NANO SUPERLATTICE TECHNOLOGY INC. - 8-K/A - 20040810 - CHANGE_IN_CONTROL
ITEM 1. CHANGE IN CONTROL
COMPANY OVERVIEW
The Company, through Nano, its operating subsidiary in Taiwan, is in the
business of developing and producing nano-scale coating technology to be applied
to various mechanical tools and metal surfaces for sale to manufacturers
specifically in the computer, mechanical and molding industries. Nanotechnology,
or molecular manufacturing, is a technological process designed to allow
products to be able to be manufactured lighter, stronger, smarter, cheaper,
cleaner and more precise. The Company purchases products needed by its customers
from various suppliers, applies the nano-scale coating technology to the
products and sells these products to its customers. The Company's main customers
have been Datech Technology Co., Delta Electronics, Inc., Honhai Molding and
Honyi Tooling. Currently, the Company is focused on the application of
nano-scale multilayer coatings to computer related parts, such as CPU coolers
and fan bearings, to industrial drill bits and cutters, and in the molding
industry to various molds used in disc production.
The Company's unique Arc Bond Sputtering and superlattice technology is a
recent development in the field of surface technology. This technique combines
multiple nano-scale layers of specific metals, known to have excellent hardness
properties and chemical resistances, in consecutive films that give the material
coated a new and improved periodical structure. The application of these new
coatings on industrial products is designed to change their physical properties,
thus improving an individual product's toughness, resistance, performance and
durability.
The Company is one of few companies in Taiwan with nano-scale technology
capable of nanotechnology commercialization. The Company has focused its
research and development efforts to apply nanotechnology in metal hard-coating.
Since Nano's inception in 2002, its business has progressed from development, to
pilot production to mass production. In the future, the Company expects to
expand the number and type of industries it is able to service. The Company
anticipates working with the developmental needs of Taiwan's semiconductor,
precision machinery and telecommunication industries to establish
micro-component production, equipment and inspection technology, and
micro-system assembly and testing technology. The Company also plans to
integrate the design technologies of mechanical, optical, electronic, magnetic,
and micro systems to be applied in future products.
INDUSTRY OVERVIEW
In recent years, Taiwan's semiconductor and electronic information
industries have experienced rapid growth. As electronic products progress
towards the trend of being "light, thin, short and small", the Company believes
that the demand toward this trend for various components, processing equipment
and precision of electronic products is also increasing. The Company believes
that these trends are creating demand for higher precision, higher density, high
speed, intellectualization, and miniaturization progressing into the "next
generation of manufacturing technology". The Company believes that this "next
generation of manufacturing technology" has primarily two major developmental
directions, which are nanotechnology and electro-mechanical system technology.
Nanotechnology is manufacturing technology in the 102nm to 0.1nm range and
electro-mechanical system technology is used in nanotechnology to produce more
refined components and parts to integrate microelectronic circuit and controller
systems.
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In 2002, the Industrial Development Bureau MOEA of Taiwan (MOEA) published
a report with the top ten newest rising industries in which nanotechnology was
the first listed. The Industrial Technology Research Institute of Taiwan (ITRI)
in its Expectation and Strategic Planning for 2008 proposal, lists
nanotechnology as the developmental focus for the next six years. As for the
magnitude of the nanotechnology market, according to MOEA, by the year 2010, the
nanotechnology market in Taiwan is expected to increase to 500 billion NT
dollars, or approximately USD$14.7 billion, and the areas affected by
nanotechnology will reach one trillion NT dollars, or approximately USD$29.4
billion. Furthermore, Taiwan's National Science Council and Ministry of Economic
Affairs has budgeted 23.1 billion NT dollars, or approximately USD$678 million,
toward its National Nanotechnology Project.
KEY MANAGEMENT
Alice Tzu-Shia Hwang, is President and Chairman of the Company. She became
president of Nano, the Company's operating subsidiary in 2002. Ms. Hwang is the
primary business director and head of all marketing and sales projects with the
Company. She has implemented numerous business projects throughout her many
years in management and sales for such publicly held companies as Long Chance
Industrial Inc. and Evertop Wire & Cable Co. She has also had extensive
experience as the Chief of Research & Development for wire and cable materials
and Director of Quality Management at Hong Tai Electric Industrial Co. Ms. Hwang
has obtained a degree in Chemical Engineering from Nanya Institute of Technology
and also a degree in Oceanography from the National Taiwan Ocean University.
Yu-Chien Cheng, is a Director of the Company and Chief Inspector of the
Company's technology team. Mr. Cheng's responsibilities include overseeing both
the production process and research and development. Mr. Cheng has had many
years of experience in research and helped in founding Nano. Mr. Cheng graduated
from the National Taiwan University with a master's degree in mechanical
engineering. He received training in Plasma Physics from the UK's Sheffield
Hallam University.
Chien-Fang Wang, is a Director and Vice President of the Company. Since
2002, Mr. Wang was employed as the General Business Manager for Nano. He is
primarily involved in projects related to business development and also sales
and marketing. For 25 years prior to joining Nano, Mr. Wang worked for Yi-Tai
Cable & Wire Inc. in production planning. Mr. Wang has a bachelor's degree in
Chemical Engineering from the Electrical Engineering Department at Tatung
University in Taiwan.
Kevin Chung-Chieh Lin, is a Director of the Company. Since 1996, Mr. Lin
has been the Chief Executive Officer of Chyun-Hwa Group, an investment company
involved in corporate finance and securities consulting. Mr. Lin has also
involved in venture capital and strategic investments and has invested in,
developed and managed more than fifteen public and private companies in Taiwan
and China. Mr. Lin's investment experience has been particularly in the biotech
and electronics industries. Mr. Lin has a degree in Economics from Tan Jiang
University.
Yun-Chun Tseng, is a Director of the Company. Over the past eighteen years,
Ms. Tseng has been primarily involved in international trade. Ms. Tseng
established Shanghai Moli-Lai Electronics Inc. and has overseen design and
manufacture of various electronic products and computer peripherals. Ms. Tseng
graduated with a degree in Business Administration from Ming Teh Business
College.
3
ITEM 7. FINANCIAL STATEMENTS
(a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED
(1) Unaudited Balance Sheet of Nano Superlattice Technology Inc. (Taiwan)
as of April 30, 2004.
(2) Unaudited Statements of Income of Nano Superlattice Technology Inc.
(Taiwan) for the ten month period from July 1, 2003 through April 30, 2004
(3) Audited Financials Statements and Notes thereto of Nano Superlattice
Technology Inc. (Taiwan) for the fiscal years ended December 31, 2002 and 2003
(b) PRO FORMA FINANCIAL INFORMATION
(1) Unaudited Pro Forma Condensed Combined Balance Sheet as of April 30,
2004
(2) Unaudited Pro Forma Condensed Combined Statements of Income for the ten
month period from July 1, 2003 through April 30, 2004
(3) Unaudited Pro Forma Condensed Combined Balance Sheet as of June 30,
2003
(4) Unaudited Pro Forma Condensed Combined Statements of Income for the
fiscal year ended June 30, 2003.
(5) Notes to the Pro Forma Condensed Combined Financial Statements.
4
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.
NANO SUPERLATTICE TECHNOLOGY INC.
By: /s/ Alice Hwang
----------------------------------------
Name: Alice Hwang
Title: President
Dated: August 9, 2004
5
Nano Superlattice Technology Inc. (Taiwan)
Balance Sheet
April 30, 2004
Unaudited
APRIL 30, 2004
Assets NT$ US$
------------ ------------
Current assets:
Cash and cash equivalents $ 4,871,679 $ 146,345
Notes receivable 3,896,641 117,055
Accounts receivable 36,352,247 1,092,021
Inventories 7,958,012 239,059
Other current assets 1,812,408 54,445
------------ ------------
Total current assets 54,890,987 1,648,925
------------ ------------
Funds and long-term investments
Long-term investments 4,500,000 135,180
------------ ------------
Property, plant and equipment 120,575,244 3,622,080
------------ ------------
Intangible assets:
Patent 30,888,000 927,876
------------ ------------
Other assets:
Deferred charges (note 6) 1,590,067 47,766
------------ ------------
Total other assets 1,590,067 47,766
------------ ------------
Total assets $212,444,298 $ 6,381,827
============ ============
Liabilities and Stockholders' Equity AMOUNT AMOUNT
------------ ------------
Current liabilities:
Short-term borrowings $ 11,767,355 353,491
Notes payable 2,842,020 85,374
Accounts payable 8,336,917 250,441
Tax payable 362,281 10,883
Advance receipts 15,709,775 471,922
------------ ------------
Total current liabilities 39,018,348 1,172,111
------------ ------------
Total liabilities 39,018,348 1,172,111
------------ ------------
Stockholders' equity
Capital stock 170,000,000 5,106,800
Legal reserve 91,559 2,751
Accumulated profit and loss 2,425,780 72,870
Current profit and loss 908,611 27,295
------------ ------------
Total stockholders' equity 173,425,950 5,209,716
------------ ------------
Total liabilities and stockholders'
equity $212,444,298 $ 6,381,827
============ ============
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Nano Superlattice Technology Inc. (Taiwan)
Statements of Income
Ten months ended April 30, 2004
Unaudited
JULY 1, 2004 TO APRIL 30, 2004
-------------------------------------
NT$ US$
------------- -------------
Operating income $ 184,954,329 $ 5,556,028
Sales returns (41,407,810) (1,243,891)
Sales discounts and allowances (1,000) (30)
------------- -------------
OPERATING REVENUES, NET $ 143,545,519 $ 4,312,107
OPERATING COSTS 121,195,234 3,640,705
------------- -------------
GROSS INCOME 22,350,285 671,402
OPERATING EXPENSES 21,935,654 658,947
------------- -------------
OPERATING INCOME 414,631 12,455
------------- -------------
NON-OPERATING INCOME:
Interest income 3,480 105
Commission income 480,000 14,419
Others 114,000 3,425
------------- -------------
TOTAL NON-OPERATING INCOME 597,480 17,949
------------- -------------
NON-OPERATING EXPENSES:
Interest expense 103,500 3,109
------------- -------------
TOTAL NON-OPERATING EXPENSES 103,500 3,109
------------- -------------
INCOME BEFORE INCOME TAX 908,611 27,295
INCOME TAX -- --
------------- -------------
NET INCOME $ 908,611 27,295
============= =============
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Nano Superlattice Techn
Financial Statementsology Inc. (Taiwan)
December 31, 2003 and 2002
(With Auditors' Report)
8
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors and Stockholders
Nano Superlattice Technology Inc. (Taiwan)
Taipei, Taiwan
We have audited the accompanying balance sheet of Nano Superlattice Technology
Inc. ("the Company") as of December 31, 2003 and 2002, and the related
consolidated statements of income, changes in stockholders' equity, and cash
flows for the years then ended. These financial statements are the
responsibility of 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 generally accepted auditing standards
of the 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. 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of the Company as of
December 31, 2003 and 2002, and the results of its operations and its cash flows
for the years ended December 31, 2003 and 2002 in conformity with generally
accepted accounting principles of the United States.
/s/ Huang Jin Fa
May 20, 2004
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NANO SUPERLATTICE TECHNOLOGY INC. (TAIWAN)
BALANCE SHEETS
(IN DOLLARS, EXCEPT PAR VALUE AND SHARE AMOUNTS)
DECEMBER 31,
--------------------------------------------------------------
2002 2003
---------------------------- ----------------------------
ASSETS NT$ US$ NT$ US$
------------ ------------ ------------ ------------
CURRENT ASSETS:
Cash and cash equivalents $ 55,037,187 $ 1,572,491 $ 6,973,118 $ 205,092
Notes receivable 976,402 27,897 4,544,802 133,671
Accounts receivable 35,032,502 1,000,929 41,080,180 1,208,240
Inventories 8,495,112 242,718 2,920,909 85,909
Prepayments -- 0 1,272 37
Other current assets 13,059 373 1,902,837 55,966
------------ ------------ ------------ ------------
TOTAL CURRENT ASSETS 99,554,262 2,844,408 57,423,118 1,688,915
------------ ------------ ------------ ------------
FUNDS AND LONG-TERM INVESTMENTS
Long-term investments -- -- 4,500,000 132,353
------------ ------------ ------------ ------------
PROPERTY, PLANT AND EQUIPMENT 55,230,000 1,578,000 120,575,244 3,546,331
------------ ------------ ------------ ------------
INTANGIBLE ASSETS:
Acquired special technology 30,888,000 882,514 30,888,000 908,470
------------ ------------ ------------ ------------
OTHER ASSETS:
Organization costs 114,952 3,284 -- --
Deferred charges -- -- 1,590,067 46,767
------------ ------------ ------------ ------------
TOTAL OTHER ASSETS 114,952 3,284 1,590,067 46,767
------------ ------------ ------------ ------------
TOTAL ASSETS $185,787,214 $ 5,308,206 $214,976,429 $ 6,322,836
============ ============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY AMOUNT AMOUNT AMOUNT AMOUNT
------------ ------------ ------------ ------------
CURRENT LIABILITIES:
Short-term borrowings $ -- $ -- $ 11,767,355 $ 346,099
Notes payable 805,608 23,017 3,258,965 95,852
Accounts payable 12,276,868 350,768 11,350,071 333,826
Accrued expenses 1,411,344 40,324 10,643 313
Tax payable 377,800 10,794 522,456 15,366
Advance receipts -- 0 15,709,775 462,052
------------ ------------ ------------ ------------
TOTAL CURRENT LIABILITIES 14,871,620 424,903 42,619,265 1,253,508
------------ ------------ ------------ ------------
TOTAL LIABILITIES 14,871,620 424,903 42,619,265 1,253,508
------------ ------------ ------------ ------------
STOCKHOLDERS' EQUITY
Common Stock: $10 par value;
17,000,000 shares authorized, issued
and outstanding at December 31, 2003
and 2002, respectively 170,000,000 4,857,143 170,000,000 5,000,000
Legal reserve -- 0 91,559 2,693
Accumulated profit and loss -- 0 824,035 24,236
Current profit and loss 915,594 26,160 1,441,570 42,399
------------ ------------ ------------ ------------
TOTAL STOCKHOLDERS' EQUITY 170,915,594 4,883,303 172,357,164 5,069,328
------------ ------------ ------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $185,787,214 $ 5,308,206 $214,976,429 $ 6,322,836
============ ============ ============ ============
The accompanying notes are an integral part of these statements.
10
NANO SUPERLATTICE TECHNOLOGY INC. (TAIWAN)
Statements of Operations
(in dollars, except per share data)
FOR THE YEARS ENDED DECEMBER 31,
------------------------------------------------------------------
2002 2003
------------------------------ ------------------------------
NT$ US$ NT$ US$
------------ ------------ ------------ ------------
OPERATING REVENUES, NET $ 75,843,244 $ 2,166,950 $155,981,538 $ 4,587,692
OPERATING COSTS 62,951,183 1,798,605 132,043,181 3,883,623
------------ ------------ ------------ ------------
GROSS INCOME 12,892,061 368,345 23,938,357 704,069
OPERATING EXPENSES 11,958,410 341,669 22,299,863 655,878
------------ ------------ ------------ ------------
OPERATING INCOME 933,651 26,676 1,638,494 48,191
------------ ------------ ------------ ------------
NON-OPERATING INCOME:
Interest income 2,222 63 3,480 102
Commission income -- -- 480,000 14,118
Others 315,929 9,027 114,000 3,353
------------ ------------ ------------ ------------
TOTAL NON-OPERATING INCOME 318,151 9,090 597,480 17,573
------------ ------------ ------------ ------------
NON-OPERATING EXPENSES:
Interest expense -- -- 103,500 3,044
------------ ------------ ------------ ------------
TOTAL NON-OPERATING EXPENSES -- -- 103,500 3,044
------------ ------------ ------------ ------------
INCOME BEFORE INCOME TAX 1,251,802 35,766 2,132,474 62,720
INCOME TAX 336,208 9,606 690,904 20,321
------------ ------------ ------------ ------------
NET INCOME $ 915,594 $ 26,160 $ 1,441,570 $ 42,399
============ ============ ============ ============
EARNINGS PER SHARE:
Primary earnings per share $ 0.05 $ 0.002 $ 0.14 $ 0.004
============ ============ ============ ============
Fully diluted earnings per share $ 0.05 $ 0.002 $ 0.14 $ 0.004
============ ============ ============ ============
OUTSTANDING SHARES: 17,000,000 17,000,000 17,000,000 17,000,000
============ ============ ============ ============
The accompanying notes are an integral part of these statements.
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NANO SUPERLATTICE TECHNOLOGY INC. (TAIWAN)
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(IN DOLLARS)
COMMON STOCK ISSUED TOTAL
------------------------------ RETAINED STOCKHOLDERS'
SHARES AMOUNT EARNINGS EQUITY
------------ ------------ ------------ ------------
NT$ NT$ NT$
------------ ------------ ------------
Balance at January 1, 2002 9,000,000 $ 90,000,000 $ -- $ 90,000,000
Issuance of common stock at NT$10
per share for cash 8,000,000 80,000,000 -- 80,000,000
Net income -- -- 915,594 915,594
------------ ------------ ------------ ------------
Balance at December 31, 2002 17,000,000 170,000,000 915,594 170,915,594
Net income -- -- 1,441,570 1,441,570
------------ ------------ ------------ ------------
Balance at December 31, 2003 17,000,000 $170,000,000 $ 2,357,164 $172,357,164
============ ============ ============ ============
The accompanying notes are an integral part of these statements.
12
NANO SUPERLATTICE TECHNOLOGY INC. (TAIWAN)
STATEMENTS OF CASH FLOWS
(IN DOLLARS)
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------------------------------------
2002 2003
---------------------------- ----------------------------
NT$ US$ NT$ US$
------------ ------------ ------------ ------------
Cash flows from operating activities:
Net income $ 915,594 $ 26,160 $ 1,441,570 $ 42,399
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation -- -- 9,443,563 277,752
Amortization -- -- 1,544,233 45,419
Decrease (increase) in notes and accounts receivable (36,008,904) (1,028,826) (9,616,078) (282,826)
Decrease (increase) in inventories (8,495,112) (242,718) 5,574,203 163,947
Decrease (increase) in prepaid expenses and other
current assets (13,059) (373) (57,121,050) (1,680,031)
Increase (decrease) in notes and accounts payable 13,082,476 373,785 1,526,560 44,899
Increase (decrease) in accrued expenses 1,411,344 40,324 (1,400,701) (41,197)
Increase (decrease) in tax payable 335,988 9,600 144,656 4,255
Increase (decrease) in other liabilities 41,812 1,195 15,709,775 462,052
------------ ------------ ------------ ------------
Net cash provided by (used in) operating activities (28,729,861) (820,853) (32,753,269) (963,331)
------------ ------------ ------------ ------------
Cash flows from investing activities:
Increase in long-term investments -- -- (4,500,000) (132,353)
Purchases of property, plant and equipment (55,230,000) (1,578,000) (19,558,807) (575,259)
Increase in deferred expenses -- -- (3,134,300) (92,185)
Increase in other assets (31,002,952) (885,799) 114,952 3,381
------------ ------------ ------------ ------------
Net cash provided by (used in) investing activities (86,232,952) (2,463,799) (27,078,155) (796,416)
------------ ------------ ------------ ------------
Cash flows from financing activities:
Increase (decrease) in long-term debt -- -- 11,767,355 346,098
Issuance of common stock 170,000,000 4,857,143 -- --
------------ ------------ ------------ ------------
Net cash provided by (used in) financing activities 170,000,000 4,857,143 11,767,355 346,098
------------ ------------ ------------ ------------
Net increase (decrease) in cash and cash equivalents 55,037,187 1,572,491 (48,064,069) (1,413,649)
Cash and cash equivalents at beginning of year -- -- 55,037,187 1,618,741
------------ ------------ ------------ ------------
Cash and cash equivalents at end of year $ 55,037,187 $ 1,572,491 $ 6,973,118 $ 205,092
============ ============ ============ ============
Supplemental cash flow information:
Interest paid (excluding capitalized interest) $ -- $ -- $ 103,500 $ 3,044
============ ============ ============ ============
Income tax paid $ 915,594 $ 26,160 $ 1,670,989 $ 49,147
============ ============ ============ ============
The accompanying notes are an integral part of these statements.
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NANO SUPERLATTICE TECHNOLOGY INC. (TAIWAN)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2003 AND 2002
(EXPRESSED IN NEW TAIWAN DOLLARS)
1. THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
THE COMPANY
Nano Superlattice Technology Inc. (the Company) was incorporated in September
2000 under the Company Law of Republic of China.
The Company is mainly engaged in the sales of electric cord and cable currently.
However through a highly successful electronics and semiconductor industry
promoted by enlightened industrial policies that were the envy of the world,
Taiwan derived tremendous economic benefits and technological prestige. As we
move from the computer age to the nano age, the company driving force for the
computer age is semiconductor technology, which has a well-understood scientific
base.
The Company, through Nano and its operating subsidiary in Taiwan, is in the
business of researching, developing and producing nano-scale coating technology
for mechanical tool and metal surfaces. Nanotechnology, or molecular
manufacturing, is a technological process intended to allow products to be
manufactured lighter, stronger, smarter, cheaper, cleaner and more precise. The
Company's unique superlattice technology is a recent development in the field of
surface technology. This technique combines multiple nano-scale layers of
specific metals, known to have excellent hardness properties and chemical
resistances, in consecutive films to give the material coated a new and improved
periodical structure.
In 2002, the Company established its own manufacturing plant, which made it the
first professional nano-coating manufacturer with production capability in
Taiwan. The Company targets customers with local and foreign businesses that
operate in the computer, machinery and molding industries. Many of the Company's
current customers are industry and market leaders, such as Datech Technology
Co., Delta Electronics, Inc., Honhai Molding and Honyi Tooling. The Company
accepts orders from these customers and using its own technique applies the
nano-scale coating to customer products such as CPU coolers, fan bearings,
industrial drill bits and cutters. Application of nano-scale coating can reduce
friction, increase corrosion resistance, reduce heat and increase the product's
toughness and durability. The Company's coating can also be applied to many
other products, including as a decorative coating for pens and jewelry.
CONVENIENCE TRANSLATION INTO US DOLLARS
The Company maintains its accounting records and prepares its financial
statements in New Taiwan ("NT") dollars. The United States ("US") dollar amounts
disclosed in the 2003 financial statements are presented solely for the
convenience of the reader and were translated at the rate of NT$34.00 to
US$1.00, the U.S. Federal Reserve Bank of New York noon buying exchange rate on
December 31, 2003. Such translation amounts should not be construed that the NT
dollar amounts represent, or have been, or could be, converted into US dollars
at that or any other rate.
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
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TRANSLATION OF FOREIGN CURRENCY TRANSACTIONS
The Company maintains its accounting records in New Taiwan dollars.
Transactions arising in foreign currencies during the year are converted at the
rates of exchange prevailing on the transaction dates. Receivables, other
monetary assets and liabilities denominated in foreign currencies at year-end
are translated at the rates of exchange prevailing at the balance sheets date.
All exchange gains or losses are included in the current year's results.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments, including cash, notes and accounts
receivable, notes and accounts payable and accrued liabilities, are carried at
cost, which approximates their fair value due to the short-term maturity of
these instruments.
INVENTORIES
Inventories are recorded at cost when acquired and are stated at the lower of
aggregate cost, based on the first-in-first-out method, or market value at the
balance sheet date. The market value for merchandise is determined on the basis
of net realizable value. An allowance for loss on obsolescence and decline in
market value is provided, when necessary.
ALLOWANCE FOR DOUBTFUL ACCOUNTS
An allowance for doubtful accounts is provided based on the evaluation of
collectibility and aging analysis of notes and accounts receivables.
REVENUE RECOGNITION
The Company's revenues consist of product sales and construction revenue.
Product sales are recognized when products are shipped, which is when title
passes to the Company's customers, provided that the Company has received a
signed purchase order, the price is fixed and collection of resulting receivable
is probable. A reserve for product returns is accrued based on historical
experience.
The Company adopts completed-contract method to account for construction
revenues and costs as the Company primarily has short-term contracts.
Accordingly, income is only recognized when the contract is completed, or
substantially completed, and all costs and related revenues are reported as
deferred items in the balance sheet until completion.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. Interest incurred relating to
the acquisition and construction of property, plant and equipment is capitalized
and depreciated accordingly. Depreciation is provided using the straight-line
method over the following estimated useful lives:
Buildings.............................. 25 years
Machinery and equipment................ 5-10 years
15
Maintenance and repairs are charged to expense as incurred. Significant renewals
and improvements are treated as capital expenditures and are depreciated
accordingly. When fixed assets are disposed of, their original cost and
accumulated depreciation are written-off. Gain or loss on disposal of fixed
assets is recorded as non-operating income or loss.
LONG-LIVED ASSETS
Long-lived assets and certain identifiable intangible assets to be held and used
are reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of such assets may not be recoverable. Determination of
recoverability is based on an estimate of undiscounted future cash flows
resulting from the use of the asset and its eventual disposition. Measurement of
an impairment loss for long-lived assets and certain identifiable intangible
assets that management expects to hold and use is based on the fair value of the
asset. Long-lived assets and certain identifiable intangible assets to be
disposed of are reported at the lower of carrying amount or fair value less
costs to sell.
ACCOUNTING FOR INCOME TAXES
The Company has adopted Statement of Financial Accounting Standards No. 109
("SFAS No. 109"), "Accounting for Income Taxes". Under SFAS No. 109, the
liability method is used in accounting for income taxes. Under this method,
deferred tax assets and liabilities are determined based on the differences
between financial reporting and tax bases of assets and liabilities and are
measured using the enacted tax rate and laws that will be in effect when the
differences are expected to reverse. Valuation allowances are established when
necessary to reduce deferred tax assets to the amount expected to be realized.
NET LOSS PER SHARE
The Company computes losses per share under Statement of Financial Accounting
Standards No.128 ("SFAS No.128"), "Earnings per Share". SFAS No.128 specifies
the computation, presentation and disclosure requirements for earnings per share
data. SFAS No.128 also requires the presentation of both basic and diluted
earnings per share data for entities with complex capital structures. Diluted
earnings per share data gives effect to all diluted potential common shares that
were outstanding during the period presented.
COMPREHENSIVE INCOME (LOSS)
Comprehensive income (loss) is defined as the change in equity of a company from
transactions and other events and circumstances excluding transactions resulting
from investments from owners and distributions to owners. Comprehensive income
(loss) is recorded as a component of stockholders' equity. For the years ended
December 31, 2002 and 2003, there were no differences between the Company's net
loss and its total comprehensive income (loss).
RECENT ACCOUNTING PRONOUNCEMENTS
In July 2001, the Financial Accounting Standard Board (FASB) issued Statement of
Financial Accounting Standards No. 141 ("SFAS 141"), "Business Combinations",
and SFAS No. 142, "Goodwill and Other Intangible Assets". SFAS No. 141 requires
that the purchase method of accounting be used for all business combinations
initiated after June 30, 2001. SFAS No. 141 also specifies criteria for
intangible assets acquired in a purchase business combination to be recognized
and reported apart from goodwill. SFAS No. 142 requires that goodwill and
intangible assets with indefinite useful lives no longer be amortized, but
instead be tested for impairment at least annually. SFAS No. 142 also requires
that intangible assets with finite useful lives be amortized over their
respective estimated useful lives to their estimated residual values, and
reviewed for impairment in accordance with SFAS No. 144, "Accounting for the
Impairment of Disposal of Long-lived Assets". The adoption of SFAS No. 141 and
SFAS No. 142 did not have a significant effect on the Company's financial
position and results of operations.
16
In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement
Obligations", which addresses financial accounting and reporting for obligations
associated with the retirement of tangible long-lived assets and the associated
asset retirement costs. The standard applies to legal obligations associated
with the retirement of long-lived assets that result from the acquisition,
construction, development and (or) normal use of the asset.
SFAS No. 143 requires that the fair value of a liability for an asset retirement
obligation be recognized in the period in which it is incurred if a reasonable
estimate of fair value can be made. The fair value of the liability is added to
the carrying amount of the associated asset and this additional carrying amount
is depreciated over the life of the asset. The liability is accreted at the end
of each period through charges to operating expense. If the obligation is
settled for other than the carrying amount of the liability, the Company will
recognize a gain or loss on settlement. The adoption of this statement is not
expected to have a material effect on the Company's financial position and
results of operations.
In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets", which supersedes SFAS No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of". SFAS No. 144 retains the fundamental provisions of SFAS No. 121 for
recognition and measurement of the impairment of long-lived assets to be held
and used and measurement of long-lived assets to be disposed of by sale. SFAS
No. 144 addresses certain implementation issues related to SFAS No. 121. This
Statement also supersedes the accounting and reporting provisions of APB Opinion
No. 30, "Reporting the Results of Operations - Reporting the Effects of Disposal
of a Segment of a Business, and Extraordinary, Unusual and Infrequently
Occurring Events and Transactions", for segments of a business to be disposed
of. SFAS No. 144 retains the basic provisions of APB Opinion No. 30 for the
presentation of discontinued operations in the income statement but broadens
that presentation to include a component of an entity, rather than a segment of
a business.
The adoption of this statement is not expected to have a material effect on the
Company's financial position and results of operations.
2. BALANCE SHEET COMPONENTS
(1) Cash and Cash Equivalents
December 31,
----------------------------
2002 2003
----------- -----------
NT$ NT$
----------- -----------
Cash on hand and petty cash $ 5,597 $ 114,145
Cash in bank checking account -- 53,032
Cash in bank demand deposit account 55,031,590 6,805,941
----------- -----------
$55,037,187 $ 6,973,118
=========== ===========
(2) Receivables
December 31,
----------------------------
2002 2003
----------- -----------
NT$ NT$
----------- -----------
Notes receivable $ 976,402 $ 4,544,802
Accounts receivable 35,032,502 41,080,180
----------- -----------
36,008,904 45,624,982
Allowance for doubtful accounts -- --
----------- -----------
$36,008,904 $45,624,982
=========== ===========
(10) Net Loss Per Share
December 31,
------------------------------
2002 2003
------------ ------------
NT$ NT$
------------ ------------
Net loss (A) $ 915,594 $ 1,441,570
========== ===========
Weighted average outstanding common stock(B) 17,000,000 10,333,333
========== ===========
Basic and diluted net loss per share (A/B) $ 0.05 $ 0.14
========== ===========
The Company did not have any potentially dilutive common shares issued and
outstanding during the years ended December 31, 2002 and 2003. Accordingly,
there was no difference between basic and dilutive net loss per share in the
years presented.
(11) Income Tax
(a) The provision for income taxes consists of the following:
For the years ended December 31,
--------------------------------
2002 2003
------------ ------------
NT$ NT$
------------ ------------
Current income tax expense $336,208 $530,729
Deferred income tax benefit -- --
-------- --------
$336,208 $530,729
======== ========
The Company did not have any potentially dilutive common shares issued and
outstanding during the years ended December 31, 2002 and 2003. Accordingly,
there was no difference between basic and dilutive net loss per share in the
years presented.
(12) COMMON STOCK
As of December 31, 2003, the authorized capital of the Company was
NT$170,000,000 represented by 17,000,000 common shares with par value of NT$10
per share. As of December 31, 2003, 17,000,000 shares of Common Stock were
issued and outstanding.
(13) CAPITAL RESERVE
As of December 31, 2003, the authorized capital of the Company was
NT$170,000,000 represented by 17,000,000 common shares with par value of NT$10
per share. As of December 31, 2003, 17,000,000 shares of Common Stock were
issued and outstanding.
A. According to the ROC Company Law, the capital reserve arising from paid-in
capital in excess of par on the issuance of stocks, from merger, from the
conversion of convertible bonds and from donation shall be exclusively used
to cover accumulated deficit or be transferred to capital, subject to
certain limitations.
Other capital reserve shall be exclusively used to cover accumulated
deficit. The capital reserve can only be used to cover accumulated deficit
when the legal reserve is insufficient to cover the deficits.
B. According to the ROC Company Law, the capital reserve arising from paid-in
capital in excess of par on the issuance of stocks can only be transferred
to capital once every year. This capital reserve transferred to capital can
not be made in the year the company issued the new shares and amount to be
capitalized is subject to certain limitation.
19
Nano Superlattice Technology Inc. (f/k/a) Wigwam Development, Inc.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
April 30, 2004 April 30, 2004
----------------- -----------------
Nano Superlattice
Technology Inc. Nano Superlattice
(f/k/a/ Wigwam Technology Inc. Pro Forma
Development, Inc. (Taiwan) Adjustments Pro Forma
----------------- -------- ----------- ---------
Assets
Current Assets
Cash and cash equivalents -- 146,345 146,345
Notes receivable -- 117,055 117,055
Accounts receivable -- 1,092,021 1,092,021
Inventory -- 239,059 239,059
Other current assets -- 54,445 54,445
---------- ---------- ----------
Total Current Assets -- 1,648,925 1,648,925
Long-term investments -- 135,180 135,180
Fixed assets, net -- 3,622,080 3,622,080
Idle assets -- --
Intangible assets -- 927,876 927,876
Other assets -- 47,766 47,766
---------- ---------- ----------
Total Assets -- 6,381,827 6,381,827
========== ========== ==========
Liabilities and Stockholders' Equity
Current Liabilities
Short-term borrowing -- 353,491 353,491
Notes payable -- 85,374 85,374
Accounts payable -- 250,441 250,441
Loans payable -- --
Accrued expenses -- -- (2) 30,000 30,000
Income tax payable -- 10,883 10,883
Advance receipts -- 471,922 471,922
Officer advances -- -- --
---------- ---------- ----------
Total Current Liabilites -- 1,172,111 1,202,111
Other liabilites -- -- --
---------- ---------- ----------
Total Liabilities -- 1,172,111 1,202,111
Stockholders' Equity
Common stock 125 5,106,800 (1) (5,106,651) 274
Legal reserve -- 2,751 (1) (2,751) --
Additional paid in capital 31,375 -- (1) 5,077,902 5,109,277
Retained earnings (31,500) 100,165 (1) 31,500 70,165
(2) (30,000)
Total Stockholders' Equity -- 5,209,716 5,179,716
---------- ---------- ---------- ----------
Total Liabilities and
Stockholders' Equity -- 6,381,827 0 6,381,827
========== ========== ========== ==========
20
Nano Superlattice Technology Inc. (f/k/a) Wigwam Development, Inc.
UNAUDITED PRO FORMA CONDENSED COMBINED INCOME STATEMENT
For the Period July 1, 2003 through April 30, 2004
Historical
-------------------------------------
Nano Superlattice
Technology Inc. Nano Superlattice
(f/k/a/ Wigwam Technology Inc. Pro Forma
Development, Inc. (Taiwan) Adjustments Pro Forma
----------------- -------- ----------- ---------
Sales revenue -- 4,312,107 4,312,107
---------- ---------- ----------
-- 4,312,107 4,312,107
Cost of goods sold -- 3,640,705 3,640,705
---------- ---------- ----------
-- 3,640,705 3,640,705
Gross Profit -- 671,402 671,402
---------- ---------- ----------
General, selling and
administrative expenses 5,354 658,947 (2) 30,000 694,301
---------- ---------- ---------- ----------
Operating income (loss) (5,354) 12,455 (30,000) (22,899)
---------- ---------- ---------- ----------
Nonoperating income (expense)
Interest income -- 105 105
Commission income -- 14,419 14,419
Other income -- 3,425 3,425
Interest expenses -- (3,109) (3,109)
---------- ---------- ----------
Total nonoperating income (expenses) -- 14,840 14,840
---------- ---------- ----------
Income (loss) before provision for income tax (5,354) 27,295 (8,059)
---------- ---------- ----------
Provision for income taxes -- -- --
Net income (loss) (5,354) 27,295 (30,000) (8,059)
========== ========== ========== ==========
21
Nano Superlattice Technology Inc. (f/k/a) Wigwam Development, Inc.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
June 30, 2003 June 30, 2003
----------------- -----------------
Nano Superlattice
Technology Inc. Nano Superlattice
(f/k/a/ Wigwam Technology Inc. Pro Forma
Development, Inc. (Taiwan) Adjustments Pro Forma
----------------- -------- ----------- ---------
Assets
Current Assets
Cash and cash equivalents 454 1,680,822 1,681,276
Notes receivable -- 181,933 181,933
Accounts receivable -- 380,788 380,788
Inventory -- -- --
Other current assets -- 4,499 4,499
---------- ---------- ----------
Total Current Assets 454 2,248,042 2,248,496
Long-term investments -- -- --
Fixed assets, net -- 3,171,706 3,171,706
Intangible assets -- 890,810 890,810
Other assets -- 93,708 93,708
---------- ---------- ----------
Total Assets 454 6,404,266 6,404,720
========== ========== ==========
Liabilities and Stockholders' Equity
Current Liabilities
Notes payable -- 496,118 496,118
Accounts payable 2,300 194,603
Accrued expenses (2) 30,000 30,000
Income tax payable 324 324
---------- ---------- ---------- ----------
Total Current Liabilites 2,300 691,045 723,345
Other liabilites -- -- --
---------- ---------- ----------
Total Liabilities 2,300 691,045 723,345
Stockholders' Equity
Common stock 125 4,902,800 (1) (4,902,651) 274
Legal reserve -- -- (1) 000 --
Additional paid in capital 24,175 -- (1) 4,876,505 4,900,680
Retained earnings (26,146) 810,421 (1) 26,146 780,421
(2) (30,000)
---------- ---------- ---------- ----------
Total Stockholders' Equity (1,846) 5,713,221 5,681,375
Total Liabilities and
Stockholders' Equity 454 6,404,266 0 6,404,720
========== ========== ========== ==========
22
Nano Superlattice Technology Inc. (f/k/a) Wigwam Development, Inc.
UNAUDITED PRO FORMA CONDENSED COMBINED INCOME STATEMENT
For the Year Ended June 30, 2003
Historical
-------------------------------------
Nano Superlattice
Technology Inc. Nano Superlattice
(f/k/a/ Wigwam Technology Inc. Pro Forma
Development, Inc. (Taiwan) Adjustments Pro Forma
----------------- -------- ----------- ---------
Sales revenue -- 4,312,107 4,312,107
---------- ---------- ----------
-- 4,312,107 4,312,107
Cost of goods sold -- 3,640,705 3,640,705
---------- ---------- ----------
-- 3,640,705 3,640,705
Gross Profit -- 671,402 671,402
---------- ---------- ----------
General, selling and
administrative expenses 8,762 658,947 (2) 30,000 697,709
---------- ---------- ---------- ----------
Operating income (loss) (8,762) 12,455 (30,000) (26,307)
---------- ---------- ---------- ----------
Nonoperating income (expense)
Interest income -- 105 105
Commission income -- 14,419 14,419
Other income -- 3,425 3,425
Interest expenses -- (3,109) (3,109)
---------- ---------- ----------
Total nonoperating income (expenses) -- 14,840 14,840
---------- ---------- ----------
Income (loss) before provision for income tax (8,762) 27,295 (11,467)
---------- ---------- ----------
Provision for income taxes -- -- --
Net income (loss) (8,762) 27,295 (30,000) (11,467)
========== ========== ========== ==========
23
NANO SUPERLATTICE TECHNOLOGY, INC.
F/K/A WIGWAM DEVELOPMENT, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
1. BASIS FOR PRO FORMA PRESENTATION
The accompanying condensed financial statements illustrate the effect of the
stock exchange agreement between Wigwam Development, Inc. and Nano Superlattice
Technology, Inc. (Taiwan), on Nano Superlattice Technology, Inc. f/k/a Wigwam
Development, Inc's (the "Company") financial position and results of operations.
The unaudited pro forma combined condensed financial statements of the Company
have been prepared on the basis of assumptions relating to the stock exchange
agreement and management estimates.
The pro forma condensed combined balance sheet as April 30, 2004 is based on the
historical balance sheets of Wigwam Development, Inc. and Nano Superlattice
Technology, Inc. (Taiwan), as of that date. The pro forma condensed combined
balance sheet of the Company assumes the acquisition took place on July 1, 2003.
The pro forma condensed combined balance sheet as June 30, 2003 is based on the
historical balance sheets of Wigwam Development, Inc. and Nano Superlattice
Technology, Inc (Taiwan), as of that date. The pro forma condensed combined
balance sheet of the Company assumes the acquisition took place on July 1, 2002.
The pro forma condensed combined statements of operations of the Company for the
year ended June 30, 2003 is based on the historical statements of operations of
Wigwam Development, Inc. and Nano Superlattice Technology, Inc. (Taiwan), and
assumes the acquisition took place on July 1, 2002. The pro forma condensed
combined statement of operations of the Company for the ten months ended April
30, 2004 is based on the historical statements of operations of Wigwam
Development, Inc. and Nano Superlattice Technology, Inc. (Taiwan) and assumes
the acquisition took place on July 1, 2003. The pro forma condensed combined
financial statements of the Company may not be indicative of the actual results
of the acquisition and there can be no assurance that the foregoing results will
be obtained. In particular, the pro forma condensed combined financial
statements of the Company are based on management's current estimates of the
exchange agreement. The actual results may differ.
The accompanying pro forma condensed combined financial statements of the
Company should be read in conjunction with the historical financial statements
of Wigwam Development, Inc. and Nano Superlattice Technology, Inc. (Taiwan)
24
2. PRO FORMA ADJUSTMENTS
Certain adjustments have been made to the historical financial statements in
order to prepare the pro forma financial information as if the transaction had
occurred at the beginning of the fiscal period presented.
The adjustments are as follows:
(1) To eliminate the equity of Wigwam Development, Inc.
(2) To accrue estimated costs to consummate the transaction.
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