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Fantatech Inc – ‘8-K/A’ for 11/6/02

On:  Tuesday, 1/21/03, at 12:49pm ET   ·   For:  11/6/02   ·   Accession #:  1010549-3-11   ·   File #:  0-24374

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  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

 1/21/03  Fantatech Inc                     8-K/A:7    11/06/02    1:41K                                    Secs Transfer Corp/FA

Amendment to Current Report   —   Form 8-K
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 8-K/A       Amendment to Current Report                           23     86K 


Document Table of Contents

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11st Page   -   Filing Submission
2Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
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SECURITIES AND EXCHANGE COMMISSION WASHINGTON DC 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) November 6, 2002 LUCAS EDUCATIONAL SYSTEMS, INC. -------------------------------------------------------------------------------- (Exact name of Registrant as Specified in Charter) Delaware 0-24374 62-1690722 -------------------------------------------------------------------------------- (State of Other Jurisdiction (Commission (IRS Employer of Incorporation) File Number) Identification No.) Flat K, 12/F., International Industrial Centre, 2-8 Kwei Tei St. Fo Tan Shatin N.T. Hong Kong -------------------------------------------------------------------------------- (Address of Principal Executive Offices) Registrant's telephone number, including area code (0755) 83365354-267
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Item 7. Financial Statements, Pro Forma Financial Information and Exhibits. Set forth below are the Financial Statements and Pro Forma Financial Statements related to the Registrants acquisition of Intsys Share Limited, a British Virgin Islands corporation on November 6, 2002. A Form 8-K detailing of the acquisition was filed with the Security Exchange Commission on November 21, 2002. (a) Financial Statements. INTSYS SHARE LIMITED AND SUBSIDIARY INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Pages ----- Report of Independent Auditors F-2 Consolidated Balance Sheet as of December 31, 2001 F-3 Consolidated Statements of Operations for the years ended December 31, 2001 and 2000 F-4 Consolidated Statements of Changes in Stockholders' Equity for the years ended December 31, 2001 and 2000 F-5 Consolidated Statements of Cash Flows for the years ended December 31, 2001 and 2000 F-6 Notes to Consolidated Financial Statements F-7 to F-13 Unaudited Consolidated Balance Sheet as of September 30, 2002 F-14 Unaudited Consolidated Statement of Operations for the nine months ended September 30, 2002 F-15 Unaudited Consolidated Statement of Cash Flows for the nine months ended September 30, 2002 F-16 Notes to Consolidated Financial Statements F-17 F-1
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INDEPENDENT AUDITORS' REPORT TO THE STOCKHOLDERS AND BOARD OF DIRECTORS OF INTSYS SHARE LIMITED We have audited the accompanying consolidated balance sheet of Intsys Share Limited (the "Company") including its subsidiary (the "Group") as of December 31, 2001 and the related consolidated statements of operations, changes in stockholders' equity and cash flows for the years ended December 31, 2001 and 2000. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated 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 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 Group as of December 31, 2001 and the results of its operations and its cash flows for the years ended December 31, 2001 and 2000 in conformity with generally accepted accounting principles in the United States of America. Thomas Leger & Co., L.L.P. Houston, Texas August 22, 2002 F-2
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INTSYS SHARE LIMITED and subsidiary CONSOLIDATED BALANCE SHEET DECEMBER 31, 2001 (UNITED STATES DOLLARS) 2001 ---------- ASSETS Current assets Cash $ 310,976 Trade receivables, net of allowance of $25,036 454,698 Related party receivable 132,313 Inventories 1,482,048 Costs and estimated earnings in excess of billings on uncompleted contracts 624,157 Deposits and prepayments 346,683 Other receivables 66,625 ---------- Total current assets 3,417,500 ---------- Property, plant and equipment, net 1,057,238 ---------- Total assets $4,474,738 ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Accounts payable $ 38,627 Related party payable 385,542 Accrued liabilities and other payables 448,707 Billings in excess of costs and estimated earnings on uncompleted contracts 49,573 ---------- Total current liabilities 922,449 Minority interests 1,253,895 Commitments and contingencies (Note 9) Stockholders' equity Common stocks; $.01 par value; 50,000,000 shares authorized, issued and outstanding 500,000 Additional paid-in capital 1,359,444 Retained earnings 438,950 ---------- Stockholders' equity 2,298,394 ---------- Total liabilities and stockholders' equity $4,474,738 ========== The accompanying footnotes are an integral part of these financial statements. F-3
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INTSYS SHARE LIMITED and subsidiary CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000 (UNITED STATES DOLLARS) 2001 2000 ---------- ---------- SALES $6,085,797 $3,843,502 COST OF SALES 5,073,751 3,217,497 ---------- ---------- GROSS PROFIT 1,012,046 626,005 SELLING AND MARKETING EXPENSES 211,204 106,075 GENERAL AND ADMINISTRATIVE EXPENSES 448,658 379,580 MINORITY INTEREST 135,823 53,135 ---------- ---------- INCOME FROM OPERATIONS 216,361 87,215 OTHER INCOME (LOSS) Net gain on sale of investments 81,178 64,262 Loss on disposition of fixed assets (44,001) (20,584) Interest expense (768) (42,015) Interest income 29,036 11,600 ---------- ---------- INCOME BEFORE TAX PROVISION 281,806 100,478 INCOME TAX EXPENSE 24,961 -- ---------- ---------- NET INCOME $ 256,845 $ 100,478 ========== ========== The accompanying footnotes are an integral part of these financial statements. F-4
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[Enlarge/Download Table] INTSYS SHARE LIMITED AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000 (UNITED STATES DOLLARS) Common Stock Additional Total ----------------------------- Paid-In Retained Stockholders' Shares Amount Capital Earnings Equity ------------- ------------- ------------- ------------- ------------- Balance, December 31, 1999 50,000,000 $ 500,000 $ 428,119 $ 81,627 $ 1,009,746 Capital contributed -- -- 931,325 -- 931,325 Net income -- -- -- 100,478 100,478 ------------- ------------- ------------- ------------- ------------- Balance, December 31, 2000 50,000,000 500,000 1,359,444 182,105 2,041,549 Net Income -- -- -- 256,845 256,845 ------------- ------------- ------------- ------------- ------------- Balance, December 31, 2001 50,000,000 $ 500,000 $ 1,359,444 $ 438,950 $ 2,298,394 ============= ============= ============= ============= ============= The accompanying footnotes are an integral part of these financial statements. F-5
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[Enlarge/Download Table] INTSYS SHARE LIMITED AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000 (UNITED STATES DOLLARS) 2001 2000 ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 256,845 $ 100,478 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation expense 454,073 282,864 Loss on disposition of fixed assets, net 44,001 20,584 Gain on disposition of short-term investments (81,178) (64,262) Minority interest expense 135,823 53,135 Changes in operating assets and liabilities: Increase in trade receivables (226,669) (305,126) Increase in Inventories (702,007) (471,325) (Decrease) increase in costs and estimated earnings in excess of billings on uncompleted contracts (584,434) 411,474 (Decrease) increase in deposits and prepayments (3,139) 495,337 Decrease in other receivables 253,147 42,104 Decrease in billings in excess of costs and estimated earnings on uncompleted contracts (234,698) (653,963) (Decrease) increase in accounts payable and accrued liabilities (262,088) 932,869 ----------- ----------- Net cash used by operating activities (950,324) 844,169 ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures (70,545) (1,183,449) Proceeds from disposition of fixed assets 49,375 -- Purchase of short-term investments (63,623) (79,418) Proceeds from sale of short-term investments 157,457 131,024 ----------- ----------- Cash provided (used) by investing activities 72,664 (1,131,843) ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES Capital contributions -- 931,325 Proceeds from bank loan -- 963,855 Principal payments on bank loan (963,855) -- ----------- ----------- Cash provided (used) by financing activities (963,855) 1,895,180 ----------- ----------- NET INCREASE (DECREASE) IN CASH (1,841,515) 1,607,506 Cash and cash equivalents, at beginning of period 2,152,491 544,985 ----------- ----------- Cash and cash equivalents, at end of period $ 310,976 $ 2,152,491 =========== =========== Supplementary disclosures of cash flow information: Interest paid $ 768 $ 42,015 =========== =========== Taxes paid $ 35,079 $ -- =========== =========== The accompanying footnotes are an integral part of these financial statements. F-6
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INSYS SHARE LIMITED AND SUBSIDIARY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -------------------------------------------------------------------------------- 1. DESCRIPTION OF BUSINESS AND BUSINESS COMBINATION Intsys Share Limited ("Company") was incorporated in the British Virgin Islands on April 29, 2002. The Company is a holding company for investments in operating companies. During May 2002, the Company acquired a 65.41% interest in Shenzen Digitainment Co., Ltd. (Digitainment) and the former owners of the 65.41% interest in Digitainment have become all the shareholders of the Company. The Company is indirectly controlled by Shenzhen Huaqiang Holdings Limited, which also indirectly controls the minority interest shareholder (34.59%) of Digitainment. Since its incorporation, the Company has not engaged in any business transactions except for the acquisition of Digitainment. Digitainment is principally engaged in the design, development and construction of 4-dimension cylindrical screen system, digital video, intelligent weak current engineering, theme sites and similar computer system integration projects and the sale of entertainment and amusement products in the Peoples Republic of China ("PRC"). All current operations are in the PRC. 2. Basis of presentation and consolidation The accompanying financial statements are prepared in accordance with generally accepted accounting principles in the United States of America. The business combination referred to in note 1 above is deemed to be a reverse acquisition and the acquisition of the 65.41% interest in Digitainment has been accounted for at historical cost. For the purpose of presenting the financial statements on a consistent basis, the consolidated financial statements have been prepared as if the Company had been in existence since December 31, 1999 and throughout the whole periods covered by those financial statements. The consolidated financial statements include the financial statements of the Company and its 65.41% owned subsidiary. All significant intercompany balances and transactions, including intercompany profits and unrealized profits and losses are eliminated on consolidation. 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Cash and cash equivalents ------------------------- Cash and cash equivalents include cash on hand, demand and time deposits with banks and liquid investments with an original maturity of three months or less. Short-term Investments ---------------------- The Company follows Statement of Financial Accounting Standards No. 115 "Accounting for Certain Investments in Debt and Equity Securities." F-7
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INSYS SHARE LIMITED AND SUBSIDIARY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -------------------------------------------------------------------------------- Accordingly, the Company classifies short-term investments as available-for-sale and at their fair value. Unrealized holding gains and losses are included as a component of SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Continued other comprehensive income until realized. Realized gains and losses are determined by the specific identification method and are reflected in income. There were no short-term investments at December 31, 2001. Proceeds and gross realized gains from the sale of short-term investments for the year ended December 31, 2001 were $157,457 and $81,178 respectively. Proceeds and gross realized gains from the sale of short-term investments for the year ended December 31, 2000 were $131,024 and $64,262 respectively. Inventory --------- Inventories consist of raw materials and are stated at the lower of cost, on a first-in, first-out basis, or net realizable value. Costs of raw materials include purchases and related costs incurred in bringing the products to their present location and condition. Property, plant and equipment ----------------------------- Property, plant and equipment are recorded at cost. Gains or losses on disposals are reflected in current operations. Major expenditures for betterments and renewals are capitalized. All ordinary repair and maintenance costs are expensed as incurred. Depreciation for financial reporting purposes is provided using the straight-line method over the estimated useful lives of the assets, generally three to five years. Leasehold improvements are amortized on a straight-line basis over the shorter of the useful life of the improvement or the term of the lease. The carrying value of property, plant and equipment is assessed annually and when factors indicating impairment is present, the carrying value of the fixed assets is reduced by the amount of the impairment. The Group determines the existence of such impairment by measuring the expected future cash flows (undiscounted and without interest charges) and comparing such amount to the net asset carrying value. An impairment loss, if exists, is measured as the amount by which the carrying amount of the asset exceeds the fair value of the asset. Revenue and cost recognition ---------------------------- The Company principally derives its revenue from (i) the design, development and construction of 4-dimension cylindrical screen system, digital video, intelligent weak current engineering, theme sites and similar computer system integration projects, (ii) the sale of entertainment and amusement products, and (iii) equipment rental. (i) Long-term construction contract revenue and costs Long-term construction contract revenue and costs are recognized as revenue and expenses in the statement of operations by reference to the stage of completion of a contract (i.e. the percentage of completion method) when the outcome of that contract can be estimated reliably. The stage of completion of a contract is determined based on the proportion that costs incurred to balance sheet date bear to total estimated costs. A loss on a contract is recognized as an expense immediately when it is probable that total contract costs will exceed total contract revenue. F-8
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INSYS SHARE LIMITED AND SUBSIDIARY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -------------------------------------------------------------------------------- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Continued Costs attributable to unpriced change orders would be treated as costs of contract performance in the period in which the costs are incurred if it is not probable that the costs will be recovered through a change in the contract price. If it is probable that the costs will be recovered through a change in the contract price, they would be treated as costs of contract performance in the period in which they are incurred, and contract revenue would be recognized to the extent of the costs incurred. If it is probable that the contract price will be adjusted by an amount that exceeds the costs attributable to the change order and the amount of the excess can be reliably estimated, the original contract price would also be adjusted for that amount when the costs are recognized as costs of contract performance if its realization is probable. (ii) Sale of entertainment and amusement products Revenue from sale of entertainment and amusement products is recognized when the products are delivered to the customers. Revenue is arrived at after deduction of any sales returns and discounts. (iii) Equipment rental income Equipment rental income is recognized when the rentals become due and receivable. Income taxes ------------ The Group accounts for income tax using Statements of Financial Accounting Standards ("SFAS") No. 109 "Accounting for Income Taxes". SFAS No. 109 requires an asset and liability approach for financial accounting and reporting for income taxes and allows recognition and measurement of deferred tax assets based upon the likelihood of realization of tax benefits in future years. Under the asset and liability approach, deferred taxes are provided for the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. A valuation allowance is provided for deferred tax assets if it is more likely than not these items will either expire before the Group is able to realize their benefits, or that future deductibility is uncertain. Foreign currency translation ---------------------------- The Group maintains its books and accounting records in Renminbi: ("RMB") the PRC's currency. Translation of amounts from RMB in United States dollars ("US$") has been made at the single rate of exchange of US$1.00:RMB8.30. No representation is made that RMB amounts have been or could be, converted into US$ at that rate. On January 1, 1994, the PRC government introduced a single rate of exchange as quoted daily by the People's Bank of China (the "Unified Exchange Rate"). F-9
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INSYS SHARE LIMITED AND SUBSIDIARY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -------------------------------------------------------------------------------- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Continued This quotation of the exchange rates does not imply free convertibility of RMB to other foreign currencies. All foreign exchange transactions continue to take place either through the Bank of China or other banks authorized to buy and sell foreign currencies at the exchange rate quoted by the People's Bank of China. Approval of foreign currency payments by the Bank of China or other institutions required submitting a payment application form together with invoices, shipping documents and signed contracts. Jointly controlled operations ----------------------------- A joint controlled operation is a joint venture in which two or more venturers combine their operations, resources and expertise in order to construct, market and operate jointly a particular project under a contractual arrangement when no corporation, partnership or other entity has been established. Different parts of the construction process are carried out by each of the venturers. Each venturers bear its own costs and takes a share of the revenue from the project, which is determined in accordance with the contractual arrangement. In respect of its interests in jointly controlled operations, the Group recognizes in the consolidated financial statements: (i) the assets that it controls and the liabilities that it incurs; and (ii) the expenses that it incurs and its share of the income that it earns from the sale of goods or services by the joint ventures. Fair values of financial instruments ------------------------------------ The Group values its financial instruments as required by SFAS No. 107, "Disclosures about Fair Value of Financial Instruments". The Group's financial instruments primarily consist of cash and cash equivalents, accounts receivable, other receivables, prepayments, accounts payable and accruals. The carrying values of financial instruments approximate the fair values because of their short-term maturities. Use of estimates ---------------- The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Reclassification ---------------- Certain reclassifications have been made to the December 31, 2000 financial statements in order to conform to the classification used in the current year. F-10
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[Download Table] INSYS SHARE LIMITED AND SUBSIDIARY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -------------------------------------------------------------------------------- 4. SUBSIDIARY Details of the Company's subsidiary as of December 31, 2001 were as follows: Ownership interest attributable to Company name Place of registration the Group Principal activities -------------- --------------------- --------------- ---------------------- Shenzhen People's Republic of 65.41% 4-dimension Digitainment China cylindrical screen Co., Ltd. system, digital video, intelligent weak current engineering, theme sites and other computer system integration projects and the development and sale of entertainment and amusement products Investment holding 5. INVENTORIES Inventories are summarized as follows at December 31, 2001: Raw materials $ 719,835 Work-in-progress 494,393 Finished goods 267,820 ---------- $1,482,048 ========== 6. COSTS AND ESTIMATED EARNINGS IN EXCESS OF BILLINGS ON UNCOMPLETED CONTRACTS 2001 ---------- Costs incurred on uncompleted contracts $6,636,260 Estimated earnings to date 931,755 ---------- 7,568,015 Less: Billings to date 6,993,431 ---------- $ 574,584 ========== Included in the accompanying balance sheet under the following captions: Costs and estimated earnings in excess of billings on uncompleted contracts $624,157 Billings in excess of costs and estimated earnings on uncompleted contracts 49,573 -------- $574,584 ======== F-11
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INSYS SHARE LIMITED AND SUBSIDIARY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -------------------------------------------------------------------------------- 7. PROPERTY, PLANT AND EQUIPMENT Property, plant, and equipment consisted of the following at December 31, 2001: Leasehold improvements 209,352 Plant and machinery 28,863 Furniture and fixtures 85,893 Computers and equipment 1,340,845 Motor vehicles 193,964 ---------- 1,858,917 Less: Accumulated depreciation (801,679) ---------- 1,057,238 ========== 8. INCOME TAXES The Company's subsidiary is subject to Enterprise Income Tax in the PRC at a rate of 15% on the net profits. However, based on the local tax rules, the Company is entitled to a tax holiday for the first two years of its operations and a 50% reduction of the rate for the third through fifth years of operations. The provision for taxes on earnings for the year ended December 31, 2001 was $24,961. No provision for deferred tax (benefit) has been made as no significant deferred tax liabilities or assets existed as of December 31, 2001. 9. LEASE COMMITMENTS Operating leases The following are the approximate minimum lease payments that will have to be made in each of the years indicated based on operating leases in effect as of December 31, 2001: 2002 $58,000 2003 19,000 2004 2,000 ------- Total minimum lease payments $79,000 ======= The total rental expenses incurred for the year ended December 31, 2001 and 2000 amounted to $158,632 and $131,215 respectively. 10. MAJOR CUSTOMERS AND CONCENTRATIONS OF CREDIT RISK Financial instruments which potentially expose the Group to concentrations of credit risk, consist of cash and accounts receivable at December 31, 2001. The Company performs ongoing evaluations of its cash position and credit evaluations at the subsidiary level to ensure collections and minimize losses. F-12
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INSYS SHARE LIMITED AND SUBSIDIARY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -------------------------------------------------------------------------------- MAJOR CUSTOMERS AND CONCENTRATIONS OF CREDIT RISK Continued One customer accounted for approximately 53% of sales for the year ended December 31, 2001. One customer accounted for approximately 62% of sales for the year ended December 31, 2000. 11. CURRENT VULNERABILITY DUE TO CERTAIN CONCENTRATIONS The Group's operations are conducted in the PRC. Accordingly, the Group's business, financial condition and results of operations may be influenced by the political, economic and legal environments in the PRC, and by the general state of the PRC's economy. The Group's operations in the PRC are subject to special considerations and significant risks not typically associated with companies in North America and Western Europe. These include risks associated with, among others, the political, economic and legal environments and foreign currency exchange. The Group's results may be adversely affected by changes in the political and social conditions in the PRC, and 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. 12. RELATED PARTY TRANSACTIONS The financial statements include balances and transactions with related parties at December 31, 2001. Sales to and purchases from related parties were at the same prices as if these transactions were with third parties. The Company's subsidiary has cash deposits and a receivable of $288,640 and $21,428 respectively with an affiliate that controls the subsidiary. The Company's subsidiary entered into a contract with an affiliate which has a common director and both entities are controlled by another affiliate. Total revenue recognized related to this contract by the subsidiary during 2001 was $260,963 and the amount receivable at December 31, 2001 from this affiliate was $132,313. During 2001, the Company's subsidiary purchased certain components for its products from an affiliate which controls the subsidiary. Total purchases from the affiliate and the related payable at December 31, 2001 was $385,542. In addition, the Company's subsidiary sold products and equipment of $391,309 to this affiliate. The Company's subsidiary leases certain facilities from an affiliate which controls the subsidiary. Total rent and building management fees for these facilities were $76,813 for the years ended December 31, 2001 and 2000. 13. SUBSEQUENT EVENTS On September 18, 2002, subject to the terms and conditions of the stock purchase agreement, the Company acquired 70% of the issued and outstanding stock of Hytechnology Inc. (a Delaware, USA corporation) for $172,000 in cash. F-13
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INTSYS SHARE LIMITED AND SUBSIDIARY CONSOLIDATED BALANCE SHEET (UNAUDITED) SEPTEMBER 30, 2002 (UNITED STATES DOLLARS) ASSETS Current assets Cash and bank balances $3,280,836 Trade receivables, net of allowance of $25,036 449,215 Related party receivables 154,979 Inventories 1,562,515 Costs and estimated earnings in excess of billings on uncompleted contracts 389,014 Deposits and prepayments 383,321 Other receivables 222,015 ---------- Total current assets 6,441,895 ---------- Property, plant and equipment, net 642,482 ---------- Total assets $7,084,377 ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Bank loans $2,168,675 Accounts payable 95,315 Accrued liabilities and other payables 855,468 Billings in excess of costs and estimated earnings uncompleted contracts 91,810 ---------- Total current liabilities 3,211,268 ---------- Minority interest 1,364,866 ---------- Stockholders' equity Common stocks 500,000 Additional paid-in capital 1,359,444 Retained earnings 648,799 ---------- Total stockholders' equity 2,508,243 ---------- Total liabilities and shareholders' equity $7,084,377 ========== F-14
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INTSYS SHARE LIMITED AND SUBSIDIARY STATEMENT OF INCOME (UNAUDITED) FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2002 (UNITED STATES DOLLARS) SALES $ 4,314,589 COSTS OF SALES 3,348,410 ----------- GROSS PROFIT 966,179 SELLING AND MARKETING EXPENSES 275,504 GENERAL AND ADMINISTRATIVE EXPENSES 294,780 MINORITY INTEREST 110,972 ----------- INCOME FROM OPERATIONS 284,923 OTHER INCOME (EXPENSE) Interest expense (9,386) Interest income 3,631 ----------- INCOME BEFORE TAX PROVISION 279,168 INCOME TAX EXPENSE 69,320 ----------- NET INCOME $ 209,848 =========== F-15
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INTSYS SHARE LIMITED AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2002 (UNITED STATES DOLLARS) CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 209,848 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation expense 377,961 Loss on disposal of fixed assets 49,305 Minority interest expense 110,972 Changes in operating assets and liabilities: Increase in trade receivables (17,183) Increase in Inventories (80,467) Decrease in costs and estimated earnings in excess of billings on uncompleted contracts 235,143 Increase in deposits and prepayments (36,638) Increase in other receivables (155,389) Increase in billings in excess of costs and estimated earnings on uncompleted contracts 42,237 Increase in accounts payable and accrued liabilities 77,905 ----------- Net cash provided by operating activities 813,694 ----------- CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures (12,510) ----------- Cash provided (used) by investing activities (12,510) ----------- CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from bank loan 2,168,676 ----------- Cash provided by financing activities 2,168,676 ----------- NET INCREASE IN CASH 2,969,860 Cash and cash equivalents, at beginning of period 310,976 ----------- Cash and cash equivalents, at end of period $ 3,280,836 =========== Supplementary disclosures of cash flow information: Interest paid $ 9,386 =========== Taxes paid $ 126,696 =========== F-16
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INTSYS SHARE LIMITED AND SUBSIDIARY FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2002 -------------------------------------------------------------------------------- NOTE 1. - BASIS OF PRESENTATION The accompanying unaudited financial statements of Intsys Share Limited and Subsidiary have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10QSB and Item 310(b) of Regulation S-B. They do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments, consisting only of normal recurring adjustments, considered necessary for a fair presentation, have been included in the accompanying unaudited financial statements. Operating results for the periods presented are not necessarily indicative of the results that may be expected for the full year. These financial statements should be read in conjunction with the financial statements and footnotes, which are included as part of financial statements for the year ended December 31, 2001. F-17
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[Enlarge/Download Table] (b) Pro Forma Financial Statements. UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION The following unaudited pro forma combined financial statements give effect to the merger using the purchase method of accounting as prescribed by Statement of Financial Accounting Standards No. 141 "Business Combinations." The following unaudited pro forma combined financial statements and the accompanying notes should be read in conjunction with the historical financial statements and related notes of Lucas Educational Systems, Inc. (Lucas) and Intsys Share Limited and Subsidiary (Intsys) which are included elsewhere in this document. The unaudited pro forma combined financial statements are provided for information purposes only and do not purport to represent what the combined financial position and results of operations would have been had the merger in fact occurred on the dates indicated. The following unaudited pro forma combined balance sheet represents the combined financial position of Lucas and Intsys as of September 30, 2002. The unaudited pro froma combined statements of operations give effect to the proposed merger of Lucas and Intsys by combining the results of operations for the year ended December 31, 2001 and the nine month period ended September 30, 2002, assuming the merger occurred in the earliest period. The unaudited pro forma combined financial statements are presented for illustrative purposes only. The pro forma adjustments are based upon available information and assumptions that management believes are reasonable.
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INTSYS SHARE LIMITED AND SUBSIDIARY AND LUCAS EDUCATIONAL SYSTEMS, INC. (A DEVELOPMENT STAGE COMPANY) PRO FORMA COMBINED BALANCE SHEET SEPTEMBER 30, 2002 LUCAS INTSYS EDUCATIONAL SHARE SYSTEMS LIMITED PRO FORMA ASSETS (Unaudited) (Unaudited) ADJUSTMENTS PRO FORMA --------------------- ----------- ----------- ----------- -----------
CURRENT ASSETS Cash and cash equivalents $ 18 $ 3,280,836 $ -- $ 3,280,854 Trade receivables -- 449,215 -- 449,215 Related party receivables -- 154,979 154,979 Inventories -- 1,562,515 -- 1,562,515 Costs and estimated earnings in excess of billings on uncompleted contracts -- 389,014 -- 389,014 Prepaid expenses -- 383,321 -- 383,321 Other receivables -- 222,015 -- 222,015 ----------- ----------- ----------- ----------- Total current assets 18 6,441,895 -- 6,441,913 PROPERTY AND EQUIPMENT, NET -- 642,482 -- 642,482 ----------- ----------- ----------- ----------- $ 18 $ 7,084,377 $ -- $ 7,084,395 =========== =========== =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable and accrued expenses $ 7,721 $ 950,783 $ 103,000 3 $ 1,061,504 Bank loan -- 2,168,675 -- 2,168,675 Due to affiliate 15,188 -- (15,188) 2 -- Billings in excess of costs and estimated earnings on uncompleted contracts -- 91,810 -- 91,810 ----------- ----------- ----------- ----------- Total current liabilities 22,909 3,211,268 87,812 3,321,989 Minority interest -- 1,364,866 -- 1,364,866 Shareholders' equity Common stock 192 500,000 (460,000) 1 40,192 Paid-in capital 3,336,706 1,359,444 (2,884,601) 1,2 1,811,549 Retained earnings(deficit) (3,359,311) 648,799 3,256,311 1,3 545,799 Treasury stock (478) -- 478 1 -- ----------- ----------- ----------- ----------- $ 18 $ 7,084,377 $ -- $ 7,084,395 =========== =========== =========== ===========
Notes to Pro Forma Financial Statements 1. Adjustment to record changes for stock issued and recapitalize Lucas Educational Systems, Inc. with the capital structure of Intsys Share Limited and Subsidiary reflecting change in par value from $0.01 to $0.001. 2. To convert outstanding related party payables into shares of common stock. 3. To record merger costs. 4. Eliminate loss from discontinued operations.
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[Enlarge/Download Table] INTSYS SHARE LIMITED AND SUBSIDIARY AND LUCAS EDUCATIONAL SYSTEMS, INC. (A DEVELOPMENT STAGE COMPANY) PRO FORMA COMBINED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2001 LUCAS INTSYS EDUCATIONAL SHARE SYSTEMS LIMITED PRO FORMA (Unaudited) (Unaudited) ADJUSTMENTS PRO FORMA ------------ ------------ ------------ ------------ Gross revenue $ -- $ 6,085,797 $ -- $ 6,085,797 Cost of sales -- 5,073,751 -- 5,073,751 ------------ ------------ ------------ ------------ Gross profit -- 1,012,046 -- 1,012,046 Selling, general and administrative expenses -- 659,862 103,000 3 762,862 Minority interest -- 135,823 -- 135,823 Other income, net -- (65,445) -- (65,445) Income tax expense -- 24,961 -- 24,961 ------------ ------------ ------------ ------------ Net income from continuing operations -- 256,845 103,000 153,845 Loss from discontinued operations (502,673) -- 502,673 4 -- ------------ ------------ ------------ ------------ Net income (loss) $ (502,673) $ 256,845 $ 399,673 $ 153,845 ============ ============ ============ ============ Income (loss) per common share Basic and diluted Income from continuing operations $ -- $ 0.00 Loss from discontinued operations $ (2.96) -- ------------ ------------ Net income (loss) $ (2.96) $ 0.00 ============ ============ Weighted average number of common shares outstanding Basic 169,951 40,192,063 Notes to Pro Forma Financial Statements 1. Adjustment to record changes for stock issued and recapitalize Lucas Educational Systems, Inc. with the capital structure of Intsys Share Limited and Subsidiary reflecting change in par value from $0.01 to $0.001. 2. To convert outstanding related party payables into shares of common stock. 3. To record merger costs. 4. Eliminate loss from discontinued operations.
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[Enlarge/Download Table] INTSYS SHARE LIMITED AND SUBSIDIARY AND LUCAS EDUCATIONAL SYSTEMS, INC. (A DEVELOPMENT STAGE COMPANY) PRO FORMA COMBINED STATEMENT OF OPERATIONS NINE MONTH PERIOD ENDED SEPTEMBER 30, 2002 LUCAS INTSYS EDUCATIONAL SHARE SYSTEMS LIMITED PRO FORMA (Unaudited) (Unaudited) ADJUSTMENTS PRO FORMA ----------- ----------- ----------- ----------- Gross revenue $ -- $ 4,314,589 -- $ 4,314,589 Cost of sales -- 3,348,410 -- 3,348,410 ----------- ----------- ----------- ----------- Gross profit -- 966,179 -- 966,179 Selling, general and administrative expenses -- 570,284 -- 570,284 Minority interest -- 110,972 -- 110,972 Other expense, net -- 5,755 -- 5,755 Income tax expense -- 69,320 -- 69,320 ----------- ----------- ----------- ----------- Net income from continuing operations 209,848 209,848 Loss from discontinued operations (63,357) -- 63,357 4 -- ----------- ----------- ----------- ----------- Net income (loss) $ (63,357) $ 209,848 $ 63,357 $ 209,848 =========== =========== =========== =========== Income (loss) per common share Basic and diluted Income from continuing operations $ -- $ 0.01 Loss from discontinued operations (0.33) -- ----------- ----------- Net income (loss) $ (0.33) $ 0.01 =========== =========== Weighted average number of common shares outstanding Basic and diluted 192,063 40,192,063 Notes to Pro Forma Financial Statements 1. Adjustment to record changes for stock issued and recapitalize Lucas Educational Systems, Inc. with the capital structure of Intsys Share Limited and Subsidiary reflecting change in par value from $0.01 to $0.001. 2. To convert outstanding related party payables into shares of common stock. 3. To record merger costs. 4. Eliminate loss from discontinued operations.
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(c) Exhibits None. 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. LUCAS EDUCATIONAL SYSTEMS, INC. Date: January 15, 2003 By /s/ Guangwei Liang ----------------------------- Name: Guangwei Liang Title: Chief Executive Officer

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