
December 31, 2008 and 2007
, the Compa
ny expensed $
411,700
and $
0
as research and development expense,
respectively.
W
UXI ANGELL AUTOCYCLE CO.,
LTD
NOTES TO FINANCIAL
STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 2008
AND
2007
2. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (Continued)
Income
Tax
The
Company utilizes Statement of Financial Accounting Standards (SFAS) No. 109,
“Accounting for Income Taxes, ” which requires the recognition of deferred tax
assets and liabilities for the expected future tax consequences of events that
have been included in the financial statements or tax returns. Under this
method, deferred income taxes are recognized for the tax consequences in future
years of differences between the tax bases of assets and liabilities and their
financial reporting amounts at each period end based on enacted tax laws and
statutory tax rates applicable to the periods in which the differences are
expected to affect taxable income. Valuation allowances are established, when
necessary, to reduce deferred tax assets to the amount expected to be
realized.
Comprehensive Income
(loss)
Comprehensive income
(loss)
is defined to include changes in equity
except those resulting from investments by owners and distributions to owners.
Among other disclosures, items that are required to be recognized under current
accounting standards as components of comprehensive income
(loss)
are required to be reported in a
financial statement that is presented with the same prominence as other
financial statements. Comprehensive income
(loss)
includes net income
(loss)
and the foreign currency translation
gain, net of tax.
Basic
and Diluted Earnings (Loss) per Share
Earnings
(Loss) per share are calculated in accordance with the SFAS 128, “Earnings per
share”. Basic net earnings (loss) per share are based upon the weighted average
number of common shares outstanding, but excluding shares issued as compensation
that have not yet vested. Diluted net earnings per share are based on the
assumption that all dilutive convertible shares and stock options were converted
or exercised, and that all unvested shares have vested. Dilution is
computed by applying the treasury stock
method. Under this method, options and warrants are assumed to be exercised at
the beginning of the period (or at the time of issuance, if later), and as if
funds obtained thereby were used to purchase common stock at the average market
price during the period.
W
UXI ANGELL AUTOCYCLE CO.,
LTD
NOTES TO FINANCIAL
STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 2008
AND
2007
2. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (Continued)
Recently
Issued Accounting Standards
On October 10, 2008, the FASB issued FSP
157-3, “Determining the Fair Value of a Financial Asset When the Market for That
Asset Is Not Active,” which clarifies the application of SFAS 157 in a market
that is not active and provides an example to illustrate key considerations in
determining the fair value of a financial asset when the market for that
financial asset is not active. FSP 157-3 became effective on October 10, 2008,
and its adoption did not have a material impact on our financial position or
results.
In June 2008, the FASB issued FASB Staff
Position on Emerging Issues Task Force Issue 03-6, “Determining Whether
Instruments Granted in Share-Based Payment Transactions Are Participating
Securities” (“FSP EITF 03-6-1”). FSP EITF 03-6-1 states that unvested
share-based payment awards that contain nonforfeitable rights to dividends or
dividend equivalents (whether paid or unpaid) are participating securities and
shall be included in the computation of earnings per share (“EPS”) pursuant to
the two-class method. FSP EITF 03-6-1 is effective for financial statements
issued for fiscal years beginning after December 15, 2008, and interim
periods within those years. All prior-period EPS data presented shall be
adjusted retrospectively (including interim financial statements, summaries of
earnings, and selected financial data) to conform with the provisions of FSP
EITF 03-6-1.
The adoption
of this FSP EITF 03-6-1 did not have a material effect on the Company’s
financial position.
In June 2008, the FASB ratified
EITF 07-5, “Determining Whether an Instrument (or Embedded Feature) is
Indexed to an Entity’s Own Stock”. EITF 07-5 addresses how an entity should
evaluate whether an instrument or embedded feature is indexed to its own stock,
carrying forward the guidance in EITF 01-6 and superseding EITF 01-6.
Other issues addressed in EITF 07-5 include addressing situations where the
currency of the linked instrument differs from the host instrument and how to
account for market-based employee stock options. EITF 07-5 is effective for
fiscal years beginning after December 15, 2008 and early adoption is not
permitted. The Company has evaluated this statement and estimated that it is not
expected to have an impact on its financial position and results of
operations.
In May 2008, the FASB issued SFAS No.
163, “Accounting for Financial Guarantee Insurance Contracts – an interpretation
of FASB Statement No. 60.” SFAS 163 requires that an insurance enterprise
recognize a claim liability prior to an event of default (insured event) when
there is evidence that credit deterioration has occurred in an insured financial
obligation. This Statement also clarifies how Statement 60 applies to
financial guarantee insurance contracts, including the recognition and
measurement to be used to account for premium revenue and claim liabilities.
Those clarifications will increase
comparability in financial reporting of
financial guarantee insurance contracts by insurance enterprises. This Statement
requires expanded disclosures about financial guarantee insurance contracts. The
accounting and disclosure requirements of the Statement will improve the quality
of information provided to users of financial statements. SFAS 163 will be
effective for financial statements issued for fiscal years beginning after
December 15, 2008. The Company does not expect the adoption of SFAS 163
will have a material impact on its financial condition or results of
operation.
W
UXI ANGELL AUTOCYCLE CO.,
LTD
NOTES TO FINANCIAL
STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 2008
AND
2007
2.
SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (Continued)
In April 2008, FASB Staff Position
No. 142-3, Determination of the Useful Life of Intangible Assets (“FSP
142-3”) was issued. This standard amends the factors that should be considered
in developing renewal or extension assumptions used to determine the useful life
of a recognized intangible asset under FASB Statement No. 142, Goodwill and
Other Intangible Assets. FSP 142-3 is effective for financial statements issued
for fiscal years beginning after December 15, 2008, and interim periods
within those fiscal years. Early adoption is prohibited. The Company has not
determined the impact on its financial statements of this accounting
standard.
In March 2008, the FASB issued Statement
of Financial Accounting Standards (“SFAS”) No. 161, Disclosures about
Derivative Instruments and Hedging Activities, an amendment of FASB Statement
No. 133, which requires additional disclosures about the objectives of the
derivative instruments and hedging activities, the method of accounting for such
instruments under SFAS No. 133 and its related interpretations, and a
tabular disclosure of the effects of such instruments and related hedged items
on our financial position, financial performance, and cash flows. SFAS
No. 161 is effective beginning January 1, 2009. The Company does
not
expect the adoption of
SFAS 161
will have a
material impact on its financial condition or results of
operation.
W
UXI ANGELL AUTOCYCLE CO.,
LTD
NOTES TO FINANCIAL
STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 2008
AND
2007
3.
INVENTORY
Inventory
consists of the following:
|
|
December
31, 2008
|
|
|
December
31, 2007
|
|
Raw
Materials
|
|
$
|
1,121,248
|
|
|
$
|
1,151,855
|
|
Finished
goods
|
|
|
280,384
|
|
|
|
154,212
|
|
Total
|
|
$
|
1,401,632
|
|
|
$
|
1,306,067
|
|
There
were no allowances recorded for the years ended December 31, 2008 and
2007.
4.
PROPERTY, PLANT AND EQUIPMENT, NET
Property,
plant and equipment consist of the following at December 31, 2008 and December
31, 2007:
|
|
December
31, 2008
|
|
|
December
31, 2007
|
|
Building
and improvements
|
|
$
|
19,335,057
|
|
|
$
|
18,033,829
|
|
Machinery
and equipment
|
|
|
5,672,179
|
|
|
|
5,287,051
|
|
Motor
Vehicles
|
|
|
207,113
|
|
|
|
396,370
|
|
|
|
|
25,214,349
|
|
|
|
23,717,250
|
|
less:
Accumulated Depreciation
|
|
|
(5,252,534
|
)
|
|
|
(3,752,903
|
)
|
|
|
|
|
|
|
|
|
|
Total
property, plant and equipment, net
|
|
$
|
19,961,815
|
|
|
$
|
19,964,347
|
|
Property,
plant and equipment are stated at cost less accumulated depreciation.
Depreciation expense for the years ended December 31, 2008, 2007 was $1,393,172
and $1,395,546, respectively.
W
UXI ANGELL AUTOCYCLE CO.,
LTD
NOTES TO FINANCIAL
STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 2008
AND
2007
5.
INTANGIBLE ASSET
Intangible
asset consists of land use right. All land in the People’s Republic of China is
government owned and cannot be sold to any individual or company. However, the
government grants the user a “land use right” to use the land. Wuxi Angell
leases two pieces of land per real estate contracts from the PRC Government for
a period from July 2003 to July 2053 and from September 2002 to June 2057
respectively, on which the office and production facilities of Wuxi Angell are
situated.
Right to
use land is stated at cost less accumulated amortization.
The Company amortizes the
rights to use land over a 5
0 year period. The Company evaluates
intangible assets for impairment, at least on an annual basis and w
henever events or changes in
circumstances indicate that the carrying value may not be recoverable from its
estimated future cash flows. Recov
erability of intangible assets and
other long-lived assets is
measured by comparing their net book value to the re
lated projected undiscounted cash flows
from these assets, considering a number of factors including past operating
results, budgets, economic projections, market trends and product development
cycles. If the net book value of the asset exceeds the relate
d
undiscounted cash flows, the asset is
considered impaired, and a second test is performed to measure the amount of
impairment loss. As of
December 31
, 2008, no impairment of intangible
assets has been recorded.
Net
intangible assets at December 31, 2008 and December 31, 2007 were as
follows:
|
|
December
31, 2008
|
|
|
December
31, 2007
|
|
Rights
to use land
|
|
$
|
6,793,395
|
|
|
$
|
6,336,793
|
|
|
|
|
|
|
|
|
|
|
Less:
accumulated amortization
|
|
|
(749,423
|
)
|
|
|
(572,316
|
)
|
|
|
|
|
|
|
|
|
|
Total
Intangible Assets, Net
|
|
$
|
6,043,972
|
|
|
$
|
5,764,477
|
|
Amortization
expense
was
$133,422 and
$
120
,
616
for the
years ended December 31,
2008 and 2007, respectively.
Based
upon current assumptions, the Company expects that the land use right will be
amortized over the next five years according to the following
schedule:
|
|
As of December
31,
|
|
2009
|
|
$
|
133,422
|
|
2010
|
|
|
133,422
|
|
2011
|
|
|
133,422
|
|
2012
|
|
|
133,422
|
|
2013
|
|
|
133,422
|
|
Thereafter
|
|
|
5,376,862
|
|
|
|
$
|
6,043,972
|
|
W
UXI ANGELL AUTOCYCLE CO.,
LTD
NOTES TO FINANCIAL
STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 2008
AND
2007
6.
SHORT TERM BANK LOANS
The
short-term bank loans include the following:
|
|
As
of
|
|
|
|
December
31, 2008
|
|
|
December
31, 2007
|
|
a)
Loan payable to Huaxia Bank
|
|
|
|
|
|
|
six-month
term from 10/10/07 to 04/10/08,
|
|
|
|
|
|
|
a
fixed interest rate of 0.540% per month
|
|
|
-
|
|
|
|
683,611
|
|
|
|
|
|
|
|
|
|
|
b)
Loan payable to Huaxia Bank
|
|
|
|
|
|
|
|
|
six-month
term from 11/09/07 to 05/09/08,
|
|
|
|
|
|
|
|
|
a
fixed interest rate of 0.540% per month
|
|
|
-
|
|
|
|
2,734,443
|
|
|
|
|
|
|
|
|
|
|
c)
Loan payable to Huaxia Bank
|
|
|
|
|
|
|
|
|
six-month
term from 11/12/07 to 05/12/08,
|
|
|
|
|
|
|
|
|
a
fixed interest rate of 0.6083% per month
|
|
|
-
|
|
|
|
4,785,278
|
|
|
|
|
|
|
|
|
|
|
d)
Loan payable to Huaxia Bank
|
|
|
|
|
|
|
|
|
from
01/01/08 to 09/21/08
|
|
|
|
|
|
|
|
|
a
fixed interest rate of 0.5475% per month
|
|
|
2,931,477
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
e)
Loan payable to Huaxia Bank
|
|
|
|
|
|
|
|
|
from
01/01/08 to 09/21/08
|
|
|
|
|
|
|
|
|
a
fixed interest rate of 0.5475% per month
|
|
|
4,397,215
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
7,328,692
|
|
|
$
|
8,203,333
|
|
All the
short-term bank loans are secured by plant and equipment and land use rights of
the Company. As of December 31, 2008, both loans from Huaxia Bank were past due.
The Company was negotiating to renew the loans. The bank increased the interest
rate to 0.809% per month for both loans as stipulated in the original loan
agreement. As of the date of this report, both loans are still outstanding and
past due.
7.
ADVANCE FROM INVESTOR
As of
December 31
, 2008, the
Company received a total amount of $3, 000,000 from Advanced Battery
Technologies, Inc. as an initial investment advance. As agreed by both parties,
this advance, along with other future cash investment, will be used to pay off
Wuxi Angell’s existing debts. (See note 17)
W
UXI ANGELL AUTOCYCLE CO.,
LTD
NOTES TO FINANCIAL
STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 2008
AND
2007
8.
LOANS FROM RELATED PARTIES
In the
past, the Company periodically received personal loans from its shareholders to
finance the operations when necessary. All shareholders’ loans were intended to
be free of interest and due upon demand. The Company owed a total amount of
$673,276 to one of the shareholders, Wuxi Baoshiyun Autocycle Co., Ltd as of
December 31, 2007. The entire balance of the loan was repaid in 2008. The
Company did not have any additional loans from its shareholders in
2008.
9.
LOAN PAYABLE TO OTHERS
The
Company also receives loans from other non-related companies and individuals as
a normal business practice in China. As of December 31, 2008, the Company owed
$1,873,085 to several non-related companies and individuals. These
loans are also intended to be free of interest and due upon demand.
10.
ADVANCES FROM CUSTOMERS
Advances
from customers represent prepayments made by customers for product sales. The
Company records theses prepayment as advance from customers when the payments
are received in advance of shipments and reclassify them to sales once shipments
are made. Advances from customers as of December 31, 2008 and 2007 amounted to $
1,482,497 and $169,233, respectively.
11.
INCOME TAXES
Under the Income Tax Laws of the PRC,
the Company is generally subject to tax at a statutory rate of 25% and was,
until January 2008, subject to tax at a statutory rate of 33% (30% state income
taxes plus 3% local income taxes) on its taxable income.
On March 16, 2007, National People’s
Congress passed a new corporate income tax law, which was effective on January
1, 2008. This new corporate income tax unifies the corporate income tax rate to
25%, and includes cost deductions and tax incentive policies for both domestic
and foreign-invested enterprises in
China
.
Due to the net loss incurred, no income
tax expense accrued for the years ended December 31, 2008 and 2007.
The net operating loss carry-forwards
may be available to reduce future years’ taxable income and will expire in 2013.
Management believes that the realization of the benefits arising from these
losses appear to be uncertain due to possible future losses. Accordingly, the
Company has provided a 100% valuation allowance at December 31, 2008
and 2007
for the temporary differences related
to loss carry-forwards. Management reviews this valuation allowance periodically
and makes adjustments as warranted.
W
UXI ANGELL AUTOCYCLE CO.,
LTD
NOTES TO FINANCIAL
STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 2008
AND
2007
11.
INCOME TAXES
(Continued)
The tax effects of temporary differences
that give rise to the Company’s net deferred tax assets as of December 31, 2008
and 2007 are as follows:
|
|
As
of December 31
|
|
|
|
2008
|
|
|
2007
|
|
Deferred
tax assets:
|
|
|
|
|
|
|
Net
operating loss carry forward
|
|
$
|
1,219,464
|
|
|
$
|
287,680
|
|
Less:
valuation allowance
|
|
|
(1,219,464
|
)
|
|
|
(287,680
|
)
|
|
|
|
|
|
|
|
|
|
Net
deferred tax assets
|
|
$
|
-
|
|
|
$
|
-
|
|
1
2
. STOCKHOLDERS’
EQUITY
The Company’s
original
registered capital
was
$3,300,000
.
In 2007, the Company’s shareholders
contributed
$1,782,315 in
cash and increased its registered capital to $5,052,315. In addition, one of the
shareholders contributed
equipment
s
and machinery
that were valued at RMB11,078,800
(approximately $1,219,243) in 2006 and
RMB 7,850,000
(approximately
$1,073,269
)
in 2007
to the Company
to expand its
manufacturing
capacity.
The
industry practice in PRC does not require the issuance of stock certificates to
the shareholders, nor a third party transfer agent to maintain the records. For
the purpose of financial reporting, the Company elected to designate one (1)
common share for each RMB contributed. Accordingly, there were total 40,997,103
shares issued and outstanding as December 31, 2008 and 2007.
13.
CONCENTRATION OF RISKS
Three
major customers accounted for
30.9
% of the net revenue for the year ended
December 31, 2008, with each customer individually accounting for
16.5
%,
7.8
%
and 6.7%,
respectively.
No single customer counted more than 10%
of the sales in the year ended December 31, 2007.
One major vendor provided 72.8% of the
Company’s purchases of raw materials for the year ended December 31,
2008.
The Com
pany’s accounts payable to this
vendor
was $
1,032,928
as of December 31
, 2008.
One major vendor provided 7.23% of the
Company’s purchase of raw materials for the year ended December 31
, 2007
.
The Com
pany’s accounts payable to
this
v
endor
was $
23,770
as of December 31,
2007.
W
UXI ANGELL AUTOCYCLE CO.,
LTD
NOTES TO FINANCIAL
STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 2008
AND
2007
14.
COMMITMENTS AND CONTINGENCIES
The
Company periodically provides off-balance guarantees on various debt obligations
(such as bank loans and bank acceptance notes) and other commitments such as
letter of credit on behalf of certain related parties. The Company would be
required to perform on these guarantees in the event of default by the
guaranteed parties. No material loss is anticipated by reason of such agreements
and guarantees.
At
December 31, 2008, the maximum potential amount of future (undiscounted)
payments under those significant guarantees provided to third parties
approximated $6.23 million. As many of these guarantees will not be drawn upon
and the maximum potential amount of future payments does not consider the
possibility of recovery under recourse or collateral provisions, these amounts
are not indicative of future cash requirements or the Company’s expected losses
from these arrangements.
The
Company’s operations in the PRC are also subject to specific considerations and
significant risks not typically associated with companies in the North America
and Western Europe. These include risks associated with, among others, the
political, economic and legal environments and foreign currency exchange. The
Company’s results may be adversely affected by changes in governmental policies
with respect to laws and regulations, anti-inflationary measures, currency
conversion and remittance abroad, and rates and methods of taxation, among other
things.
The
Company’s sales, purchases and expenses transactions are denominated in RMB and
all of the Company’s assets and liabilities are also denominated in RMB. The RMB
is not freely convertible into foreign currencies under the current law. In
China, foreign exchange transactions are required by law to be transacted only
by authorized financial institutions at exchange rates set by the People’s Bank
of China, the central bank of China. Remittances in currencies other than RMB
may require certain supporting documentation in order to affect the
remittance.
15.
LEGAL PROCEEDINGS
From time to time, the Company becomes
involved in various lawsuits and legal proceedings which arise in the ordinary
course of business.
As of December 31, 2008, the Company was
involved in the following major lawsuits or arbitrary
actions:
In May 2008
, an action was filed against the
Company by
Wuxi Lide Auto
Parts Co., Ltd. (“Wuxi Lide”) in Wuxi
District
Court
, seeking specific perf
ormance of the Company's unpaid
debts
plus accrued interests and penalties in
the total amount of RMB 12,400,000 (approximately $1,823,529). The Court issued
a judgment to settle the claim against the Company and in favor of Wuxi Lide.
The Company was ordered to pay the total amount claimed plus court costs and
attorney’s fees in the form of monthly installment payment of RMB1,300,000
(approximately $191,175) per month through July 2009. As of December
31, 2008, no payment has been made by the Company yet.
W
UXI ANGELL AUTOCYCLE CO.,
LTD
NOTES TO FINANCIAL
STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 2008
AND
2007
15.
LEGAL PROCEEDINGS (Continued)
In
September 2008, Jiansu Sanjiang Disheng Electric Machinery Co., Ltd. filed a
lawsuit at Wuxi Sub-district Court of High-Tech Industrial Park, demanding
specific performance of the Company’s unpaid debts plus accrued interests. The
Company was ordered to pay a total amount of RMB1,024,524 (approximately
$150,665), in addition to the applicable court costs. As of December 31, 2008,
the Company has not made any payments on this claim.
In March
2008, an arbitrary action was filed by Huaren Construction Group Co. with China
Economic and Trade Arbitration Commission, Wuxi Branch for the dispute of
certain construction payments owed by the Company. On June 24, 2008, an
arbitrary judgment was issued against the Company and the Company was ordered to
pay a total amount of RMB4,000,000 (approximately $588,235), of which,
approximately $441,176 was to be paid within twenty (20) days of the judgment
date and remaining to be paid on or before September 30, 2008. As of December
31, 2008, the Company has not made any payments on this claim. Both parties are
still under negotiation on when the payments can be made.
In June
2008, an action was filed against the Company by Mr. Jinyu Zhu in Wuxi
Sub-district Court of High-Tech Industrial Park, demanding the payment of unpaid
debts of RMB1,000,000 (approximately $147,058) by the Company. A judgment order
was issued against the Company for an immediate payment of the claimed amount
plus court costs. As of December 31, 2008, the entire amount has not been paid
by the Company.
In July
2008, an action was filed against the Company by Wuxi Longbiap Electronics Co.,
Ltd. in Wuxi Sub-district Court of High-Tech Industrial Park, seeking specific
performance of the Company’s unpaid debts of RMB341,514 (approximately $50,222).
A judgment order was issued against the Company for an immediate payment of the
claimed amount plus court costs. As of December 31, 2008, the entire amount has
not been paid by the Company.
In
September 2008, another action was filed against the Company by Jiande City Five
Star Automobile Co., Ltd. in Wuxi Sub-district Court of High-Tech Industrial
Park, seeking specific performance of the Company’s unpaid debts of RMB303,720
(approximately $44,665). A judgment order was issued against the Company for an
immediate payment of the claimed amount plus court costs. As of December 31,
2008, the entire amount has not been paid by the Company.
W
UXI ANGELL AUTOCYCLE CO.,
LTD
NOTES TO FINANCIAL
STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 2008
AND
2007
16.
GOING CONCERN
The accompanying
financial statements have been prepared
in accordance with accounting principles generally accepted in the
United States of America
, which contemplate continuation of the
Company as
a going concern.
The Company has
sustained
opera
ting losses for both
year ended December 31, 2008 and 2007, and has negative net working capital of
$15,282,212 at December 31, 2008.
These factors raise substantial doubt
about its ability to continue as a going concern.
In November 2008, the Company started
the process of negotiating a business combination with an outside
company.
As of the date of this report, the
acquisition of the Company by Advanced Battery Technologies, Inc. was
successfully completed (See note 17).
Presently, the Company
is under a new management team and has
formulated and is in the process of implementing its new business plan intended
to develop steady revenues and income, as well as reducing expenses in the areas
of operations. The Company
cannot ascertain the eventual success of
management’s plan with any deg
ree of certainty. Success of these
plans
is contingent upon a
number of factors and the Company does not represent tha
t any or all of those
objectives will occur
. The
accompanying
financial
statements do not include any adjustments that might result from the eventual
outcome of the risks and uncertainties described above.
17.
SUBSEQUENT EVENT
On April
28, 2009, the shareholders of the Company entered into a Share Purchase
Agreement (“Agreement”) and a subsequent addendum to the Agreement, with
Cashtech Investment Limited (“Cashtech”), a wholly-owned subsidiary of Advanced
Battery Technologies, Inc (“ABAT”), a public-traded company listed on NASDAQ.
Pursuant to the Agreement and the applicable addendum, Cashtech agrees to
acquire 100% interest of Wuxi Angell for: 1) 3,000,000 shares of ABAT’s common
stocks; 2) Cash payments of US$3,640,000 and RMB70,0000.000 (approx.
$10,248,902). Based on the subsequent addendum, all of the cash payments shall
be used to satisfy various outstanding debts of Wuxi Angell existed prior to the
date of the Agreement. The acquisition was consummated on May 4, 2009.
Accordingly, the final consideration paid for the acquisition of the net assets
of Wuxi Angell is 3,000,000 shares of ABAT’s common stock, valued at the market
price for those shares on May 4, 2009, the date of the acquisition. Following
the acquisition by ABAT, Wuxi Angell was renamed to Wuxi Zhongqiang Autocycle
Co. Ltd.
Advanced
Battery Technologies, Inc.
Unaudited
Pro Forma Condensed Combined Financial Statements
On May 4,
2009, Advanced Battery Technologies, Inc. (the “Company” or “ABAT”) , through
its wholly-owned subsidiary, Cashtech Investment Limited, completed
the acquisition of 100% of the ownership interest in Wuxi Angell
Autocycle Co., Ltd. (“Wuxi Angell”). The ownership interest was
purchased from the shareholders of Wuxi Angell: Wuxi Baoshiyun Autocycle Co.,
Ltd. and Mr. Bao Jin (“Sellers”), who are not affiliated with ABAT or its
subsidiaries. In exchange for the 100% ownership interest in Wuxi
Angell, ABAT agrees to pay US$3,640,000 and Chinese Renminbi (“RMB”) 70,000,000
(approx. $10,248,902) in cash, all of which, as agreed by the
parties, will be used to satisfy the outstanding debts of Wuxi Angell
that existed prior to date of the acquisition. In addition, ABAT issued three
million shares of its common stock to the Sellers.
In order
to facilitate the purchase of Wuxi Angell, Mr. Zhiguo Fu, the Chairman of ABAT,
previously agreed to purchase one million shares of ABAT’s common stock from Mr.
Bao Jin, one of the previous shareholders of Wuxi Angell. The
purchase was also completed on May 4, with Mr. Fu paying to Mr. Bao Jin the
market price for the shares on that date.
The
following unaudited pro forma condensed combined balance sheet presents our
historical financial position combined with Wuxi Angell as if the acquisition
had occurred on March 31, 2009. The following unaudited pro forma condensed
combined statements of income present the combined results of the Company’s
operations with Wuxi Angell as if the acquisition had occurred on
January 1, 2008.
The
unaudited pro forma condensed financial statements should be read in conjunction
with:
|
•
|
|
accompanying
Notes to the Unaudited Pro Forma Condensed Combined Financial
Statements
|
|
•
|
|
separate
historical financial statements of the Company included in our Annual
Report on Form 10-K for the year ended December 31, 2008 and Form
10-Q for the three months ended March 31, 2009;
and
|
|
•
|
|
Separate
historical financial statements of Wuxi
Angell.
|
The
unaudited pro forma condensed combined balance sheet combines the historical
consolidated balance sheets of the Company and Wuxi Angell, giving effect to the
acquisition as if it had been completed on March 31, 2009. Such information
was prepared using the purchase method of accounting with the Company treated as
the acquiring entity. Accordingly, we have adjusted the historical consolidated
financial information to give effect to the impact of the cash consideration
issued in connection with the acquisition. In the unaudited pro forma condensed
combined balance sheet, the Company’s cost to acquire Wuxi Angell has been
allocated to the assets acquired and liabilities assumed based upon estimates of
their fair value, as further discussed below.
The
unaudited pro forma condensed combined statements of income for the three months
ended March 31, 2009 and for the year ended December 31, 2008, combine
the historical consolidated statements of income of the Company and Wuxi Angell,
giving effect to the acquisition as if it had been completed on January 1,
2008.
Based on
the Company’s review of Wuxi Angell’s summary of significant accounting policies
disclosed in its historical financial statements and related notes, the nature
and amount of any adjustments to the historical financial statements of Wuxi
Angell to conform their accounting policies to those of the Company are not
expected to be significant.
ADVANCED BATTERY TECHNOLOGIES,
INC
|
UNAUDITED PRO FORMA CONDENSED
COMBINED BALANCE SHEET
|
March 31,
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro
Forma
|
|
|
|
Pro Forma
|
|
|
|
ABAT
|
|
|
Wuxi Angell
|
|
|
Adjustments
|
|
Notes
|
|
Combined
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
33,545,014
|
|
|
$
|
193,603
|
|
|
|
|
|
|
$
|
33,738,617
|
|
Accounts receivable,
net
|
|
|
16,724,986
|
|
|
|
632,090
|
|
|
|
(1,031,181
|
)
|
a
|
|
|
16,325,895
|
|
Inventories,
net
|
|
|
1,516,234
|
|
|
|
1,377,852
|
|
|
|
|
|
|
|
|
2,894,086
|
|
Loan
receivable
|
|
|
1,619,355
|
|
|
|
-
|
|
|
|
|
|
|
|
|
1,619,355
|
|
Other
receivables
|
|
|
109,163
|
|
|
|
62,947
|
|
|
|
|
|
|
|
|
172,110
|
|
Loan to related
parties
|
|
|
-
|
|
|
|
731,923
|
|
|
|
|
|
|
|
|
731,923
|
|
Advance to
suppliers
|
|
|
129,925
|
|
|
|
1,824,498
|
|
|
|
|
|
|
|
|
1,954,423
|
|
Total current
assets
|
|
|
53,644,677
|
|
|
|
4,822,913
|
|
|
|
|
|
|
|
|
57,436,409
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and Equipment,
Net
|
|
|
16,481,181
|
|
|
|
19,575,484
|
|
|
|
2,327,085
|
|
b
|
|
|
38,383,750
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment in unconsolidated
entity
|
|
|
1,027,751
|
|
|
|
-
|
|
|
|
|
|
|
|
|
1,027,751
|
|
Investment
advance
|
|
|
3,814,946
|
|
|
|
-
|
|
|
|
(3,814,946
|
)
|
c
|
|
|
-
|
|
Deposit for long-term
assets
|
|
|
3,712,390
|
|
|
|
-
|
|
|
|
|
|
|
|
|
3,712,390
|
|
Intangible assets,
net
|
|
|
1,514,834
|
|
|
|
5,999,893
|
|
|
|
7,368,462
|
|
d
|
|
|
14,883,189
|
|
Goodwill
|
|
|
2,482,873
|
|
|
|
-
|
|
|
|
|
|
|
|
|
2,482,873
|
|
Other
assets
|
|
|
26,624
|
|
|
|
-
|
|
|
|
|
|
|
|
|
26,624
|
|
Total other
assets
|
|
|
12,579,418
|
|
|
|
5,999,893
|
|
|
|
|
|
|
|
|
22,132,827
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
ASSETS
|
|
$
|
82,705,276
|
|
|
$
|
30,398,290
|
|
|
|
|
|
|
|
$
|
117,952,986
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS'
EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
Liabilites
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
913,210
|
|
|
$
|
6,216,585
|
|
|
|
(1,031,181
|
)
|
a
|
|
$
|
6,098,614
|
|
Advance from
Customer
|
|
|
83,185
|
|
|
|
1,313,927
|
|
|
|
|
|
|
|
|
1,397,112
|
|
Accrued expenses and other
payables
|
|
|
498,045
|
|
|
|
193,951
|
|
|
|
-
|
|
|
|
|
691,996
|
|
Short term bank
loans
|
|
|
-
|
|
|
|
7,316,295
|
|
|
|
|
|
|
|
|
7,316,295
|
|
Loan from officers and related
parties
|
|
|
8,390
|
|
|
|
-
|
|
|
|
|
|
|
|
|
8,390
|
|
Advance from
investor
|
|
|
-
|
|
|
|
3,814,946
|
|
|
|
(3,814,946
|
)
|
c
|
|
|
-
|
|
Loan payable -
Other
|
|
|
-
|
|
|
|
1,862,601
|
|
|
|
|
|
|
|
|
1,862,601
|
|
Tax payable
|
|
|
1,079,760
|
|
|
|
12,309
|
|
|
|
|
|
|
|
|
1,092,069
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current
liabilities
|
|
|
2,582,590
|
|
|
|
20,730,614
|
|
|
|
|
|
|
|
|
18,467,077
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS'
EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock, $0.001 par value,
60,000,000 shares authorized;
|
|
|
54,822
|
|
|
|
-
|
|
|
|
3,000
|
|
e
|
|
|
57,822
|
|
57,821,577 shares issued and
57,626,996 shares outstanding as of March 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
Registered
Capital
|
|
|
-
|
|
|
|
5,082,315
|
|
|
|
(5,082,315
|
)
|
f
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional paid-in
capital
|
|
|
39,602,197
|
|
|
|
2,292,512
|
|
|
|
7,574,488
|
|
e,f
|
|
|
49,469,197
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive
income
|
|
|
5,914,649
|
|
|
|
3,154,660
|
|
|
|
(3,570,757
|
)
|
h
|
|
|
5,498,552
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retained
earnings
|
|
|
34,993,347
|
|
|
|
(861,811
|
)
|
|
|
10,771,131
|
|
g
|
|
|
44,902,667
|
|
Less: Cost of treasury stock
(194,581 shares as of March 31, 2009)
|
|
|
(442,329
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
(442,329
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders' equity
(deficit)
|
|
|
80,122,686
|
|
|
|
9,667,676
|
|
|
|
|
|
|
|
|
99,485,909
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
$
|
82,705,276
|
|
|
$
|
30,398,290
|
|
|
|
|
|
|
|
$
|
117,952,986
|
|
See
Notes to unaudited Pro forma condensed combined financial statements
ADVANCED BATTERY TECHNOLOGIES,
INC
|
UNAUDITED PRO FORMA CONDENSED
COMBINED STATEMENT OF OPERATIONS
|
FOR THE THREE MONTHS ENDED MARCH
31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
Pro
Forma
|
|
|
|
|
Pro
Forma
|
|
|
|
|
ABAT
|
|
|
|
Wuxi
Angell
|
|
|
|
Adjustments
|
|
Notes
|
|
|
Combined
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
REVENUES
|
|
$
|
10,685,738
|
|
|
$
|
749,092
|
|
|
$
|
(204,801
|
)
|
i
|
|
$
|
11,230,029
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COST OF GOODS
SOLD
|
|
|
(5,651,189
|
)
|
|
|
(636,339
|
)
|
|
|
132,902
|
|
j
|
|
|
(6,154,626
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GROSS
PROFIT
|
|
|
5,034,549
|
|
|
|
112,753
|
|
|
|
|
|
|
|
|
5,075,403
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING
EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
expense
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
-
|
|
Selling, General and adminstrative
expenses
|
|
|
(896,319
|
)
|
|
|
(957,210
|
)
|
|
|
(135,386
|
)
|
k
|
|
|
(1,988,915
|
)
|
Total operating
expense
|
|
|
(896,319
|
)
|
|
|
(957,210
|
)
|
|
|
|
|
|
|
|
(1,988,915
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS) FROM
OPERATIONS
|
|
|
4,138,230
|
|
|
|
(844,457
|
)
|
|
|
|
|
|
|
|
3,086,488
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME
(EXPENSE)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
(expense)
|
|
|
74,348
|
|
|
|
(177,587
|
)
|
|
|
|
|
|
|
|
(103,239
|
)
|
Other
income
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
-
|
|
Other
expense
|
|
|
(9,798
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
(9,798
|
)
|
Total other income and
(expense)
|
|
|
64,550
|
|
|
|
(177,587
|
)
|
|
|
|
|
|
|
|
(113,037
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS) BEFORE PROVISION
FOR INCOME TAXES
|
|
|
4,202,779
|
|
|
|
(1,022,044
|
)
|
|
|
|
|
|
|
|
2,973,451
|
|
AND MINORITY
INTEREST
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PROVISION FOR INCOME
TAX
|
|
|
(602,482
|
)
|
|
|
|
|
|
|
|
|
|
|
|
(602,482
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS) APPLICABLE TO
COMMON SHARES
|
|
$
|
3,600,297
|
|
|
$
|
(1,022,044
|
)
|
|
|
|
|
|
|
$
|
2,370,969
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER COMPREHENSIVE INCOME
(LOSS)
|
|
|
(97,825
|
)
|
|
|
(29,470
|
)
|
|
|
|
|
|
|
|
(127,295
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMPREHENSIVE INCOME
(LOSS)
|
|
$
|
3,502,472
|
|
|
$
|
(1,051,514
|
)
|
|
|
|
|
|
|
$
|
2,243,674
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (Loss) per
share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.08
|
|
|
$
|
(0.02
|
)
|
|
|
|
|
|
|
$
|
0.05
|
|
Diluted
|
|
$
|
0.07
|
|
|
$
|
(0.02
|
)
|
|
|
|
|
|
|
$
|
0.04
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
47,055,374
|
|
|
|
40,997,103
|
|
|
|
|
|
|
|
|
47,055,374
|
|
Diluted
|
|
|
54,692,874
|
|
|
|
40,997,103
|
|
|
|
|
|
|
|
|
54,692,874
|
|
See
Notes to unaudited Pro forma condensed combined financial statements
ADVANCED BATTERY TECHNOLOGIES,
INC
|
UNAUDITED PRO FORMA CONDENSED
COMBINED STATEMENT OF OPERATIONS
|
FOR THE YEAR ENDED DECEMBER 31,
2008
|
|
|
|
|
|
|
|
|
Pro
Forma
|
|
|
Pro
Forma
|
|
|
ABAT
|
|
|
Wuxi
Angell
|
|
|
Adjustments
|
Notes
|
|
Combined
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
REVENUES
|
|
$
|
45,172,111
|
|
|
$
|
9,332,105
|
|
|
$
|
(6,079,041
|
)
|
i
|
|
$
|
48,425,175
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COST OF GOODS
SOLD
|
|
|
(23,122,610
|
)
|
|
|
(8,455,682
|
)
|
|
|
5,791,445
|
|
j
|
|
|
(25,786,847
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GROSS
PROFIT
|
|
|
22,049,501
|
|
|
|
876,423
|
|
|
|
|
|
|
|
|
22,638,328
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING
EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
expense
|
|
|
(4,463
|
)
|
|
|
(411,700
|
)
|
|
|
|
|
|
|
|
(416,163
|
)
|
Selling, general and adminstrative
expenses
|
|
|
(3,263,409
|
)
|
|
|
(2,882,947
|
)
|
|
|
(541,543
|
)
|
k
|
|
|
(6,687,899
|
)
|
Total operating
expense
|
|
|
(3,267,872
|
)
|
|
|
(3,294,647
|
)
|
|
|
|
|
|
|
|
(7,104,062
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS) FROM
OPERATIONS
|
|
|
18,781,629
|
|
|
|
(2,418,224
|
)
|
|
|
|
|
|
|
|
15,534,266
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME
(EXPENSE)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
(expense)
|
|
|
124,487
|
|
|
|
(1,093,197
|
)
|
|
|
|
|
|
|
|
(968,710
|
)
|
Equity in loss from unconsolidated
entity
|
|
|
(90,707
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
(90,707
|
)
|
Other income
(expense)
|
|
|
3,118
|
|
|
|
(215,715
|
)
|
|
|
|
|
|
|
|
(212,597
|
)
|
Total other income and
(expense)
|
|
|
36,898
|
|
|
|
(1,308,911
|
)
|
|
|
|
|
|
|
|
(1,272,014
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS) BEFORE PROVISION
FOR INCOME TAXES
|
|
|
18,818,527
|
|
|
|
(3,727,135
|
)
|
|
|
|
|
|
|
|
14,262,252
|
|
AND MINORITY
INTEREST
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PROVISION FOR INCOME
TAX
|
|
|
(2,722,407
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
(2,722,407
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS) APPLICABLE TO
COMMON SHARES
|
|
$
|
16,096,120
|
|
|
$
|
(3,727,135
|
)
|
|
|
|
|
|
|
$
|
11,539,845
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER COMPREHENSIVE
INCOME
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation
adjustment
|
|
$
|
2,912,481
|
|
|
$
|
921,776
|
|
|
|
|
|
|
|
$
|
3,834,257
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMPREHENSIVE INCOME
(LOSS)
|
|
$
|
19,008,601
|
|
|
$
|
(2,805,359
|
)
|
|
|
|
|
|
|
$
|
15,374,102
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (Loss) per
share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.37
|
|
|
$
|
(0.09
|
)
|
|
|
|
|
|
|
$
|
0.27
|
|
Diluted
|
|
$
|
0.31
|
|
|
$
|
(0.09
|
)
|
|
|
|
|
|
|
$
|
0.22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
43,493,492
|
|
|
|
40,997,103
|
|
|
|
|
|
|
|
|
43,493,492
|
|
Diluted
|
|
|
51,671,992
|
|
|
|
40,997,103
|
|
|
|
|
|
|
|
|
51,671,992
|
|
See
Notes to unaudited Pro forma condensed combined financial statements
Notes
to Unaudited Pro Forma Condensed Combined Financial Statements
Note 1:
Description of transaction and basis of presentation
On May 4,
2009, Advanced Battery Technologies, Inc. (the “Company” or “ABAT”), through its
wholly-owned subsidiary, Cashtech Investment Limited, completed the acquisition
of 100% of the ownership interest in Wuxi Angell Autocycle Co., Ltd. (“Wuxi
Angell”). The acquisition has been accounted for as a purchase under
accounting principles generally accepted in the United States
(GAAP). Under the purchase method of accounting, in accordance with
Statement of Financial Accounting Standards No. 141(R),
Business Combinations,
the
assets and liabilities of Wuxi Angell are recorded as of the acquisition date at
their respective fair values, and consolidated with the Company’s assets and
liabilities.
Note 2:
Purchase Price
For the
purposes of this pro forma analysis, the purchase price has been allocated based
on an estimate of the fair value of assets and liabilities acquired as of the
date of acquisition. The determination of estimated fair value requires
management to make significant estimates and assumptions.
Fair value of stock
issued
|
|
$
|
9,870,000
|
|
|
|
|
|
|
Total purchase
price
|
|
$
|
9,870,000
|
|
|
|
|
|
|
Assets
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
837,462
|
|
Account
receivable
|
|
|
573,084
|
|
Advanced payments to
vendors
|
|
|
1,823,105
|
|
Loan from
others
|
|
|
58,575
|
|
Inventory
|
|
|
1,694,627
|
|
Fixed
assets
|
|
|
21,908,014
|
|
Intangible
assets
|
|
|
13,378,643
|
|
Total
assets
|
|
$
|
40,273,510
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
Short term bank
loans
|
|
$
|
7,328,112
|
|
Accounts
payable
|
|
|
5,285,072
|
|
Other
liabilities
|
|
|
7,881,005
|
|
Total
liabilities
|
|
$
|
20,494,189
|
|
|
|
|
|
|
Gain on bargain purchase
*
|
|
|
9,909,320
|
|
Estimated purchase
price
|
|
$
|
9,870,000
|
|
|
*
|
The
gain on bargain purchase will be recorded as a separate component of
revenues in the Company’s Form 10-Q for the quarter ended June 30,
2009.
|
Note 3:
Pro Forma Adjustments
Adjustments
included in the column under the heading “Pro Forma Adjustments” primarily
relate to the following:
a:
|
Represents
the elimination of intercompany accounts receivable and accounts payable
between Wuxi Angell and the
Company.
|
b:
|
Represents
an adjustment to fixed assets as historically reported by Wuxi Angell on a
fair value basis for purchase accounting
purposes.
|
c:
|
Represent
the elimination of intercompany investment advance between Wuxi Angell and
the Company.
|
d:
|
Represents
an adjustment to intangible assets as historically reported by Wuxi Angell
on a fair value basis and allocate value for internally developed
intangible assets including customer list and patent rights for purchase
accounting purposes
|
e:
|
Represent
issuance of stock for acquisition.
|
f:
|
Represent
an adjustment to eliminate the capital of Wuxi Angell upon acquisition and
consolidation into the Company’s financial statements as of May 4,
2009.
|
g:
|
Represent
the elimination of the historical balance of retained earnings of Wuxi
Angell and the extraordinary gain on bargain purchase recognized on the
acquisition date.
|
h:
|
Represent
the elimination of the historical balance of accumulated other
comprehensive income of Wuxi Angell and the effect of exchange rate change
from March 31, 2009 to May 4, 2009.
|
i:
|
Represent
the elimination of intercompany sales between Wuxi Angell and the
Company;
|
j:
|
Represent
the elimination of cost of goods sold due to intercompany sales between
Wuxi Angell and the Company, and an adjustment of depreciation expense of
fixed assets as historically reported by Wuxi Angell on a fair value basis
for purchase accounting purposes.
|
k:
|
Represent
an adjustment of depreciation expense of fixed assets and amortization
expense of intangible assets as historically reported by Wuxi Angell on a
fair value basis for purchase accounting
purposes.
|
* * * * *
American Battery Technol... (NASDAQ:ABAT)
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