<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 7, 2000
SCORE ONE, INC.
(Exact name of registrant as specified in its charter)
Nevada 000-26717 88-0409164
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) Identification Number)
Blk. 2, Flat 6, 3rd Floor
Tak Fung Industrial Centre
166-176 Texaco Road
Tsuen Wan, Hong Kong
(Address of principal executive offices)
Registrant's telephone number, including area code: 011-852-2406-8978
1
<PAGE>
ITEM 7. FINANCIAL STATEMENTS.
(a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED.
Filed herewith are the financial statements required by this item.
2
<PAGE>
Advanced Technology International Holdings Limited
Consolidated Balance Sheets
(Unaudited)
For the period ended For the period ended
(US$) 31-May-99 29-Feb-00
ASSETS
Current
Assets
Cash and Cash Equivalents 77,441 (38,220)
Accounts Receivable 3,612,140 5,281,740
Inventories 613,570 1,301,143
Other Receivables,
Prepayments and Deposits 78,074
------------ ------------
Total Current Assets 4,381,225 6,544,793
Fixed Assets 2,588,035 2,735,702
------------ ------------
TOTAL ASSETS 6,969,260 9,280,492
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts Payable 1,588,438 2,904,788
Other Payables and 280,346 252,144
Accrued Expenses
Due to Directors 1,674,742 420,700
Taxation - 173,161
------------ ------------
Total Current Liabilities 3,543,526 3,750,793
Long Term Liabilities
Note Payable to the
Shareholder 1,290,323 1,290,323
Deferred Taxation 8,661 172,516
------------ ------------
Total Long Term Liabilities 1,298,984 1,462,839
TOTAL LIABILITIES 4,842,510 5,213,632
SHAREHOLDERS' EQUITY
Share Capital 1,006 1,006
Reserve 2,125,743 4,065,854
------------ ------------
Total Shareholders' Equity 2,126,750 4,066,860
TOTAL LIABILITIES &
SHAREHOLDERS' EQUITY 6,969,260 9,280,492
============ ============
3
<PAGE>
Consolidated Income Statements
(Unaudited)
For the 5-month Period For the 8-month Period
(US$) 1 Jan 99 to 31 May 99 1 Jun 99 to 29 Feb 00
Revenue 8,527,946 17,473,074
Cost of Sales (6,085,406) (13,887,309)
-------------- ---------------
Gross Profit 2,442,540 3,585,765
Other Income 16,860 13,046
Operating Expenses (333,657) (553,851)
-------------- ---------------
Income before Tax 2,125,743 3,044,960
Tax - (345,677)
-------------- ---------------
Net Income 2,125,743 2,699,283
============== ===============
4
<PAGE>
Report of Independent Auditors
To the Board of Directors of
Advanced Technology International Holdings Limited
(Formerly known as Modern Frame International Limited)
We have audited the accompanying consolidated balance sheets of Advanced
Technology International Holdings Limited as of December 31, 1998 and December
31, 1999, and the related consolidated statements of operations, stockholder's
equity and cash flows for the period from inception to December 31, 1998 and the
twelve months ended December 31, 1999. 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 generally accepted auditing standards
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our 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 consolidated financial position of
Advanced Technology International Holdings Limited as of December 31, 1998 and
December 31, 1999 and the consolidated results of its operations and cash flows
for the period from inception to December 31, 1998 and the twelve months ended
December 31, 1999, in conformity with generally accepted accounting principles
in the United States of America.
/s/ BDO International
BDO International
Certified Public Accountants
Hong Kong,
May 16, 2000
5
<PAGE>
Advanced Technology International Holdings Limited
(Formerly known as Modern Frame International Limited)
Index To Consolidated Financial Statements
<TABLE>
<CAPTION>
Pages
<S> <C>
Report of Independent Auditors 5
Consolidated Balance Sheets 7
Consolidated Statements of Operations 8
Consolidated Statements of Stockholder's Equity 9
Consolidated Statements of Cash Flows 10
Notes to Consolidated Financial Statements 11
</TABLE>
6
<PAGE>
Advanced Technology International Holdings Limited
(Formerly known as Modern Frame International Limited)
Consolidated Balance Sheets
(Expressed in US Dollars)
<TABLE>
<CAPTION>
December 31, December 31,
1998 1999
--------------- ---------------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 1,000 $ 114,171
Accounts receivable (Note 3) - 3,236,703
Other receivables, deposits and prepayments (Note 4) - 428,945
Inventories (Note 5) - 591,653
Amount due from the stockholder (Note 9) - 394,441
--------------- ---------------
Total current assets 1,000 4,765,913
Plant and equipment, net (Note 6) - 2,711,271
--------------- ---------------
Total assets $ 1,000 $ 7,477,184
=============== ===============
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities
Accounts payable $ - $ 1,835,045
Other payables and accrued expenses - 52,305
Income taxes payable (Note 7) - 173,161
Dividends payable - 759,172
--------------- ---------------
Total current liabilities - 2,819,683
Long term liabilities
Note payable to the stockholder (Note 9) - 1,290,323
Deferred income taxes (Note 7) - 172,517
--------------- ---------------
Total long term liabilities - 1,462,840
--------------- ---------------
Total liabilities - 4,282,523
--------------- ---------------
Commitments and Contingencies (Note 8)
Stockholder's equity
Common stock, par value $1 per share;
50,000 shares authorized; 1,000 shares
issued and outstanding 1,000 1,000
Retained earnings - 3,193,661
--------------- ---------------
Total stockholder's equity - 3,194,661
--------------- ---------------
Total liabilities and stockholder's equity $ 1,000 $ 7,477,184
=============== ===============
</TABLE>
See accompanying summary of accounting policies and notes to consolidated
financial statements.
7
<PAGE>
Advanced Technology International Holdings Limited
(Formerly known as Modern Frame International Limited)
Consolidated Statements of Operations
(Expressed in US Dollars)
<TABLE>
<CAPTION>
From Twelve
inception to months ended
December 31, December 31,
1998 1999
--------------- ---------------
<S> <C> <C>
Net sales $ - $ 21,591,106
Cost of sales - (16,519,906)
---------------
Gross profit - 5,071,200
Selling expenses - (27,247)
General and administrative expenses - (773,530)
--------------- ---------------
Operating income - 4,270,423
Other income - 28,088
---------------
Income before income taxes - 4,298,511
Provision for income taxes (Note 7) - (345,678)
--------------- ---------------
Net income $ - $ 3,952,833
=============== ===============
</TABLE>
See accompanying summary of accounting policies and notes to consolidated
financial statements.
8
<PAGE>
Advanced Technology International Holdings Limited
(Formerly known as Modern Frame International Limited)
Consolidated Statements of Stockholder's Equity
(Expressed in US Dollars)
<TABLE>
<CAPTION>
Common Stock Total
------------------------------
Number Retained Stockholder's
of Shares Amount Earnings Equity
------------- ------------ -------------- ---------------
<S> <C> <C> <C> <C>
Balance, November 18, 1998 1,000 $ 1,000 $ - $ 1,000
Net income - - - -
------------- ------------ -------------- ---------------
Balance, December 31, 1998 1,000 1,000 - 1,000
Net income - - 3,952,833 3,952,833
Dividends declared - - (759,172) (759,172)
------------- ------------ -------------- ---------------
Balance, December 31, 1999 1,000 $ 1,000 $ 3,193,661 $ 3,194,661
============= ============ ============== ===============
</TABLE>
See accompanying summary of accounting policies and notes to consolidated
financial statements.
9
<PAGE>
Advanced Technology International Holdings Limited
(Formerly known as Modern Frame International Limited)
Consolidated Statements of Cash Flows
Increase/(Decrease) in Cash and Cash Equivalents
(Expressed in US Dollars)
<TABLE>
<CAPTION>
From Twelve
inception to months ended
December 31, December 31,
1998 1999
--------------- -------------
<S> <C> <C>
Cash flows from operating activities
Net income $ - $ 3,952,833
Adjustments to reconcile net income
to net cash provided by operating activities
Depreciation of plant and equipment - 536,865
Deferred income taxes - 172,517
Changes in - net of acquisition
Accounts receivable - (1,378,689)
Other receivables, deposits and prepayments - (427,706)
Inventories - (71,428)
Amount due from the stockholder - (394,441)
Accounts payable - 901,152
Other payables and accrued expenses - 32,236
Income taxes payable - 173,161
---------- -----------
Net cash provided by operating activities - 3,496,500
---------- -----------
Cash flows used in investing activities
Acquisition of plant and equipment - (1,065,242)
Bank balance acquired from a related company - 14,216
---------- -----------
Net cash used in investing activities - (1,051,026)
---------- -----------
Cash flows from financing activities
Issuance of common stock 1,000 -
Repayment of note payable to the stockholder - (2,332,303)
---------- -----------
Net cash provided by/(used in) financing activities 1,000 (2,332,303)
---------- -----------
Net increase in cash and cash equivalents 1,000 113,171
Cash and cash equivalents at beginning of period - 1,000
---------- -----------
Cash and cash equivalents at end of period $ 1,000 $ 114,171
========== ===========
Supplemental disclosure of cash flow information
Interest paid during the period $ - $ 527
Supplemental disclosure of non-cash activities
Acquisition of assets from related companies $ - $ 4,562,372
Assumption of liabilities from a related company $ - $ 953,962
</TABLE>
See accompanying summary of accounting policies and notes to consolidated
financial statements.
10
<PAGE>
Note 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
Advanced Technology International Holdings Limited was incorporated in the
British Virgin Islands on November 18, 1998, under the name of Modern Frame
International Limited ("the Company"). The name of the Company was changed to
Advanced Technology International Holdings Limited on December 23, 1999. The
principal activity of the Company is to hold investments in subsidiaries.
On November 18, 1998, the Company acquired a 100% equity interest in a newly
incorporated shell company, Ford Reach (H.K.) Limited ("Ford Reach") at a
consideration of $129. Ford Reach is a limited liability company incorporated
in Hong Kong.
On January 8, 1999, the Company acquired a 100% equity interest in a newly
incorporated shell company, Fortune (Conductive Carbon) PCB Factory Company
Limited ("Fortune BVI") (formerly known as Goal Best Gold Limited), at a
consideration of $100. The name of Goal Best Gold Limited was changed to Fortune
(Conductive Carbon) PCB Factory Company Limited on November 2, 1999. Fortune BVI
is a limited liability company incorporated in the British Virgin Islands.
Pursuant to a purchase and sale agreement dated January 1, 1999, Ford Reach
acquired substantially all the assets and assumed substantially all the
liabilities of Fortune (Conductive Carbon) PCB Factory Co., Ltd. ("Fortune HK"),
a limited liability company incorporated in Hong Kong, in exchange for a note
payable to Mr. Ho Wing Cheong of $1,731,664, which was the aggregate book value
of assets acquired less liabilities assumed. Fortune HK is a Hong Kong based
company and wholly owned by Mr. Ho Wing Cheong, the director and sole beneficial
stockholder of the Company. The Company believed that the $1,731,664
approximated the fair market value of assets acquired less liabilities assumed
at January 1, 1999.
Pursuant to a purchase and sale agreement dated January 8, 1999, Fortune BVI
acquired certain plant and equipment from Dongguan Fortune Circuit Factory Co.,
Ltd. ("Dongguan Fortune") in exchange for a note payable to Mr. Ho Wing Cheong
of $1,890,962, which was the aggregate book value of these assets as of January
1, 1999. Dongguan Fortune is a People's Republic of China ("PRC") based company
in which Mr. Ho Wing Cheong has a controlling interest. Based on the valuation
report prepared by Messrs. LCH (Asia Pacific) Surveyors Limited dated May 3,
2000, the Company believed that the $1,890,962 approximated the fair market
value of those assets acquired at January 8, 1999.
Both Ford Reach and Fortune BVI are engaged in the manufacture and sale of
printed circuit boards for telecommunication systems, scientific calculators and
audio visual equipment to companies in Hong Kong. Ford Reach and Fortune BVI
commenced operations on January 1, 1999 and January 8, 1999, respectively. On
October 1, 1999, Ford Reach transferred all its assets and liabilities to
Fortune BVI at their book values and has become dormant since then.
11
<PAGE>
NOTE 2 - SUMMARY OF IMPORTANT ACCOUNTING POLICIES
Basis of Accounting and Principles of Consolidation
The consolidated financial statements are prepared in accordance with generally
accepted accounting principles in the United States of America and present the
financial statements of the Company and its wholly owned subsidiaries, Ford
Reach and Fortune BVI. All material intercompany transactions have been
eliminated.
Foreign Currency Translation and Transactions
The functional currency of the Company and its subsidiaries is the Hong Kong
Dollar (HK$) and the financial records are maintained and the financial
statements prepared in HK$. Foreign currency transactions during the period are
translated into HK$ at the exchange rates ruling at the transaction dates.
Assets and liabilities denominated in foreign currencies at the balance sheet
date are translated into HK$ at year end exchange rates. When assets,
liabilities and equity denominated in HK$ are translated into United States
Dollars, translation adjustments are included as a component of stockholder's
equity.
For the purpose of preparing these financial statements, the financial
statements in HK$ have been translated into United States Dollars at US$1.00 =
HK$7.75.
Revenue Recognition
Revenue from goods sold is recognized when title of goods sold has passed to the
buyers, which is at the time of delivery.
Inventories
Inventories are stated at the lower of cost or market. Cost is computed using
the first-in-first-out method and includes all costs of purchase, cost of
conversion and other costs incurred in bringing the inventories to their present
location and condition. Market value is determined by reference to the sales
proceeds of items sold in the ordinary course of business after the balance
sheet date or to management estimates based on prevailing market conditions.
Cash and Cash Equivalents
Cash and cash equivalents include all highly liquid investments with an original
maturity of three months or less.
12
<PAGE>
NOTE 2 - SUMMARY OF IMPORTANT ACCOUNTING POLICIES (Cont'd)
Accounts Receivable and Concentration of Credit Risk
During the normal course of business, the Company extends unsecured credit to
its customers. The collectibility of debts owed by its customers depends
substantially on the financial condition and cash flow position of its
customers. The Company reviews regularly the credit status of each customer on a
case by case basis and the provision for doubtful accounts is recorded based on
the management's assessment of the credit status of its customers.
Plant, Equipment and Depreciation
Plant and equipment are stated at cost. Depreciation is computed using the
straight-line method to allocate the cost of depreciable assets over the
estimated useful lives of the assets as follows:
Estimated
useful life
(in years)
-------------
Leasehold improvements 10
Furniture and fixtures 5
Machinery and moulds 5
Transportation equipment 5
Computer and telephone equipment 5
Maintenance, repairs and minor renewals are charged directly to the statement of
operations as incurred. Additions and betterments to plant and equipment are
capitalized. When assets are disposed of, the related cost and accumulated
depreciation thereon are removed from the accounts and any resulting gain or
loss is included in the statement of operations.
Long-lived Assets
The Company periodically reviews its long-lived assets for impairment based upon
the estimated undiscounted future cash flows expected to result from the use of
the assets and their eventual disposition. When events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable, the asset is written down to its net realizable value.
Income Taxes
The Company and its subsidiaries account for income taxes using the liability
method, which requires an entity to recognize deferred tax liabilities and
assets. Deferred income taxes are recognized based on the differences between
the tax bases of assets and liabilities and their reported amounts in the
financial statements which will result in taxable or deductible amounts in
future years. Further, the effects of enacted tax laws or rate changes are
included as part of deferred tax expenses or benefits in the year that covers
the enactment in the near future date. A valuation allowance will be provided
when there is an uncertainty that a deferred tax benefit will be realized.
13
<PAGE>
NOTE 2 - SUMMARY OF IMPORTANT ACCOUNTING POLICIES (Cont'd)
Fair Values of Financial Instruments
The carrying amounts of certain financial instruments, including cash, accounts
receivable and accounts payable approximate their fair values as of December 31,
1999 because of the relatively short-term maturity of these instruments. The
fair value of the Company's related party receivables and payables, and note
payable to the sole beneficial stockholder cannot be determined due to the
nature of the transactions.
Use of Estimates
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect 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. Among the more
significant estimates included in the financial statements are the allowance for
doubtful accounts, provision for inventory obsolescence and slow moving items,
and deferred income tax liability. Actual results could differ from those
estimates.
New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 ("SFAS No. 133"), Accounting for
Derivative Instruments and Hedging Activities. SFAS No. 133 requires companies
to recognize all derivative contracts as either assets or liabilities in the
balance sheet and to measure them at fair value. If certain conditions are met,
a derivative may be specifically designated as a hedge, the objective of which
is to match the timing of gain or loss recognition on the hedging derivative
with the recognition of (i) the changes in the fair value of the hedged asset or
liability that are attributable to the hedged risk or (ii) the earnings effect
of the hedged forecasted transaction. For a derivative not designated as a
hedging instrument, the gain or loss is recognized as income in the period of
change. SFAS No. 133 as amended by SFAS No. 137 is effective for all fiscal
quarters of fiscal years beginning after June 15, 2000. Based on its current and
planned future activities relative to derivative instruments, the Company
believes that the adoption of SFAS No. 133 will not have a significant effect on
its financial statements.
14
<PAGE>
NOTE 3 - ACCOUNTS RECEIVABLE
<TABLE>
<CAPTION>
December 31,
1999
---------------
<S> <C>
Accounts receivable $ 3,430,252
Less: Allowance for doubtful accounts 193,549
---------------
$ 3,236,703
===============
</TABLE>
NOTE 4 - OTHER RECEIVABLES, DEPOSITS AND PREPAYMENTS
<TABLE>
<CAPTION>
December 31,
1999
---------------
<S> <C>
Staff advances $ 77,419
Temporary advance to subcontractor 350,880
Other 646
---------------
$ 428,945
===============
</TABLE>
NOTE 5 - INVENTORIES
<TABLE>
<CAPTION>
December 31,
1999
---------------
<S> <C>
Raw materials $ 536,549
Work-in-progress 55,104
Finished goods 126,980
---------------
718,633
Less: Provision for slow-moving goods 126,980
---------------
$ 591,653
===============
</TABLE>
NOTE 6 - PLANT AND EQUIPMENT, NET
<TABLE>
<CAPTION>
December 31,
1999
---------------
<S> <C>
Leasehold improvements $ 297,262
Furniture and fixtures 155,181
Machinery and moulds 2,694,619
Transportation equipment 83,115
Computer and telephone equipment 17,959
---------------
3,248,136
Less: Accumulated depreciation 536,865
---------------
$ 2,711,271
===============
</TABLE>
15
<PAGE>
NOTE 7 - INCOME TAXES PAYABLE
Tax in the consolidated statement of operations represents:
<TABLE>
<CAPTION>
Twelve
months ended
December 31,
1999
---------------
<S> <C>
Current income tax - Hong Kong $ 173,161
Deferred income tax - Hong Kong 172,517
---------------
$ 345,678
===============
</TABLE>
Deferred income taxes represent the tax effect on the excess of depreciation
allowances over related depreciation for financial statement purposes.
A reconciliation from the statutory tax rate to the effective tax rate is
presented below:
<TABLE>
<CAPTION>
Twelve
months ended
December 31,
1999
---------------
%
<S> <C>
Hong Kong statutory tax rate 16
50% reduction for manufacturing operations in PRC (8)
-------
Effective tax rate 8
=======
</TABLE>
Under the Hong Kong tax authority's Departmental Interpretation and Practice
Notes, a company based in Hong Kong, but with substantially all of its
manufacturing operations located in the PRC conducted under a processing
agreement with a PRC company, can enjoy profit apportionment under which only
50% of its manufacturing profit is subject to Hong Kong profits tax. All of the
Company's manufacturing operations are located in Dongguan, PRC and conducted
under a processing agreement with Dongguan Fu Chi Circuit Factory Co. ("Dongguan
Fu Chi"), a PRC company. Therefore only 50% of the profits of the Company is
subject to Hong Kong profits tax. Such tax concession is granted based on annual
application by the Company. The submission of profits tax returns by the
Company to the Hong Kong tax authority is not yet due and therefore no
application for the grant of the concession has yet been made.
16
<PAGE>
NOTE 8 - COMMITMENTS AND CONTINGENCIES
Lease Commitments
A subsidiary leased general and administrative facilities under an operating
lease. Rent expenses paid under this lease for the year ended December 31, 1999
was $6,194. There are no lease commitments outstanding as at December 31, 1999.
NOTE 9 - RELATED PARTY TRANSACTIONS
As described in Note 1, in January 1999, the Company acquired assets and assumed
liabilities from companies controlled by Mr. Ho Wing Cheong, the sole beneficial
stockholder and director of the Company at an aggregate consideration of
$3,622,626 satisfied by a note payable to Mr. Ho of that amount.
As of December 31, 1999, balances with the sole beneficial stockholder consist
of the following:
<TABLE>
<CAPTION>
December 31,
1999
--------------
<S> <C>
Amount due from the stockholder:
Mr. Ho Wing Cheong $ 394,441
==============
Note payable to the stockholder:
Mr. Ho Wing Cheong $ 1,290,323
==============
</TABLE>
The amount due from the stockholder is unsecured, interest-free and has no fixed
terms of repayment. The stockholder has no intention to demand repayment within
next year.
The note payable to the stockholder which arose from the acquisition of assets
and assumption of liabilities from companies controlled by the stockholder as
described in Note 1, was recorded at an initial amount of $3,622,626. It was
partially repaid during the period. The remaining balance of the note payable
is unsecured, interest-free and is not repayable within the next 12 months from
the balance sheet date.
17
<PAGE>
NOTE 10 - CONCENTRATION OF CUSTOMER AND VENDORS
During 1999, 47% of revenue of Ford Reach and Fortune BVI is derived from the
sale of goods to Yue Fung Development Limited ("YFD").
During 1999, the following vendors accounted for more than 10% of total
purchases:
<TABLE>
<CAPTION>
Twelve
months ended
December 31,
1999
--------------
<S> <C>
Vendor A $ 1,273,091
Vendor B 1,288,633
Vendor C 4,590,298
==============
</TABLE>
NOTE 11 - ECONOMIC DEPENDENCE
Ford Reach and Fortune BVI's manufacturing operations are supported by a single
PRC company, Dongguan Fu Chi. Under a processing agreement with an expiry date
of December 31, 2008, Dongguan Fu Chi provides the factory premises, the workers
and, in many cases, supplementary materials at a fee. There can be no assurance
that Dongguan Fu Chi's premises and workforce are sufficient to handle an
increase in production orders should the Company's business expand or that the
Company can locate another third party subcontractor who can handle the
Company's production on as favorable terms as those existing with Dongguan Fu
Chi.
NOTE 12 - SUBSEQUENT EVENT
Subsequent to the balance sheet date, Yue Fung International Group Holding
Limited ("YFIGH"), a company incorporated in Bermuda and listed on the Hong Kong
Stock Exchange and the holding company of YFD, a major customer of the Company,
acquired a 30% equity interest in the Company at a consideration of $7,397,419
(equivalent to HK$57,330,000).
18
<PAGE>
Audited Proforma Financial Statements
ADVANCED TECHNOLOGY INTERNATIONAL HOLDINGS LIMITED
(Incorporated in the British Virgin Islands with limited liability)
31 December 1998
19
<PAGE>
REPORT OF THE AUDITOR
TO THE DIRECTORS OF
ADVANCED TECHNOLOGY INTERNATIONAL HOLDINGS LIMITED
(Incorporated in the British Virgin Islands with limited liability)
I have audited the financial statements on pages 22 to 32 which have been
prepared in accordance with accounting principles generally accepted in Hong
Kong.
Respective responsibilities of directors and auditors
The Company's directors are responsible for the preparation of financial
statement which give a true and fair view. In preparing financial statements
which give a true and fair view it is fundamental that appropriate accounting
policies are selected and applied consistently. It is my responsibility to form
an independent opinion, based on my audit, on those statements together with the
notes thereon and to report my opinion to you.
Basis of opinion
I conducted my audit in accordance with Statements of Auditing Standards issued
by the Hong Kong Society of Accountants. An audit includes an examination, on a
test basis, of evidence relevant to the amounts and disclosures in the financial
statements. It also includes an assessment of the significant estimates and
judgements made by the directors in the preparation of the financial statements,
and of whether the accounting policies are appropriate to the Company's
circumstances, consistently applied and adequately disclosed.
I planned and performed my audit so as to obtain all the information and
explanations which I considered necessary in order to provide me with sufficient
evidence to give reasonable assurance as to whether the financial statements are
free from material misstatement. In forming my opinion I also evaluated the
overall adequacy of the presentation of information in the financial statements.
I believe that my audit provides a reasonable basis for my opinion.
Opinion
In my opinion the proforma financial statements, prepared on the basis set out
in note 2, give a true and fair view, in all material respects, of the state of
affairs of the Company and of the Group as at 31 December 1998 and of its profit
and cash flows of the Group for the period from 1 April 1998 to 31 December 1998
and have been properly prepared in accordance with the disclosure requirements
of the Hong Kong Companies Ordinance.
/s/ Wong Hei Chiu
Wong Hei Chiu
Certified Public Accountant
Hong Kong
31 March 2000
20
<PAGE>
ADVANCED TECHNOLOGY INTERNATIONAL HOLDINGS LIMITED
CONTENTS
<TABLE>
<CAPTION>
Pages
<S> <C>
Report of the Auditor 20
AUDITED PROFORMA FINANCIAL STATEMENTS
Combined:
Balance sheet 22
Statements of operations 23
Statements of cash flow 24
Company:
Balance Sheet 25
Notes to financial statements 27
</TABLE>
21
<PAGE>
ADVANCED TECHNOLOGY INTERNATIONAL HOLDINGS LIMITED
PROFORMA COMBINED BALANCE SHEET
31 December 1998
<TABLE>
<CAPTION>
Notes US$
<S> <C> <C>
ASSETS
Current assets
Cash and bank balances 14,333
Inventories 10 520,225
Accounts receivable 1,858,014
Prepayments, deposits and other receivables 1,238
-------------
Total current assets 2,393,810
-------------
Plant and equipment, net 9 291,933
-------------
Total assets 2,685,743
=============
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities
Accounts payable 933,893
Accrued and other payables 20,069
Due to a director 11 523,679
Due to a related company 12 424,319
Income taxes payable 6 105,435
-------------
Total current liabilities 2,007,396
-------------
Stockholder's equity
Common stock 13 1,000
Contributed surplus 129,032
Retained profits 548,315
-------------
Total stockholder's equity 678,347
Total liabilities and stockholder's equity 2,685,743
=============
</TABLE>
22
<PAGE>
ADVANCED TECHNOLOGY INTERNATIONAL HOLDINGS LIMITED
PROFORMA COMBINED STATEMENTS OF OPERATIONS
Period from 1 April 1998 to 31 December 1998
<TABLE>
<CAPTION>
Notes US$
<S> <C> <C>
Net sales 3 5,796,930
Cost of sales (4,609,210)
-------------
Gross profit 1,187,720
General and administrative expenses (540,302)
-------------
Operating income 647,418
Other income 5,472
-------------
Income before income taxes 4 652,890
Provision for income taxes 6 (96,774)
-------------
Net income 556,116
=============
</TABLE>
23
<PAGE>
ADVANCED TECHNOLOGY INTERNATIONAL HOLDINGS LIMITED
PROFORMA COMBINED CASH FLOW STATEMENT
Period from 1 April 1998 to 31 December 1998
<TABLE>
<CAPTION>
Notes US$
<S> <C> <C>
NET CASH INFLOW FROM OPERATING ACTIVITIES 14 86,158
RETURNS ON INVESTMENTS AND SERVICING OF FINANCE
Dividend Paid (62,978)
-------------
Net cash (outflow) from returns on investments and servicing of finance (62,978)
-------------
INVESTING ACTIVITIES
Purchases of fixed assets 9 (37,313)
-------------
Net cash (outflow) from investing activities (37,313)
-------------
NET CASH (OUTFLOW) BEFORE FINANCING ACTIVITIES (14,133)
FINANCING ACTIVITIES
Proceeds from issue of share capital 1,000
-------------
Net cash inflow from financing activities 1,000
-------------
INCREASE IN CASH AND CASH EQUIVALENTS (13,133)
Cash and cash equivalents at beginning of period 27,466
-------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD 14,333
=============
ANALYSIS OF BALANCES OF CASH AND CASH EQUIVALENTS
Cash and bank balances 14,333
=============
</TABLE>
24
<PAGE>
ADVANCED TECHNOLOGY INTERNATIONAL HOLDINGS LIMITED
BALANCE SHEET
31 December 1998
Notes US$
ASSETS
Current assets
Prepayments, deposits and other receivables 1,000
---------------
1,000
===============
LIABILITIES AND STOCKHOLDER'S EQUITY
Stockholder's equity
Common stock 13 1,000
---------------
1,000
===============
25
<PAGE>
Advanced Technology International Holdings Limited
Reconciliation of net assets and results
31 December 1998
Net Assets Reconciliation
-------------------------
Reconciliation of net assets of Advanced Technology International Holdings
Limited between Hong Kong Generally Accepted Accounting Principles (HKGAAP) and
United States of America Generally Accepted Accounting Principles ("USGAAP") as
at 31 December.
As at
31 December 1998
US$
Net assets per audited accounts 678,347
in accordance with HKGAAP
USGAAP adjustment -
---------------
Adjusted net assets balance under USGAAP 678,347
---------------
Net Results Reconciliation
--------------------------
Reconciliation of net results of Advanced Technology International Holdings
Limited between Hong Kong Generally Accepted Accounting Principles (HKGAAP) and
United States of America Generally Accepted Accounting Principles ("USGAAP") for
the period from April 1, 1998 to December 31, 1998.
For 9 months ended
31 December 1998
US$
Net results per audited accounts 556,116
in accordance with HKGAAP
USGAAP adjustment -
---------------
Adjusted net assets balance under USGAAP 556,116
----------------
26
<PAGE>
ADVANCED TECHNOLOGY INTERNATIONAL HOLDINGS LIMITED
NOTES TO FINANCIAL STATEMENTS
31 December 1998
1. GROUP REORGANIZATION
The Company was incorporated in the British Virgin Islands with limited
liability under the Companies Act 1981 on 18 November 1999. Pursuant to a
reorganisation scheme to rationalise the structure of the Group, the
Company became the holding company of the companies, Ford Reach (HK)Limited
("Ford") and Gold Best Goal Limited, which are now comprised the Group.
This was accomplished by Ford acquiring the entire business, including
assets and liabilities of Fortune (Conductive Carbon) PCB Factory Company
Limited ("Fortune") on 1 January 1999.
2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of accounting
-------------------
These proforma financial statements have been prepared in accordance with
Hong Kong Statements of Standard Accounting Practice, accounting principles
generally accepted in Hong Kong and the disclosure requirements of the Hong
Kong Companies Ordinance.
Basis of presentation and consolidation
---------------------------------------
The proforma combined financial statements have been prepared using the
merger basis of accounting as a result of a Group reorganization completed.
Under this basis, the Company has been treated as the holding company of
Fortune for the financial year presented rather than from the date of their
acquisition. Accordingly, the proforma combined results of the Group for
the year ended 31 December 1998 include the results of the Company and
Fortune with effect from 1 January 1998. No comparative proforma combined
balance sheet as at 31 December 1997 has been prepared by the Company.
In the opinion of the directors, the proforma combined financial statements
prepared on the above basis present more fairly the results and the state
of affairs of the Group as a whole.
All significant intercompany transactions and balances within the Group
have been eliminated on combination.
Revenue recognition
-------------------
Revenue is recognised when it is probable that the economic benefits will
flow to the Group and when the revenue can be measured reliably, on the
following bases:
- on the sale of goods, when the significant risks and rewards of
ownership have been transferred to the buyer, provided that the Group
maintains neither managerial involvement to the degree usually associated
with ownership, nor effective control over the goods sold; and
- interest, on a time proportion basis.
27
<PAGE>
2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Fixed assets and depreciation
-----------------------------
Fixed assets are stated at cost less accumulated depreciation.
The cost of an asset comprises its purchase price and any directly
attributable costs of bringing the asset to its working condition and
location for its intended use. Expenditure incurred after the fixed assets
have been put into operations, such as repairs and maintenance, is normally
charged to the profit and loss account in the period in which it is
incurred. In situations where it can be clearly demonstrated that the
expenditure has resulted in an increase in the future economic benefits
expected to be obtained from the use of the fixed asset, the expenditure is
capitalised as an addition cost of the fixed asset.
Depreciation is provided on the straight-line basis to write off the cost
of each asset over the estimated useful lives at the rates of 10% - 30% per
annum. Leasehold improvement is charged on straight-line basis over 10
years.
The gain or loss on disposal or retirement of a fixed asset recognised in
the profit and loss account in the difference between the sales proceeds
and the carrying amount of the relevant asset.
Inventories
-----------
Inventories are stated at the lower of cost and net realisable value. Cost
is determined on the weighted average cost basis and, in the case of work
in progress and finished goods, comprises direct materials, direct labour
and an appropriate proportion of manufacturing overheads. Net realisable
value is based on estimated selling price less any further costs expected
to be incurred on disposal.
Foreign currencies
------------------
All the books and records of the Company are maintained in Hong Kong
dollars. Foreign currency transactions are recorded at the approximate
rates of exchange ruling at the transaction dates. Monetary assets and
liabilities denominated in foreign currencies at the balance sheet date are
translated at the approximate rates of exchange ruling at that date.
Exchange differences are dealt with in the profit and loss account.
Deferred taxation
-----------------
Deferred taxation is provided, using the liability method, on all
significant timing differences in the recognition of revenue and expenses
for tax and for financial reporting purposes, to the extent it is probable
that the liability will crystallise in the foreseeable future. A deferred
tax asset is not recognised unless its realisation is assured beyond
reasonable doubt.
Operating leases
----------------
Leases where substantially all the rewards and risks of ownership of assets
remain with the leasing company are accounted for as operating leases.
Rentals applicable to such operating leases are charged to the profit and
loss account on the straight-line over the lease terms.
3. TURNOVER
Turnover represents invoiced value of goods sold, net of trade discounts
and returns.
28
<PAGE>
ADVANCED TECHNOLOGY INTERNATIONAL HOLDINGS LIMITED
NOTES TO FINANCIAL STATEMENTS
31 December 1998
4. PROFIT BEFORE TAXATION
The Group's profit before taxation is arrived at after charging:
HK$
Depreciation 413,169
Operating lease rentals in respect of land and buildings 48,000
Auditor's remuneration 45,000
=======
5. DIRECTORS' REMUNERATION
Group
HK$
Fees 746,989
Other emoluments -
-------
746,989
=======
6. TAXATION
Group
HK$
Current year provision:
Hong Kong -
Overseas 750,000
Deferred taxation 67,122
-------
817,122
=======
Hong Kong profits tax has not been provided as the Group did not generate
any assessable profit attributable to its operation in Hong Kong during the
period from 1 April 1998 to 31 December 1998. Taxes on profits assessable
elsewhere have been calculated at the rates of taxation prevailing in the
countries in which the Group operates.
Movements on the provision for deferred taxation liability are as follows:
Group
HK$
At beginning of period 67,122
Charge for the period -
-------
At balance sheet date 67,122
======
The Group did not have any significant unprovided deferred taxation in the
relevant period.
29
<PAGE>
ADVANCED TECHNOLOGY INTERNATIONAL HOLDINGS LIMITED
NOTES TO FINANCIAL STATEMENTS
31 December 1998
7. DIVIDEND
Group
HK$
Final dividends of HK$488.081
(1997: Nil) per ordinary share 488,081
=======
8. NET PROFIT ATTRIBUTABLE TO SHAREHOLDERS
The net profit attributable to shareholders dealt with in the financial
statements of the Company is HK$4,249,391.
9. FIXED ASSETS
Group
<TABLE>
<CAPTION>
Leasehold Plant Computer Furniture Total
Improvements Machinery and and
Telephone Fixtures
HK$ HK$ HK$ HK$ HK$
<S> <C> <C> <C> <C> <C>
Cost:
At beginning of 78,030 3,792,920 72,820 57,666 4,001,436
period
Additions 50,233 221,540 6,900 10,500 289,173
---------------- ------------- -------------- ------------ ---------
At 31 December 1998 128,263 4,014,460 79,720 68,166 4,290,609
---------------- ------------- -------------- ------------ ---------
Accumulated
depreciation:
At beginning of 21,057 1,536,040 35,421 22,443 1,614,961
period
Provided for the 10,875 383,273 12,303 6,718 413,169
period
---------------- ------------- -------------- ------------ ------------
At 31 December 1998 31,932 1,919,313 47,724 29,161 2,028,130
---------------- ------------- -------------- ------------ ------------
Net book value:
At 31 December 1998 96,331 2,095,147 31,996 39,005 2,262,479
================ ============= ============== ============ ============
10. INVENTORIES
Group
HK$
Raw materials 3,257,543
Work in progress 222,574
Finished goods 551,627
---------
4,031,744
=========
</TABLE>
30
<PAGE>
ADVANCED TECHNOLOGY INTERNATIONAL HOLDINGS LIMITED
NOTES TO FINANCIAL STATEMENTS
31 December 1998
11. DUE TO A DIRECTOR
The amount due to a director is unsecured, interest-free and repayable on
demand.
12. DUE TO A RELATED COMPANY
The amount due to a related company is unsecured, interest-free and
repayable on demand.
13. SHARE CAPITAL
HK$
Authorized, issued and fully paid:
1,000 ordinary shares of US $1 7,800
=====
14. NOTES TO PROFORMA COMBINED CASH FLOW STATEMENT
Reconciliation of profit before taxation to net cash inflow from operation
activities
HK$
Profit before taxation 5,059,895
Depreciation 413,169
(Increase) in inventories (4,031,744)
Decrease in accounts receivable 4,281,410
Increase in accounts payable 2,382,767
(Decrease) in other payables (7,915,997)
Increase in amount due to related companies 3,288,475
Decrease in amount due to a director (2,810,295)
--------------
Net cash inflow from operating activities 667,680
==============
15. COMMITMENTS
Group
HK$
Commitments payable in the following year
under operating leases in respect of
land and buildings expiring:
Within one year 48,000
In the second to fifth years, inclusive 36,000
------
84,000
======
31
<PAGE>
ADVANCED TECHNOLOGY INTERNATIONAL HOLDINGS LIMITED
NOTES TO FINANCIAL STATEMENTS
31 December 1998
16. APPROVAL OF THE FINANCIAL STATEMENTS
The financial statements were approved by the board of directors on 31
March 2000.
32
<PAGE>
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.
SCORE ONE, INC.
Date: June 21, 2000 By: /s/ Wing Cheong Ho
----------------------------
Wing Cheong Ho, President
33
