UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
10-KSB/A
(Amendment
No. 1)
(Mark
One)
x ANNUAL REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the
fiscal year ended December 31, 2007
OR
¨ 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 000-30264
|
NETWORK CN
INC.
|
||
|
(Name
of small business issuer in its charter)
|
|
Delaware
|
11-3177042
|
|
|
(State
or other jurisdiction of incorporation or
organization)
|
(I.R.S.
Employer Identification No.)
|
21/F.,
Chinachem Century Tower, 178 Gloucester Road, Wanchai, Hong
Kong
(Address
of Principal Executive Offices)
(852)
2833-2186
(Registrant’s
Telephone Number, including Area Code)
Securities
registered pursuant to Section 12(b) of the Exchange Act:
NONE
Securities
registered pursuant to Section 12(g) of the Exchange Act:
Title of
Each Class
Common
Stock, $0.001 Par Value
Check
whether the issuer is not required to file reports pursuant to Section 13 or
15(d) of the Exchange Act. YES¨ NOx
Check
whether the issuer (1) filed all reports to be filed by Section 13 or 15(d) of
the Exchange Act 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 ¨
Check if there is no
disclosure of delinquent filers in response to Item 405 of Regulation S-B
contained in this form, and no disclosure will 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-KSB or any amendment to
this Form 10-KSB. x
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
YES ¨
NO x
The
issuer's revenues for the fiscal year ended December 31, 2007 were
$27,582,907.
The
aggregate market value of the registrant’s common stock held by non-affiliates
computed by reference to the closing price of the common stock on March 6,
2008, as reported by OTC Bulletin Board, was approximately
$108,294,000. All executive officers, directors and each person who owns 5%
or more of the outstanding common stock, based on the filings with the
Securities and Exchange Commission, have been excluded since such persons may be
deemed affiliates. This determination of affiliate status is not necessarily a
conclusive determination for other purposes.
As of
March 6, 2008, the issuer had 71,546,608 shares of common stock,
$0.001 par value, outstanding.
Documents
Incorporated by Reference:
None
Transitional
Small Business Disclosure Format (Check one): YES ¨ NO
x
EXPLANATORY
NOTE
This
Amendment No. 1 to Form 10-KSB (this “Amendment No. 1”) amends the
Annual Report on Form 10-KSB for the fiscal year ended December 31,
2007, originally filed with the U.S. Securities and Exchange Commission ( the
“SEC”) on March 24, 2008 (the “Original Report”), of Network CN Inc., a Delaware
corporation ( the “Company”, “our”, “we”, or “us”). We are filing this Amendment
No. 1 to include the comments received from the Staff of the SEC with respect to
(1) amendment to the Report of Independent Registered Public Accounting Firms as
a result of Webb & Company. P.A. being replaced with Jimmy C.H. Cheung &
Co as our principal independent auditor. and (2) additional disclosure on the
accounting policies for prepayments of advertising operating rights and
convertible promissory notes and warrants included in Part II, Item 6. “Management’s Discussion and Analysis or Plan of
Operation”- Critical
Accounting Policies and Part II, Item 7. “Financial Statements and
Supplementary Data” -
Summary of Significant
Accounting Policies and
Note 10 – Convertible Promissory Notes and
Warrants.
This
Amendment No. 1 is not intended to revise any of the financial data presented in
the Original Report. Other than the revisions referred to above and related
consents and certifications, all other information included in the Original
Report remains unchanged. This Amendment No. 1 continues to speak as of the
date of the Original Report and is not intended to, nor does it, reflect events
that have occurred since the filing of the Original Report, and does not modify
or update the disclosures therein in any way other than as required to reflect
the changes described above.
|
PART
II
|
|
ITEM
6.
|
MANAGEMENT'S
DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION
|
CRITICAL
ACCOUNTING POLICIES
The
preparation of our financial statements requires us to make estimates and
judgments that affect the reported amounts of assets, liabilities, revenues and
expenses, and related disclosure of contingent assets and liabilities. On an
ongoing basis, we evaluate our estimates, including but not limited to those
related to income taxes and impairment of long-lived assets. We base our
estimates on historical experience and on various other assumptions and factors
that are believed to be reasonable under the circumstances, the results of which
form the basis for making judgments about the carrying values of assets and
liabilities that are not readily apparent from other sources. Based on our
ongoing review, we plan to adjust to our judgments and estimates where facts and
circumstances dictate. Actual results could differ from our
estimates.
We
believe the following critical accounting policies are important to the
portrayal of our financial condition and results and require our management's
most difficult, subjective or complex judgments, often because of the need to
make estimates about the effect of matters that are inherently
uncertain.
1. Prepayments
for advertising operating rights
Prepayments
for advertising operating rights are measured at cost less accumulated
amortization and impairment losses. Cost includes prepaid expenses directly
attributable to the acquisition of advertising operating rights. Such prepaid
expenses are in general charged to the consolidated statements of operations on
a straight-line basis over the operating period. The operating periods of the
existing advertising operating rights range from 16 months to 20 years. All the
costs expected to be amortized after 12 months of the balance sheet date are
classified as non-current assets.
An
impairment loss is recognized when the carrying amount of the prepayments for
advertising operating rights exceeds the sum of the undiscounted cash flows
expected to be generated from the advertising operating right’s use and eventual
disposition. An impairment loss is measured as the amount by which the carrying
amount exceeds the fair value of the asset calculated using a discounted cash
flow analysis.
2. Equipment, net
Equipment
is stated at cost, less accumulated depreciation. Depreciation is provided using
the straight-line method over the estimated useful life of the assets, which is
from three to five years. When equipment is retired or otherwise disposed of,
the related cost and accumulated depreciation are removed from the respective
accounts, and any gain or loss is reflected in the statement of operations.
Repairs and maintenance costs on equipment are expensed as
incurred.
3. Intangible
rights, net
Intangible
rights are stated at cost, less accumulated amortization and provision for
impairment loss. Intangible rights that have indefinite useful lives are not
amortized. Other intangible rights with finite useful lives are amortized on
straight-line basis over their estimated useful lives of 16 months to 20 years.
The amortization methods and estimated useful lives of intangible rights are
reviewed regularly.
4. Impairment
of Long-Lived Assets
Long-lived
assets, including intangible rights with definite lives, are reviewed for
impairment whenever events or changes in circumstance indicate that the carrying
amount of the assets may not be recoverable. An intangible right that is not
subject to amortization is reviewed for impairment annually or more frequently
whenever events or changes in circumstances indicate that the carrying amount of
the asset may not be recoverable. An impairment loss is recognized when the
carrying amount of a long-lived asset and intangible right exceeds the sum of
the undiscounted cash flows expected to be generated from the asset’s use and
eventual disposition. An impairment loss is measured as the amount by which the
carrying amount exceeds the fair value of the asset calculated using a
discounted cash flow analysis.
5. Convertible
Promissory Notes and Warrants
In 2007,
the Company issued 12% convertible promissory note and warrants and 3%
convertible promissory notes and warrants. As of December 31, 2007, the warrants
and embedded conversion feature were classified as equity under EITF 00-19, “Accounting for Derivative Financial
Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock” and met the
other criteria in paragraph 11(a) of SFAS 133, “Accounting for Derivative
Instruments and Hedging
Activities”. Such classification
will be reassessed at each balance sheet date. The Company allocated the
proceeds of the convertible promissory notes between convertible promissory
notes and the financial instruments related to warrants associated with
convertible promissory notes based on their relative fair values at commitment
date. The fair value of the financial instruments related to warrants associated
with convertible promissory notes was determined utilizing the Black-Scholes
option pricing model and the respective allocated proceeds to warrants is
recorded in additional paid-in capital. The embedded beneficial conversion
feature associated with convertible promissory notes was recognized and measured
by allocating a portion of the proceeds equal to the intrinsic value of that
feature to additional paid-in capital in according to EITF Issue No. 98-5, “Accounting for Convertible
Securities with Beneficial Conversion Features or Contingently Adjustable
Conversion Ratio” and EITF Issue No. 00-27, “Application of Issue No. 98-5 to
Certain Convertible Instruments” .
The
portion of debt discount resulting from allocation of proceeds to the financial
instruments related to warrants associated with convertible promissory notes is
being amortized to interest expense over the life of the convertible promissory
notes, using the effective yield method. For portion of debt discount resulting
from allocation of proceeds to the beneficial conversion feature, it is
recognized as interest expenses over the minimum period from the date of
issuance to the date of earliest conversion, using the effective yield
method.
6. Early
Redemption of Convertible Promissory Notes
Should
early redemption of convertible promissory notes occur, the unamortized portion
of the associated deferred charges and debt discount would be fully written off
and the early redemption premium, if any, will be recognized as an expense upon
its occurrence. All such related charges, if material, would be aggregated and
included in a separate line, charges on early redemption of convertible
promissory notes, which would be included in ordinary activities on the
consolidated statements of operations as required by SFAS No.145, “Rescission of FASB Statements No.
4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections”.
Pursuant
to the provisions of agreements in connection with 3% convertible promissory
notes, certain of investors may require the company to redeem the 3% Convertible
Promissory Notes at 100% of the principal amount, plus any accrued and unpaid
interest, plus an amount representing a 20% internal rate of return on the then
outstanding principal amount in the event of a default, or if the Company’s
actual EPS in any fiscal year is less than 80% of the respective EPS target. The
Company accounts for such potential liability of 20% internal rate of return on
the then outstanding principal amount in accordance with SFAS No. 5, “Accounting for
Contingencies”.
7. Revenue
Recognition
For hotel
management services, the Company recognizes revenue in the period when the
services are rendered and collection is reasonably assured.
For tour
services, the Company recognizes services-based revenue when the services have
been performed. Guangdong Tianma International Travel Service Co., Ltd
(“Tianma”) offers independent leisure travelers bundled packaged-tour products,
which include both air-ticketing and hotel reservations. Tianma’s packaged-tour
products cover a variety of domestic and international destinations.
Tianma
organizes inbound and outbound tour and travel packages, which can incorporate,
among other things, air and land transportation, hotels, restaurants and tickets
to tourist destinations and other excursions. Tianma books all elements of such
packages with third-party service providers, such as airlines, car rental
companies and hotels, or through other tour package providers and then resells
such packages to its clients. A typical sale of tour services is as
follows:
|
1.
|
Tianma,
in consultation with sub-agents, organizes a tour or travel package,
including making reservations for blocks of tickets, rooms, etc. with
third-party service providers. Tianma may be required to make deposits,
pay all or part of the ultimate fees charged by such service providers or
make legally binding commitments to pay such fees. For air-tickets, Tianma
normally books a block of air tickets with airlines in advance and pays
the full amount of the tickets to reserve seats before any tours are
formed. The air tickets are usually valid for a certain period of time. If
the pre-packaged tours do not materialize and are eventually not formed,
Tianma will resell the air tickets to other travel agents or customers.
For hotels, meals and transportation, Tianma usually pays an upfront
deposit of 50-60% of the total cost. The remaining balance is then settled
after completion of the tours.
|
|
2.
|
Tianma,
through its sub-agents, advertises tour and travel packages at prices set
by Tianma and sub-agents.
|
|
3.
|
Customers
approach Tianma or its appointed sub-agents to book an advertised packaged
tour.
|
|
4.
|
The
customers pay a deposit to Tianma directly or through its appointed
sub-agents.
|
|
5.
|
When
the minimum required number of customers (which number is different for
each tour based on the elements and costs of the tour) for a particular
tour is reached, Tianma will contact the customers for tour confirmation
and request full payment. All payments received by the appointed
sub-agents are paid to Tianma prior to the commencement of the
tours.
|
|
6.
|
Tianma
will then make or finalize corresponding bookings with outside service
providers such as airlines, bus operators, hotels, restaurants, etc. and
pay any unpaid fees or deposits to such
providers.
|
Tianma is
the principal in such transactions and the primary obligor to the third-party
providers, regardless of whether it has received full payment from its
customers. In addition, Tianma is also liable to the customers for any claims
relating to the tours, such as accidents or tour services. Tianma has adequate
insurance coverage for accidental loss arising during the tours. The Company
utilizes a network of sub-agents who operate strictly in Tianma’s name and can
only advertise and promote the business of Tianma with the prior approval
of Tianma.
For
advertising services, the Company recognizes revenue in the period when
advertisements are either aired or published.
8. Stock-based
Compensation
In
December 2004, the Financial Accounting Standards Board (“FASB”) issued
Statement of Financial Accounting Standards (“SFAS”) No. 123R,“Share-Based Payment” , a
revision to SFAS No. 123,
“Accounting for
Stock-Based Compensation” , and superseding APB Opinion No. 25, “Accounting for Stock Issued to
Employees” and its related implementation guidance. Effective
January 1, 2006, the Company adopted SFAS 123R, using a modified prospective
application transition method, which establishes accounting for stock-based
awards in exchange for employee services. Under this application, the Company is
required to record stock-based compensation expense for all awards granted after
the date of adoption and nonvested awards that were outstanding as of the date
of adoption. SFAS 123R requires that stock-based compensation cost is measured
at grant date, based on the fair value of the award, and recognized in expense
over the requisite services period.
Common
stock, stock options and warrants issued to other than employees or directors in
exchange for services are recorded on the basis of their fair value, as required
by SFAS No. 123R, which is measured as of the date required by EITF
Issue 96-18,
“Accounting for Equity
Instruments That Are Issued to Other Than Employees for Acquiring, or in
Conjunction with Selling, Goods or Services ”. In accordance with
EITF 96-18, the non-employee stock options or warrants are measured at
their fair value by using the Black-Scholes option pricing model as of the
earlier of the date at which a commitment for performance to earn the equity
instruments is reached (“performance commitment date”) or the date at which
performance is complete (“performance completion date”). The stock-based
compensation expenses are recognized on a straight-line basis over the shorter
of the period over which services are to be received or the vesting period.
Accounting for non-employee stock options or warrants which involve only
performance conditions when no performance commitment date or performance
completion date has occurred as of reporting date requires measurement at the
equity instruments then-current fair value. Any subsequent changes in the market
value of the underlying common stock are reflected in the expense recorded in
the subsequent period in which that change occurs.
9. Income
Taxes
The
Company accounts for income taxes under SFAS No. 109, “Accounting for Income Taxes”.
Under SFAS 109, deferred tax assets and liabilities are provided for the future
tax effects attributable to temporary differences between the financial
statement carrying amounts of assets and liabilities and their respective tax
bases, and for the expected future tax benefits from items including tax loss
carry forwards.
Deferred
tax assets and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary differences are
expected to be recovered or reversed. Under SFAS 109, the effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
10. Foreign
Currency Translation
The
assets and liabilities of the Company’s subsidiaries and variable interest
entities (VIEs) denominated in currencies other than United States (“U.S.”)
dollars are translated into U.S. dollars using the applicable exchange rates at
the balance sheet date. For statement of operations’ items, amounts denominated
in currencies other than U.S. dollars were translated into U.S. dollars using
the average exchange rate during the period. Equity accounts were translated at
their historical exchange rates. Net gains and losses resulting from translation
of foreign currency financial statements are included in the statements of
stockholders’ equity as accumulated other comprehensive income (loss). Foreign
currency transaction gains and losses are reflected in the statements of
operations.
11. Consolidation of variable interest
entity
In
accordance with FIN 46R, VlEs are generally entities that lack sufficient equity
to finance their activities without additional financial support from other
parties or whose equity holders lack adequate decision making ability. All VIEs
with which the Company is involved must be evaluated to determine the primary
beneficiary of the risks and rewards of the VIE. The primary beneficiary is
required to consolidate the VIE for financial reporting purposes.
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the
Board of' Directors of:
Network
CN, Inc. and Subsidiaries
We have
audited the accompanying balance sheet of Network CN, Inc. as of December 31,
2007, and the related statements of operations, changes in stockholders' equity
and cash flows for the years
ended December 31, 2007 and 2006. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight
Board (United States). Those standards require that we plan and perform the
audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures
in the financial statements. An audit also includes assessing the accounting
principles used and
significant estimates made by management, as well as evaluating the overall
financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our
opinion the financial statements referred to above present fairly in all
material respects, the
financial position of Network CN, Inc. as of December 31, 2007 and the results
of its operations
and its cash flows for the years ended December 31, 2007 and 2006 in conformity
with
accounting principles generally accepted in the United States of
America.
WEBB
& COMPANY, P.A.
Certified
Public Accountants
Boynton
Beach, Florida
March 12,
2008
1501
Corporate Drive, Suite 150 • Boynton Beach, FL 33426
Telephone:
(561) 752-1721 • Fax: (561) 734-8562
www.cpawebb.com
F-1
 |
Jimmy
C.H. Cheung & Co
Certified
Public Accountants
(A
member of Kreston International)
|
Registered
with the Public Company
Accounting
Oversight Board
|
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the
Board of Directors of:
Network
CN Inc.
We have
audited the consolidated balance sheet of Network CN Inc. and subsidiaries as of
December 31, 2007 and the related statements of operations, stockholders’
equity and cash flows for the years ended December 31, 2007 and 2006. These
financial statements are the responsibility of the Company’s management. Our
responsibility is to express an opinion on these financial statements based on
our audits. We did not audit the financial statements of the ultimate holding
company, which statements reflect total assets of $2.1 million for 2007. Those
statements were audited by other accountants whose reports have been furnished
to us, and our opinion, insofar as it relates to the amounts included for the
ultimate holding company is based on the reports of other
accountants.
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 audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits of the financial
statements 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 Network CN Inc. and
subsidiaries as of December 31, 2007 and the results of its operations and its
cash flows for the years ended December 31, 2007 and 2006, in conformity with
accounting principles generally accepted in the United States of
America.
/s/ Jimmy
C.H. Cheung & Co
JIMMY
C.H. CHEUNG & CO
Certified
Public Accountants
Hong
Kong
Date:
July 29, 2008
|
1607
Dominion Centre, 43 Queen’s Road East, Wanchai, Hong Kong
Tel:
(852) 25295500 Fax: (852) 28651067
Email:
jchc@krestoninternational.com.hk
Website:
http://www.jimmycheungco.com
|
 |
F-2
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2007 AND 2006
|
NOTE
2
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
|
|
(A)
Basis of Presentation
The
consolidated financial statements of the Company have been prepared in
accordance with accounting principles generally accepted in
the United States of America.
(B)
Principles of Consolidation
The
consolidated financial statements include the financial statements of
Network CN Inc., its subsidiaries and its variable interest entities
(VIEs). In May 2006, the management of the Company decided to discontinue
the business and wind down the operations of Teda (Beijing) Hotels
Management Limited, a wholly owned subsidiary which has been accounted for
as discontinued operations since the fourth quarter of 2006 and the wind
down process was yet to be completed as of December 31, 2007. All
significant intercompany transactions and balances have been eliminated
upon consolidation.
In
accordance with Interpretation No. 46R, Consolidation of Variable Interest
Entities (“FIN 46R”), VIEs are generally entities that lack sufficient
equity to finance their activities without additional financial support
from other parties or whose equity holders lack adequate decision making
ability. All VIEs with which the Company is involved must be evaluated to
determine the primary beneficiary of the risks and rewards of the VIE. The
primary beneficiary is required to consolidate the VIEs for financial
reporting purposes. The Company has concluded that Tianma and Quo
Advertising are VIEs and that the Company is the primary beneficiary.
Under the requirements of FIN 46R the Company consolidated the financial
statements of Tianma and Quo Advertising as VIEs of the
Company.
|
|
|
(C)
Use of Estimates
In
preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
the disclosure of contingent assets and liabilities as of the date of the
financial statements and the reported amounts of revenues and expenses
during the reported period. Actual results could differ from those
estimates. Differences from those estimates are reported in the period
they become known and are disclosed to the extent they are material to the
financial statements taken as a whole.
(D)
Cash and Cash Equivalents
Cash
includes cash on hand, cash accounts, and interest bearing savings
accounts placed with banks and financial institutions. For purposes of the
cash flow statements, the Company considers all highly liquid investments
with original maturities of three months or less at the time of purchase
to be cash equivalents. As of December 31, 2007 and 2006, the Company had
no cash equivalents.
(E)
Prepayments for advertising operating rights
Prepayments
for advertising operating rights are measured at cost less accumulated
amortization and impairment losses. Cost includes prepaid expenses
directly attributable to the acquisition of advertising operating rights.
Such prepaid expenses are in general charged to the consolidated
statements of operations on a straight-line basis over the operating
period. The operating periods of the existing advertising operating rights
range from 16 months to 20 years. All the costs expected to be amortized
after 12 months of the balance sheet date are classified as non-current
assets.
An
impairment loss is recognized when the carrying amount of the prepayments
for advertising operating rights exceeds the sum of the undiscounted cash
flows expected to be generated from the advertising operating right’s use
and eventual disposition. An impairment loss is measured as the amount by
which the carrying amount exceeds the fair value of the asset calculated
using a discounted cash flow analysis.
|
F-7
|
(F)
Equipment, Net
Equipment
is stated at cost, less accumulated depreciation. Depreciation is provided
using the straight-line method over the estimated useful life of the
assets, which is from three to five years. When equipment is retired or
otherwise disposed of, the related cost and accumulated depreciation are
removed from the respective accounts, and any gain or loss is
reflected in the statement of operations. Repairs and maintenance costs on
equipment are expensed as incurred.
(G)
Intangible Rights, Net
Intangible
rights are stated at cost, less accumulated amortization and provision for
impairment loss. Intangible rights that have indefinite useful lives are
not amortized. Other intangible rights with finite useful lives are
amortized on straight-line basis over their estimated useful lives of 16
months to 20 years. The amortization methods and estimated useful lives of
intangible rights are reviewed regularly.
(H)
Impairment of Long-Lived Assets
Long-lived
assets, including intangible rights with definite lives, are reviewed for
impairment whenever events or changes in circumstance indicate that the
carrying amount of the assets may not be recoverable. An intangible right
that is not subject to amortization is reviewed for impairment annually or
more frequently whenever events or changes in circumstances indicate that
the carrying amount of the asset may not be recoverable. An
impairment loss is recognized when the carrying amount of a long-lived
asset and intangible right exceeds the sum of the undiscounted cash flows
expected to be generated from the asset’s use and eventual disposition. An
impairment loss is measured as the amount by which the carrying amount
exceeds the fair value of the asset calculated using a discounted cash
flow analysis.
(I)
Deferred Charges, Net
Deferred
charges are fees and expenses directly related to an issuance of
convertible promissory notes, including placement agents’ fee. Deferred
charges are capitalized and amortized over the life of the convertible
promissory notes using the effective interest method. Amortization of
deferred charges is included in interest expense on the consolidated
statements of operations while the unamortized balance is included in
deferred charges on the consolidated balance
sheet.
|
F-8
|
(J)
Convertible Promissory Notes and Warrants
In
2007, the Company issued 12% convertible promissory note and warrants and
3% convertible promissory notes and warrants. As of December 31, 2007, the
warrants and embedded conversion feature were classified as equity under
EITF 00-19,
“Accounting for
Derivative Financial Instruments Indexed to, and Potentially Settled in, a
Company’s Own Stock” and met
the other criteria in paragraph 11(a) of SFAS 133, “Accounting for Derivative
Instruments and Hedging Activities”. Such classification
will be reassessed at each balance sheet date. The Company allocated the
proceeds of the convertible promissory notes between convertible
promissory notes and the financial instruments related to warrants
associated with convertible promissory notes based on their relative fair
values at commitment date. The fair value of the financial instruments
related to warrants associated with convertible promissory notes was
determined utilizing the Black-Scholes option pricing model and the
respective allocated proceeds to warrants is recorded in additional
paid-in capital. The embedded beneficial conversion feature
associated with convertible promissory notes was recognized and measured
by allocating a portion of the proceeds equal to the intrinsic value of
that feature to additional paid-in capital in according to EITF Issue No.
98-5, “Accounting for Convertible
Securities with Beneficial Conversion Features or Contingently Adjustable
Conversion Ratio” and EITF Issue No. 00-27, “Application of Issue No. 98-5
to Certain Convertible Instruments”.
The
portion of debt discount resulting from allocation of proceeds to the
financial instruments related to warrants associated with convertible
promissory notes is being amortized to interest expense over the life of
the convertible promissory notes, using the effective yield method. For
portion of debt discount resulting from allocation of proceeds to the
beneficial conversion feature, it is recognized as interest expenses over
the minimum period from the date of issuance to the date of earliest
conversion, using the effective yield method.
(K)
Early Redemption of Convertible Promissory Notes
Should
early redemption of convertible promissory notes occur, the unamortized
portion of the associated deferred charges and debt discount would be
fully written off and the early redemption premium, if any, will be
recognized as an expense upon its occurrence. All such related charges, if
material, would be aggregated and included in a separate line, charges on
early redemption of convertible promissory notes, which would be included
in ordinary activities on the consolidated statements of operations as
required by SFAS No.145,
“Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB
Statement No. 13, and Technical Corrections”
Pursuant
to the provisions of agreements in connection with 3% convertible
promissory notes, certain of investors may require the company to redeem
the 3% Convertible Promissory Notes at 100% of the principal amount, plus
any accrued and unpaid interest, plus an amount representing a 20%
internal rate of return on the then outstanding principal amount in the
event of a default, or if the Company’s actual EPS in any fiscal year is
less than 80% of the respective EPS target. The Company accounts for such
potential liability of 20% internal rate of return on the then outstanding
principal amount in accordance with SFAS No. 5, “Accounting for
Contingencies”.
(L)
Revenue Recognition
For
hotel management services, the Company recognizes revenue in the period
when the services are rendered and collection is reasonably
assured.
For
tour services, the Company recognizes services-based revenue when the
services have been performed. Guangdong Tianma International Travel
Service Co., Ltd (“Tianma”) offers independent leisure travelers bundled
packaged-tour products, which include both air-ticketing and hotel
reservations. Tianma’s packaged-tour products cover a variety of domestic
and international destinations.
Tianma
organizes inbound and outbound tour and travel packages, which can
incorporate, among other things, air and land transportation, hotels,
restaurants and tickets to tourist destinations and other excursions.
Tianma books all elements of such packages with third-party service
providers, such as airlines, car rental companies and hotels, or through
other tour package providers and then resells such packages to its
clients. A typical sale of tour services is as follows:
|
||
| 1. |
Tianma,
in consultation with sub-agents, organizes a tour or travel package,
including making reservations for blocks of tickets, rooms, etc. with
third-party service providers. Tianma may be required to make deposits,
pay all or part of the ultimate fees charged by such service providers or
make legally binding commitments to pay such fees. For air-tickets, Tianma
normally books a block of air tickets with airlines in advance and pays
the full amount of the tickets to reserve seats before any tours are
formed. The air tickets are usually valid for a certain period of time. If
the pre-packaged tours do not materialize and are eventually not formed,
Tianma will resell the air tickets to other travel agents or customers.
For hotels, meals and transportation, Tianma usually pays an upfront
deposit of 50-60% of the total cost. The remaining balance is then settled
after completion of the tours.
|
|
F-9
| 2. | Tianma, through its sub-agents, advertises tour and travel packages at prices set by Tianma and sub-agents. | |
| 3. | Customers approach Tianma or its appointed sub-agents to book an advertised packaged tour. | |
| 4. | The customers pay a deposit to Tianma directly or through its appointed sub-agents. | |
| 5. | When the minimum required number of customers (which number is different for each tour based on the elements and costs of the tour) for a particular tour is reached, Tianma will contact the customers for tour confirmation and request full payment. All payments received by the appointed sub-agents are paid to Tianma prior to the commencement of the tours. | |
| 6. | Tianma will then make or finalize corresponding bookings with outside service providers such as airlines, bus operators, hotels, restaurants, etc. and pay any unpaid fees or deposits to such providers. | |
|
Tianma
is the principal in such transactions and the primary obligor to the
third-party providers, regardless of whether it has received full payment
from its customers. In addition, Tianma is also liable to the customers
for any claims relating to the tours, such as accidents or tour services.
Tianma has adequate insurance coverage for accidental loss arising during
the tours. The Company utilizes a network of sub-agents who operate
strictly in Tianma’s name and can only advertise and promote the business
of Tianma with the prior approval of Tianma.
For
advertising services, the Company recognizes revenue in the period when
advertisements are either aired or published.
(M)
Stock-based Compensation
In
December 2004, the Financial Accounting Standards Board (“FASB”) issued
Statement of Financial Accounting Standards (“SFAS”) No. 123R, “Share-Based Payment” ,
a revision to SFAS No. 123, “Accounting for Stock-Based
Compensation” , and superseding APB Opinion No. 25, “Accounting for Stock Issued to
Employees” and its related implementation guidance.
Effective January 1, 2006, the Company adopted SFAS 123R, using a modified
prospective application transition method, which establishes accounting
for stock-based awards in exchange for employee services. Under this
application, the Company is required to record stock-based compensation
expense for all awards granted after the date of adoption and nonvested
awards that were outstanding as of the date of adoption. SFAS 123R
requires that stock-based compensation cost is measured at grant date,
based on the fair value of the award, and recognized in expense over the
requisite services period.
Common
stock, stock options and warrants issued to other than employees or
directors in exchange for services are recorded on the basis of their fair
value, as required by SFAS No. 123R, which is measured as of the date
required by EITF Issue 96-18, “Accounting for Equity Instruments That
Are Issued to Other Than Employees for Acquiring, or in Conjunction with
Selling, Goods or Services ”. In accordance with EITF 96-18,
the non-employee stock options or warrants are measured at their fair
value by using the Black-Scholes option pricing model as of the earlier of
the date at which a commitment for performance to earn the equity
instruments is reached (“performance commitment date”) or the date at
which performance is complete (“performance completion date”).
The stock-based compensation expenses are recognized on a
straight-line basis over the shorter of the period over which services are
to be received or the vesting period. Accounting for non-employee stock
options or warrants which involve only performance conditions when no
performance commitment date or performance completion date has occurred as
of reporting date requires measurement at the equity instruments
then-current fair value. Any subsequent changes in the market value of the
underlying common stock are reflected in the expense recorded in the
subsequent period in which that change
occurs.
|
||
F-10
|
(N)
Income Taxes
The
Company accounts for income taxes under SFAS No. 109, “Accounting for Income
Taxes”. Under SFAS 109, deferred tax assets and liabilities are
provided for the future tax effects attributable to temporary differences
between the financial statement carrying amounts of assets and liabilities
and their respective tax bases, and for the expected future tax benefits
from items including tax loss carry forwards.
Deferred
tax assets and liabilities are measured using enacted tax rates expected
to apply to taxable income in the years in which those temporary
differences are expected to be recovered or reversed. Under SFAS 109, the
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment
date.
(O)
Comprehensive Income (Loss)
The
Company follows SFAS No. 130, “Reporting Comprehensive
Income” for the reporting and display of its comprehensive income
(loss) and related components in the financial statements and thereby
reports a measure of all changes in equity of an enterprise that results
from transactions and economic events other than transactions with
the shareholders. Items of comprehensive income (loss) are reported
in both the consolidated statement of operations and comprehensive loss
and the consolidated statement of stockholders’ equity.
(P)
Earnings (Loss) Per Common Share
Basic
earnings (loss) per common share are computed by dividing the net income
(loss) attributable to holders of common stock by the weighted average
number of shares of common stock outstanding during the period. Diluted
earnings (loss) per share is computed by dividing net income (loss) by the
weighted average number of common shares including the dilutive effect of
common share equivalents then outstanding.
The
diluted net loss per share is the same as the basic net loss per share for
the years ended December 31, 2007 and 2006 as all potential ordinary
shares including stock options and warrants are anti-dilutive and are
therefore excluded from the computation of diluted net loss per
share.
|
F-11
|
(Q)
Operating Leases
Leases
where substantially all the rewards and risks of ownership of assets
remain with the leasing company are accounted for as operating
leases. Payments made under operating leases are charged to the
consolidated statements of operations on a straight-line basis over the
lease period.
(R)
Foreign Currency Translation
The
assets and liabilities of the Company’s subsidiaries denominated in
currencies other than United States (“U.S.”) dollars are translated into
U.S. dollars using the applicable exchange rates at the balance sheet
date. For statement of operations’ items, amounts denominated in
currencies other than U.S. dollars were translated into U.S. dollars using
the average exchange rate during the period. Equity accounts were
translated at their historical exchange rates. Net gains and losses
resulting from translation of foreign currency financial statements are
included in the statements of stockholders’ equity as accumulated other
comprehensive income (loss). Foreign currency transaction gains and losses
are reflected in the statements of operations.
(S)
Fair Value of Financial Instruments
The
carrying value of the Company’s financial instruments, which consist
of cash, accounts receivables, prepaid expenses and other current assets,
accounts payable, accrued expenses and other payables, approximates fair
value due to the short-term maturities.
The
carrying value of the Company’s financial instruments related to warrants
associated with convertible promissory notes issued in 2007 is stated at a
value being equal to the allocated proceeds of convertible promissory
notes based on the relative fair value of notes and warrants. In the
measurement of the fair value of these instruments, the Black-Scholes
option pricing model is utilized, which is consistent with the Company’s
historical valuation techniques. These derived fair value estimates are
significantly affected by the assumptions used. The allocated value of the
financial instruments related to warrants associated with convertible
promissory notes is recorded as an equity, which does not require to
mark-to-market as of each subsequent reporting period ,
(T) Concentration of Credit
Risk
The
Company places its cash with various financial institutions. The
Company believes that no significant credit risk exists as these cash
investments are made with high-credit-qualify financial
institutions.
All
the revenue of the Company and a significant portion of the Company’s
assets are generated and located in China. The Company’s business
activities and accounts receivables are mainly from tour services and
advertising services. Deposits are usually collected from customers in
advance and the Company performs ongoing credit evaluation of its
customers. The Company believes that no significant credit risk exists as
credit loss.
|
F-12
|
(U)
Segmental Reporting
SFAS
No. 131,
“Disclosures
about Segments of an Enterprise and Related Information”
establishes standards for reporting information about operating segments
on a basis consistent with the Company’s internal organization structure
as well as information about geographical areas, business segments and
major customers in financial statements. The Company’s operating segments
are organized internally primarily by the type of services rendered. In
2007, the Company changed their operating segments as a result of change
of internal organization structure by management. It is the management’s
view that the services rendered by the Company are of three operating
segments: Media Network, Travel Network and Investment Holding in
2007.
(V)
Recent Accounting Pronouncements
In
September 2006, FASB issued SFAS 157, “Fair Value
Measurements”. This statement defines fair value and establishes a
framework for measuring fair value in generally accepted accounting
principles. More precisely, this statement sets forth a standard
definition of fair value as it applies to assets or liabilities, the
principal market (or most advantageous market) for determining fair value
(price), the market participants, inputs and the application of the
derived fair value to those assets and liabilities. The effective date of
this pronouncement is for all full fiscal and interim periods beginning
after November 15, 2007. The Company is currently evaluating the
impact of adopting SFAS 157 on its financial statements and related
disclosures.
In
February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities” which permit entities
to choose to measure many financial instruments and certain other items at
fair value that are not currently required to be measured at fair value.
SFAS 159 is effective for fiscal years beginning after November 15,
2007. The Company is currently evaluating the impact of adopting SFAS 159
on its financial statements and related disclosures.
In
December 2007, the FASB issued SFAS No. 141 (Revised), “Business Combinations”
(“SFAS No. 141 (R)”), replacing
SFAS No. 141,
“Business
Combinations” (“SFAS No. 141”), and
SFAS No. 160,
“Noncontrolling
Interests in Consolidated Financial Statements — an Amendment of ARB
No. 51” .
SFAS No. 141(R) retains the fundamental requirements of
SFAS No. 141, broadens its scope by applying the acquisition
method to all transactions and other events in which one entity obtains
control over one or more other businesses, and requires, among other
things, that assets acquired and liabilities assumed be measured
at fair value as of the acquisition date, that liabilities
related to contingent consideration be recognized at the
acquisition date and re-measured at fair value in each
subsequent reporting period, that acquisition-related costs be
expensed as incurred, and that income be recognized if the fair value
of the net assets acquired exceeds the fair value of the consideration
transferred. SFAS No. 160 establishes accounting and
reporting standards for non controlling interests (i.e. minority
interests) in a subsidiary, including changes in a parent’s ownership
interest in a subsidiary and requires, among other things,
that noncontrolling interests in subsidiaries be classified as a
separate component of equity. Except for the presentation and disclosure
requirements of SFAS No. 160, which are to be applied
retrospectively for all periods presented, SFAS No. 141 (R) and
SFAS No. 160 are to be applied prospectively in financial
statements issued for fiscal years beginning after December 15, 2008.
The Company is currently assessing the impact of adopting
SFAS No. 141 (R) and SFAS No. 160 on its
financial statements and related
disclosures.
|
F-13
|
NOTE
10
|
CONVERTIBLE
PROMISSORY NOTES AND WARRANTS
|
|
(a) 12%
Convertible Promissory Note and Warrants
|
|
|
On
November 12, 2007, the Company entered into a 12% Note and Warrant
Purchase Agreement with Wei An Developments Limited (“Wei An”) with
respect to the purchase by Wei An a convertible promissory note in the
principal account of $5,000,000 at interest rate of 12% per annum (the
“12% Convertible Promissory Note”). The 12% Convertible Promissory
Note is convertible into the Company’s common stock at the conversion
price of $2.40 per share. Pursuant to the agreement, the Company is
subject to a commitment fee of 2% of the principal amount of the 12%
Convertible Promissory Note. The term of the 12% Convertible Promissory
Note is six months and the Company has the option to extend the 12%
Convertible Promissory Note by an additional six-month period at an
interest rate of 14% per annum and be subject to an additional commitment
fee of 2% of the principal amount of the note. However, the Company has
the right to prepay all or any portion of the amounts due under the note
at any time without penalty or premium.
|
|
|
In
addition, pursuant to the Warrant Purchase Agreement, the Company issued
warrants to purchase up to 250,000 shares of the Company’s common stock at
the exercise price of $2.30 per share, which are exercisable for a period
of two years.
|
|
|
(b) 3%
Convertible Promissory Notes and warrants
|
|
|
On
November 19, 2007, the Company, Quo Advertising and the Designated Holders
(as defined in the Purchase Agreement), entered into a 3% Note and Warrant
Purchase Agreement (the “Purchase Agreement”) with affiliated investment
funds of Och-Ziff Capital Management Group (the “Investors”). Pursuant to
the Purchase Agreement, the Company agreed to issue 3% Senior Secured
Convertible Notes due June 30, 2011 in the aggregate principal amount of
up to $50,000,000 (the “3% Convertible Promissory Notes”) and warrants to
acquire an aggregate amount of 34,285,715 shares of common stock of the
Company (the “Warrants”). The 3% Convertible Promissory Notes and
Warrants are issued and issuable in three tranches, with Convertible Notes
in the aggregate principal amount of $6,000,000, Warrants exercisable for
2,400,000 shares at $2.50 per share and Warrants exercisable for 1,714,285
shares at $3.50 per share, issued on 19 November, 2007, Convertible Notes
in the aggregate principal amount of $9,000,000, Warrants exercisable for
3,600,000 shares at $2.50 per share and Warrants exercisable for 2,571,430
shares at $3.50 per share issued on 28 November 2007, and Convertible
Notes in the aggregate principal amount of $35,000,000, Warrants
exercisable for 14,000,000 shares at $2.50 per share and Warrants
exercisable for 10,000,000 shares at $3.50 per share to be issued in
the third tranche, which was completed in January 2008. Please refer
to Note 18 - Subsequent Events for details. The warrants shall expire on
June 30, 2011, pursuant to the Purchase Agreement.
|
|
|
The
3% Convertible Promissory Notes bear interest at 3% per annum payable
semi-annually in arrears and mature on June 30, 2011. The 3% Convertible
Promissory Notes are convertible into shares of common stock at an initial
conversion price of $1.65 per share, subject to customary anti-dilution
adjustments. In addition, the conversion price will be adjusted
downward on an annual basis if the Company should fail to meet certain
annual earnings per share (“EPS”) targets described in the Purchase
Agreement. In the event of a default, or if the Company’s actual EPS for
any fiscal year is less than 80% of the respective EPS target, certain of
the investors may require the Company to redeem the 3% Convertible
Promissory Notes at 100% of the principal amount, plus any accrued and
unpaid interest, plus an amount representing a 20% internal rate of
return on the then outstanding principal amount. The Warrants grant the
holders the right to acquire shares of common stock at $2.50 and $3.50 per
share, subject to customary anti-dilution adjustments. The exercise price
of the Warrants will also be adjusted downward whenever the conversion
price of the 3% Convertible Promissory Notes is adjusted downward in
accordance with the provisions of the Purchase
Agreement.
|
F-20
|
As
of December 31, 2007, none of the conversion options and warrants
associated with the above convertible promissory notes was
exercised.
|
|
|
The
following table details the accounting treatment of the convertible
promissory notes:
|
|
12%
Convertible
Promissory
Note
|
3%
Convertible
Promissory
Notes
|
Total
|
|||||||||||
|
Proceeds
of convertible promissory notes
|
$
|
5,000,000
|
$
|
15,000,000
|
$
|
20,000,000
|
|||||||
|
Allocation
of proceeds:
|
|||||||||||||
|
Allocated
relative fair value of warrants
|
(333,670
|
)
|
(2,490,000
|
)
|
(2,823,670
|
)
|
|||||||
|
Allocated
intrinsic value of beneficial conversion feature
|
-
|
(4,727,272
|
)
|
(4,727,272
|
)
|
||||||||
|
Total
net proceeds of the convertible promissory notes as of December 31,
2007
|
4,666,330
|
7,782,728
|
12,449,058
|
||||||||||
|
Amortization
of debt discount for the year ended December 31, 2007
|
74,466
|
4,762,728
|
4,837,194
|
||||||||||
|
Net
carrying value of convertible promissory notes
|
$
|
4,740,796
|
$
|
12,545,456
|
$
|
17,286,252
|
|||||||
| Warrant and Beneficial Conversion Features | |
|
The
fair value of the financial instruments associated with warrants of both
12% convertible promissory note and 3% convertible promissory notes was
determined utilizing Black-Scholes option pricing model, which is
consistent with the Company’s historical valuation methods. The following
assumptions and estimates were used in the Black-Scholes option pricing
model: (1) 12% convertible promissory note: volatility of 182%; an average
risk-free interest rate of 3.52%; dividend yield of 0%; and an expected
life of 2 years, (2) 3% convertible promissory notes: volatility of 47%;
an average risk-free interest rate of 3.30%; dividend yield of 0%; and an
expected life of 3.5 years.
|
F-21
|
Both
the warrants and embedded conversion features issued in connection with
12% convertible promissory note and 3% convertible promissory notes meet
the criteria of EITF 00-19, “Accounting for Derivative
Financial Instruments Indexed to, and Potentially Settled in, a Company's
Own Stock” for equity classification and also met the other
criteria in paragraph 11(a) of SFAS 133, “Accounting for Derivative
Instruments and Hedging Activities” as of December
31, 2007. Accordingly, the conversion features do not require derivative
accounting. The intrinsic value of beneficial conversion feature is
calculated in according to EITF Issue No. 98-5, “Accounting for Convertible
Securities with Beneficial Conversion Features or Contingently Adjustable
Conversion Ratio” and EITF Issue No. 00-27, “Application of Issue No. 98-5
to Certain Convertible Instruments” . For 3%
convertible promissory note, as the effective conversion price after
allocating a portion of the proceeds to the warrants was less than the
Company’s market price of common stock at commitment date, it was
considered to have a beneficial conversion feature while for 12%
convertible promissory note, no beneficial conversion feature existed. The
value of beneficial conversion feature is recorded as a reduction in the
carrying value of the convertible promissory notes against additional
paid-in capital. As 3% convertible promissory notes are convertible at the
date of issuance, the respective debt discount being equal to the value of
beneficial conversion feature of $4,727,272 is fully amortized through
interest expense as of the date of issuance.
|
|
| Amortization of Deferred Charges and Debt Discount | |
|
The
amortization of deferred charges and debt discount for the year ended
December 31, 2007 were as follows:
|
|
Warrants
|
Conversion
Features
|
Deferred
Charges
|
Total
|
||||||||||||||
|
12%
convertible promissory note
|
$
|
74,466
|
$
|
-
|
$
|
19,301
|
$
|
93,767
|
|||||||||
|
3%
convertible promissory notes
|
35,456
|
4,727,272
|
9,856
|
4,772,584
|
|||||||||||||
|
Total
|
$
|
109,922
|
$
|
4,727,272
|
$
|
29,157
|
$
|
4,866,351
|
|||||||||
F-22
|
ITEM
13.
|
EXHIBITS
|
The
following Exhibits are filed as part of this Amendment No.1 to Annual Report on
Form 10-KSB:
|
23.1
|
Consent
of independent auditors Webb & Company, P.A. *
|
|
23.2
|
Consent
of independent auditors Jimmy C.H. Cheung & Co. *
|
|
24.1
|
Power
of Attorney (included in the Signatures section of this
report).
|
|
31.1
|
Rule
13a-15(e)/15d-15(e) Certification by the Chief Executive Officer.
*
|
|
31.2
|
Rule
13a-15(e)/15d-15(e) Certification by the Chief Financial Officer.
*
|
|
32.1
|
Certification
by the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
*
|
|
32.2
|
Certification
by the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
*
|
*
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
Date:
August 11, 2008
|
NETWORK
CN INC.
|
|
By:
/s/ Godfrey Hui
|
|
Godfrey
Hui
|
|
Chief
Executive Officer
|
POWER
OF ATTORNEY
Each
person whose signature appears below appoints Godfrey Hui his or her
attorney-in-fact, with full power of substitution and re-substitution, to sign
any and all amendments to this report on Form 10-KSB/A of Network CN Inc., and
to file them, with all their exhibits and other related documents, with the
Securities and Exchange Commission, ratifying and confirming all that their
attorney-in-fact and agent or his or her substitute or substitutes may lawfully
do or cause to be done by virtue of this appointment. In accordance with the
Exchange Act, this report has been signed below by the following persons on
behalf of the Registrant and in the capacities and on the dates
indicated:
|
Name
|
Title
|
Date
|
|
|
/s/
Godfrey Hui
|
Director
and Chief Executive Officer
|
August 11,
2008
|
|
|
Godfrey
Hui
|
|||
|
/s/
Daley Mok
|
Director
and Chief Financial Officer
|
August 11,
2008
|
|
|
Daley
Mok
|
|||
|
/s/
Daniel So
|
Managing
Director
|
August 11,
2008
|
|
|
Daniel
So
|
|||
|
/s/
Stanley Chu
|
Director
|
August 11,
2008
|
|
|
Stanley
Chu
|
|||
|
/s/
Peter Mak
|
Director
|
August 11,
2008
|
|
|
Peter
Mak
|