SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-Q /A
(Amendment No.
1)
x
QUARTERLY REPORT UNDER
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the
quarterly period ended September 30, 2008
or
o
TRANSITION REPORT UNDER
SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the
transition period from _____________ to ___________
Commission
File Number 33-19048-NY
AMERICAN METAL
& TECHNOLOGY, INC.
(Exact
Name of Small Business Issuer as specified in its charter)
Delaware
|
22-2856171
|
(State or other jurisdiction of incorporation or
organization)
|
(I.R.S. employer identification
no.)
|
|
633
W. 5
th
Street, 28
th
Floor
Los
Angeles, CA 90071
|
|
|
(Address of principal executive offices) (Zip Code)
|
|
|
|
|
|
Registrant's telephone number, including area code:
(213)
223-2321
|
|
Indicate
by check mark whether the Issuer:
(1) Has
filed all reports required to be filed by Section 13 or 15(d) of the Exchange
Act during the past 12 months (or for such shorter period that the registrant
was required to file such reports):
Yes
o
No
x
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
Large
Accelerated Filer
|
o
|
Accelerated
Filer
|
o
|
|
|
|
|
Non-Accelerated
Filer
|
o
|
Smaller
Reporting Company
|
x
|
(2) Has
been subject to such filing requirements for the past 90 days.
Yes
x
No
o
10,720,268
shares of the registrant's Common Stock, $.0001 per share, were outstanding as
of November 12, 2008.
AMERICAN
METAL & TECHNOLOGY, INC.
TABLE OF
CONTENTS
FORM
10-Q /A
|
PART
I FINANCIAL INFORMATION
|
|
|
|
|
Item Number
|
|
Page
|
|
|
|
Item
1.
|
Financial
Statements
|
3
|
|
|
|
|
Consolidated Balance
Sheet as of September 30, 2008 (Unaudited)
|
3
|
|
|
|
|
Consolidated
Statements of Income and Other Comprehensive Income for the Three Months
and Nine Months Ended September 30, 2008 and
2007 (Unaudited)
|
4
|
|
|
|
|
Consolidated
Statements of Cash Flows for The Three Months and Nine Months Ended
September 30, 2008 and 2007 (Unaudited)
|
5
|
|
|
|
|
Notes
to Financial Statements
|
6 -
16
|
|
|
|
Item
2.
|
Management’s
Discussion and Analysis of Financial Condition or Plan of
Operation
|
17
|
|
|
|
Item
3.
|
Qualitative
and Quantitative Disclosures About Market Risk
|
22
|
|
|
|
Item
4T.
|
Controls
and Procedures
|
23
|
|
|
|
|
PART
II OTHER INFORMATION
|
23
|
|
|
|
Item
1.
|
Legal
Proceedings
|
23
|
|
|
|
Item
2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
23
|
|
|
|
Item
3.
|
Defaults
upon Senior Securities
|
23
|
|
|
|
Item
4.
|
Submission
of Matters to a Vote of Security Holders
|
23
|
|
|
|
Item
5.
|
Other
Information
|
23
|
|
|
|
Item
6.
|
Exhibits
and Reports on Form 8-K
|
24
|
|
|
|
|
Signatures
|
24
|
PART
I. FINANCIAL INFORMATION
ITEM
1. FINANCIAL STATEMENTS
AMERICAN
METAL & TECHNOLOGY, INC. AND SUBSIDIARIES
|
CONSOLIDATED
BALANCE SHEET
|
AS
OF SEPTEMBER 30, 2008
|
(UNAUDITED)
|
|
ASSETS
|
Current
Assets
|
|
|
|
Cash
and cash equivalents
|
|
$
|
6,433,189
|
|
Accounts
receivable - net
|
|
|
3,629,696
|
|
Investment
in marketable securities
|
|
|
73,828
|
|
Other
receivables
|
|
|
145,909
|
|
Advances
to suppliers
|
|
|
961,826
|
|
Inventories
|
|
|
732,938
|
|
Total
Current Assets
|
|
|
11,977,387
|
|
|
|
|
|
|
Property,
Plant And Equipment, net
|
|
|
4,405,240
|
|
|
|
|
|
|
Construction
in Progress
|
|
|
1,748,805
|
|
|
|
|
|
|
Intangible
Assets, net
|
|
|
701,136
|
|
|
|
|
|
|
Total
Assets
|
|
$
|
18,832,569
|
|
|
|
|
|
|
LIABILITIES
AND SHAREHOLDERS' EQUITY
|
|
|
|
|
|
Current
Liabilities
|
|
|
|
|
Accounts
payable
|
|
$
|
1,165,856
|
|
Accrued
liabilities and other payables
|
|
|
76,208
|
|
Amount
due to related parties
|
|
|
1,260,132
|
|
Unearned
revenue
|
|
|
25,079
|
|
|
|
|
|
|
Total
Current Liabilities
|
|
|
2,527,274
|
|
|
|
|
|
|
Commitments
|
|
|
-
|
|
|
|
|
|
|
Shareholders'
Equity
|
|
|
|
|
Common
stocks; $0.0001 par value, 30,000,000 shares authorized,
10,720,268
shares issued and outstanding
|
|
|
1,072
|
|
Additional
paid in capital
|
|
|
7,786,114
|
|
Deferred
expense-warrants
|
|
|
(45,841
|
)
|
Statutory
reserve
|
|
|
1,294,597
|
|
Accumulated
other comprehensive income
|
|
|
1,904,758
|
|
Retained
earnings
|
|
|
5,364,594
|
|
|
|
|
|
|
Total
Stockholders' Equity
|
|
|
16,305,294
|
|
|
|
|
|
|
Total
Liabilities and Shareholders' Equity
|
|
$
|
18,832,569
|
|
|
|
|
|
|
The
accompanying notes are an integral part of the consolidated financial
statements.
|
AMERICAN
METAL & TECHNOLOGY, INC. AND SUBSIDIARIES
|
CONSOLIDATED
STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME
|
FOR
THE THREE MONTH AND NINE MONTH PERIODS ENDED SEPTEMBER 30, 2008 AND
2007
|
(UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
month periods ended
|
|
|
Nine
month periods ended
|
|
|
|
September
30
|
|
|
September
30
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
sales
|
|
$
|
4,353,422
|
|
|
$
|
2,738,896
|
|
|
$
|
14,336,775
|
|
|
$
|
7,210,970
|
|
Cost
of goods sold
|
|
|
(3,027,594
|
)
|
|
|
(1,781,008
|
)
|
|
|
(9,772,407
|
)
|
|
|
(4,817,465
|
)
|
Gross
profit
|
|
|
1,325,829
|
|
|
|
957,888
|
|
|
|
4,564,369
|
|
|
|
2,393,505
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling
expenses
|
|
|
(9,887
|
)
|
|
|
(5,262
|
)
|
|
|
(40,604
|
)
|
|
|
(19,520
|
)
|
Impairment
of goodwill
|
|
|
(120,128
|
)
|
|
|
-
|
|
|
|
(120,128
|
)
|
|
|
-
|
|
Operating
and administrative expenses
|
|
|
(512,989
|
)
|
|
|
(391,833
|
)
|
|
|
(1,354,247
|
)
|
|
|
(936,545
|
)
|
Total
operating expenses
|
|
|
(643,004
|
)
|
|
|
(397,095
|
)
|
|
|
(1,514,979
|
)
|
|
|
(956,065
|
)
|
Income
from operations
|
|
|
682,825
|
|
|
|
560,793
|
|
|
|
3,049,390
|
|
|
|
1,437,440
|
|
Other
income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
206,021
|
|
|
|
5,408
|
|
|
|
206,021
|
|
|
|
7,490
|
|
Gain
on disposal of marketable securities
|
|
|
45,416
|
|
|
|
-
|
|
|
|
45,416
|
|
|
|
-
|
|
Other
expense
|
|
|
(28,349
|
)
|
|
|
-
|
|
|
|
(28,349
|
)
|
|
|
(2,418
|
)
|
Total
other income
|
|
|
223,087
|
|
|
|
5,408
|
|
|
|
223,087
|
|
|
|
5,072
|
|
Income
before minority interests
|
|
|
905,912
|
|
|
|
566,201
|
|
|
|
3,272,477
|
|
|
|
1,442,512
|
|
Minority
interests
|
|
|
(9,693
|
)
|
|
|
(6,777
|
)
|
|
|
(9,693
|
)
|
|
|
(6,644
|
)
|
Net
income
|
|
|
915,605
|
|
|
|
572,978
|
|
|
|
3,282,170
|
|
|
|
1,449,156
|
|
Other
comprehensive items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized
loss from marketable securities
|
|
|
(39,479
|
)
|
|
|
-
|
|
|
|
(117,401
|
)
|
|
|
-
|
|
Foreign
currency translation adjustment
|
|
|
127,650
|
|
|
|
170,380
|
|
|
|
1,028,067
|
|
|
|
362,752
|
|
Comprehensive
income
|
|
$
|
1,003,776
|
|
|
$
|
743,358
|
|
|
$
|
4,192,836
|
|
|
$
|
1,811,908
|
|
Basic
weighted average shares outstanding
|
|
|
10,430,606
|
|
|
|
9,386,993
|
|
|
|
10,411,993
|
|
|
|
8,012,302
|
|
Basic
net earnings per share
|
|
$
|
0.09
|
|
|
$
|
0.06
|
|
|
$
|
0.32
|
|
|
$
|
0.18
|
|
Diluted
weighted average shares outstanding
|
|
|
10,430,606
|
|
|
|
9,405,873
|
|
|
|
10,411,993
|
|
|
|
8,042,613
|
|
Diluted
net earnings per share
|
|
$
|
0.09
|
|
|
$
|
0.06
|
|
|
$
|
0.32
|
|
|
$
|
0.18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of the consolidated financial
statements.
|
AMERICAN
METAL & TECHNOLOGY, INC. AND SUBSIDIARIES
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
FOR
THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 2008 AND
2007
|
(UNAUDITED)
|
|
|
2008
|
|
|
2007
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
Net
Income
|
|
$
|
3,282,170
|
|
|
$
|
1,449,156
|
|
Adjustments
to reconcile net income to
|
|
|
|
|
|
|
|
|
net
cash provided by operating activities:
|
|
|
|
|
|
|
|
|
Minority
interest
|
|
|
(9,693
|
)
|
|
|
(6,644
|
)
|
Impairment
of goodwill
|
|
|
120,128
|
|
|
|
|
|
Issuance
of warrants for services
|
|
|
54,955
|
|
|
|
-
|
|
Gain
on disposal of marketable securities
|
|
|
(45,416
|
)
|
|
|
-
|
|
Bad
debt expenses
|
|
|
(40,444
|
)
|
|
|
-
|
|
Depreciation
and amortization
|
|
|
298,230
|
|
|
|
218,104
|
|
(Increase)/decrease
in assets:
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
(2,096,776
|
)
|
|
|
392,902
|
|
Note
receivable
|
|
|
-
|
|
|
|
(61,154
|
)
|
Other
receivables
|
|
|
34,359
|
|
|
|
56,679
|
|
Inventory
|
|
|
(140,659
|
)
|
|
|
(26,379
|
)
|
Advance
to suppliers
|
|
|
83,070
|
|
|
|
218,005
|
|
Prepaid
expenses
|
|
|
-
|
|
|
|
-
|
|
Accounts
payable
|
|
|
357,393
|
|
|
|
193,380
|
|
Other
payable and accrued expenses
|
|
|
(40,597
|
)
|
|
|
27,839
|
|
Unearned
revenue
|
|
|
10,871
|
|
|
|
54,117
|
|
|
|
|
|
|
|
|
|
|
Net
Cash Provided By Operating Activities
|
|
|
1,867,589
|
|
|
|
2,516,005
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
Additions
to construction in progress
|
|
|
(1,306,389
|
)
|
|
|
-
|
|
Cash
paid for acquisition of minority interest
|
|
|
(92,566
|
)
|
|
|
-
|
|
Purchase
of equipment and leasehold improvements
|
|
|
(1,384,585
|
)
|
|
|
(2,130
|
)
|
|
|
|
|
|
|
|
|
|
Net
Cash Used in Investing Activities
|
|
|
(2,783,540
|
)
|
|
|
(2,130
|
)
|
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
|
Cash
received on stock issuance
|
|
|
-
|
|
|
|
3,275,562
|
|
Purchase
of marketable securities
|
|
|
(44,621
|
)
|
|
|
-
|
|
Proceeds
(Payments) from (to) related party loan
|
|
|
908,665
|
|
|
|
(234,339
|
)
|
|
|
|
|
|
|
|
|
|
Net
Cash Provided By Financing Activities
|
|
|
864,044
|
|
|
|
3,041,223
|
|
|
|
|
|
|
|
|
|
|
Net
Increase (decrease) in Cash and Cash Equivalents
|
|
|
(51,907
|
)
|
|
|
5,555,098
|
|
|
|
|
|
|
|
|
|
|
Effects
of Exchange Rate Change in Cash
|
|
|
447,903
|
|
|
|
127,738
|
|
|
|
|
|
|
|
|
|
|
Cash
and Cash Equivalents-Beginning Balance
|
|
|
6,037,193
|
|
|
|
787,444
|
|
|
|
|
|
|
|
|
|
|
Cash
and Cash Equivalents-Ending Balance
|
|
$
|
6,433,189
|
|
|
$
|
6,470,280
|
|
|
|
|
|
|
|
|
|
|
Supplement
disclosure of cash flow information:
|
|
|
|
|
|
|
|
|
Income
taxes paid
|
|
$
|
-
|
|
|
$
|
4,638
|
|
Interest
expenses paid
|
|
$
|
-
|
|
|
$
|
485
|
|
Non
Cash Transaction:
|
|
|
|
|
|
|
|
|
Numbers
of share issued due to reorganization
|
|
$
|
-
|
|
|
$
|
1,223,295,573
|
|
Numbers
of share issued due to acquisition of minority interest
|
|
$
|
383,555
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of the consolidated financial
statements.
|
AMERICAN
METAL & TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
1.
Organization and description of business
On June
1, 2007, American Metal & Technology, Inc. formally changed its name from
Murray United Development Corporation to American Metal & Technology,
Inc.
The
Company was incorporated on October 13, 1987 under the laws of the State of
Delaware. It was organized to further develop and exploit commercially certain
technology for a rotary internal combustion engine that would utilize
alternative fuels. The patent and related rights to the use of the technology
have been assigned to the Company. These rights were subsequently assigned
pursuant to the terms of the Stock Purchase Agreement dated November 6, 2006
discussed below.
The
Company entered into a Stock Purchase Agreement on November 6, 2006 (the "Stock
Purchase Agreement") with American Metal Technology Group, a Nevada corporation
(“AMTG"), pursuant to which the Company acquired one hundred (100%) percent of
AMTG's outstanding common stock from the AMTG Stockholders and AMTG became
a wholly-owned subsidiary of the company in a two step reverse
takeover transaction on May 22, 2007. In connection with this
transaction, and in addition to the 173,253,434 shares of common stock
outstanding immediately prior to closing, the Company issued 1,213,295,563
shares to the stockholders and consultants of AMTG, (1,142,388,273 shares to
AMTG's former shareholders, including 20,000,000 shares of common stock issues
to AMTG as investment upon completion of the due diligence period to
the Stock Purchase Agreement, and redistributed proportionally to AMTG's
shareholders as of May 22, 2007, and 70,907,300 shares to AMTG's
consultants). These shares represent more than eighty five (85%) of the
Company's issued and outstanding shares of voting capital stock on a fully
diluted basis, and therefore the former shareholders of AMTG and its consultants
effectively have control of the Company. In addition, as a condition of
the closing of the Stock Purchase Agreement, the Company issued an additional
10,000,000 shares of common stock to a former officer and director of the
Company in connection with the cancellation of all indebtedness to him, and his
assumption of all liabilities and the assignment all assets of the Company
immediately prior to closing. AMTG is now a wholly owned subsidiary
of the Company.
The
exchange of shares with AMTG has been accounted for as a reverse acquisition
under the purchase method of accounting since the shareholders of AMTG obtained
control of the consolidated entity. Accordingly, the combination of the two
companies has been recorded as a recapitalization of AMTG, with AMTG being
treated as the continuing entity. The historical financial statements
presented herein are those of AMTG. The continuing company has retained December
31 as its fiscal year end.
Reflecting
the change of ownership, the Company filed a Certificate of Amendment
to its Certificate of Incorporation to change its name to American Metal
& Technology, Inc., which became effective June 1,
2007.
The
Company now through AMTG via its wholly owned subsidiaries, Beijing Tong Yuan
Heng Feng Technology Co., Ltd. and American Metal Technology (Lang Fang) Co.,
Ltd., is mainly in the business of manufacturing and sales of high-precision
investment casting and metal fabrication products in the People's Republic of
China (“
China
”)
. The Company's production
involves high-precision investment casting and machined products, including
valves, pipe fittings, etc.
AMERICAN
METAL & TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
1. Organization and description of
business -
continued
AMTG was
incorporated on January 13, 2004 under the laws of the State of Nevada. On June
1, 2004, AMTG entered into an Equity Purchase Agreement with Beijing Sande
Technology (Holding) Co., Ltd. (“
BST”)
to acquire 80%
ownership of Beijing Tong Yuan Heng Feng Technology Co., Ltd. (“
BJTY”)
. As a result, AMTG
issued 7,200 shares of his pre-split common stock to BST in exchange for 80%
ownership of BJTY. On August 2, 2004, AMTG incorporated American Metal
Technology (Lang Fang) Co., Ltd. (“
AMLF”)
in Hebei, China, for
the purpose of expanding the production facility of BJTY. On August 8,
2004, AMTG and AMLF together entered into an equity purchase agreement with
Beijing Sande Shang Mao Co., Ltd. (BSS
)
for the remaining 20% of
BJTY. As a result, AMTG which issued 1,800 shares of pre-split common stock to
BSS and AMLF becomes the owner of 20% shareholder of BJTY. AMTG later acquired
the 20% ownership of BJTY from AMLF and owns 100% of BJTY. On November 12, 2004,
AMTG effectuated a forward split of all the outstanding shares of common stock
on a 1,000 for 1 basis. On November 2005, AMTG sold 5% of BJTY to an unrelated
party for $240,000. As set forth below, the Company repurchased such shares
pursuant to an Equity Purchase Agreement executed on September 22,
2008.
On
December 3, 2007, American Metal Technology, Inc. (AMTI
, "We, "Us, "Our"
or the
"Company"
) implemented
a reverse stock split at the ratio of one (1) for one hundred fifty (150), such
that stockholders shall receive one (1) share of common stock of the Company for
every one hundred fifty (150) shares of common stock currently held, with no
change in the par value of shares of common stock.
The
reverse stock split will reduce the number of shares of Common Stock outstanding
from approximately 1,560,374,357 shares to approximately 10,402,496 shares. In
connection with the implementation of the reverse stock split, the board of
directors and shareholders each approved by written consent as of November 15,
2007 to amend the Certificate of Incorporation (the "Amendment") of the Company
to decrease the number of authorized shares from two billion (2,000,000,000)
shares of common stock and one hundred million (100,000,000) shares of preferred
stock to thirty million (30,000,000) shares of common stock and ten million
(10,000,000) shares of preferred stock. The par value of the Company's stock
shall remain at $.0001 per share for both the common and preferred
shares.
On
September 22, 2008, the Company entered in an Equity Purchase Agreement with Wen
Ge Ren (the "Seller"), a shareholder owning a 5% stock interest in Beijing Tong
Yuan Heng Feng Technology Co., Ltd ("BJTY"), which is 95% owned through the
Company's wholly owned subsidiary American Metal Technology Group. Pursuant to
the Equity Purchase Agreement, the Company shall pay to the Seller US $390,299.
The Seller has agreed to accept from the Company the equivalent of US $92,566.46
or RMB 629,451.91 and balance of US $297,732.57 pursuant to the issuance of such
number of shares of restricted Common Stock based upon the amount equal to 75%
of the average of the closing bid price of the Company's Common Stock for the
five-day trading period commencing on September 18, 2008. Pursuant to the Equity
Purchase Agreement, the Company shall deliver to the Seller the cash
consideration and duly executed share certificates representing the underlying
shares registered in the name of the Seller within 60 days from the date of
signature. The Company delivered the cash consideration and issued 317,581
shares to the Seller prior to September 30, 2008.
2.
Summary of significant accounting policies
The
accompanying unaudited financial statements of the Company have been prepared in
accordance with generally accepted accounting principles for interim financial
information. Accordingly, they do not include all of the information
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of normal
recurring adjustments) considered necessary for a fair presentation have been
included. Operating results for the interim periods are not necessarily
indicative of the results for any future period. These statements should be read
in conjunction with the Company's audited financial statements and notes thereto
for the fiscal year ended December 31, 2007. The results of the nine month
period ended September 30, 2008 are not necessarily indicative of the results to
be expected for the full fiscal year ending December 31, 2008.
AMERICAN
METAL & TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
2. Summary of significant accounting
policies -
continued
Principal of
consolidation
The
consolidated financial statements of American Metal Technology, Inc. reflect the
activities of the following subsidiaries:
Subsidiaries
|
Percentage
Of
Ownership
|
|
American
Metal Technology Group, (“AMTG") Co., Ltd.
|
U.S.
|
100
|
%
|
American
Metal Technology (Lang Fang) Co., Ltd.
|
P.R.C.
|
100
|
%
|
Beijing
Tong Yuan Heng Feng (Technology) Co., Ltd.
|
P.R.C.
|
100
|
%
|
The
accompanying financial statements have been prepared in accordance with
accounting principles generally accepted in the United States of America. All
significant inter-company transactions and accounts have been eliminated in the
consolidation.
Use of
estimates
The
preparation of consolidated financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the consolidated financial statements and the amount of revenues and
expenses during the reporting periods. Management makes these estimates using
the best information available at the time the estimates are made. However,
actual results could differ materially from those results.
Cash and cash equivalents
and
concentration of credit risk
For
Statement of Cash Flows purposes, the Company considers all cash on hand and in
banks, including accounts in book overdraft positions, certificates of deposit
and other highly-liquid investments with maturities of three months or less,
when purchased, to be cash and cash equivalents. As of September 30, 2008, cash
and cash equivalent amounted to $6,433,189. The cash is deposited
with four banks in China and is not insured.
Accounts
receivable
The
Company's policy is to maintain reserves for potential credit losses for
accounts receivable. Management reviews the composition of accounts receivable
and analyzes historical bad debts, customer concentrations, customer credit
worthiness, current economic trends and changes in customer payment patterns to
evaluate the adequacy of these reserves. As of September 30, 2008, the Company
had accounts receivable of $3,629,696, net of allowance of $37,165.
Advances to
suppliers
The
Company makes advances to certain vendors for the purchase of material. As of
September 30, 2008, the advances to suppliers amounted to $961,826.
Revenue
recognition
The
Company's revenue recognition policies are in compliance with Staff accounting
bulletin (SAB) 104. Sales revenue is recognized at the date of shipment to
customers when a formal arrangement exists, the price is fixed or determinable,
the delivery is completed, no other significant obligations of the Company exist
and collectability is reasonably assured. Payments received before all of
the relevant criteria for revenue recognition are satisfied are recorded as
unearned revenue. Unearned revenue as of September 30, 2008 amounted to
$25,079.
AMERICAN
METAL & TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
2. Summary of significant accounting
policies -
continued
The
Company's revenue consists of invoiced value of goods, net of a value-added tax
(VAT). No product return or sales discount allowance is made as products
delivered and accepted by customers are normally not returnable and sales
discount is normally not granted after products are delivered.
Foreign currency
translation
The
reporting currency of the Company is the US dollar. The Company uses their local
currency, Renminbi (RMB), as their functional currency. Results of operations
and cash flow are translated at average exchange rates during the period, and
assets and liabilities are translated at the unified exchange rate at the end of
the period. Translation adjustments resulting from this process are included in
accumulated other comprehensive income in the statement of shareholders' equity.
Transaction gains and losses that arise from exchange rate fluctuations on
transactions denominated in a currency other than the functional currency are
included in the results of operations as incurred.
Translation
adjustments resulting from this process are included in accumulated other
comprehensive income in the consolidated statement of shareholders' equity.
Accumulated other comprehensive income included unrealized loss from available
for sale securities of $105,000 and translation adjustment of $2,009,758 as of
September 30, 2008.
Income
taxes
The
Company utilizes SFAS No. 109, "Accounting for Income Taxes," which requires the
recognition of deferred tax assets and liabilities for the expected future tax
consequences of events that have been included in the financial statements or
tax returns. Under this method, deferred income taxes are recognized for the tax
consequences in future years of differences between the tax bases of assets and
liabilities and their financial reporting amounts at each period end based on
enacted tax laws and statutory tax rates applicable to the periods in which the
differences are expected to affect taxable income. Valuation allowances are
established, when necessary, to reduce deferred tax assets to the amount
expected to be realized. At September 30, 2008 and 2007, there was no
significant book to tax differences.
Local PRC Income
Tax
The
Company is governed by the Income Tax Law of the PRC concerning subsidiaries
located in PRC. Under the Income Tax Laws of the PRC, Chinese enterprises are
generally subject to an income tax at an effective rate of 33% (30% state income
taxes plus 3% local income taxes) on income reported in the statutory financial
statements after appropriate tax adjustments.
The
Company does not have any significant deferred tax asset or liabilities in the
PRC tax jurisdiction.
Beginning
January 1, 2008, the new Enterprise Income Tax (EIT) law replaced the existing
laws for Domestic Enterprises (DES) and Foreign Invested Enterprises (FIEs). The
new standard EIT rate of 25% replaced the 33% rate previously applicable to both
DES and FIEs. The Company evaluated the effect of the new EIT law on its
financial position, and the two years tax exemption, three years 50% tax
reduction tax holiday for production-oriented FIEs will be
continued.
Segment
reporting
Statement
of Financial Accounting Standards No. 131 ("SFAS 131"), "Disclosure about
Segments of an Enterprise and Related Information" requires use of the
"management approach" model for segment reporting. The management approach model
is based on the way a company's management organizes segments within the company
for making operating decisions and assessing performance. Reportable segments
are based on products and services, geography, legal structure, management
structure, or any other manner in which management disaggregates a
company.
AMERICAN
METAL & TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
2. Summary of significant accounting
policies -
continued
SFAS No.
131 has no effect on the Company's consolidated financial statements as the
Company operates in one reportable business segment - manufacture and marketing
high-precision investment casting and metal fabrication products in
China.
Recent accounting
pronouncements
In
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements”, which is an amendment of Accounting Research
Bulletin (“ARB”) No. 51. This statement clarifies that a
noncontrolling interest in a subsidiary is an ownership interest in the
consolidated entity that should be reported as equity in the consolidated
financial statements. This statement changes the way the consolidated
income statement is presented, thus requiring consolidated net income to be
reported at amounts that include the amounts attributable to both parent and the
noncontrolling interest. This statement is effective for the fiscal
years, and interim periods within those fiscal years, beginning on or after
December 15, 2008. Based on current conditions, the Company does not
expect the adoption of SFAS 160 to have a significant impact on its results of
operations or financial position.
In
December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business
Combinations.” This statement replaces FASB Statement No. 141,
“Business Combinations.” This statement retains the fundamental requirements in
SFAS 141 that the acquisition method of accounting (which SFAS 141 called
the purchase method) be used for all business combinations and for an acquirer
to be identified for each business combination. This statement defines the
acquirer as the entity that obtains control of one or more businesses in the
business combination and establishes the acquisition date as the date that
the acquirer achieves control. This statement requires an acquirer to recognize
the assets acquired, the liabilities assumed, and any noncontrolling interest in
the acquiree at the acquisition date, measured at their fair values as of that
date, with limited exceptions specified in the statement. This statement applies
prospectively to business combinations for which the acquisition date is on or
after the beginning of the first annual reporting period beginning on or after
December 15, 2008. The Company does not expect the adoption of SFAS 141 to have
a significant impact on its results of operations or financial
position.
In March,
2008, the FASB issued FASB Statement No. 161, “Disclosures about Derivative
Instruments and Hedging Activities”. The new standard is intended to improve
financial reporting about derivative instruments and hedging activities by
requiring enhanced disclosures to enable investors to better understand their
effects on an entity’s financial position, financial performance, and cash
flows. It is effective for financial statements issued for fiscal years and
interim periods beginning after November 15, 2008, with early application
encouraged. The new standard also improves transparency about the location and
amounts of derivative instruments in an entity’s financial statements; how
derivative instruments and related hedged items are accounted for under
Statement 133; and how derivative instruments and related hedged items affect
its financial position, financial performance, and cash flows.
FASB
Statement No. 161 achieves these improvements by requiring disclosure of the
fair values of derivative instruments and their gains and losses in a tabular
format. It also provides more information about an entity’s liquidity by
requiring disclosure of derivative features that are credit risk–related.
Finally, it requires cross-referencing within footnotes to enable financial
statement users to locate important. Based on current conditions, the Company
does not expect the adoption of SFAS 161 to have a significant impact on its
results of operations or financial position.
In May
2008, FSAB issued SFASB No.162, The Hierarchy of Generally Accepted Accounting
Principles. The pronouncement mandates that the GAAP hierarchy should
reside in the accounting literature as opposed to the audit
literature. This has the practical impact of elevating FASB
Statements of Financial Accounting Concepts in the GAAP
hierarchy. This pronouncement will become effective 60 days following
SEC approval. The Company does not believe this pronouncement will
impact its financial statements.
AMERICAN
METAL & TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
2. Summary of significant
accounting policies -
continued
In May
2008, FASB issued SFASB No. 163, Accounting for Financial Guarantee Insurance
Contracts-an interpretation of FASB Statement No. 60. The scope of
the statement is limited to financial guarantee insurance (and reinsurance)
contracts. The pronouncement is effective for fiscal years beginning
after December 31, 2008. The Company does not believe this
pronouncement will impact its financial statements.
3.
Marketable Securities
The
Company’s securities are classified as available-for-sale and, as such, are
carried at fair value. The securities comprised of shares of common stock of
third party customers and securities purchased. Securities classified as
available-for-sale may be sold in response to changes in interest rates,
liquidity needs, and for other purposes. The Company does not currently have any
held-to-maturity or trading securities.
Unrealized
holding gains and losses for available-for-sale securities are excluded from
earnings and reported as a separate component of stockholder’s equity. Realized
gains and losses for securities classified as available-for-sale are reported in
earnings based upon the adjusted cost of the specific security
sold.
Marketable
securities classified as available for sale consisted of the following as of
September 30, 2008:
Marketable
Securities
|
|
Cost
|
|
|
Market
Value at September 30, 2008
|
|
|
Unrealized
loss for the nine month period ended September 30, 2008
|
|
|
Accumulated
Unrealized Loss
|
|
|
|
|
|
|
|
|
|
|
|
|
Various
|
|
$
|
178,828
|
|
|
$
|
73,828
|
|
|
$
|
117,401
|
|
$
|
105,000
|
As of
September 30, 2008, the Company evaluated its marketable securities holdings by
valuing the securities according to the quoted price of the securities on the
stock exchange.
4.
Other receivables
Other
receivable of $145,909 is comprised of notes receivable of $117,822 and other
receivable amounting $28,087 as of September 30, 2008. Both are due from
unrelated parties, unsecured, due on demand, and interest free.
5.
Inventories
Inventories
consisted of the followings at September 30, 2008:
|
2008
|
Supplies
and raw materials
|
535,188
|
Work
in process
|
141,909
|
Finished
goods
|
55,841
|
Totals
|
732,938
|
AMERICAN
METAL & TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
6.
Property, Plant and Equipment
Property,
Plant and Equipment consist of the following at September 30,
2008:
Building
and improvements
|
986,022
|
Vehicle
|
114,970
|
Machinery
and equipments
|
4,298,672
|
Totals
|
5,399,664
|
Less:
accumulated depreciation
|
(994,424)
|
|
4,405,240
|
Depreciation
expenses for the nine month period ended September 30, 2008 and 2007 were
$256,925 and $182,327, respectively.
7.
Intangible assets
The
intangible assets comprised of following at September 30, 2008:
Land
use right, net
|
615,650
|
Permits,
net
|
85,486
|
Total
|
701,136
|
Land
use right:
Per the
People's Republic of China's governmental regulations, the Government owns all
land. However, the government grants the user a “land use right” (the Right) to
use the land. The Company has recognized the amounts paid for the acquisition of
rights to use land as intangible asset and amortizing over a period of fifty
years.
American
Metal Technology (Lang Fang) Co., Ltd. acquired land use rights during the year
ended 2004 for a total amount of $669,185. The land use right is for fifty
years. The intangible assets consist of the followings as of September 30,
2008:
|
2008
|
Intangible
assets
|
669,185
|
Less:
accumulated amortization
|
53,535
|
|
615,650
|
Permits:
Permits
amounted to $85,486 as of September 30, 2008 and are amortized over 5
years:
|
|
2008
|
Prepaid
expenses
|
|
$
|
197,275
|
Less:
accumulated amortization
|
|
|
111,789
|
|
|
$
|
85,486
|
AMERICAN
METAL & TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
7. Intangible assets -
continued
Intangible
assets of the Company are reviewed annually as to whether their carrying value
has become impaired. The Company considers assets to be impaired if the carrying
value exceeds the future projected cash flows from related operations. The
Company also re-evaluates the periods of amortization to determine whether
subsequent events and circumstances warrant revised estimates of useful lives.
As of September 30, 2008 the Company expects these assets to be fully
recoverable.
Total
amortization expenses for the nine month period ended September, 2008 and 2007
amounted to $41,305 and $35,777 respectively. Amortization expenses for next
five years after September 30, 2008 are as follows:
1
year after September 30, 2008
|
|
$
|
52,839
|
2 year after September 30, 2008
|
|
|
52,839
|
3 year after September 30, 2008
|
|
|
19,960
|
4 year after September 30, 2008
|
|
|
13,384
|
5 year after September 30, 2008
|
|
|
13,384
|
Total
|
|
$
|
152,404
|
8.
Other payable and accrued expenses
Other
payable and accrued expenses amounted to $76,208 as of September 30, 2008. Other
payable and accrued expenses include taxes payables $15,111 and other accrued
expenses $61,097.
9.
Due to related parties
Due to
related parties amounted to $1,260,132 as of September 30, 2008. Due to related
parties includes $1,209,532 due to an entity, 35% of which is owned by Mr. Gao,
our President and CEO and $50,600 due to Mr. Gao. Due to related parties payable
is due on demand, interest free, and unsecured.
10.
Stockholders’ equity
Additional
paid in capital
The local
government in Lang Fang required the Company’s subsidiary American Metal
Technology (Lang Fang) Co., Ltd, to increase its investments in Lang Fang with
respect to its 2
nd
phase
construction. On May 8, 2008, the Board of Directors authorized the transfer of
$2,245,981 from the Company’s Retained Earnings to Paid in Capital.
Statutory
reserve
As
stipulated by the Company Law of the People's Republic of China (PRC), net
income after taxation can only be distributed as dividends after appropriation
has been made for the following:
i) Making
up cumulative prior years' losses, if any;
ii)
Allocations to the "Statutory surplus reserve" of at least 10% of income after
tax, as determined under PRC accounting rules and regulations, until the fund
amounts to 50% of the Company's registered capital;
iii)
Allocations of 5-10% of income after tax, as determined under PRC accounting
rules and regulations, to the Company's "Statutory common welfare fund", which
is established for the purpose of providing employee facilities and other
collective benefits to the Company's employees; and Statutory common welfare
fund is no longer required per the new cooperation law executed in
2006.
iv)
Allocations to the discretionary surplus reserve, if approved in the
shareholders' general meeting.
In
accordance with the Chinese Company Law, the Company has allocated 10% of its
net income to surplus. The amount allocated to the surplus reserve amounted to
$368,529 and $93,880 for the nine months ended September 30, 2008 and 2007,
respectively.
AMERICAN
METAL & TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
11.
Options and warrants
Stock
Options
In April
2002 the Company issued options to purchase 40,000 shares of common stock
at $3.00 per share. The options were issued to an employee under a non qualified
option plan. As of April, 2007, all options have expired. No options were issued
during the nine month period ended September 30, 2008. The following table
summarizes the options outstanding as of September 30, 2008:
|
|
Options
Outstanding
|
|
|
Weighted
Average Exercise Price
|
|
|
Aggregate
Intrinsic
Value
|
|
Outstanding,
January 1, 2007
|
|
|
40,000
|
|
|
$
|
3.00
|
|
|
$
|
-
|
|
Reclassified
from warrants
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Forfeited/Canceled
|
|
|
(40,000
|
)
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Outstanding,
December 31, 2007
|
|
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Reclassified
from warrants
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Forfeited/Canceled
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Outstanding,
September 30, 2008
|
|
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Warrants
As a
result of the exercises and expiration of warrants, the Company has no Class A
and Class B warrants as of December 31, 2007. 99,320 Class B
warrants, and 3,333 underwriter's B warrants expired on March 12,
2007.
AMERICAN
METAL & TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
11. Options and warrants -
continued
On March
15, 2008, the Company issued to CCG Investor Relations Partners LLC warrants to
purchase 50,000 shares to assist the Company in the execution of its investor
relations strategy.
The
following table summarizes the warrants outstanding as of September 30,
2008:
|
|
Warrants
outstanding
|
|
|
Weighted
Average Exercise Price
|
|
|
Aggregate
Intrinsic
Value
|
|
Outstanding,
January 1, 2007
|
|
|
102,653
|
|
|
$
|
0.15
|
|
|
$
|
-
|
|
Transferred
to options
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Forfeited/Canceled
(March 12, 2007)
|
|
|
(102,653
|
)
|
|
$
|
0.15
|
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Outstanding,
December 31, 2007
|
|
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Transferred
to options
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Granted
(3/15/2008)
|
|
|
50,000
|
|
|
$
|
5
|
|
|
$
|
-
|
|
Forfeited/Canceled
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Outstanding,
September 30, 2008
|
|
|
50,000
|
|
|
$
|
5
|
|
|
$
|
-
|
|
The
weighted average remaining contractual life of warrants outstanding is 3.5 years
as of September 30, 2008.
12.
Current vulnerability due to certain concentrations
BJTY and
AMLF’s operations are all carried out in the PRC. Accordingly, the Company’s
business, financial condition and results of operations may be influenced by the
political, economic and legal environments in the PRC, and by the general state
of the PRC's economy.
The
Company’s operations in the PRC are subject to specific considerations and
significant risks not typically associated with companies in North America and
Western Europe. These include risks associated with, among others, the
political, economic and legal environments and foreign currency exchange. The
Company's results may be adversely affected by changes in governmental policies
with respect to laws and regulations, anti-inflationary measures, currency
conversion and remittance abroad, and rates and methods of taxation, among other
things.
AMERICAN
METAL & TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
12. Current vulnerability
due to certain concentrations -
continued
Major customers and major
vendors
One major
customer accounted for 71% of the net revenue for the nine months ended
September 30, 2008. The Company had accounts receivable of $3,195,049 from
the customer as of September 30, 2008.
A majority of our
customers ultimately sell our products to users in Europe which subjects us to a
substantial risk of an economic downturn to Europe.
Mr. Gao,
our President and Chief Executive Officer and a Director, and Xin Yan Yuan, our
Secretary and a Director own 35% and 21.6%, respectively of a company now known
as Beijing Sande Technology (Holding) Co., Ltd. (“Beijing Sande”) which is a
Chinese Corporation which, in turn, owns approximately 20% of Beijing Micro
Matic Machinery, Ltd, which is the 71% customer referred to
above. The controlling interest of approximately 80% of Beijing Micro
Matic Machinery, Ltd. is owned by Denmark Micro Matic International SA,
(“Denmark Micro”) an entity registered in Denmark.
Three major
vendors provided 69% of the Company’s purchase of raw materials for the nine
months ended September 30, 2008. The Company had $483,752 of accounts payable to
those vendors as of September 30, 2008.
One major
customer accounted for 66% of the net sales for the nine months ended September
30, 2007. The Company had no accounts receivable from such customer as of
September 30, 2007.
One
vendor provided 64% of the Company's purchase of raw materials for the nine
months ended September 30, 2007. The Company had $222,367 of accounts payable to
these vendors as of September 30, 2007.
The
Company extends credit to its customers based upon its assessment of their
credit worthiness and generally does not require collateral. Credit losses have
not been significant.
13.
Commitments
Consulting
agreements:
On March
15, 2008, the Company signed a letter of engagement with CCG Investor Relations
Partners LLC. According to the terms of the agreement, CCG agreed to
assist the company in the execution of its investor relations strategy. The
agreement was for a twelve-month period and the Company agreed to pay $7,000 per
month to CCG and issue warrants to purchase 50,000 shares of the Company's
common stock at an exercise price of $5 per share. These warrants were recorded
at the fair value of $100,796 based on 70% volatility, 4.12% discount rate and
0% annual rate of quarterly dividends. The Company has been expensing the
fair value of these warrants over the term of the agreement.
During
the nine months ended September 30, 2008, the Company expensed $54,955 and
deferred $45,841 in the consolidated financial statements.
14. Acquisition of Minority
Interest
On
September 22, 2008, the Company entered in an Equity Purchase Agreement ("the
Agreement") with Wen Ge Ren (the "Seller"), a shareholder owning a 5% stock
interest in Beijing Tong Yuan Heng Feng Technology Co., Ltd ("BJTY"),
which was 95% owned through the Company's wholly owned subsidiary American
Metal Technology Group. Pursuant to the Agreement, the Company agreed
to pay to the Seller US $390,299. The Seller has agreed to accept from the
Company the equivalent of US $92,566.46 or RMB 629,451.91 and balance of US
$297,732.57 pursuant to the issuance of such number of shares of restricted
Common Stock based upon the amount equal to 75% of the average of the closing
bid price of the Company's Common Stock for the five-day trading period
commencing on September 18, 2008. The Company agreed to deliver to the
Seller the cash consideration and duly executed share certificates representing
the underlying shares registered in the name of the Seller within 60 days from
the date of signature. The Company delivered the cash consideration and issued
317,581 shares to the Seller prior to September 30, 2008.
The
following discussion and analysis provides information which we believe is
relevant to an assessment and understanding of our results of operations and
financial condition. This discussion should be read in conjunction with the
financial statements and notes thereto appearing elsewhere in this Form
10-Q.
Statements
in this Form 10-Q which are not statements of historical or current fact
constitute "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Such forward-looking statements
involve known and unknown risks, uncertainties and other unknown factors that
could cause our actual results to be materially different from the historical
results or from any future results expressed or implied by such forward-looking
statements. In addition to statements that explicitly describe such risks and
uncertainties, readers are urged to consider statements labeled with the terms
"believes," "belief," "intends," "anticipates" or "plans" to be uncertain and
forward-looking. The forward-looking statements contained herein are also
subject generally to other risks and uncertainties that are described from time
to time in our reports filed with the Securities and Exchange
Commission.
Critical
Accounting Policies and Estimates
The
preparation of financial statements and related disclosures in conformity with
U.S. generally accepted accounting principles and the Company's discussion and
analysis of its financial condition and operating results require the Company's
management to make judgments, assumptions, and estimates that affect the amounts
reported in its consolidated financial statements and accompanying notes.
Note 2 "Summary of Significant Accounting Policies" of Notes to
Consolidated Financial Statements in this Form 10-Q describes the significant
accounting policies and methods used in the preparation of the Company's
consolidated financial statements. Management bases its estimates on historical
experience and on various other assumptions it believes to be reasonable under
the circumstances, the results of which form the basis for making judgments
about the carrying values of assets and liabilities. Actual results may differ
from these estimates and such differences may be material.
Revenue
recognition
The
Company's revenue recognition policies are in compliance with Staff accounting
bulletin (SAB) 104. Sales revenue is recognized at the date of shipment to
customers when a formal arrangement exists, the price is fixed or determinable,
the delivery is completed, no other significant obligations of the
Company exist and collectability is reasonably assured. Payments received
before all of the relevant criteria for revenue recognition are satisfied are
recorded as unearned revenue. Unearned revenue as of September 30,
2008 amounted to $25,079.
The
Company's revenue consists of invoiced value of goods, net of a value-added tax
(VAT). No product return or sales discount allowance is made as products
delivered and accepted by customers are normally not returnable and sales
discount is normally not granted after products are delivered.
Allowance
for doubtful accounts
The
Company's policy is to maintain reserves for potential credit losses for
accounts receivable. Management reviews the composition of accounts receivable
and analyzes historical bad debts, customer concentrations, customer credit
worthiness, current economic trends and changes in customer payment patterns to
evaluate the adequacy of these reserves. As of September 30, 2008, the Company
had net accounts receivable of $3,629,696, net of allowance of
$37,165.
Inventory
valuation
Inventories
are valued at the lower of cost or market value using weighted average method.
Management compares the cost of inventory with the market value and an allowance
is made for writing down the inventory to its market value, if
lower.
Impairment
of long-lived assets
The
Company applies the provisions of Statement of Financial Accounting Standard No.
144,
"Accounting for the
Impairment or Disposal of Long-Lived Assets"
(
"FAS No. 144"
), issued by the
Financial Accounting Standards Board (
"FASB"
). FAS No. 144 requires
that long-lived assets be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable through the estimated undiscounted cash flows expected to result
from the use and eventual disposition of the assets. Whenever any such
impairment exists, an impairment loss will be recognized for the amount by which
the carrying value exceeds the fair value.
The
Company tests long-lived assets, including property, plant and equipment and
intangible assets subject to periodic amortization, for recoverability at least
annually or more frequently upon the occurrence of an event or when
circumstances indicate that the net carrying amount is greater than its fair
value. Assets are grouped and evaluated at the lowest level for their
identifiable cash flows that are largely independent of the cash flows of other
groups of assets. The Company considers historical performance and future
estimated results in its evaluation of potential impairment and then compares
the carrying amount of the asset to the future estimated cash flows expected to
result from the use of the asset. If the carrying amount of the asset exceeds
estimated expected undiscounted future cash flows, the Company measures the
amount of impairment by comparing the carrying amount of the asset to its fair
value. The estimation of fair value is generally measured by discounting
expected future cash flows as the rate the Company utilizes to evaluate
potential investments. The Company estimates fair value based on the information
available in making whatever estimates, judgments and projections are considered
necessary. There was an impairment of goodwill in the amount of $120,128
and $0 for the nine months ended September 30, 2008 and September 30,
2007.
Foreign
currency translation
The
reporting currency of the Company is the US dollar. The Company uses their local
currency, Renminbi (RMB), as their functional currency. Results of operations
and cash flow are translated at average exchange rates during the period, and
assets and liabilities are translated at the unified exchange rate at the end of
the period. Translation adjustments resulting from this process are included in
accumulated other comprehensive income in the statement of shareholders' equity.
Transaction gains and losses that arise from exchange rate fluctuations on
transactions denominated in a currency other than the functional
currency are included in the results of operations as
incurred.
Translation
adjustments resulting from this process are included in accumulated other
comprehensive income in the consolidated statement of shareholders' equity
included unrealized loss from available for sale securities of
$105,000 and translation adjustment of $2,009,758 as of September 30,
2008.
Income
taxes
The
Company utilizes SFAS No. 109,
"Accounting for Income
Taxes,"
which requires the recognition of deferred tax assets and
liabilities for the expected future tax consequences of events that have been
included in the financial statements or tax returns. Under this method, deferred
income taxes are recognized for the tax consequences in future years of
differences between the tax bases of assets and liabilities and their financial
reporting amounts at each period end based on enacted tax laws and statutory tax
rates applicable to the periods in which the differences are expected to affect
taxable income. Valuation allowances are established, when necessary, to reduce
deferred tax assets to the amount expected to be realized. At September 30, 2008
and 2007, there was no significant book to tax differences.
RESULTS OF
OPERATIONS
We design
and manufacture high-precision casting and machined parts based on blueprints
supplied by its customers. To set us apart from competition, we streamlined
production cycle by providing a one stop solution to include all three integral
processes in making high precision parts, which are molding design and
fabrication, high precision investment casting and CNC machining process. Our
products are almost exclusively component parts for use in final products, which
are either assembled or manufactured outside China or are manufactured and
assembled in China exported to foreign markets. Our primary focus
during 2008 has been to increase demand for our castings and machined parts
outside China, and we experienced significant growth in existing and new markets
with existing and new customers. We believe there is substantial
additional demand for our products and services.
To
capitalize on the increased demand for our products, we have undertaken
significant capital expansion and capital improvement efforts, utilizing most of
the net proceeds received from our equity financing in 2007 to expand and
enhance our manufacturing capabilities. Specifically, we have a phased plan to
expand our capacity. By the end of first quarter ended March 31,
2008, we completed the first phase of the expansion plan. Phase one entails a
53,819 square foot manufacturing space, 5 turning centers and 60 CNC Mazak
Lathe, 19 of which were delivered and became operational in the three months
ended December 31, 2007 and the three months ended March 31, 2008 and the last
of which became operational on or about April 7, 2008. All of the new
high-precision lathe machines are equal in size and capacity to the Company's
existing machines.
In March
2008, we announced we are planning to invest $3 million to build additional
facilities at our Langfang manufacturing center. The new facilities mark the
second phase of a three-phase plan to transform the Company’s capacity and
capabilities for the foreseeable future. This second phase of our three-phase
expansion plan will add two buildings totaling 71,041 square foot of
manufacturing space (a two story building) and 47,361 square foot for dormitory
space (a five story building), increasing annual capacity for molding design and
fabrication by 100%, casting products by 50% to 3,600 tons from 2,400 tons and
CNC lathe capacity by 25%. Construction is due to be completed in
December 2008, with full production beginning in January 2009.
On
September 22, 2008, the Company entered in an Equity Purchase Agreement ("the
Agreement") with Wen Ge Ren (the "Seller"), a shareholder owning a 5% stock
interest in Beijing Tong Yuan Heng Feng Technology Co., Ltd ("BJTY"), which is
95% owned through the Company's wholly owned subsidiary American Metal
Technology Group. Pursuant to the Agreement, the Company shall pay to the Seller
US $390,299. The Seller has agreed to accept from the Company the equivalent of
US $92,566.46 or RMB 629,451.91 and balance of US $297,732.57 pursuant to the
issuance of such number of shares of restricted Common Stock based upon the
amount equal to 75% of the average of the closing bid price of the Company's
Common Stock for the five-day trading period commencing on September 18, 2008.
The Company shall deliver to the Seller the cash consideration and duly executed
share certificates representing the underlying shares registered in the name of
the Seller within 60 days from the date of signature. The Company
delivered the cash consideration and issued 317,581 shares to the Seller prior
to September 30, 2008.
Revenue
Revenue
for the three months ended September 30, 2008 was $4,353,422 an increase of 59%
as compared to $2,738,896 for the three months ended September 30,
2007. Gross profit for the three months ended September 30, 2008, was
$1,325,829, or approximately 30% of revenues, compared to $957,888, or 35% of
revenues, for the same period in 2007.
Revenue
for the nine months ended September 30, 2008 was $14,336,775 an increase of 99%
as compared to $7,210,970 for the nine months ended September 30,
2007. Gross profit for the nine months ended September 30, 2008, was
$4,564,369, or 32% of revenues, compared to $2,393,505 for the same period in
2007.
The
increase in revenue was due to several factors, including, but not limited to,
greater production output as a result of increased capacity, effective
management to maximize the production capacity of our machinery, and an overall
rise in commodity prices. In particular, since June 30, 2007, we have
purchased and installed an additional 20 CNC MAZAK lathes, (bringing our total
to 60 lathes), including 1 machine installed in April 2008. The
additional machines increased our production capacity and accordingly, will
increase revenues based upon orders which we were previously unable to
fill. With continued efforts in implementing our business plan to
expand market share, we were able to fully utilize the new production capacity
with new orders and customers. We estimate that approximately 50% of our
increase in revenues is related to our increase in machines. In
addition, our management, after a careful and thorough study of our production
methods, made several changes to improve our production and
efficiency. For example, we increased the turning speed of the blade
in our lathe machines in order to produce more products within same time frame,
and, whereas previously we employed one quality inspector for every two
machines, where required we now allocate one inspector per
machine. Both of these changes provide us with greater utilization of
our machinery. We estimate that approximately 20% of our increase in
revenue is related to such effective management to maximize our production
capacity. Finally, our revenues increased as a result of pricing
changes related to the overall cost of commodities which we
utilize. We passed this price increase onto our
customers. We estimate that the remainder of our increase in revenue
and gross profit, or approximately 30%, is related to fluctuations in commodity
prices.
Expenses
from Operations
Total
expenses, comprised mostly of general and administrative expenses were
approximately $643,004 for the three month period ended September 30, 2008, a
net increase of $245,909 compared to $397,095 for the three month period ended
September 30, 2007.
Total
expenses, comprised mostly of general and administrative expenses were
approximately $1,514,979 for the nine month period ended September 30, 2008, a
net increase of $558,914 compared to $956,065 for the nine month period
ended September 30, 2007.
The
increase in operating expenses for the three month and nine month periods ended
September 30, 2008 was mainly due to increased depreciation and amortization
cost from the new MAZAK lathes which we purchased in 2007 and during the six
months ended June, 2008 and an increase in our workforce to operate the new
machines.
Interest
Income and Expense
Net
interest income for the three months ended September 30, 2008 was $206,021 as
compared to net interest income of $5,408 for the three months ended September
30, 2007.
Net
interest income for the nine months ended September 30, 2008 was $206,021 as
compared to net interest income of $7,490 for the nine months ended September
30, 2007
This
increase is primarily due to the increase in our cash and cash
equivalents.
Other
Income (Expense)
Other
expense for the three months ended September 30, 2008 was $28,349 as compared to
other expense of $0 for the three months ended September 30, 2007.
Other
expense for the nine months ended September 30, 2008 was $28,349 as compared to
other expense of $2,418 for the nine months ended September 30,
2007.
Net
Income
We had
net income of $915,605 for the three months ended September 30, 2008 an increase
of 59.8% as compared to net income of $572,978 for the three months ended
September 30, 2007.
We had
net income of $3,282,170 for the nine months ended September 30, 2008, an
increase of 126% as compared to net income of $1,449,156 for the nine months
ended September 30, 2007
The
increase was mainly due to an increase in revenue which increased 59% and 99%
compared with the three months and nine months ended September 30, 2007,
respectively, and an increase in gross profit which increased 38% and 91%
compared with the three months and nine months ended September 30, 2007,
respectively.
LIQUIDITY AND CAPITAL
RESOURCES
Our cash
and cash equivalents were $6,433,189 on September 30, 2008. We met
our liquidity needs through the revenue derived pursuant to the sale of our
precision metal castings and electronic circuit boards manufactured at
facilities controlled by our subsidiary corporations in the People’s Republic of
China, and the issuance of shares during the full year ended 2007 of our common
stock for cash.
Ultimately,
our success is dependent upon our ability to generate revenues from the sale of
precision metal casting and electronic circuit boards manufactured in facilities
located in the People’s Republic of China.
During
the nine month period ended September 30, 2008, net cash provided by operating
activities was $1,867,589, and net cash provided from financing activities was
$864,044.
Off-Balance
Sheet Arrangements
We have
no off-balance sheet arrangements.
Material
Commitments
None.
Purchase of Significant
Equipmen
t
The
Company is currently executing a phased plan for growth. The first phase
of the plan is now complete and the second phase is in process. We
anticipate that the second phase will be complete sometime during the last
quarter of 2008 or the first quarter 2009. We contemplate during this second
phase the purchase of both machinery and equipment over the next 12 months and
may include specialized casting equipment, CNC turning centers and additional
CNC lathe machines. Ultimately however, any additional machinery we
purchase shall be based upon the current and projected needs at the time of
purchase. At this stage the Company contemplates spending
approximately $3 million for construction for the phased growth, and between
approximately $.5 and $1 million for additional machinery and
equipment.
ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
As of
September 30, 2008 we have investments of $73,828 in marketable
securities. During the three months and nine months ended September
30, 2008, we recorded a gain of $569 and $45,416 on such
securities. Although these investments represent less than one (1%)
percent of our total assets, and, accordingly, do not represent a significant
component of our assets, there can be no assurance that there will not be
significant fluctuations in the equity markets that reduce the value of these
investments including, but not limited to, a total loss of the value of these
investments.
We
require substantial amounts of raw materials in our operations, including metals
and energy. We purchase all of our raw materials from outside sources, and our
metals purchases are from a select group of suppliers. As a result,
our purchases of metals are concentrated with a few suppliers and any
interruptions in their ability to supply these materials could have a material
adverse effect on our financial position, results of operations and/or cash
flows. The availability and price of raw materials may also be subject to
shortages in supply, suppliers’ allocations to other purchasers, and
interruptions in production by suppliers (including by reason of labor strikes
or work stoppages at our suppliers’ plants). In addition, although we
are subject to changes in exchange rates and worldwide price levels of raw
materials, our contracts with our suppliers provide that we are not responsible
for any 3-5% increase in commodity prices, including price increases resulting
from currency fluctuations. Our management has in the past and
intends in the future to pass any additional increases in price to our
customers.
ITEM 3. QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK -
continued
Our
subsidiary corporations in the People’s Republic of China conduct business in
the local currency and therefore, we are exposed to foreign currency exchange
risk resulting from fluctuations in foreign currencies. This risk could
adversely impact our results and financial condition. We believe our current
exposure to fluctuations in foreign currency exchange rates is immaterial, based
upon the aforementioned provisions with respect to price increases found in our
contracts with our suppliers. We have not entered into any foreign currency
exchange and option contracts to reduce our exposure to foreign currency
exchange risk and the corresponding variability in operating results as a result
of fluctuations in foreign currency exchange rates.
ITEM
4T. CONTROLS AND PROCEDURES
After
we filed our Form 10-KSB for the fiscal year ended December 31, 2007, we were
notified by the Securities and Exchange Commission (“SEC”) that the statement
which we filed with respect to our evaluation of our disclosure controls and
procedures was not in compliance with SEC regulations for reasons which include,
but are not limited to, our failure to provide our Management’s Annual Report on
Internal Control over Financial Reporting (the “Report”) and to specifically
refer to the framework utilized to evaluate the effectiveness of our internal
control over financial reporting. Due to these omissions, our principal
executive and financial officer determined that the Company’s Form 10-KSB for
the fiscal year ended December 31, 2007 was not in compliance with SEC
regulations and concluded that as of December 31, 2007 its disclosure controls
and procedures were ineffective to provide reasonable assurance that information
required to be disclosed by us in the reports that we file or submit under the
Exchange Act (i) is accumulated and communicated to our management, including
our Chief Executive Officer, as appropriate to allow timely decisions regarding
required disclosure and (ii) is
recorded,
processed, summarized and reported within the time periods specified in the
Commission’s rules and forms. Accordingly, we are filing an amended Form 10-KSB
with the Report and a reference to the framework utilized in management’s
evaluation.
In
view of the fact that we had not filed the amended Form 10-KSB for the fiscal
year ended December 31, 2007 as of the fiscal quarter ended September 30, 2008,
our principal executive and financial officer, after evaluating the
effectiveness of our “disclosure controls and procedures” (as defined in the
Securities Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e)), has concluded
that as of the fiscal quarter ended September 30, 2008 our disclosure controls
and procedures were ineffective to provide reasonable assurance that information
required to be disclosed by us in the reports that we file or submit under the
Exchange Act (i) is accumulated and communicated to our management, including,
our Chief Executive Officer and Principal Financial Officer, as appropriate to
allow timely decisions regarding required disclosure, and (ii) is recorded,
processed, summarized and reported within the time periods specified in the
Commission’s rules and forms.
There
have been no changes in our internal control over financial reporting identified
during the period covered by this report which have materially affected, or were
reasonably likely to materially affect, our internal control over financial
reporting.
PART
II - OTHER INFORMATION
ITEM
1. LEGAL PROCEEDINGS.
We know
of no material, existing or pending legal proceedings against our company, nor
are we involved as a plaintiff in any material proceeding or pending litigation.
There are no proceedings in which any of our directors, officers or affiliates,
or any registered or beneficial shareholder, is an adverse party or has a
material interest adverse to our interest.
ITEM 2. UNREGISTERED SALES OF EQUITY
SECURITIES AND USE OF PROCEEDS.
None.
ITEM
3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER
INFORMATION
None.
ITEM
6. EXHIBITS AND REPORTS ON FORM 8-K.
(A)
Exhibits
Exhibit Number
|
Description
|
33
|
Equity
Purchase Agreement*
|
(B) Reports on Form
8-K
(1)
|
Filed
July 22, 2008, the Company announced its financial results for the second
quarter ended June 30, 2008 as well as revised estimated for the full year
ending December 31, 2008.
|
(2)
|
Filed
on September 23, 2008, the Company entered in an Equity Purchase
Agreement.
|
|
|
*
Incorporated by reference to our Form 8-K filed with the US Securities and
Exchange Commission on September 23, 2008.
SIGNATURES
In
accordance with the requirements of the Exchange Act, the registrant caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
|
|
AMERICAN METAL & TECHNOLOGY,
INC.
|
|
|
|
(Registrant)
|
|
|
|
|
|
Date:
December 31, 2008
|
By:
|
/s/
Chen Gao
|
|
|
|
Chen
Gao
|
|
|
|
Title:
President and Chief Executive Officer
|
|
24
American Metal and Techn... (CE) (USOTC:AMGY)
Historical Stock Chart
From May 2024 to Jun 2024
American Metal and Techn... (CE) (USOTC:AMGY)
Historical Stock Chart
From Jun 2023 to Jun 2024