Attached files
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EX-21 - INNOCOM TECHNOLOGY HOLDINGS, INC. | v181163_ex21.htm |
EX-31.1 - INNOCOM TECHNOLOGY HOLDINGS, INC. | v181163_ex31-1.htm |
EX-32.2 - INNOCOM TECHNOLOGY HOLDINGS, INC. | v181163_ex32-2.htm |
EX-31.2 - INNOCOM TECHNOLOGY HOLDINGS, INC. | v181163_ex31-2.htm |
EX-32.1 - INNOCOM TECHNOLOGY HOLDINGS, INC. | v181163_ex32-1.htm |
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-K
x ANNUAL REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the
fiscal year ended December 31, 2009
OR
o TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the
transition period
from
to
Commission File Number
0- 50164
INNOCOM
TECHNOLOGY HOLDINGS, INC.
(Exact
name of registrant as specified in its charter)
Nevada
|
87-0618756
|
|
(State
or other jurisdiction of
Incorporation
or organization)
|
(IRS
Employer Identification No.)
|
Suite
901, Sun Hung Kai Centre,
30
Harbour Road, Wanchai, Hong Kong, PRC
(Address
of principal executive offices)
(852) 3102 1602
(Issuer's
telephone number, including area code)
Securities
registered pursuant to Section 12(b) of the Act: None.
Securities
registered pursuant to Section 12(g) of the Act: Common Stock ($0.001 par
value)
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act. Yes o No x
Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Exchange Act. Yes o No x
Indicate
by check mark whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes x No
¨
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. ¨
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of “accelerated
filer and large accelerated filer” in Rule 12b-2 of the Exchange
Act.
Large
accelerated filer ¨ Accelerated
filer o
Non-accelerated filer x Smaller reporting
company ¨
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes ¨ No x
As of
December 31, 2009, the aggregate market value of the registrant’s common
stock held by non-affiliates of the registrant was $419,493.18 based on the
closing sale price as reported on the Over-the-Counter Bulletin Board. As of
April 14, 2010, there were 37,900,536 shares of common stock
outstanding.
DOCUMENTS
INCORPORATED BY REFERENCE
None
Innocom
Technology Holdings, Inc.
FORM
10-K
For the
Year Ended December 31, 2009
TABLE
OF CONTENTS
PART
I
|
3
|
|||
ITEM
1.
|
Business
|
3
|
||
ITEM
1A.
|
Risk
Factors
|
5
|
||
ITEM
1B.
|
Unresolved
Staff Comments
|
5
|
||
ITEM
2.
|
Properties
|
5
|
||
ITEM
3.
|
Legal
Proceedings
|
5
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||
ITEM
4.
|
Submission
of Matters to a Vote of Security Holders
|
5
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||
PART
II
|
5
|
|||
ITEM
5.
|
Market
for Registrant’s Common Equity, Related Stockholder Matters and
Issuer
Purchases of Equity Securities
|
5
|
||
ITEM
6.
|
Selected
Financial Data
|
6
|
||
ITEM
7.
|
Management's
Discussion and Analysis of Financial Condition and Results of
Operations
|
6
|
||
ITEM
7A.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
8
|
||
ITEM
8.
|
Financial
Statements and Supplementary Data
|
9
|
||
ITEM
9.
|
Changes
In and Disagreements with Accountants on Accounting and Financial
Disclosure
|
10
|
||
ITEM
9A.
|
Controls
and Procedures
|
10
|
||
ITEM
9A(T)
|
Controls
and Procedures
|
10
|
||
ITEM
9B.
|
Other
Information
|
10
|
||
PART
III
|
11
|
|||
ITEM
10.
|
Directors
and Executive Officers of the Registrant
|
11
|
||
ITEM
11.
|
Executive
Compensation
|
12
|
||
ITEM
12.
|
Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
|
13
|
||
ITEM
13.
|
Certain
Relationships and Related Transactions
|
14
|
||
ITEM
14.
|
Principal
Accountant Fees and Services
|
14
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||
PART
IV
|
15
|
|||
ITEM
15
|
Exhibits,
Financial Statement Schedules
|
15
|
||
SIGNATURES
|
15
|
2
INFORMATION
REGARDING FORWARD-LOOKING STATEMENTS
This
Annual Report on Form 10-K contains forward-looking statements. These statements
relate to future events or our future financial performance. These statements
involve known and unknown risks, uncertainties and other factors that may cause
our actual results, levels of activity, performance or achievements to be
materially different from any future results, levels of activity, performance,
or achievements expressed or implied by forward-looking statements. In some
cases, you can identify forward-looking statements by terminology such as "may,"
"will," "should," "expect," "plan," "anticipate," "believe," "estimate,"
"predict," "potential" or "continue," the negative of such terms or other
comparable terminology. These statements are only predictions. Actual events or
results may differ materially.
Although
we believe that the expectations reflected in the forward-looking statements are
reasonable, we cannot guarantee future results, levels of activity, performance
or achievements. Moreover, neither we nor any other person assumes
responsibility for the accuracy and completeness of the forward-looking
statements. We undertake no duty to update any of the forward-looking statements
after the date of this report to conform such statements to actual results or to
changes in our expectations.
Readers
are also urged to carefully review and consider the various disclosures made by
us which attempt to advise interested parties of the factors which affect our
business, including without limitation the disclosures made in PART I. ITEM 1A:. Risk
Factors and PART II.
ITEM 6 "Management's Discussion and Analysis or Plan of Operation"
included herein.
PART
I.
History
Innocom
Technology Holdings, Inc., (the "Company") was organized under the laws of the
state of Nevada on June 26, 1998 under the name Dolphin Productions, Inc., The
Company has provided musical and other performance services for concerts and
public events. During the fiscal year ended September 30, 2003, the
Company determined to shift its emphasis away from the presentation of concerts
and toward the Internet marketing of recorded music. The Company has not
presented live musical concerts during then past two fiscal years. The
Company owns the rights to the domain name "dolphinproductions.net." The
Company has encountered substantial competitive, legal, technological and
financial obstacles to its entry into the business of marketing recorded music
through the Internet. The Company has not generated substantial revenues
from Internet marketing of musical properties.
On March
30, 2006, pursuant to an Agreement and Plan of Reorganization dated March 15,
2006 among the Company, Innocom Technology Holdings Limited, a British Virgin
Islands corporation, (“Innocom”) and certain shareholders of Innocom, the
Company acquired 100% of Innocom’s issued and outstanding common stock making
Innocom a wholly owned subsidiary of the Company. As a result, the
Company, which previously had no material operations, has acquired the business
of Innocom which have two principal business lines: design and solution
provision for mobile phones, and trading of mobile phone handsets and related
components.
In 2006,
we change the name of the Company from Dolphin Production, Inc. to Innocom
Technology Holdings, Inc.
Due to
keen competition, the Company ceased the business of design and solution
provision for mobile phone segment in the last quarter of 2006 and disposed of
entire segment in May 2007 with a profit of US$599,544.
In
February 2007, we have established a wholly-foreign owned subsidiary company to
acquire distressed land, factory building and equipments under receivership from
municipal government. Deposits have been paid by installments. We expect to
complete the acquisition in near future. The factory will be used for assembling
mobile phones under the trade mark we purchased in May 2007 and components parts
on OEM basis.
In May
2007, we acquire a trade mark, namely “Tsinghua Unisplendour” for a period of 10
years.
In 2007,
we discontinue the registration of domain name
“dolphinproductions.net”.
Our
Business
We
provide sourcing of mobile phone handsets and components for customers on a
wholesale basis.
Customers
Our
customers include major mobile handset brand owners in China, such as TCL, CECT,
Cosun Communications, Panda Communications and Zhejiang Holley Communication
Group Co., Ltd.
We
generate our revenue from sale and trading of complete mobile handsets and
component parts.
Facilities
Other
than PRC land use right held by Changzhou Innocom Communication Technology, we
do not own any land and building in Hong Kong. We currently rent a 260 square
meters office with a lease period of two years in Hong Kong as our headquarter
office.
3
Employees
As of
December 31, 2009, we employed approximately 3 full-time employees. The Company
does not have any collective bargaining agreements with its employees and we
consider our employee relations to be good.
Website Access to our SEC
Reports
Our
Internet website address is www.innocomtechnology.com. Through our Internet
website, we will make available, free of charge, the following reports as soon
as reasonably practicable after electronically filing them with, or furnishing
them to, the SEC: our Annual Reports on Form 10-K; our Quarterly Reports on Form
10-Q; our Current Reports on Form 8-K; and amendments to those reports filed or
furnished pursuant to Section 13(a) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). Our Proxy Statements for our Annual Stockholder
Meetings are also available through our Internet website. Our Internet website
and the information contained therein or connected thereto are not intended to
be incorporated into this Annual Report on Form 10-K.
You may
also obtain copies of our reports without charge by writing to:
Attn:
Investor Relations
Suite
901, Sun Hung Kai Centre
30
Harbour Road
Wanchai,
Hong Kong, PRC
The
public may also read and copy any materials filed with the SEC at the SEC's
Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549, or through
the SEC website at www.sec.gov. The Public Reference Room may be contact at
(800) SEC-0330. You may also access our other reports via that link to the SEC
website.
4
Item
1A. Risk Factors
N/A
Item
1B. Unresolved Staff Comments
None.
Item
2. Properties
Our
principal executive offices are located at Suite 901, Sun Hung Kai Centre, 30
Harbour Road, Wanchai, Hong Kong, PRC. In January 2010, we began renting office
facilities consisting of approximately 120 square meters in Hong Kong, our
current headquarters, for a period of 2 (2) years on a month-to-month basis at
$5,600 per month. During the twelve months ended December 31, 2009,
total payments for all property rent was $131,861 (Twelve months ended December
31, 2008: $109,292).
We
periodically evaluate our facilities requirements. Some of our facilities are
sublet in whole or in part.
Item
3. Legal Proceedings
We are
not involved in any material pending legal proceedings at this time, and
management is not aware of any contemplated proceeding by any governmental
authority.
Item
4. Submission of Matters to a Vote of Security Holders
No
matters were submitted during the fourth quarter of the fiscal year covered by
this report to a vote of security holders.
ITEM
5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
Our
common stock is traded on the Over-the-Counter Bulletin Board under the symbol
“INCM.OB”. As of April 14, 2010, there were: (i) 248 shareholders of
record, without giving effect to determining the number of shareholders who hold
shares in "street name" or other nominee status; (ii) no outstanding options to
purchase shares of our common stock; (iii) outstanding 37,900,536 shares of our
common stock, of which 6,316,759 shares are either freely tradable or eligible
for sale under Rule 144 or Rule 144K, and (v) no shares subject to registration
rights.
The
following table sets forth, for the fiscal quarters indicated, the high and low
closing prices as reported by the Over-the-Counter Bulletin Board. These
quotations reflect inter-dealer prices, without retail mark-up, mark-down or
commission, and may not represent actual transactions.
Sales
Price
High
|
Low
|
|||||||
Fiscal
2009
|
||||||||
First
Quarter
|
$ | 0.04 | $ | 0.03 | ||||
Second
Quarter
|
$ | 0.09 | $ | 0.03 | ||||
Third
Quarter
|
$ | 0.08 | $ | 0.03 | ||||
Fourth
Quarter
|
$ | 0.04 | $ | 0.03 | ||||
Fiscal
2008
|
||||||||
First
Quarter
|
$ | 0.35 | $ | 0.17 | ||||
Second
Quarter
|
$ | 0.30 | $ | 0.15 | ||||
Third
Quarter
|
$ | 0.22 | $ | 0.09 | ||||
Fourth
Quarter
|
$ | 0.20 | $ | 0.03 |
Dividend
Policy
We have
not paid, nor declared, any dividends since our inception and do not intend to
declare any such dividends in the foreseeable future. Our ability to pay
dividends is subject to limitations imposed by Nevada law. Under Nevada law,
dividends may be paid to the extent that a corporation’s assets exceed its
liabilities and it is able to pay its debts as they become due in the usual
course of business.
Recent
Sales of Unregistered Securities
During
the year ended December 31, 2009, we did not issue any securities that were not
registered under the Securities Act of 1933, as amended (the “Securities
Act”).
5
Item
6. Selected Financial Data
The
following tables summarize the consolidated financial data of Innocom Technology
Holdings, Inc. for the periods presented. You should read the following
financial information together with the information under “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” and
our consolidated financial statements and the related notes to these
consolidated financial statements appearing elsewhere in this Form
10-K.
Years
ended December 31,
|
||||||||||||
2007
|
2008
|
2009
|
||||||||||
Revenue
|
$ | 2,241,726 | $ | 401,190 | $ | - | ||||||
Cost
of sales
|
- | - | - | |||||||||
Gross
profit
|
2,241,726 | 401,190 | - | |||||||||
Depreciation
and amortization
|
(6,000,306 | ) | (602,124 | ) | (3,154 | ) | ||||||
Impairment
loss on long-lived assets
|
- | (14,481,991 | ) | - | ||||||||
Selling
and distribution expenses
|
- | - | - | |||||||||
General
and administrative expenses
|
(468,665 | ) | (1,139,336 | ) | (350,960 | ) | ||||||
Other
income
|
592,696 | 19,058 | - | |||||||||
Interest
expense
|
- | (240,497 | ) | (1 | ) | |||||||
Income
(loss) before income tax
|
(3,634,549 | ) | (16,043,700 | ) | (354,115 | ) | ||||||
Income
tax expense
|
- | - | - | |||||||||
Net
income (loss) attributable to the Shareholders of the
Company
|
$ | (3,634,549 | ) | $ | (16,043,700 | ) | $ | (354,115 | ) | |||
Earnings
(loss) per Share — basic (US$)
|
$ | (0.10 | ) | $ | (0.42 | ) | $ | (0.01 | ) | |||
Earnings
(loss) per Share — diluted (US$)
|
$ | (0.10 | ) | $ | (0.42 | ) | $ | (0.01 | ) |
As
of December 31,
|
||||||||||||
2007
|
2008
|
2009
|
||||||||||
Cash
and cash equivalents
|
$
|
3,597
|
$
|
11,553
|
$
|
7,548
|
||||||
Total
current assets
|
30,233 | 84,422 | 80,398 | |||||||||
Total
assets
|
14,098,908 | 822,281 | 815,136 | |||||||||
Short-term
borrowings
|
- | - | - | |||||||||
Total
current liabilities
|
2,037,491 | 4,443,968 | 4,791,956 | |||||||||
Total
stockholders’ equity (deficit)
|
12,061,417 | (3,621,687 | ) | (3,976,820 | ) |
Item
7. Management's Discussion and Analysis of Financial Condition and Results of
Operations
The
information in this discussion contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. These forward-looking
statements involve risks and uncertainties, including statements regarding our
capital needs, business strategy and expectations. Any statements contained
herein that are not statements of historical facts may be deemed to be
forward-looking statements. In some cases, you can identify forward-looking
statements by terminology such as "may", "will", "should", "expect", "plan",
"intend", "anticipate", "believe", "estimate", "predict", "potential" or
"continue", the negative of such terms or other comparable terminology. Actual
events or results may differ materially. We disclaim any obligation to publicly
update these statements, or disclose any difference between its actual results
and those reflected in these statements. The information constitutes
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995.
Overview
and Future Plan of Operations
In
February 2009, the Company determined to have a temporary closure in the
manufacturing facility in Changzhou City, Zhejiang Province, the PRC. Starting
from the fourth quarter 2008, global economic conditions have deteriorated
significantly across the countries and the demand for communication products and
components was adversely slowed down. During such challenging economic times,
the Company has discontinued operation in the manufacture of mobile
communication products and components in the PRC. However, the Company did not
intend to dispose by sale and may continue to operate the manufacturing facility
depending upon the market recovery condition in the next 12 months.
Results
of Operations for the Years Ended December 31, 2009 and December 31,
2008
During
the year ended December 31, 2009, we experienced a net loss of $354,115 which is
attributable to the significant deteriorated environment and the challenging
economic crisis during the year.
During
the year ended December 31, 2008, we experienced a net loss of $16,043,700 which
is attributable to impairment loss of long-lived assets resulting from temporary
closure of production facilities during the first quarter of 2009.
Revenue
As a
result of temporary discontinue of business and operation in the manufacture of
mobile communication products and components in the PRC, no revenue is recorded
during the year ended December 31, 2009.
6
During
year ended December 31, 2008, we derived $401,190 revenue from our Trading of
Mobile Phone and Related Component operations, representing a decrease in
revenue of $1,840,536 or 82% decrease from comparable year ended December 31,
2007. The decrease is attributable to the slow down of economy.
Cost
of Sales
As our
trading cost is netted with billed value as revenue, the Company does not have
any cost of sales.
Administrative
Expenses
Below
table sets out the analysis of administrative expenses:
Year
ended
December
31, 2009
|
Year
ended
December
31, 2008
|
|||||||
Total general and administrative
expenses
|
$ | 354,114 | $ | 1,741,460 | ||||
Less: non-cash
items
|
(3,154 | ) | (689,423 | ) | ||||
$ | 350,960 | $ | 1,052,037 |
The
decrease in administrative expenses was primarily attributable to temporary
discontinue of business and operation in the manufacture of mobile communication
products and components in the PRC.
Non-cash
items
Below
table set out the components of non-cash items:
Year
ended
December
31, 2009
|
Year
ended
December
31, 2008
|
|||||||
Amortization
of intangible assets
|
$ | - | $ | 598,562 | ||||
Depreciation
|
3,154 | 3,562 | ||||||
Write-off
of obsolete inventories
|
- | 87,299 | ||||||
$ | 3,154 | $ | 689,423 |
The
decrease in amortization of intangible assets is due to intangible assets being
written off during the last quarter of 2008.
The
depreciation policy adopted in 2009 was consistent with that adopted in
2008.
Other
Income (Expenses)
Total
other income (expenses) for both periods presented was immaterial and consisted
of the following:
Year
ended
December
31, 2009
|
Year
ended
December
31, 2008
|
|||||||
Interest
income
|
$ | - | $ | 20,727 | ||||
Interest
expense
|
$ | 1 | $ | 240,497 | ||||
Loss
on disposal of plant and equipment
|
- | 1,669 | ||||||
$ | 1 | $ | 242,166 |
Net
Loss
Net loss
for 2009 of $354,115 is attributable to the significant deteriorated
environment and the challenging economic crisis during the year.
Net loss
for 2008 of $16,043,700 is attributable to impairment loss of long-lived assets
resulting from temporary closure of production facilities during the first
quarter of 2009.
Trends,
Events, and Uncertainties
N/A
Liquidity
and Capital Resources for the Twelve Month Period Ended December 31, 2009 and
2008
Cash
flows from operating activities
We
experienced negative cash flows used in operations in the amount of $298,918 for
the year ended December 31, 2009.
7
We
experienced negative cash flows used in operations in the amount of $910,288 for
the year ended December 31, 2008.
Cash
flows from investing activities
During
2009, there are no investing activities.
During
2008, we purchase $258,982 plant and equipment and $185,402 land use right
financed by amount due from a related party
Cash
flows from financing activities
During
2009, we obtain $295,941 advance from a related party.
During
2008, we obtain short term loan of $6,080,032 which is fully repaid during the
year.
Liquidity
On a
long-term basis, our liquidity will be dependent on establishing profitable
operations, receipt of revenues, additional infusions of capital and additional
financing. If necessary, we may raise capital through an equity or debt
offering. The funds raised from this offering will be used to develop and
execute our business plan. However, there can be no assurance that we will be
able to obtain additional equity or debt financing in the future, if at all. If
we are unable to raise additional capital, our growth potential will be
adversely affected. Additionally, we will have to significantly modify our
plans.
Critical
Accounting Policies
The
financial statements are prepared in accordance with accounting principles
generally accepted in the U.S., which requires us to make estimates and
assumptions in certain circumstances that affect amounts reported in the
accompanying financial statements and related footnotes. In preparing these
financial statements, management has made its best estimates and judgments of
certain amounts included in the financial statements, giving due consideration
to materiality. We do not believe there is a great likelihood that materially
different amounts would be reported related to the accounting policies described
below. However, application of these accounting policies involves the exercise
of judgment and use of assumptions as to future uncertainties and, as a result,
actual results could differ from these estimates.
Details
of critical accounting policies are set out in notes to the financial statements
included in Item 8.
Foreign
Exchange Risk
While our
reporting currency is the U.S. Dollar, all of our consolidated revenues and
consolidated costs and expenses are denominated in Renminbi (“RMB”).
All of our assets are denominated in RMB except for cash. As a result, we are
exposed to foreign exchange risk as our revenues and results of operations may
be affected by fluctuations in the exchange rate between U.S. Dollars and RMB.
If the RMB depreciates against the U.S. Dollar, the value of our RMB revenues,
earnings and assets as expressed in our U.S. Dollar financial statements will
decline. We have not entered into any hedging transactions in an effort to
reduce our exposure to foreign exchange risk.
Inflation
Inflationary
factors such as increases in the cost of our product and overhead costs may
adversely affect our operating results. Although we do not believe that
inflation has had a material impact on our financial position or results of
operations to date, a high rate of inflation in the future may have an adverse
effect on our ability to maintain current levels of gross margin and selling,
general and administrative expenses as a percentage of net revenues if the
selling prices of our products do not increase with these increased
costs.
8
Item
8. Financial Statements and Supplementary Data
INNOCOM
TECHNOLOGY HOLDINGS, INC.
INDEX
TO CONSOLIDATED FINANCIAL STATEMENTS
Page
|
||
Report
of Independent Registered Public Accounting Firm
|
F-1
|
|
Consolidated
Balance Sheets
|
F-2
|
|
Consolidated
Statements of Operations And Comprehensive Loss
|
F-3
|
|
Consolidated
Statements of Cash Flows
|
F-4
|
|
Consolidated
Statements of Stockholders’ Deficit
|
F-5
|
|
Notes
to Consolidated Financial Statements
|
F-6
– F-15
|
9
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board
of Directors and Stockholders of
Innocom
Technology Holdings, Inc.
We have
audited the accompanying consolidated balance sheets of Innocom Technology
Holdings, Inc. and its subsidiaries (“the Company”) as of December 31, 2009 and
2008, and the related consolidated statements of operations and comprehensive
loss, cash flows and stockholders’ deficit for the years ended December 31, 2009
and 2008. The 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 the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. The Company is not
required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audits include consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, 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, 2009 and 2008, and the results of operations and cash flows for the years
ended December 31, 2009 and 2008 in conformity with accounting principles
generally accepted in the United States of America.
The
accompanying consolidated financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note 2 to the
consolidated financial statements, the Company has incurred substantial losses
and capital deficits, all of which raise substantial doubt about its ability to
continue as a going concern. Management’s plans in regard to these matters are
also described in Note 2. These consolidated financial statements do not include
any adjustments that might result from the outcome of this
uncertainty.
/s/ ZYCPA Company
Limited
ZYCPA
Company Limited
Certified
Public Accountants
Hong
Kong, China
April 15,
2010
9
FLOOR, CHINACHEM HOLLYWOOD CENTRE, 1-13 HOLLYWOOD ROAD, CENTRAL, HONG
KONG
|
|
Phone:
(852) 2573 2296 Fax: (852) 2384
2022
|
http://www.zycpa.us
|
F-1
INNOCOM
TECHNOLOGY HOLDINGS, INC.
CONSOLIDATED
BALANCE SHEETS
AS
OF DECEMBER 31, 2009 AND 2008
(Currency
expressed in United States Dollars (“US$”), except for number of
shares)
As
of December 31,
|
||||||||
2009
|
2008
|
|||||||
ASSETS
|
||||||||
Current
assets:
|
||||||||
Cash
and cash equivalents
|
$ | 7,548 | $ | 11,553 | ||||
Prepayments
and other receivables
|
72,850 | 72,869 | ||||||
Total
current assets
|
80,398 | 84,422 | ||||||
Non-current
assets:
|
||||||||
Plant
and equipment, net
|
734,738 | 737,859 | ||||||
TOTAL
ASSETS
|
$ | 815,136 | $ | 822,281 | ||||
LIABILITIES
AND STOCKHOLDERS’ DEFICIT
|
||||||||
Current
liabilities:
|
||||||||
Accounts
payable
|
$ | 80,696 | $ | 80,692 | ||||
Amount
due to a related party
|
4,448,351 | 4,152,410 | ||||||
Other
payables and accrued liabilities
|
262,909 | 210,866 | ||||||
Total
current liabilities
|
4,791,956 | 4,443,968 | ||||||
Commitments
and contingencies
|
||||||||
Stockholders’
deficit:
|
||||||||
Common
stock, $0.001 par value; 50,000,000 shares authorized; 37,898,251 shares
issued and outstanding as of December 31, 2009 and 2008
|
37,898 | 37,898 | ||||||
Additional
paid-in capital
|
6,901,232 | 6,901,232 | ||||||
Accumulated
other comprehensive income
|
531,230 | 532,248 | ||||||
Accumulated
deficit
|
(11,447,180 | ) | (11,093,065 | ) | ||||
Total
stockholders’ deficit
|
(3,976,820 | ) | (3,621,687 | ) | ||||
TOTAL
LIABILITIES AND STOCKHOLDERS’ DEFICIT
|
$ | 815,136 | $ | 822,281 |
See
accompanying notes to consolidated financial statements.
F-2
INNOCOM
TECHNOLOGY HOLDINGS, INC.
CONSOLIDATED
STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008
(Currency
expressed in United States Dollars (“US$”), except for number of
shares)
Years
ended December 31,
|
||||||||
2009
|
2008
|
|||||||
Revenues,
net
|
$ | - | $ | 401,190 | ||||
Cost
of revenue
|
- | - | ||||||
Gross
profit
|
- | 401,190 | ||||||
Operating
expenses:
|
||||||||
Impairment
loss on long-lived assets
|
- | 14,481,991 | ||||||
General
and administrative
|
354,114 | 1,741,460 | ||||||
Total
operating expenses
|
354,114 | 16,223,451 | ||||||
LOSS
FROM OPERATIONS
|
(354,114 | ) | (15,822,261 | ) | ||||
Other
income (expense):
|
||||||||
Interest
expense
|
(1 | ) | (240,497 | ) | ||||
Interest
income
|
- | 20,727 | ||||||
Loss
on disposal of plant and equipment
|
- | (1,669 | ) | |||||
LOSS
BEFORE INCOME TAXES
|
(354,115 | ) | (16,043,700 | ) | ||||
Income
tax expense
|
- | - | ||||||
NET
LOSS
|
$ | (354,115 | ) | $ | (16,043,700 | ) | ||
Other
comprehensive (loss) income:
|
||||||||
Foreign
currency translation (loss) gain
|
(1,018 | ) | 360,596 | |||||
COMPREHENSIVE
LOSS
|
$ | (355,133 | ) | $ | (15,683,104 | ) | ||
Net
loss per share – Basic and diluted
|
$ | (0.01 | ) | $ | (0.42 | ) | ||
Weighted
average shares outstanding – Basic and diluted
|
37,898,251 | 37,898,251 |
See
accompanying notes to consolidated financial statements.
F-3
INNOCOM
TECHNOLOGY HOLDINGS, INC.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008
(Currency
expressed in United States Dollars (“US$”))
Years
ended December 31,
|
||||||||
2009
|
2008
|
|||||||
Cash
flows from operating activities:
|
||||||||
Net
loss
|
$ | (354,115 | ) | $ | (16,043,700 | ) | ||
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
||||||||
Depreciation
|
3,154 | 3,562 | ||||||
Amortization
of intangible assets
|
- | 598,562 | ||||||
Impairment
of long-lived assets
|
- | 14,481,991 | ||||||
Write-off
of obsolete inventories
|
- | 87,299 | ||||||
Loss
on disposal of plant and equipment
|
- | 1,669 | ||||||
Change
in operating assets and liabilities:
|
||||||||
Inventories
|
- | (87,299 | ) | |||||
Prepayments
and other receivables
|
- | (46,233 | ) | |||||
Accounts
payable, trade
|
- | 80,692 | ||||||
Other
payables and accrued liabilities
|
52,043 | 13,169 | ||||||
Net
cash used in operating activities
|
(298,918 | ) | (910,288 | ) | ||||
Cash
flows from investing activities:
|
||||||||
Payment
on proceeds from disposal of subsidiaries
|
- | (2,382 | ) | |||||
Payment
on plant and equipment
|
- | (258,982 | ) | |||||
Payment
on land use rights
|
- | (185,402 | ) | |||||
Net
cash used in investing activities
|
- | (446,766 | ) | |||||
Cash
flows from financing activities:
|
||||||||
Advances
from a related party
|
295,941 | 836,052 | ||||||
Proceeds
from short-term borrowings
|
- | 6,080,032 | ||||||
Repayment
of short-term borrowings
|
- | (6,080,032 | ) | |||||
Net
cash provided by financing activities
|
295,941 | 836,052 | ||||||
Effect
of exchange rate changes on cash and cash equivalents
|
(1,028 | ) | 528,958 | |||||
Net
change in cash and cash equivalents
|
(4,005 | ) | 7,956 | |||||
CASH
AND CASH EQUIVALENT, BEGINNING OF YEAR
|
11,553 | 3,957 | ||||||
CASH
AND CASH EQUIVALENT, END OF YEAR
|
$ | 7,548 | $ | 11,553 | ||||
SUPPLEMENTAL
DISCLOSURE OF CASH FLOW INFORMATION:
|
||||||||
Cash
paid for income taxes
|
$ | - | $ | - | ||||
Cash
paid for interest
|
$ | 1 | $ | 240,497 | ||||
NON-CASH
INVESTING AND FINANCING ACTIVITIES:
|
||||||||
Settlement
of amount due to related party with proceeds from disposal of
subsidiaries
|
$ | - | $ | 5,617,101 |
See
accompanying notes to consolidated financial statements
F-4
INNOCOM
TECHNOLOGY HOLDINGS, INC.
CONSOLIDATED
STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)
FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008
(Currency
expressed in United States Dollars (“US$”), except for number of
shares)
Common
stock
|
Additional
|
Accumulated
other
comprehensive
|
Retained earnings
(accumulated
|
Total
stockholders’
|
||||||||||||||||||||
No.
of shares
|
Amount
|
paid-in
capital
|
(loss)
income
|
deficit)
|
equity
(deficit)
|
|||||||||||||||||||
Balance
as of January 1, 2008
|
37,898,251 | $ | 37,898 | $ | 6,901,232 | $ | 171,652 | $ | 4,950,635 | $ | 12,061,417 | |||||||||||||
Net
loss for the year
|
- | - | - | - | (16,043,700 | ) | (16,043,700 | ) | ||||||||||||||||
Foreign
currency translation adjustment
|
- | - | - | 360,596 | - | 360,596 | ||||||||||||||||||
Balance
as of December 31, 2008
|
37,898,251 | 37,898 | 6,901,232 | 532,248 | (11,093,065 | ) | (3,621,687 | ) | ||||||||||||||||
Net
loss for the year
|
- | - | - | - | (354,115 | ) | (354,115 | ) | ||||||||||||||||
Foreign
currency translation adjustment
|
- | - | - | (1,018 | ) | - | (1,018 | ) | ||||||||||||||||
Balance
as of December 31, 2009
|
37,898,251 | $ | 37,898 | $ | 6,901,232 | $ | 531,230 | $ | (11,447,180 | ) | $ | (3,976,820 | ) |
See
accompanying notes to consolidated financial statements.
F-5
INNOCOM
TECHNOLOGY HOLDINGS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008
(Currency
expressed in United States Dollars (“US$”))
1.
|
ORGANIZATION
AND BUSINESS BACKGROUND
|
Innocom
Technology Holdings, Inc. (the “Company” or “INCM”) was incorporated in the
State of Nevada on June 26, 1998. On June 20, 2006, the Company changed its name
from “Dolphin Productions, Inc.” to “Innocom Technology Holdings,
Inc.”
The
Company, through its subsidiaries, is principally engaged in trading and
manufacture of mobile phone handsets and components in Hong Kong and the
People’s Republic of China (“the PRC”).
In
February 2009, the Company has temporarily ceased its planned principal
operation in the manufacturing facility in Changzhou City, Zhejiang Province,
the PRC. Starting from the fourth quarter 2008, global economic conditions have
deteriorated significantly across the countries and the demand for communication
products and components was adversely slowed down. During such challenging
economic times, the Company temporarily discontinued operation in the
manufacture of mobile communication products and components in the PRC. The
Company intends to continue to operate the manufacturing facility depending upon
the market recovery condition and demands from the customers.
As of
December 31, 2009, details of the Company’s subsidiaries are described
below:
Name
of company
|
Place
and date of
incorporation
|
Issued
and fully
paid
capital
|
Principal
activities
|
|||
|
||||||
Innocom
Technology Holdings Limited (“ITHL”)
|
British
Virgin Islands
July
12, 2005
|
1
issued share of US$1 each
|
Investment
holding
|
|||
|
|
|
||||
Sky
Talent Development Limited (“STDL”)
|
British
Virgin Islands
September
8, 2005
|
1
issued share of US$1 each
|
Investment
holding
|
|||
|
|
|
||||
Innocom
Mobile Technology Limited (“IMTL”)
|
Hong
Kong
June
21, 2006
|
2,000,000
issued share of HK$1 each
|
Inactive
|
|||
|
|
|
||||
Pender
Holdings Ltd. (“Pender”)
|
British
Virgin Islands
August
15, 2003
|
1
issued share of US$1 each
|
Trading
of mobile phone handsets and components
|
|||
|
|
|
||||
Favor
Will International Ltd. (“FWIL”)
|
British
Virgin Islands
July
11, 2007
|
1
issued share of US$1 each
|
Investment
holding
|
|||
|
|
|
||||
Changzhou
Innocom Communication Technology Limited (“CICTL”)
|
The
PRC
January
19, 2007
|
RMB50,000,000
|
Manufacture
of mobile phone handsets and
components
|
INCM and
its subsidiaries are hereinafter referred to as (the “Company”).
2.
|
GOING
CONCERN UNCERTAINTIES
|
The
accompanying consolidated financial statements have been prepared using the
going concern basis of accounting, which contemplates the realization of assets
and the satisfaction of liabilities in the normal course of
business.
From its
inception, the Company has suffered from continuous losses with an accumulated
deficit of $11,447,180 as of December 31, 2009 and experienced negative cash
flows form operations. The continuation of the Company as a going concern
through December 31, 2010 is dependent upon the continued financial support from
its stockholders. Management believes the existing shareholders will provide the
additional cash to meet the Company’s obligations as they become due, and will
allow its planned principal business to commence and assembly the production
lines of mobile handsets and components in the PRC. Also, the Company is
currently pursuing the additional financing for its operations. However, there
is no assurance that the Company will be successful in securing sufficient funds
to sustain the operations.
F-6
INNOCOM
TECHNOLOGY HOLDINGS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008
(Currency
expressed in United States Dollars (“US$”))
These and
other factors raise substantial doubt about the Company’s ability to continue as
a going concern. These consolidated financial statements do not include any
adjustments to reflect the possible future effects on the recoverability and
classification of assets and liabilities that may result in the Company not
being able to continue as a going concern.
3.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
|
l
|
Basis
of consolidation
|
The
consolidated financial statements include the financial statements of INCM and
its subsidiaries. All significant inter-company balances and transactions within
the Company have been eliminated upon consolidation.
l
|
Use
of estimates
|
In
preparing these consolidated financial statements, management makes estimates
and assumptions that affect the reported amounts of assets and liabilities in
the balance sheets and revenues and expenses during the years reported. Actual
results may differ from these estimates.
l
|
Revenue
recognition
|
The
Company will recognize its revenue in accordance with the ASC Topic 605, "Revenue Recognition".
Revenue will be recognized upon shipment, provided that evidence of an
arrangement exists, title and risk of loss have passed to the customer, fees are
fixed or determinable and collection of the related receivable is reasonably
assured. Revenue will be recorded net of taxes and estimated product returns,
which is based upon the Company's return policy, sales agreements, management
estimates of potential future product returns related to current period revenue,
current economic trends, changes in customer composition and historical
experience.
During
fiscal year 2008, the Company generated revenue from the trading activities of
mobile phone handsets & related components as an agent. The Company
recognizes its revenue on a net basis in compliance with EITF 99-19, “Reporting Revenues Gross as a
Principal versus Net as an Agent” (“EITF 99-19”), because the
Company:
(1) determined
that it no longer operates as the primary obligor in the trading
activities,
(2) typically
is not responsible for damages to goods,
(3) bears
no credit and inventory risk,
(4) earns
commission income at a fixed rate of the gross amount billed to the
customer.
For the
year ended December 31, 2008, the Company recognizes $401,190 as net revenues,
at a rate of 7.5% based on the gross amount of $5,369,441 billed to the
customers.
l
|
Cash
and cash equivalents
|
Cash and
cash equivalents are carried at cost and represent cash on hand, demand deposits
placed with banks or other financial institutions and all highly liquid
investments with an original maturity of three months or less as of the purchase
date of such investments.
l
|
Intangible
assets
|
Intangible
assets include trademarks of mobile phone handsets purchased from a third party.
In accordance with ASC Topic 350-50, “General Intangibles Other Than
Goodwill”, intangible assets with finite useful lives related to
developed technology, customer lists, trade names and other intangibles are
being amortized on a straight-line basis over the estimated useful life of the
related asset.
F-7
INNOCOM
TECHNOLOGY HOLDINGS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008
(Currency
expressed in United States Dollars (“US$”))
Trademarks
are carried at cost less accumulated amortization and impairment loss, are
amortized on a straight-line basis over their estimated useful lives of 10 years
beginning at the time the related trademarks are granted. They will be used in
the planned assembly line for mobile phone communication products and components
in the PRC and subject to amortization when they are in operational
use.
For the
year ended December 31, 2009, amortization is no longer required since their
carrying values were fully provided for impairment loss in fiscal year
2008.
l
|
Land
use right
|
All lands
in the PRC are owned by the PRC government. The government in the PRC, according
to the relevant PRC law, may sell the right to use the land for a specified
period of time. Thus, all of the Company’s land purchases in the PRC are
considered to be leasehold land and are stated at cost less accumulated
amortization and any recognized impairment loss. Amortization is provided over
the term of the land use right agreements on a straight-line basis, which is 45
years and they will expire in 2054.
For the
year ended December 31, 2009, amortization is no longer required since its
carrying value was fully provided for impairment loss during fiscal year
2008.
l
|
Plant
and equipment, net
|
Plant and
equipment are stated at cost less accumulated depreciation and accumulated
impairment losses, if any. Depreciation is calculated on the straight-line basis
(after taking into account their respective estimated residual values) over the
following expected useful lives from the date on which they become fully
operational:
Depreciable
life
|
Residual
value
|
||
Plant
and machinery
|
5-10
years
|
5%
|
|
Furniture,
fixtures and office equipment
|
5
years
|
5%
|
|
Leasehold
improvement
|
2
years
|
0%
|
Expenditure
for repairs and maintenance is expensed as incurred. When assets have retired or
sold, the cost and related accumulated depreciation are removed from the
accounts and any resulting gain or loss is recognized in the results of
operations.
l
|
Valuation
of long-lived assets
|
Long-lived
assets primarily include plant and equipment, land use right and intangible
assets. In accordance with ASC Topic 360-10-5, “Impairment or Disposal of Long-Lived
Assets”, the Company periodically reviews long-lived assets for
impairment whenever events or changes in business circumstances indicate that
the carrying amount of the assets may not be fully recoverable or that the
useful lives are no longer appropriate. Each impairment test is based on a
comparison of the undiscounted cash flows to the recorded value of the asset. If
an impairment is indicated, the asset is written down to its estimated fair
value based on a discounted cash flow analysis. Determining the fair value of
long-lived assets includes significant judgment by management, and different
judgments could yield different results. There has been no impairment as of
December 31, 2009.
l
|
Comprehensive
(loss) income
|
ASC Topic
220, “Comprehensive
Income” establishes standards for reporting and display of comprehensive
income, its components and accumulated balances. Comprehensive income as defined
includes all changes in equity during a period from non-owner sources.
Accumulated comprehensive income, as presented in the accompanying consolidated
statements of stockholders’ equity consists of changes in unrealized gains and
losses on foreign currency translation. This comprehensive income is not
included in the computation of income tax expense or benefit.
F-8
INNOCOM
TECHNOLOGY HOLDINGS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008
(Currency
expressed in United States Dollars (“US$”))
l
|
Income
taxes
|
The
Company adopts the ASC Topic 740, “Income Taxes”, regarding
accounting for uncertainty in income taxes which prescribes the recognition
threshold and measurement attributes for financial statement recognition and
measurement of tax positions taken or expected to be taken on a tax return. In
addition, the guidance requires the determination of whether the benefits of tax
positions will be more likely than not sustained upon audit based upon the
technical merits of the tax position. For tax positions that are determined to
be more likely than not sustained upon audit, a company recognizes the largest
amount of benefit that is greater than 50% likely of being realized upon
ultimate settlement in the financial statements. For tax positions that are not
determined to be more likely than not sustained upon audit, a company does not
recognize any portion of the benefit in the financial statements. The guidance
provides for de-recognition, classification, penalties and interest, accounting
in interim periods and disclosure.
The
Company did not have any unrecognized tax positions or benefits and there was no
effect on the financial condition or results of operations for the years ended
December 31, 2009 and 2008. The Company and its subsidiaries are subject to
local and various foreign tax jurisdictions. The Company’s tax returns remain
open subject to examination by major tax jurisdictions.
l
|
Net
loss per share
|
The
Company calculates net loss per share in accordance with ASC Topic 260, “Earnings per Share”. Basic
loss per share is computed by dividing the net loss by the weighted-average
number of common shares outstanding during the period. Diluted loss per share is
computed similar to basic loss per share except that the denominator is
increased to include the number of additional common shares that would have been
outstanding if the potential common stock equivalents had been issued and if the
additional common shares were dilutive.
l
|
Foreign
currencies translation
|
Transactions
denominated in currencies other than the functional currency are translated into
the functional currency at the exchange rates prevailing at the dates of the
transaction. Monetary assets and liabilities denominated in currencies other
than the functional currency are translated into the functional currency using
the applicable exchange rates at the balance sheet dates. The resulting exchange
differences are recorded in the statement of operations.
The
reporting currency of the Company is the United States Dollar ("US$"). The
Company’s subsidiaries operating in Hong Kong and the PRC maintained their books
and records in their local currency, Hong Kong Dollars ("HK$") and Renminbi Yuan
(“RMB”), which are functional currencies as being the primary currency of the
economic environment in which these entities operate.
In
general, assets and liabilities are translated into US$, in accordance with ASC
Topic 830-30, “Translation of
Financial Statement”, using the exchange rate on the balance sheet date.
Revenues and expenses are translated at average rates prevailing during the
period. The gains and losses resulting from translation of financial statements
of foreign subsidiaries are recorded as a separate component of accumulated
other comprehensive income within the statement of stockholders’
equity.
Translation
of amounts from HK$ into US$1 has been made at the following exchange rates for
the respective year:
2009
|
2008
|
|||||||
Year-end
RMB:US$1 exchange rate
|
6.8187 | 6.8175 | ||||||
Annual
average RMB:US$1 exchange rate
|
6.8212 | 6.9985 | ||||||
Year-end
HK$:US$1 exchange rate
|
7.7551 | 7.7507 | ||||||
Annual
average HK$:US$1 exchange rate
|
7.7522 | 7.7874 |
l
|
Related
parties
|
Parties,
which can be a corporation or individual, are considered to be related if the
Company has the ability, directly or indirectly, to control the other party or
exercise significant influence over the other party in making financial and
operating decisions. Companies are also considered to be related if they are
subject to common control or common significant influence.
F-9
INNOCOM
TECHNOLOGY HOLDINGS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008
(Currency
expressed in United States Dollars (“US$”))
l
|
Fair
value measurement
|
ASC Topic
820 “Fair Value Measurements
and Disclosures” ("ASC 820") establishes a new framework for measuring
fair value and expands related disclosures. Broadly, ASC 820 framework requires
fair value to be determined based on the exchange price that would be received
for an asset or paid to transfer a liability (an exit price) in the principal or
most advantageous market for the asset or liability in an orderly transaction
between market participants. ASC 820 establishes a three-level valuation
hierarchy based upon observable and non-observable inputs. These tiers include:
Level 1, defined as observable inputs such as quoted prices in active markets;
Level 2, defined as inputs other than quoted prices in active markets that are
either directly or indirectly observable; and Level 3, defined as unobservable
inputs in which little or no market data exists, therefore requiring an entity
to develop its own assumptions.
For
financial assets and liabilities, fair value is the price the Company would
receive to sell an asset or pay to transfer a liability in an orderly
transaction with a market participant at the measurement date. In the absence of
active markets for the identical assets or liabilities, such measurements
involve developing assumptions based on market observable data and, in the
absence of such data, internal information that is consistent with what market
participants would use in a hypothetical transaction that occurs at the
measurement date.
l
|
Financial
instruments
|
Cash and
cash equivalents, prepayments and other receivables, accounts payable, amount
due to a related party, other payables and accrued liabilities are carried at
cost which approximates fair value. Any changes in fair value of assets or
liabilities carried at fair value are recognized in other comprehensive income
for each period.
l
|
Recent
accounting pronouncements
|
The
Company has reviewed all recently issued, but not yet effective, accounting
pronouncements and does not believe the future adoption of any such
pronouncements may be expected to cause a material impact on its financial
condition or the results of its operations.
During
2009, Accounting Standards Codification (“ASC”) became the source of
authoritative U.S. GAAP recognized by the Financial Accounting Standards Board
(“FASB”) for nongovernmental entities, except for certain FASB Statements not
yet incorporated into ASC. Rules and interpretive releases of the SEC under
federal securities laws are also sources of authoritative U.S. GAAP for
registrants. The discussion below includes the applicable ASC
reference.
The
Company adopted ASC Topic 810-10, “Consolidation” (formerly SFAS
No. 160, “Noncontrolling
Interests in Consolidated Financial Statements – an amendment of ARB No.
51”) effective January 2, 2009. Topic 810-10 changes the manner of
presentation and related disclosures for the noncontrolling interest in a
subsidiary (formerly referred to as a minority interest) and for the
deconsolidation of a subsidiary. The adoption of these sections did not have a
material impact on the Company’s consolidated financial statements.
ASC Topic
815-10, “Derivatives and
Hedging” (formerly SFAS No. 161, “Disclosures about Derivative
Instruments and Hedging Activities”) was adopted by the Company effective
January 2, 2009. The guidance under ASC Topic 815-10 changes the manner of
presentation and related disclosures of the fair values of derivative
instruments and their gains and losses.
In April
2009, the FASB issued an update to ASC Topic 820-10, “Fair Value Measurements and
Disclosures” (“ASC 820-10) (formerly FASB Staff Position No. SFAS 157-4,
“Determining Fair Value When
the Volume and Level of Activity for the Asset or Liability Have Significantly
Decreased and Identifying Transactions That Are Not Orderly”). The
standard provides additional guidance on estimating fair value in accordance
with ASC 820-10 when the volume and level of transaction activity for an asset
or liability have significantly decreased in relation to normal market activity
for the asset or liability have significantly decreased and includes guidance on
identifying circumstances that indicate if a transaction is not orderly. The
Company adopted this pronouncement effective April 1, 2009 with no impact on its
consolidated financial statements.
F-10
INNOCOM
TECHNOLOGY HOLDINGS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008
(Currency
expressed in United States Dollars (“US$”))
In April
2009, the FASB issued FSP SFAS No. 107-1, “Disclosures about Fair Value of
Financial Instruments” (“ASC 825-10”). ASC 825-10 requires fair value of
financial instruments disclosure for interim reporting periods of
publicly traded companies as well as in annual financial statements. ASC 825-10
is effective for interim periods ending after June 15, 2009 and was adopted by
the Company in the second quarter of 2009. There was no material impact to the
Company’s consolidated financial statements as a result of the adoption of ASC
825-10.
In April
2009, the FASB issued FSP APB No. 28-1, “Interim Financial Reporting”
(“ASC 825-10”). ASC 825-10 requires the fair value of financial
instruments disclosure in summarized financial information at interim reporting
periods. ASC 825-10 is effective for interim periods ending after June 15, 2009
and was adopted by the Company in the second quarter of 2009. There was no
material impact to the Company’s consolidated financial statements as a result
of the adoption of ASC 825-10.
In June
2009, the FASB finalized SFAS No. 167, “Amending FASB interpretation No.
46(R)”, which was included in ASC Topic 810-10-05 “Variable Interest Entities”.
The provisions of ASC Topic 810-10-05 amend the definition of the primary
beneficiary of a variable interest entity and will require the Company to make
an assessment each reporting period of its variable interests. The provisions of
this pronouncement are effective January 1, 2010. The Company is evaluating the
impact of the statement on its consolidated financial statements.
In July
2009, the FASB issued SFAS No. 168, “The Hierarchy of Generally Accepted
Accounting Principles”. SFAS 168 codified all previously issued
accounting pronouncements, eliminating the prior hierarchy of accounting
literature, in a single source for authoritative U.S. GAAP recognized by the
FASB to be applied by nongovernmental entities. SFAS 168, now ASC Topic 105-10
“Generally Accepted Accounting
Principles”, is effective for financial statements issued for interim and
annual periods ending after September 15, 2009. The adoption of this
pronouncement did not have an effect on the Company’s consolidated financial
statements.
In August
2009, the FASB issued an update of ASC Topic 820, “Measuring Liabilities at Fair Value
”. The new guidance provides clarification that in circumstances in which
a quoted price in an active market for the identical liability is not available,
a reporting entity is required to measure fair value using prescribed
techniques. The Company adopted the new guidance in the third quarter of 2009
and it did not materially affect the Company’s financial position and results of
operations.
In
October 2009, the FASB issued Accounting Standards Update (“ASU”) No. 2009-13,
“Revenue Recognition (Topic
605): Multiple-Deliverable Revenue Arrangements (a consensus of the FASB
Emerging Issues Task Force)” which amends ASC 605-25, “Revenue Recognition:
Multiple-Element Arrangements.” ASU No. 2009-13 addresses how to
determine whether an arrangement involving multiple deliverables contains more
than one unit of accounting and how to allocate consideration to each unit of
accounting in the arrangement. This ASU replaces all references to fair value as
the measurement criteria with the term selling price and establishes a hierarchy
for determining the selling price of a deliverable. ASU No. 2009-13 also
eliminates the use of the residual value method for determining the allocation
of arrangement consideration. Additionally, ASU No. 2009-13 requires expanded
disclosures. This ASU will become effective for us for revenue arrangements
entered into or materially modified on or after April 1, 2011. Earlier
application is permitted with required transition disclosures based on the
period of adoption. The Company is currently evaluating the application date and
the impact of this standard on its consolidated financial
statements.
In
September 2009, the FASB issued certain amendments as codified in ASC 605-25,
“Revenue Recognition;
Multiple-Element Arrangements.” These amendments provide
clarification on whether multiple deliverables exist, how the arrangement should
be separated, and the consideration allocated. An entity is required to
allocate revenue in an arrangement using estimated selling prices of
deliverables in the absence of vendor-specific objective evidence or third-party
evidence of selling price. These amendments also eliminate the use of the
residual method and require an entity to allocate revenue using the relative
selling price method. The amendments significantly expand the disclosure
requirements for multiple-deliverable revenue arrangements. These
provisions are to be applied on a prospective basis for revenue arrangements
entered into or materially modified in fiscal years beginning on or after June
15, 2010, with earlier application permitted. The Company is currently
evaluating the impact of these amendments to its consolidated financial
statements.
F-11
INNOCOM
TECHNOLOGY HOLDINGS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008
(Currency
expressed in United States Dollars (“US$”))
In
November 2009, the FASB issued ASU 2009-16, “Transfers and Servicing
(Topic 860) – Accounting
for Transfers of Financial Assets,” which formally codifies FASB
Statement No. 166, “Accounting
for Transfers of Financial Assets.” ASU 2009-16 is a revision to SFAS No.
140, “Accounting for Transfers and Servicing
of Financial Assets and Extinguishments of Liabilities,” and requires
more information about transfers of financial assets, including securitization
transactions, and where entities have continuing exposure to the risks related
to transfer of financial assets. It eliminates the concept of a “qualifying
special-purpose entity,” changes the requirements for derecognizing financial
assets, and requires additional disclosures. The provisions are effective
January 1, 2010, for a calendar year-end entity, with early application not
being permitted. Adoption of these provisions is not expected to have a
material impact on the Company’s consolidated financial statements.
4.
|
DISCONTINUED
OPERATIONS
|
Starting
from the fourth quarter of 2008, global economic conditions have deteriorated
significantly across the countries and the demand for communication products and
components was adversely slowed down. The Company has discontinued its trading
business in the mobile communication products and components in Hong Kong since
the customers no longer demanded for sales orders during the fiscal year of
2009.
5.
|
PLANT
AND EQUIPMENT
|
Plant and
equipment, consisted of the following:
As
of December 31,
|
||||||||
2009
|
2008
|
|||||||
Plant
and machinery
|
$ | 7,327,707 | $ | 7,327,707 | ||||
Furniture,
fixtures and office equipment
|
6,190 | 6,190 | ||||||
Leasehold
improvement
|
6,301 | 6,301 | ||||||
Foreign
translation difference
|
326 | 8 | ||||||
7,340,524 | 7,340,206 | |||||||
Less:
accumulated depreciation
|
(3,142 | ) | (3,142 | ) | ||||
Less:
impairment loss
|
(6,428,310 | ) | (6,428,310 | ) | ||||
Less:
foreign translation difference
|
(174,334 | ) | (170,895 | ) | ||||
Plant
and equipment, net
|
$ | 734,738 | $ | 737,859 |
Depreciation
expense for the years ended December 31, 2009 and 2008 was $3,154 and
$3,562.
For the
year ended December 31, 2008, the Company tested for impairment in accordance
with the ASC Topic 350-50. Based on the results of the Company's undiscounted
cash flows calculation, the Company evaluated whether or not there was an
impairment loss by comparing the fair value of the intangible asset to its
carrying value. Since the carrying value of the intangible asset exceeded its
fair value, the Company recognized an impairment loss of $6,428,310 for the year
ended December 31, 2008.
6.
|
AMOUNT
DUE TO A RELATED PARTY
|
As of
December 31, 2009 and 2008, the balance of $4,448,351 and $4,152,410 due to a
director and a major shareholder of the Company, Mr. William Hui, represented
temporary advance to the Company which was unsecured, interest-free with no
fixed repayment term.
F-12
INNOCOM
TECHNOLOGY HOLDINGS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008
(Currency
expressed in United States Dollars (“US$”))
7.
|
INCOME
TAXES
|
The
Company operates in various countries: United States, British Virgin Island,
Hong Kong and the PRC that are subject to taxes in the jurisdictions in which
they operate, as follows:
United
States of America
The
Company is registered in the State of Nevada and is subject to United States
current tax law.
As of
December 31, 2009, the United States operation had $6,183,759 cumulative net
operating losses available for federal tax purposes, which are available to
offset future taxable income. The net operating loss carryforwards begin to
expire in 2030. The Company has provided for a full valuation allowance against
the deferred tax assets on the expected future tax benefits from net operating
loss carryforwards as the management believes it is more likely than not that
these assets will not be realized in the future.
British
Virgin Island
Under the
current BVI law, the Company is not subject to tax on income.
Hong
Kong
For the
years ended December 31, 2009 and 2008, no provision for Hong Kong Profits Tax
is provided for since the Company’s income neither arises in, nor is derived
form Hong Kong under its applicable tax law.
The
reconciliation of income tax rate to the effective income tax rate based on loss
before income taxes from Hong Kong operation for the years ended December 31,
2009 and 2008 are as follows:
Years
ended December 31,
|
||||||||
2009
|
2008
|
|||||||
Loss
before income taxes
|
$ | (345,486 | ) | $ | (418,872 | ) | ||
Statutory
income tax rate
|
16.5 | % | 16.5 | % | ||||
Income
tax impact at Hong Kong Profits Tax statutory rate
|
(57,005 | ) | (69,114 | ) | ||||
Non-taxable
interest income
|
- | (1 | ) | |||||
Net
operating loss
|
57,005 | 69,115 | ||||||
Income
tax expense
|
$ | - | $ | - |
As of
December 31, 2009, Hong Kong operation generated approximately $1,011,683 of net
operating loss carryforwards for Hong Kong tax purpose at no
expiration.
The
PRC
With
effect from January 1, 2008, the Company’s subsidiary, CICTL is subject to the
unified income rate of 25% on the taxable income. For the years ended December
31, 2009 and 2008, CICTL generated net operating losses and accordingly, no
provision for income tax has been recorded.
As of
December 31, 2009, the PRC operation incurred $1,846,861 of net operating losses
carryforward available for income tax purposes that may be used to offset future
taxable income and will begin to expire in 5 years from the year of incurrence,
if unutilized. The Company has provided for a full valuation allowance against
the deferred tax assets on the expected future tax benefits from the net
operating loss carryforwards as the management believes it is more likely than
not that these assets will not be realized in the future.
F-13
INNOCOM
TECHNOLOGY HOLDINGS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008
(Currency
expressed in United States Dollars (“US$”))
The
following table sets forth the significant components of the aggregate net
deferred tax assets of the Company as of December 31, 2009 and
2008:
As
of December 31,
|
||||||||
2009
|
2008
|
|||||||
Deferred
tax assets:
|
||||||||
Net
operating loss carryforward
|
||||||||
–
United States of America
|
$ | 2,164,316 | $ | 2,163,964 | ||||
–
Hong Kong
|
166,928 | 108,682 | ||||||
–
The PRC
|
461,715 | 461,715 | ||||||
Total
deferred tax assets
|
2,792,959 | 2,734,361 | ||||||
Less:
valuation allowance
|
(2,792,959 | ) | (2,734,361 | ) | ||||
Net
deferred tax assets
|
$ | - | $ | - |
As of
December 31, 2009, the Company incurred $9,042,303 of the aggregate net
operating loss carryforwards available to offset its taxable income for income
tax purposes. The Company has provided for a full valuation allowance against
the deferred tax assets of $2,792,959 on the expected future tax benefits from
the net operating loss carryforwards as the management believes it is more
likely than not that these assets will not be realized in the future. For the
year ended December 31, 2009, the valuation allowance increased by $58,598,
primarily relating to net operating loss carryforwards from local and foreign
tax regimes.
8.
|
NET
LOSS PER SHARE
|
The
following table sets forth the computation of basic and diluted net loss per
share for the years indicated:
Years
ended December 31,
|
||||||||
2009
|
2008
|
|||||||
Basic
and diluted net loss per share calculation:
|
||||||||
Numerator:
|
||||||||
Net
loss in computing basic net loss per share
|
$ | (354,115 | ) | $ | (16,043,700 | ) | ||
Denominator:
|
||||||||
Weighted
average shares outstanding
|
37,898,251 | 37,898,251 | ||||||
Basic
and diluted net loss per share
|
$ | (0.01 | ) | $ | (0.42 | ) |
9.
|
PENSION
PLANS
|
Hong
Kong
The
Company’s subsidiary operating in Hong Kong participates in a defined
contribution pension scheme under the Mandatory Provident Fund Schemes Ordinance
(“MPF Scheme”) for all of its eligible employees in Hong
Kong.
F-14
INNOCOM
TECHNOLOGY HOLDINGS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008
(Currency
expressed in United States Dollars (“US$”))
The
PRC
Under the
PRC Law, full-time employees of its subsidiary of the Company in the PRC are
entitled to staff welfare benefits including medical care, welfare subsidies,
unemployment insurance and pension benefits through a China government-mandated
multi-employer defined contribution plan. They are required to accrue for these
benefits based on certain percentages of the employees’ salaries. The total
contributions made for such employee benefit were $0 and $1,417 for the years
ended December 31, 2009 and 2008, respectively.
10.
|
CONCENTRATIONS
OF RISK
|
The
Company is exposed to the following concentrations of risk:
(a) Major
customers
For the
year ended December 31, 2009, there was no customer represented more than 10% of
the Company’s revenue and accounts receivable.
For the
year ended December 31, 2008, one customer represented more than 10% of the
Company’s revenue and accounts receivable, respectively. This customer accounted
for 100% of revenue amounting to $401,190, with $0 of accounts receivable,
respectively.
(b) Exchange
rate risk
The
Company cannot guarantee that the current exchange rate will remain steady;
therefore there is a possibility that the Company could post the same amount of
net income for two comparable periods and because of the fluctuating exchange
rate actually post higher or lower profit depending on exchange rate of RMB
converted to US$ on that date. The exchange rate could fluctuate depending on
changes in political and economic environments without notice.
11.
|
COMMITMENTS
AND CONTINGENCIES
|
The
Company leases an office premise under a non-cancelable operating lease for a
term of 2 years due June 15, 2010. Costs incurred under this operating lease are
recorded as rent expense and totaled approximately $131,861 and $109,292 for the
years ended December 31, 2009 and 2008.
As of
December 31, 2009, the Company has the future minimum rental payments of $99,174
under a non-cancelable operating lease in the next 12 months.
None
ITEM
9A. CONTROLS AND PROCEDURES
Please
refer to the disclosure provided in "Item 9A(T) Controls and
Procedures" below.
(a)
|
Evaluation
of Disclosure Controls and
Procedures
|
Our chief
executive officer and chief financial officer evaluated the effectiveness of our
disclosure controls and procedures as of December 31, 2009. The term
“disclosure controls and procedures,” as defined in
Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means
controls and other procedures of a company that are designed to ensure that
information required to be disclosed by a company in the reports that it files
or submits under the Exchange Act is recorded, processed, summarized and
reported, within the time periods specified in the SEC’s rules and forms.
Disclosure controls and procedures include, without limitation, controls and
procedures designed to ensure that information required to be disclosed by a
company in the reports that it files or submits under the Exchange Act is
accumulated and communicated to the company’s management, including its
principal executive and principal financial officers, as appropriate to allow
timely decisions regarding required disclosure. Management recognizes that any
controls and procedures, no matter how well designed and operated, can provide
only reasonable assurance of achieving their objectives and management
necessarily applies its judgment in evaluating the cost-benefit relationship of
possible controls and procedures. Based on the evaluation of our disclosure
controls and procedures as of December 31, 2009, our chief executive
officer and chief financial officer concluded that, as of such date, our
disclosure controls and procedures were effective.
(b)
|
Management’s
Report on Internal Control Over Financial
Reporting
|
Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting. Internal control over financial reporting is
defined in Rule 13a-15(f) or 15d-15(f) promulgated under the
Exchange Act as a process designed by, or under the supervision of, the
company’s principal executive officer and principal financial officer and
effected by the Company’s Board of Directors, management and other personnel, to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles and includes those policies and
procedures that:
·
|
pertain
to the maintenance of records that, in reasonable detail, accurately and
fairly reflect the transactions and dispositions of the assets of the
Company;
|
·
|
provide
reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the Company
are being made only in accordance with management authorization,
and
|
·
|
provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of the Company’s assets that
could have a material effect on the financial
statements.
|
Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Projections of any evaluation of effectiveness
to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
Our
management assessed the effectiveness of our internal control over financial
reporting as of December 31, 2009. In making this assessment, the company’s
management used the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO) in Internal Control-Integrated
Framework.
Based on
this assessment, our management concluded that, as of December 31, 2009,
our internal control over financial reporting is effective.
This
annual report does not include an attestation report of our Company’s
independent registered public accounting firm regarding internal control over
financial reporting. Management’s report was not subject to attestation by our
independent registered public accounting firm pursuant to temporary
rules of the Securities and Exchange Commission that permit us to provide
only management’s report in this annual report.
(c)
|
Changes in Internal
Controls
|
No change
in our internal control over financial reporting occurred during the fiscal year
ended December 31, 2009 that has materially affected, or is reasonably
likely to materially affect, our internal control over financial
reporting.
Item
9B. Other Information
None
10
PART
III.
Item 10. Directors, Executive
Officers and Corporate Governance.
DIRECTORS
AND EXECUTIVE OFFICERS
Our
directors and officers, as of December 31, 2009, are set forth below. The
directors hold office for their respective term and until their successors are
duly elected and qualified. Vacancies in the existing Board are filled by a
majority vote of the remaining directors. The officers serve at the will of the
Board of Directors.
Name
|
Age
|
Position
|
Since
|
|||
Hui
Yan Sui, William
|
44
|
Chairman
and Chief Executive Officer
|
2006
|
|||
Tang
Chin Pang, Eric
|
48
|
Executive
Director
|
2006
|
|||
Tan
Ah Mee
|
63
|
Non-executive
Director
|
2006
|
|||
Lau
Yiu Nam, Eric
|
50
|
Non-executive
Director
|
2006
|
|||
Qian
Jian Yu, Mike
|
46
|
Non-executive
Director
|
2007
|
|||
Cheung
Wai Hung, Eddie
|
55
|
Chief
Financial Controller
|
2007
|
Hui Yan
Sui, William, age 44, has approximately 20 years experience in industrial
management. In 1986, Mr. Hui established Yat Lung Industrial Limited (Yat
Lung), a company that manufactures cassette and video tapes. Mr. Hui is
currently a director of Yat Lung. In 2002, Yat Lung became a wholly owned
subsidiary of Swing Media Technology Group Limited (Swing Media), an investment
holding company that manufactures and trades cassette tapes, video tapes, VCD's,
CDR's and DVDR's through its subsidiaries. From January 2002 until May
2003, Mr. Hui served as Chairman and Chief Executive Officer of Swing Media.
Mr. Hui resigned as CEO of Swing Media in May 2003 and retains his
position as Chairman. Swing Media is a company listed on the Singapore
Stock Exchange Dealings and Automated Quotation System (the “SGX-SESDAQ”).
In 2003, Mr. Hui established Chinarise Capital (International) Limited
(Chinarise), a company that trades mobile phone handsets and components in Hong
Kong. He is currently the director of Chinarise.
Tang Chin
Pang, Eric, age 48, has been our Chief Financial Officer since October 2005.
Before joining us in October 2005, Mr. Tang is the corporate consultant for
three years. From 1984 to 2001, Mr. Tang worked at Deloitte Touche Tohmatsu for
seventeen years, including his last position as an audit senior manager. Mr.
Tang graduated from Hong Kong Shue Yan University in 1984. He is a fellow of the
Association of Chartered Certified Accountants and an associate member of the
Hong Kong Institute of Certified Public Accountants.
Dr. Tan
Ah Mee, age 63, holds Doctor of Philosphy from International Management Centre,
Buckingham, United Kingdom. Dr. Tan is Ex-Rotarian (Chartered) of Rotary Club of
Tebrau, Jogn Baru and Elected Council Member of the Sinagpore Confederation of
Industries (1998 – 2000), He is director of Heng Da Investments Pte. Limited,
Ingmedia Pte. Limited and Yorkshire Capital Pte. Limited
Lau Yiu
Nam , Eric, age 50, was admitted as a barrister in England and Australia . Mr.
Lau returned to Hong Kong in 1983 and was employed in the Attorney General's
Chambers as Crown Counsel before he went into private practice in 1996.
Currently, Mr. Lau is the Head of his Chambers in Hong Kong which comprised of
over 15 barristers practicing in commercial and civil litigation. He is
independent non-executive director of Swing Media.
Qian Jian
Yu, Mike, age 46, is the General Manager and founder of Shanghai Boda
Electronics Co., Ltd. (“Boda”). Prior to the establishment of Boda in
September 2001, Mr. Qian worked for Arrow Electronics China Limited from 1998 to
2001. From 1986 to 1998, Mr. Qian worked for the Shanghai Space Bureau. Mr. Qian
graduated from Nanjing University in 1986.
Cheung
Wai Hung, Eddie, age 55, has been a branch manager of Shanghai Commercial Bank
Limited for the past 12 years up to May 14, 2007. Mr. Cheung possesses a
Bachelor degree of Commerce from Curtin University of Technology, Perth W.
Australia, in 1998.
(a)
Significant Employees
Other
than our officers, there are no employees who are expected to make a significant
contribution to our corporation.
(b)
Family Relationships
Our
directors currently have terms which will end at our next annual meeting of the
stockholders or until their successors are elected and qualify, subject to their
prior death, resignation or removal. Officers serve at the discretion of the
Board of Directors. There are no family relationships among any of our directors
and executive officers. There are no family relationships among our officers,
directors, or persons nominated for such positions.
11
LEGAL
PROCEEDINGS
No
officer, director, or persons nominated for these positions, and no promoter or
significant employee of our corporation has been involved in legal proceedings
that would be material to an evaluation of our management.
AUDIT
COMMITTEE
The Board
does not have standing audit committee.
CODE
OF ETHICS
The
Company does not have a Code of Ethics.
COMPLIANCE
WITH SECTION 16 OF THE SECURITIES EXCHANGE ACT OF 1934
Section
16(a) of the Securities Exchange Act of 1934, as amended, requires our directors
and executive officers and beneficial holders of more than 10% of our common
stock to file with the Commission initial reports of ownership and reports of
changes in ownership of our equity securities. As of the date of this Report,
the Company is in the process of reviewing all transactions that may cause
initial reports of ownership or changes in ownership to be filed on Form 3
(Initial Statement of Beneficial Ownership), Form 4 (Changes in Beneficial
Ownership) and Form 5 (Annual Statement of Changes in Beneficial Ownership)
which is required to be filed under applicable rules of the
Commission.
Item
11. Executive Compensation
COMPENSATION
DISCUSSION AND ANALYSIS
Background
and Compensation Philosophy
Our board
of directors consists of six individuals: (1) William Hui Yan Sui,
our Chief Executive Officer, Chairman of the Board and beneficial owner of
60.97% of our common stock; (2) Tang Chin Pang, Eric, our Executive Director;
(3) Cheung Wai Hung, Eddie, our Chief Financial Officer and beneficial owner of
3.69% of our common stock; (4) Tan Ah Mee, a non-executive director; (5) Lau Yiu
Nam, Eric, a non-executive director and (6) Qian Jian Yu, Mike, a non-executive
director. Our board of directors have historically determined the
compensation to be paid to our executive officers based on our financial and
operating performance and prospects, the level of compensation paid to similarly
situated executives in comparably sized companies and contributions made by the
officers’ to our success. Each of the named officers will be measured
by a series of performance criteria by the board of directors, or the
compensation committee when it is established, on a yearly
basis. Such criteria will be set forth based on certain objective
parameters such as job characteristics, required professionalism, management
skills, interpersonal skills, related experience, personal performance and
overall corporate performance.
Our board
of directors have not adopted or established a formal policy or procedure for
determining the amount of compensation paid to our executive
officers. Mr. Hui Yan Sui, William, Mr. Tang Chin Pang, Eric and Mr.
Cheung Wai Hung, Eddie have been and may continue to be involved when
our board of directors deliberate compensation issues related to their
compensation.
As our
executive leadership and board of directors grow, our board of directors may
decide to form a compensation committee charged with the oversight of executive
compensation plans, policies and programs.
Elements
of Compensation
We
provide our executive officers solely with a base salary to compensate them for
services rendered during the year. Our policy of compensating our
executives with a cash salary has served us well. Because of our
history of attracting and retaining executive talent, we do not believe it is
necessary at this time to provide our executives discretionary bonuses, equity
incentives, or other benefits in order for us to continue to be
successful.
Base
Salary
The
yearly base salary of Mr. Cheung Wai Hung, Eddie for the 2009 was $53,846 (2008:
$53,846). Mr. Hui Yan Sui and Mr. Tang Chin Pang received no salary
in 2009.
Discretionary
Bonus
We have
not provided our executive officers with any discretionary bonuses at the moment
but our board of directors may consider the necessity of such scheme in the
future based on our financial and operating performance and prospects, the level
of compensation paid to similarly situated executives in comparably sized
companies and contributions made by the officers’ to our success.
12
Equity
Incentives
We have
not established equity based incentive program and have not granted stock based
awards as a component of compensation. In the future, we may adopt
and establish an equity incentive plan pursuant to which awards may be granted
if our board of directors determines that it is in the best interests of our
stockholders and the Company to do so.
Retirement
Benefits
Our
executive officers are not presently entitled to company-sponsored retirement
benefits.
Perquisites
We have
not provided our executive officers with any material perquisites and other
personal benefits and, therefore, we do not view perquisites as a significant or
necessary element of our executive’s compensation.
Deferred
Compensation
We do not
provide our executives the opportunity to defer receipt of annual
compensation.
SUMMARY
COMPENSATION TABLE
The
following table sets forth the cash and non-cash compensation for the years
indicated earned by or awarded to Hui Yan Sui, William, our Chief Executive
Officer, Tang Chin Pang, Eric, our Chief Financial Officer, and our other
executive officers and employees whose total cash compensation exceeded
$100,000, or the Named Executive Officers and employees, in fiscal year
2009.
Summary
Compensation Table
Name
and Principal Position
|
|
Year
|
|
Salary
($)
|
|
Bonus
($)
|
|
Stock
Awards
($)
|
|
All
Other
Compensation
($)
|
|
Total
($)
|
Hui
Yan Sui, William
Chief
Executive Officer; Director
|
|
2009
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
Tang
Chin Pang, Eric
Executive
Director
|
|
2009
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
Cheung
Wai Hung, Eddie
Chief
Financial Officer
|
|
2009
|
|
53,846
|
|
-
|
|
-
|
|
-
|
|
53,846
|
No
directors and offices have service contact with the Company or its subsidiary
companies.
Compensation
of Directors
There is
no compensation awarded to or paid to the directors during 2009.
Item
12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters.
Beneficial
ownership is shown as of April 14, 2010, for shares held by (i) each person or
entity known to us to be the beneficial owner of more than 5% of our issued and
outstanding shares of common stock based solely upon a review of filings made
with the Commission and our knowledge of the issuances by us, (ii) each of our
directors, (iii) our Chief Executive Officer and our three other most highly
compensated officers whose compensation exceeded $100,000 during the fiscal year
ended December 31, 2009, or the Named Executive Officers, and (iv) all of our
current directors and executive officers as a group. Unless otherwise indicated,
the persons listed below have sole voting and investment power with respect to
the shares and may be reached at Suite 901, Sun Hung Kai Centre, 30 Harbour
Road, Wanchai, Hong Kong, PRC.
Security
Ownership - Certain Beneficial Owners
There are
no Beneficial Owners outside of management that own more than 5% of the issued
and outstanding shares of common stock. Please see the table below
for certain beneficial ownership by management.
13
Security
Ownership – Management
Amount
|
||||||||||
And
|
Percentage
|
|||||||||
Nature
of
|
of
Class
|
|||||||||
Beneficial
|
Beneficially
|
|||||||||
Beneficial Owner (including
address)
|
Title
of class
|
Ownership
(1)
|
Total
|
Owned
|
||||||
Hui
Yan Siu William (2)
|
Common
|
23,107,430
|
D
|
23,107,430
|
60.97
|
%
|
||||
Cheung
Wai Hung, Eddie (2)
|
Common
|
-0-
|
-0-
|
-0-
|
%
|
|||||
Tang
Chin Pang, Eric (2)
|
Common
|
-0-
|
-0-
|
-0-
|
%
|
|||||
Dr.
Tan Ah Mee (2)
|
Common
|
-0-
|
-0-
|
-0-
|
%
|
|||||
Lau
Yiu Nam, Eric (2)
|
Common
|
-0-
|
-0-
|
-0-
|
%
|
|||||
Qian
Jian Yu, Mike (2)
|
Common
|
-0-
|
-0-
|
-0-
|
%
|
|||||
Total
|
Common
|
23,107,430
|
23,107,430
|
60.97
|
%
|
Notes:
(1)
|
–
(D) stands for direct ownership; (I) stands for indirect
ownership
|
(2)
|
All
officers and directors use the Company’s address, Suite 901, Sun Hung Kai
Centre, 30 Harbour Road, Wanchai, Hong Kong,
PRC.
|
Changes
in Control
There are
no arrangements, known to the Registrant, including any pledge by any person of
securities of the Registrant which may at a subsequent date result in a change
in control of the Registrant.
Securities
Authorized for Issuance Under Equity Compensation Plans
There is
no equity or option granted during 2009.
Item
13. Certain Relationships and Related Transactions, and Director
Independence
Certain
Relationships and Related Transactions
As of
December 31, 2009, a balance of $4,448,351 due to a director and a major
shareholder of the Company, Mr. William Hui, represented temporary advance to
the Company which was unsecured, interest-free and has no fixed repayment term.
The imputed interest on the amount due to a stockholder was not
significant.
Director
Independence
The
following members of our Board of Directors are independent, as “independent” is
defined in the rules of the NASDAQ National Market System: Dr. Tan Ah
Mee, Lau Yiu Nam and Qian Jian Yu.
Item
14. Principal Accountant Fees and Services.
The
following is a summary of the fees billed to us by ZYCPA Company Limited, the
Company’s current auditors for professional services rendered for the years
ended December 31, 2009 and December 31, 2008:
Service
|
2009
|
2008
|
||||||
Audit
Fees
|
$ | 11,538 | $ | 55,000 | ||||
Audit
Related Fees
|
- | |||||||
Tax
Fees
|
- | |||||||
All
Other Fees
|
- | |||||||
TOTAL
|
$ | 11,538 | $ | 55,000 |
Audit
fees consist of the aggregate fees billed for services rendered for the audit of
our annual financial statements, the reviews of the financial statements
included in our Forms 10-Q and for any other services that are normally provided
by our independent auditors in connection with our statutory and regulatory
filings or engagements.
Audit
related fees consist of the aggregate fees billed for professional services
rendered for assurance and related services that reasonably related to the
performance of the audit or review of our financial statements that were not
otherwise included in Audit Fees.
14
Tax fees
consist of the aggregate fees billed for professional services rendered for tax
compliance, tax advice and tax planning. These services include assistance
regarding federal, state and local tax compliance and consultation in connection
with various transactions and acquisitions.
All other
fees consist of the aggregate fees billed for products and services provided by
our independent auditors and not otherwise included in Audit Fees, Audit Related
fees or Tax Fees.
Item
15. Exhibits, Financial Statement Schedules
(a)
Financial Statements
The
financial statements are set forth under Item 8 of this Annual Report on
Form 10-K. Financial statement schedules have been omitted since they are either
not required, not applicable, or the information is otherwise
included.
(b)
Exhibits
3.1
|
Articles
of Incoporation (Filed with the Commission on January 29, 2003 as Exhibit
1 to the Form 10-SB.)
|
3.2
|
Bylaws
(Filed with the Commission on January 29, 2003 as Exhibit 2 to the Form
10-SB.)
|
21
|
Subsidiaries
List (filed herewith)
|
24
|
Power
of Attorney (filed herewith) (see signature
page)
|
31.1
|
Certification
of Chief Executive Officer pursuant to 13a-14 and 15d-14 of the Exchange
Act (filed herewith)
|
31.2
|
Certification
of Chief Financial Officer pursuant to 13a-14 and 15d-14 of the Exchange
Act (filed herewith)
|
32.1
|
Certificate
pursuant to 18 U.S.C. ss. 1350 for Hui Yan Siu, William, Chief Executive
Officer (filed herewith)
|
Certificate
pursuant to 18 U.S.C. ss. 1350 for Cheung Wai Hung, Eddie, Chief Financial
Officer (filed herewith)
|
SIGNATURES
Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
INNOCOM
TECHNOLOGY HOLDINGS, INC.
|
|||
|
|
/s/ William Yan Sui Hui | |
Dated:
April 15, 2010
|
William Yan Sui Hui, Chief Executive Officer | ||
(Principal executive officer) |
|
|
/s/ Cheung Wai Hung Eddie | |
Dated:
April 15, 2010
|
Cheung Wai Hung, Eddie, Chief Financial Officer | ||
(Principal financial officer) |
Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities indicated by the dates.
/s/
Yan Sui Hui William
|
/s/
Tang Chin Pang Eric
|
|||
Yan
Sui Hui, William Director
|
Tang
Chin Pang, Eric, Director
|
|||
Dated:
April 15, 2010
|
Dated:
April 15, 2010
|
15