AMERICAN
BUSINESS HOLDING CORPORATION
FINANCIAL
STATEMENT FOOTNOTES
1.
Summary of Significant
Accounting Policies:
Industry:
American
Business Holding Corporation (the Company) was incorporated on September 9, 2004
in the State of Delaware with its resident agent located in
Delaware. The Company’s fiscal year end is December 31, a calendar
year. During September of 2004 the Company commenced operations with
the acquisition of Tissakin Ltd. (the Subsidiary). The Parent
Company issued 8,000,000 shares of its common stock in exchange for all of the
216,000 outstanding shares of the Subsidiary.
The
Subsidiary was incorporated in 1947 at Kinshasa, the then Belgian Congo under
the name Tissako Ltd. During the year 1960 the name was changed to
Tissakin Ltd. The Subsidiary is engaged in the manufacturing and sale
of bags for mainly agricultural packaging in the Democratic Republic of Congo
since 1998. The Subsidiary is the principal manufacturer of bags for
agricultural packaging in a country that produces coffee, cacao, manioc, rice,
sugar, maize, corn flour as well as tea and tobacco. The country’s
climate is tropical, yet mild, which allows for continuous agricultural
production throughout the year.
Cash and Cash
Equivalents
:
The
Company considers cash on hand and amounts on deposit with financial
institutions which have original maturities of three months or less to be cash
and cash equivalents.
Functional
Currency:
All
amounts in the Company’s financial statements and related footnotes are stated
in U.S. Dollars. The Company had no significant gains or losses from
foreign currency transactions and no material adjustments to the financial
statements for translation adjustments. The functional currency of
the Company is U.S. Dollars, but the Company does keep minimal amounts in the
local currency for transactions on a day to day basis in a country that uses
U.S. Dollars as well as its currency. The Company reviews its
compliance with Statement of Financial Accounting Standards (SFAS) n° 52 on a
quarterly basis.
Basis of
Accounting
:
The
Company’s financial statements are prepared in accordance with U.S. Generally
Accepted Accounting Principles (GAAP). Revenues and expenses
associated with the manufacture of packaging and sale are accounted for as
revenue and expense when sold. No extended warranties
exist.
Estimates and
adjustment:
The
Company’s management is of the opinion that all estimates and adjustment have
been made in accordance with Generally Accepted Accounting Principles in order
for the financial statements to not be misleading.
The
preparation of financial statements is in conformity with U.S. Generally
Accepted Accounting Principles (GAAP) 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 financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those
estimates.
AMERICAN
BUSINESS HOLDING CORPORATION
AND
SUBSIDIARY
NOTES TO
THE FINANCIAL STATEMENTS
The Accounting
Acquirer:
Prior to
the acquisition of the Subsidiary, the Company was a non-operating corporation
with nominal assets in the form of cash. The owners and management of
the Subsidiary, a private operating company, have operating control of the
Company as a result of the transaction. Therefore, this transaction
is a capital transaction in substance, rather than a business combination, in
the form of a share exchange. That is, the transaction is equivalent
to the issuance of stock by a private company, the Parent, for the stock of the
subsidiary which resulted in a re-capitalization of the Parent
Company. The accounting is identical to that resulting from a reverse
acquisition, except no goodwill or other intangible assets are recorded. Because
the Subsidiary Company is essentially then treated as the acquirer for
accounting purposes, the equity accounts are adjusted for the share exchange and
carried forward. Prior accumulated deficits of the Parent Company are
adjusted to additional paid in capital therefore carrying forward the
accumulated deficit or earnings of the Subsidiary Company.
Revenue
Recognition
:
Revenues
resulting from the manufacture of packaging are recognized when
sold. A deferred revenue account has been established in the
financial statements for deposits given in advance of sale.
Inventory:
Inventory
is accounted for at lower of standard cost or market. The
Company starts with standard cost approximating the weighted average cost basis
with direct labour, direct materials and production overhead
applied. Overhead applied is that of the production facility and does
not include general and administrative costs of its administration
office. There are no unusual or significant purchase commitments nor
are there liens against and pledges of inventories. The Company does
not hold an allowance for a decline in value to market value as the Company has
never had to reduce its inventory value below its cost. There also
have been no significant market declines subsequent to the date of these
financial statements.
Long-lived
Assets:
Long
lived assets, including property and equipment and certain intangible assets to
be held and used by the Company are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying value of the assets may not
be recoverable. Impairment losses are recognized if expected future
cash flows of the related assets are less than their carrying
values. Measurement of an impairment loss is based on the fair value
of the asset. Long-lived assets and certain identifiable intangibles
to be disposed of are reported at the lower of carrying amount or fair value
less cost to sell.
Property
and Equipment are first recorded at cost. Depreciation is computed
using the straight-line method over the estimated useful lives of the various
classes of assets as follows:
Computer
equipment 3 years
Vehicles 5 years
Furniture
and
fixtures 7 years
Plant and
plant
machinery
15 years
Office
and industrial
buildings 25 years
Maintenance
and repairs, as incurred, are charged to expense. Betterments and
renewals are capitalized in plant and equipment accounts. Cost and accumulated
depreciation applicable to items replaced or retired are eliminated from the
related accounts; gain or loss on the disposition thereof is included as
income.
AMERICAN
BUSINESS HOLDING CORPORATION
AND
SUBSIDIARY
NOTES TO
THE FINANCIAL STATEMENTS
Income
Taxes:
The
Parent Company utilizes the asset and liability method to measure and record
deferred income tax assets and liabilities. Deferred tax assets and
liabilities reflect the future income tax effects of temporary differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases and are measured using enacted tax
rates that apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. Deferred tax
assets are reduced by a valuation allowance when, in the opinion of management,
it is more likely than not that some portion or all of the deferred tax assets
will not be realized. Currently, the Company has no U.S. tax
responsibility to account for in the financial statements. To this
date the Parent Company has had no operating activity and therefore has no tax
liabilities or assets.
The
Subsidiary Company records tax expense in accordance with the tax laws of the
Democratic Republic of the Congo and has no other tax liabilities.
Fair Value of Financial
Instruments:
The
Company’s financial instruments include cash and cash equivalents, short-term
investments, accounts receivable, accounts payable and other
liabilities. The carrying amount of long-term debt, if used, to banks
approximates fair value based on interest rates that are currently available to
the Company for issuance of debt with similar terms and remaining
maturities. The carrying amounts of other financial instruments
approximate their fair value because of short-term maturities, currently; the
Company has no long-term obligations.
Earning Per
Share:
Basic
earnings per share (EPS) is computed by dividing earnings available to common
shareholders by the weighted-average number of common shares outstanding for the
period as required by the Financial Accounting Standards Board (FASB) under
Statement of Financial Accounting Standards (SFAS) n° 128, Earnings per Shares.
Diluted EPS reflects the potential dilution of securities that could share in
the earnings.
Concentrations of
Risk:
Financial
instruments, which potentially expose the Company to concentrations of credit
risk, consist principally of operating demand deposit accounts. The
Company’s policy is to place its operating demand deposit accounts with high
credit quality financial institutions. These financial institutions
are not insured by the FDIC.
Only one
customer represents more than 10% of the Company’s total sales.
2.
Accounts
Receivable:
Accounts
receivable historically have been immaterial for bad debts to be accounted for
by the Company. The Company’s management has decided that an allowance is not
necessary.
3.
Inventories
:
Major
categories of inventories are as follows:
|
Year
|
|
December 2007
|
|
|
December 2006
|
|
|
|
|
|
|
|
|
|
|
Raw
materials
|
|
$
|
985,057
|
|
|
$
|
1,076,009
|
|
|
Work
in process
|
|
|
124,545
|
|
|
|
153,335
|
|
|
Finished
goods
|
|
|
165,595
|
|
|
|
217,407
|
|
|
Total
|
|
$
|
1,275,197
|
|
|
$
|
1,446,751
|
|
AMERICAN
BUSINESS HOLDING CORPORATION
AND
SUBSIDIARY
NOTES TO
THE FINANCIAL STATEMENTS
4.
Property, Plant and
Equipment
:
As
of December 31, 2007, Property, plant and equipment are accounted for as
follows:
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
Cost
|
|
|
Depreciation
|
|
|
Net
value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Land
|
|
$
|
8,467,920
|
|
|
$
|
0
|
|
|
$
|
8,467,920
|
|
|
Industrial
buildings
|
|
|
6,073,943
|
|
|
|
2,291,916
|
|
|
|
3,782,028
|
|
|
Office
building
|
|
|
719,712
|
|
|
|
273,493
|
|
|
|
446,220
|
|
|
Residential
buildings
|
|
|
5,171,160
|
|
|
|
1,965,041
|
|
|
|
3,206,119
|
|
|
Vehicles
|
|
|
450,740
|
|
|
|
314,298
|
|
|
|
136,442
|
|
|
Plant
and machinery
|
|
|
11,856,434
|
|
|
|
7,256,768
|
|
|
|
4,599,666
|
|
|
Computer
and software
|
|
|
57,595
|
|
|
|
57,595
|
|
|
|
0
|
|
|
Office
furniture and fixtures
|
|
|
34,272
|
|
|
|
34,272
|
|
|
|
0
|
|
|
Residential
furniture & fixtures
|
|
|
185,359
|
|
|
|
185,359
|
|
|
|
0
|
|
|
Total
|
|
$
|
33,017,135
|
|
|
$
|
12,378,741
|
|
|
$
|
20,638,394
|
|
Included
in cost of sales is depreciation expense of $887,671 and included in
general and administrative expense is depreciation expense of
$228,113.
As of
December 31, 2006, Property, plant and equipment are accounted for as
follows:
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
Cost
|
|
|
Depreciation
|
|
|
Net
value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Land
|
|
$
|
8,467,920
|
|
|
$
|
0
|
|
|
$
|
8,467,920
|
|
|
Industrial
buildings
|
|
|
5,818,343
|
|
|
|
2,062,060
|
|
|
|
3,756,283
|
|
|
Office
building
|
|
|
719,712
|
|
|
|
249,501
|
|
|
|
470,211
|
|
|
Residential
buildings
|
|
|
5,171,160
|
|
|
|
1,792,669
|
|
|
|
3,378,491
|
|
|
Vehicles
|
|
|
339,740
|
|
|
|
282,548
|
|
|
|
57,192
|
|
|
Plant
and machinery
|
|
|
11,856,434
|
|
|
|
6,598,953
|
|
|
|
5,257,481
|
|
|
Computer
and software
|
|
|
57,595
|
|
|
|
57,595
|
|
|
|
0
|
|
|
Office
furniture and fixtures
|
|
|
34,272
|
|
|
|
34,272
|
|
|
|
0
|
|
|
Residential
furniture & fixtures
|
|
|
185,359
|
|
|
|
185,359
|
|
|
|
0
|
|
|
Total
|
|
$
|
32,650,535
|
|
|
$
|
11,262,957
|
|
|
$
|
21,387,578
|
|
Included
in cost of sales is depreciation expense of $880,002 and included in general and
administrative expense is depreciation expense of $211,463.
5.
Accounts Payable and Accrued
Expenses:
Accounts
payable and accrued expenses consist of trade payables, accrued payroll and
payroll taxes created from normal operations of the business.
6.
Long-term
Debt:
Long-term
debt is not used by the Company. The Company has no leases that would
be accounted for as long-term leases or capital leases.
AMERICAN
BUSINESS HOLDING CORPORATION
AND
SUBSIDIARY
NOTES TO
THE FINANCIAL STATEMENTS
7.
Stockholders’
Equity:
The
Company has authorized 500,000,000 common shares of stock with a par value of
$.001 and the Company has authorized 10,000,000 preferred shares of stock with a
par value of $.001 of which none have been issued.
During
December of the year 2004 the Company issued 200,000 shares of common stock for
$40,000, or $0.20 per share. The stock issuance was a private
placement of shares of which the Company considers exempt from registration with
the U.S. Securities and Exchange Commission.
During
September of 2004 the Company commenced operations with the acquisition of
Tissakin Ltd. (the Subsidiary) with the issuance of 8,000,000 shares of its
common stock for all of the 216,000 outstanding shares of the Subsidiary. The
transaction was accounted for as a reverse merger for consolidations as guided
by Generally Accepted Accounting Principals. The transaction did not
culminate with the recording of Goodwill.
The
Subsidiary issues stock without legal or par value. There is no
requirement for authorization of shares for the Subsidiary under the
jurisdiction of incorporation. There are 216,000 shares issued and
outstanding, held by the Company, those have all been accounted for as capital
stock.
During
March 2007, the Company undertook a 10-for-1 forward stock split of the
Corporation’s issued and outstanding shares.
8.
Employment Contract and
Incentive Commitments:
The
Company’s subsidiary has labour contracts with no incentive
commitments. Local law requires that after 26 days of employment a
contract is to be given to a semi-skilled, skilled or educated
employee. The contract is in one of two forms. A “Limited
Duration Contract” covers the employee for a period of time in which a specific
task(s) is completed. The contract may then be cancelled when the
task(s) is completed. A “Simple Labour” Contract is a permanent
labour contract which is not limited in duration. Both contracts have
a structure of eight sanctions that if an employee is reprimanded the employee
has eight times to be reprimanded and upon the eighth sanction the employee is
terminated.
9.
Deferred Tax Assets and
Liabilities:
The
Company accounts for income taxes in accordance with Statement of Financial
Accounting Standards (SFAS) n° 109. As of September 30, 2007 and
December 31, 2006, the Company had no deferred tax asset or liabilities as the
Company had no US activities to account for deferred tax assets and
liabilities. The Subsidiary Company pays income tax in accordance
with the laws of the Democratic Republic of the Congo whereby there are no
deferred tax assets and liabilities to account for. If the parent
company accounted for the subsidiary’s income tax liability under the U.S. tax
code the Company would accrue a tax liability at an effective rate of 20%
whereby the tax liability for December 31, 2006 and December 31, 2005 would be
$13,796 and $5,150, respectively. There would be no deferrals of tax
assets or liabilities that would be derived from applying U.S. accounting
standards.
AMERICAN
BUSINESS HOLDING CORPORATION
AND
SUBSIDIARY
NOTES TO
THE FINANCIAL STATEMENTS
10.
Litigation, Claims and
Assessments:
There is
no litigation, claims and assessments asserted or known by the Company’s
management.
11.
Subsequent
Events:
There are
no material subsequent events known by the Company’s management.