exv10w14



 







Exhibit 10.14




WELLS EASTERN ASIA DISPLAYS (M) SDN. BHD.

(Incorporated in Malaysia)

Company No: 501396-U




Financial Statements 

Years ended December 31, 2005, 2004 and 2003




Contents




	 	 	 
	 	 	Page
	Report of Independent Registered Public Accounting Firm
	 	1
	Balance Sheets as of December 31, 2005 and 2004
	 	2
	Income Statements for the Years Ended December 31, 2005, 2004 and 2003
	 	3
	Statements of Changes in Equity for the Years Ended December 31, 2005, 2004 and 2003
	 	4
	Cash Flows Statements for the Year Ended December 31, 2005, 2004 and 2003
	 	5
	Notes to Financial Statements
	 	6-12











 









 











Report Of Independent Registered Public Accounting Firm




To The Members of 

WELLS EASTERN ASIA DISPLAYS (M) SDN. BHD.

(Incorporated in Malaysia)




We have audited the accompanying balance sheets of Wells Eastern Asia Displays (M) Sdn. Bhd.
as of December 31, 2005 and 2004 and the related statements of operations, changes in equity and
cash flows for each of the three years in the period ended December 31, 2005. 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 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 statements
presentation. We believe that our audit provide 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 Wells Eastern Asia Displays (M) Sdn. Bhd. as of December 31
2005 and 2004 and the results of its operations and its cash flows for each of the three years in
the period ended December 31, 2005 in conformity with accounting principles generally accepted in
the United States of America.



Horwath

Penang, Malaysia




February 24th, 2006





Page 1









 








WELLS EASTERN ASIA DISPLAYS (M) SDN. BHD.

(Incorporated in Malaysia)

Company No: 501396-U




Balance Sheets 




	 	 	 	 	 	 	 	 	 
	 	 	As of December 31,
	 	 	2005	 	2004
	 	 	USD	 	USD
	ASSETS
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Current Assets
	 	 	 	 	 	 	 	 
	Cash and cash equivalents
	 	 	285,467	 	 	 	268,227	 
	Trade accounts receivable
	 	 	22,801	 	 	 	114,592	 
	Trade accounts receivable, related party
	 	 	4,198,586	 	 	 	7,203,908	 
	Inventories
	 	 	1,650,066	 	 	 	2,011,104	 
	Prepaid and other current assets
	 	 	43,012	 	 	 	21,339	 
	 
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Total Current Assets
	 	 	6,199,932	 	 	 	9,619,170	 
	 
	 	 	 	 	 	 	 	 
	Property, plant and equipment, net
	 	 	262,423	 	 	 	333,602	 
	Deferred tax assets
	 	 	25,618	 	 	 	0	 
	 
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Total Assets
	 	 	6,487,973	 	 	 	9,952,772	 
	 
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	LIABILITIES AND SHAREHOLDERS’ EQUITY
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Current Liabilities
	 	 	 	 	 	 	 	 
	Trade accounts payable
	 	 	205,491	 	 	 	1,206,006	 
	Trade accounts payable, related party
	 	 	990,637	 	 	 	2,587,503	 
	Other accounts payable, related party
	 	 	790,837	 	 	 	70,994	 
	Accrued expenses and others
	 	 	292,615	 	 	 	338,009	 
	Bank borrowings
	 	 	1,361,905	 	 	 	3,404,769	 
	Income taxes payable
	 	 	49,495	 	 	 	11,596	 
	 
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Total Current Liabilities
	 	 	3,690,980	 	 	 	7,618,877	 
	 
	 	 	 	 	 	 	 	 
	Stockholders’ equity:
	 	 	 	 	 	 	 	 
	  Common Stock
	 	 	 	 	 	 	 	 
	RM1.00 per value (equivalent to USD 0.2632); 10,000,000 shares authorized
5,000,000 shares issued at December 31, 2005 and 2004, respectively
	 	 	 	 	 	 	 	 
	 
	 	 	1,315,789	 	 	 	1,315,789	 
	  Retained earnings
	 	 	1,481,204	 	 	 	1,018,106	 
	 
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Total Stockholders’ Equity
	 	 	2,796,993	 	 	 	2,333,895	 
	 
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Total Liabilities and Stockholders’ Equity
	 	 	6,487,973	 	 	 	9,952,772	 
	 
	 	 	 	 	 	 	 	 






			
	 	 	 
	The annexed notes form an integral part of these financial statements
	 	Page 2






 









 





WELLS EASTERN ASIA DISPLAYS (M) SDN. BHD.

(Incorporated in Malaysia)

Company No: 501396-U




Statements of Operations




	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	For the Years Ended December 31,
	 	 	2005	 	2004	 	2003
	 	 	USD	 	USD	 	USD
	SALES
	 	 	 	 	 	 	 	 	 	 	 	 
	Net related party sales
	 	 	16,549,707	 	 	 	19,319,539	 	 	 	12,639,956	 
	Net third party sales
	 	 	38,697	 	 	 	503,134	 	 	 	0	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Net sales
	 	 	16,588,404	 	 	 	19,822,673	 	 	 	12,639,956	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	COST OF SALES
	 	 	 	 	 	 	 	 	 	 	 	 
	Related party purchases
	 	 	8,523,179	 	 	 	9,408,104	 	 	 	7,010,278	 
	Others
	 	 	6,698,545	 	 	 	8,939,091	 	 	 	4,682,822	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Cost of sales
	 	 	15,221,724	 	 	 	18,347,195	 	 	 	11,693,100	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Gross profits
	 	 	1,366,680	 	 	 	1,475,478	 	 	 	946,856	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	OPERATING EXPENSE
	 	 	 	 	 	 	 	 	 	 	 	 
	Selling, general and administrative
	 	 	566,814	 	 	 	476,353	 	 	 	379,037	 
	Research and development
	 	 	165,401	 	 	 	120,848	 	 	 	63,158	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Total operating expense
	 	 	732,215	 	 	 	597,201	 	 	 	442,195	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Operating earnings
	 	 	634,465	 	 	 	878,277	 	 	 	504,661	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Interest income
	 	 	6,481	 	 	 	3,044	 	 	 	1,340	 
	Interest expense
	 	 	(183,644	)	 	 	(95,511	)	 	 	(67,658	)
	Other income
	 	 	77,774	 	 	 	21,348	 	 	 	22,843	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Earnings before income tax
	 	 	535,076	 	 	 	807,158	 	 	 	461,186	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Income tax
	 	 	(71,978	)	 	 	(90,837	)	 	 	(34,225	)
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Net earnings
	 	 	463,098	 	 	 	716,321	 	 	 	426,961	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 






			
	 	 	 
	The annexed notes form an integral part of these financial statements
	 	Page 3






 









 






WELLS EASTERN ASIA DISPLAYS (M) SDN. BHD.

(Incorporated in Malaysia)

Company No: 501396-U




Cash Flows Statements




 




	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	For the Years Ended December 31,
	 	 	2005	 	2004	 	2003
	 	 	USD	 	USD	 	USD
	CASH FLOWS FROM OPERATING ACTIVITIES
	 	 	 	 	 	 	 	 	 	 	 	 
	Net earnings
	 	 	463,098	 	 	 	716,321	 	 	 	426,961	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Adjustments to reconcile net ernings to net cash
provided by /(used in) operating activities:-
	 	 	 	 	 	 	 	 	 	 	 	 
	Allowance for slow moving inventories
	 	 	—	 	 	 	0	 	 	 	26,316	 
	Depreciation
	 	 	78,793	 	 	 	78,955	 	 	 	69,825	 
	Loss on sale of property, plant and equipment
	 	 	1,667	 	 	 	0	 	 	 	0	 
	Changes in net assets and liabilities
	 	 	 	 	 	 	 	 	 	 	 	 
	Trade accounts receivable
	 	 	91,791	 	 	 	(114,592	)	 	 	0	 
	Trade accounts receivable — related party
	 	 	3,005,322	 	 	 	(2,813,946	)	 	 	259,651	 
	Inventories
	 	 	361,038	 	 	 	(537,331	)	 	 	376,790	 
	Prepaid and other current assets
	 	 	(21,673	)	 	 	(7,019	)	 	 	4,173	 
	Deferred tax assets
	 	 	(25,618	)	 	 	30,789	 	 	 	(8,421	)
	Trade accounts payable
	 	 	(1,000,515	)	 	 	661,612	 	 	 	473,439	 
	Trade accounts payable — related party
	 	 	(1,596,866	)	 	 	167,471	 	 	 	(2,311,148	)
	Accrued expenses and others
	 	 	674,449	 	 	 	178,554	 	 	 	(51,869	)
	Income taxes payable
	 	 	37,899	 	 	 	1,201	 	 	 	(14,079	)
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Net cash provided by/(used in) operating activities
	 	 	2,069,385	 	 	 	(1,637,985	)	 	 	(748,362	)
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	CASH FLOWS FROM INVESTING ACTIVITIES
	 	 	 	 	 	 	 	 	 	 	 	 
	Proceeds from sale of property, plant and equipment
	 	 	5,789	 	 	 	0	 	 	 	0	 
	Purchase of property, plant and equipment
	 	 	(15,070	)	 	 	(18,952	)	 	 	(67,604	)
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Net cash used in investing activities
	 	 	(9,281	)	 	 	(18,952	)	 	 	(67,604	)
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	CASH FLOWS FROM FINANCING ACTIVITIES
	 	 	 	 	 	 	 	 	 	 	 	 
	(Decrease)/Increase in bank borrowings
	 	 	(2,042,864	)	 	 	1,531,085	 	 	 	(399,474	)
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Net cash (used in)/provided by financing activities
	 	 	(2,042,864	)	 	 	1,531,085	 	 	 	(399,474	)
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Net increase/(decrease) in cash and cash equivalents
	 	 	17,240	 	 	 	(125,852	)	 	 	(1,215,440	)
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Cash and cash equivalents at beginning
	 	 	268,227	 	 	 	394,079	 	 	 	1,609,519	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Cash and cash equivalents at ending
	 	 	285,467	 	 	 	268,227	 	 	 	394,079	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Supplemental cash flow information
	 	 	 	 	 	 	 	 	 	 	 	 
	Cash paid for interest
	 	 	183,644	 	 	 	95,511	 	 	 	67,616	 
	Cash paid for income tax
	 	 	59,697	 	 	 	58,847	 	 	 	56,725	 






			
	 	 	 
	The annexed notes form an integral part of these financial statements
	 	Page 4






 









 





WELLS EASTERN ASIA DISPLAYS (M) SDN. BHD.

(Incorporated in Malaysia)

Company No: 501396-U




Statements Of Changes in Equity



	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Common Stock	 	Retained	 	 
	 	 	 	 	Amount	 	earnings	 	Total
	 	 	Shares	 	USD	 	USD	 	USD
	Balance at December 31, 2002
	 	 	2,508,000	 	 	 	660,000	 	 	 	530,613	 	 	 	1,190,613	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Net earnings for the year
	 	 	0	 	 	 	0	 	 	 	426,961	 	 	 	426,961	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Balance at December 31, 2003
	 	 	2,508,000	 	 	 	660,000	 	 	 	957,574	 	 	 	1,617,574	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Issuance of bonus stock
	 	 	2,492,000	 	 	 	655,789	 	 	 	(655,789	)	 	 	0	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Net earnings for the year
	 	 	0	 	 	 	0	 	 	 	716,321	 	 	 	716,321	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Balance at December 31, 2004
	 	 	5,000,000	 	 	 	1,315,789	 	 	 	1,018,106	 	 	 	2,333,895	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Net earnings for the year
	 	 	0	 	 	 	0	 	 	 	463,098	 	 	 	463,098	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Balance at December 31, 2005
	 	 	5,000,000	 	 	 	1,315,789	 	 	 	1,481,204	 	 	 	2,796,993	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 






			
	 	 	 
	The annexed notes form an integral part of these financial statements
	 	Page 5







 









 






WELLS EASTERN ASIA DISPLAYS (M) SDN. BHD.

(Incorporated in Malaysia)

Company No: 501396-U




Notes To The Financial Statements





	1.	 	General Information
	 
	 	 	The Company was incorporated in 2000 and is principally engaged in the manufacture of
colour video monitors. There are two major stockholders, Wells-Gardner Electronics
Corporation and Eastech Electronics (M) Sdn. Bhd., each holding 50% of the paid up capital
of the Company.
	 
	 	 	The local currency of the Company is Ringgit Malaysia (RM). The reporting currency used in
presenting this set of financial statements is United States Dollars (USD).
	 
	2.	 	Summary of Significant Accounting Policies






	 	2.1	 	Basis of Preparation of Financial Statements
	 
	 	 	 	The financial statements of the Company are prepared under the historical cost
convention, modified to include other bases of measurement as disclosed in other
sections of the significant accounting policies, and in compliance with the
accounting principles generally accepted in the United States of America.
	 
	 	2.2	 	Management Estimates
	 
	 	 	 	The preparation of 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 financial
statements and the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
	 
	 	2.3	 	Revenue Recognition
	 
	 	 	 	In general, the Company recognizes revenue when shipment has occurred, the sales
price is fixed and determinable and collectibility is reasonably assured.
	 
	 	2.4	 	Financial Instruments
	 
	 	 	 	The fair value of the Company’s financial instruments does not materially vary from
the carrying value of such instruments due to their short maturity.
	 
	 	2.5	 	Receivables
	 
	 	 	 	Receivables are carried at original invoice or closing statement amount less
estimates made for doubtful receivables. Management determines the allowances for
doubtful accounts by reviewing and identifying troubled accounts at regular
intervals. Receivables are written off when deemed uncollectible. Recoveries of
receivables previously written off are recorded when received.




Page 6









 





WELLS EASTERN ASIA DISPLAYS (M) SDN. BHD.

(Incorporated in Malaysia)

Company No: 501396-U







Notes To The Financial Statements





	2.	 	Significant Accounting Policies (cont’d)






	 	2.6	 	Inventory Obsolescence and Costing Method
	 
	 	 	 	Inventory is stated at the lower of cost (determined on the first-in, first-out
basis) and net realisable value after making due allowance for any obsolete or
slow-moving items. The company provides an allowance for estimated obsolete or
excess inventory based on assumptions about future demands for its products.
	 
	 	2.7	 	Property, Plant and Equipment
	 
	 	 	 	Property, plant and equipment are stated at cost and are depreciated for financial
reporting purposes over the estimated useful lives on a straight-line basis as
follows:-





	 	 	 	 	 
	Plant and machinery
	 	5 — 10 years
	Electrical installation and renovation
	 	10 years
	Motor vehicles
	 	5 years
	Office equipment
	 	5 years
	Furniture and fittings
	 	10 years
	Computer
	 	5 — 10 years
	Factory tools and equipment
	 	5 years
	Mould
	 	10 years







	 	2.8	 	Research and Development Cost
	 
	 	 	 	Research and development costs for the year ended December 31, 2005, 2004 and 2003
were approximately USD165,000, USD123,000 and USD63,000 respectively, which were 1%,
0.6% and 0.5% of annual sales respectively.
	 
	 	2.9	 	Income Taxes
	 
	 	 	 	We use the asset and liability method of accounting for income taxes. Under the
asset and liability method, we recognize deferred tax assets and liabilities for the
future consequences attributable to differences between the financial statement
carrying amounts and the tax basis of existing assets and liabilities. A valuation
allowance is provided for deferred tax assets when it is more likely than not that
the asset will not be realized.




Page 7










 





WELLS EASTERN ASIA DISPLAYS (M) SDN. BHD.

(Incorporated in Malaysia)

Company No: 501396-U







Notes To The Financial Statements





	2.	 	Significant Accounting Policies (cont’d)






	 	2.10	 	Recently Issued Accounting Pronouncements
	 
	 	 	 	In December 2004, the FASB issued SFAS No. 123, “Share-Based Payment.” SFAS No.
123(R) will require that the compensation cost relating to share-based payment
transactions be recognized in financial statements. That cost will be measured
based on the fair value of the equity or liability instruments issued. SFAS No.
123(R) covers a wide range of share-based compensation arrangements including share
options, restricted share plans, performance based awards, share appreciation rights
and employee share purchase plans. SFAS No. 123(R) replaces FASB No. 123,
“Accounting for Stock-Based Compensation” and supersedes Accounting Principles Board
Opinion No. 25, “Accounting for Stock Issued to Employees.” SFAS No. 123, as
originally issued in 1995, established as preferable a fair value-based method of
accounting for share-based payment transactions with employees. However, that
Statement permitted entities the option of continuing to apply the guidance in APB
Opinion No. 25, as long as the footnotes to the financial statements disclosed what
net income would have been had the preferable fair value-base method been used. The
Company will be required to apply SFAS No. 123(R) as of the first interim or annual
reporting period that begins after December 15, 2005. The impact the adoption of
SFAS No. 123(R) will have an immaterial impact on our financial position, results of
operations and cash flows.
	 
	 	 	 	In December 2003, the FASB issued FASB Interpretation No. 46R, Consolidation of
Variable Interest Entities, (“FIN 46R”), which clarified some of the provisions of
FIN 46 and exempted certain entities from its requirements. FIN 46R was effective
at the end of the first interim period ending after December 15, 2003. We have
considered the provisions of FIN 46R and believe that it is not necessary to include
in our financial statements any assets, liabilities or activities of any third party
entity that deals with the Company and that the requirements do not impact the
Company’s financial statements.
	 
	 	 	 	In December 2002, the FASB issued SFAS No. 148, “Accounting for Stock-Based
Compensation—Transition and Disclosure,” this statement, which is effective for the
years ending after December 15, 2003 which amends Statement No. 123 “Accounting for
Stock-Based Compensation” and provides alternative methods of transition for
voluntary change to the fair value-based method of accounting for stock-based
employee compensation. In addition, Statement No. 148 amends the disclosure
requirements of Statement No. 123 regardless of the accounting method used to
account for stock-based compensation. The SFAS No. 123 and SFAS No. 148 do not
impact the Company’s financial statements, as the Company does not have any
stock-based employee compensation.




Page 8











 





WELLS EASTERN ASIA DISPLAYS (M) SDN. BHD.

(Incorporated in Malaysia)

Company No: 501396-U







Notes To The Financial Statements





	3.	 	Inventory
	 
	 	 	Inventory consist of the following as of December 31, 2005 and 2004:





	 	 	 	 	 	 	 	 	 
	 	 	2005	 	2004
	 	 	USD	 	USD
	Raw materials
	 	 	1,417,906	 	 	 	1,752,117	 
	Work-in-progress
	 	 	157,848	 	 	 	65,137	 
	Finished goods
	 	 	124,734	 	 	 	235,695	 
	Goods-in-transit
	 	 	0	 	 	 	8,577	 
	 
	 	 	 	 	 	 	 	 
	Total
	 	 	1,700,488	 	 	 	2,061,526	 
	Inventory obsolescence reserve
	 	 	(50,422	)	 	 	(50,422	)
	 
	 	 	 	 	 	 	 	 
	 
	 	 	1,650,066	 	 	 	2,011,104	 
	 
	 	 	 	 	 	 	 	 







	4.	 	property and Equipment
	 
	 	 	Property and equipment consist of the following as of December 31, 2005 and 2004:





	 	 	 	 	 	 	 	 	 
	 	 	2005	 	2004
	 	 	USD	 	USD
	Plant, machinery, factory tools and equipment
	 	 	570,837	 	 	 	562,096	 
	Electrical installation and renovation
	 	 	13,952	 	 	 	11,399	 
	Motor vehicles
	 	 	13,916	 	 	 	27,074	 
	Office equipment, furniture and fittings and computers
	 	 	44,776	 	 	 	41,000	 
	 
	 	 	 	 	 	 	 	 
	Total
	 	 	643,481	 	 	 	641,569	 
	Less : Accumulated depreciation
	 	 	(381,058	)	 	 	(307,967	)
	 
	 	 	 	 	 	 	 	 
	Property and equipment, net
	 	 	262,423	 	 	 	333,602	 
	 
	 	 	 	 	 	 	 	 







	 	 	Included in property and equipment as of December 31, 2004 was a motor vehicle with a
carrying amount of USD1,623 acquired under a capital lease.
	 
	5.	 	Prepaid and Other Current Assets
	 
	 	 	Prepaid and other current assets consists of the following as of December 31, 2005 and
2004:





	 	 	 	 	 	 	 	 	 
	 	 	2005	 	2004
	 	 	USD	 	USD
	Sundry deposits
	 	 	361	 	 	 	359	 
	Advance to suppliers
	 	 	34,624	 	 	 	0	 
	Prepaid expenses
	 	 	7,629	 	 	 	20,913	 
	Other
	 	 	398	 	 	 	43	 
	 
	 	 	 	 	 	 	 	 
	Total
	 	 	43,012	 	 	 	21,339	 
	 
	 	 	 	 	 	 	 	 






Page 9











 





WELLS EASTERN ASIA DISPLAYS (M) SDN. BHD.

(Incorporated in Malaysia)

Company No: 501396-U


Notes To The Financial Statements





	6.	 	Accrued Expenses and Other
	 
	 	 	Accrued expenses and other consists of the following as of December 31, 2005 and 2004:





	 	 	 	 	 	 	 	 	 
	 	 	2005	 	2004
	 	 	USD	 	USD
	Accrued expenses
	 	 	79,325	 	 	 	51,163	 
	Employee payables
	 	 	73,824	 	 	 	28,042	 
	Other payables
	 	 	139,466	 	 	 	258,804	 
	 
	 	 	 	 	 	 	 	 
	Total
	 	 	292,615	 	 	 	338,009	 
	 
	 	 	 	 	 	 	 	 







	7.	 	Significant customers
	 
	 	 	The Company has a major concentration of credit risk as the largest customer accounted
for 99% of total sales for 2005 and 2004 and 100% of total sales for 2003 respectively, and
99% and 98% of total accounts receivable as of December 31, 2005 and 2004 respectively.
	 
	8.	 	Bank Borrowings — Unsecured





	 	 	 	 	 	 	 	 	 
	 	 	2005	 	2004
	 	 	USD	 	USD
	Banker acceptance I
	 	 	239,683	 	 	 	656,052	 
	Banker acceptance II
	 	 	352,381	 	 	 	791,316	 
	Banker acceptance III
	 	 	401,852	 	 	 	1,200,263	 
	Banker acceptance IV
	 	 	47,355	 	 	 	227,895	 
	Export credit refinancing I
	 	 	160,317	 	 	 	0	 
	Export credit refinancing II
	 	 	160,317	 	 	 	0	 
	 
	 	 	 	 	 	 	 	 
	 
	 	 	1,361,905	 	 	 	2,875,526	 
	Short-term loans
	 	 	0	 	 	 	529,243	 
	 
	 	 	 	 	 	 	 	 
	 
	 	 	1,361,905	 	 	 	3,404,769	 
	 
	 	 	 	 	 	 	 	 





The details of bank borrowings are as follows:-




	 	 	 	 	 	 	 	 	 
	Facility	 	Bank	 	Maturity	 	Interest
	Banker acceptance I

	 	Affin Bank Berhad
	 	January — February 2006
	 	 	3.05% — 3.35	%
	Banker acceptance II

	 	EON Bank Berhad
	 	January — February 2006
	 	 	2.91% — 3.00	%
	Banker acceptance III

	 	Southern Bank Berhad
	 	January — March 2006
	 	 	2.91% — 3.40	%
	Banker acceptance IV

	 	Malayan Banking Berhad
	 	February 2006
	 	 	2.70	%
	Export Credit

Refinancing I

	 	Southern Bank Berhad
	 	February 2006
	 	 	3.50	%
	Export Credit

Refinancing II

	 	Malayan Banking Berhad
	 	February 2006
	 	 	3.25	%






Page 10











 





WELLS EASTERN ASIA DISPLAYS (M) SDN. BHD.

(Incorporated in Malaysia)

Company No: 501396-U


Notes To The Financial Statements





	8.	 	Bank Borrowings — Unsecured (cont’d)
	 
	 	 	All the bank borrowings are guaranteed by Eastern Asia Technology Limited, which is the
holding corporation of a substantial shareholder of the Company. The bank borrowings have
been settled when payments are due.
	 
	9.	 	Income Taxes 





	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	2005	 	2004	 	2003
	 	 	USD	 	USD	 	USD
	Tax based on results for the year:-
	 	 	 	 	 	 	 	 	 	 	 	 
	Malaysian income tax
	 	 	97,596	 	 	 	60,281	 	 	 	43,553	 
	Deferred tax
	 	 	(25,367	)	 	 	30,789	 	 	 	(11,579	)
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	72,229	 	 	 	91,070	 	 	 	31,974	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Tax (over)/underprovided in prior year:-
	 	 	 	 	 	 	 	 	 	 	 	 
	Malaysian income tax
	 	 	0	 	 	 	(233	)	 	 	(907	)
	Deferred tax
	 	 	(251	)	 	 	0	 	 	 	3,158	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	71,978	 	 	 	90,837	 	 	 	34,225	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 







	 	 	The effective income tax rates differed from the expected statutory income tax rate (28%)
for the following reasons:





	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	2005	 	2004	 	2003
	 	 	USD	 	USD	 	USD
	Computed expected tax expense
	 	 	145,773	 	 	 	226,004	 	 	 	129,132	 
	Non-deductible expenses
	 	 	9,131	 	 	 	3,732	 	 	 	3,447	 
	Income exempted from tax
under pioneer status
	 	 	(82,675	)	 	 	(138,666	)	 	 	(100,605	)
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	72,229	 	 	 	91,070	 	 	 	31,974	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 







	 	 	The Company was granted pioneer status incentive by the Ministry of International Trade and
Industry of Malaysia. Under this incentive, the Company received a tax holiday for a period
of 5 years from 1 August 2000 to 31 July 2005 whereby 70% of its taxable earnings were
exempt from Malaysian Income Tax.
	 
	 	 	Deferred income taxes reflect the impact of temporary differences between the amounts of
assets and liabilities for financial reporting purposes and as measured by income tax
regulations. Temporary differences which gave rise to deferred tax assets and deferred tax
liabilities consisted of:





	 	 	 	 	 	 	 	 	 
	 	 	2005	 	2004
	 	 	USD	 	USD
	Deferred tax assets
	 	 	 	 	 	 	 	 
	Inventory obsolescence reserve
	 	 	14,193	 	 	 	14,118	 
	Accrued expenses and other
	 	 	47,135	 	 	 	20,619	 
	 
	 	 	 	 	 	 	 	 
	Total deferred tax assets
	 	 	61,328	 	 	 	34,737	 
	 
	 	 	 	 	 	 	 	 
	Deferred tax liabilities
	 	 	 	 	 	 	 	 
	Property, plant and equipment, principally depreciation
	 	 	(35,710	)	 	 	(34,737	)
	 
	 	 	 	 	 	 	 	 
	 
	 	 	25,618	 	 	 	0	 
	 
	 	 	 	 	 	 	 	 






Page 11











 





WELLS EASTERN ASIA DISPLAYS (M) SDN. BHD.

(Incorporated in Malaysia)

Company No: 501396-U


Notes To The Financial Statements





	10.	 	Significant Transactions With Related Parties
	 
	 	 	The following represent related party transactions for each of the financial years
ended December 31:





	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	2005	 	2004	 	2003
	 	 	USD	 	USD	 	USD
	Sale of goods to Wells-Gardner
Electronics Corporation *
	 	 	16,549,707	 	 	 	19,319,539	 	 	 	12,639,956	 
	Purchase of goods from
Wells-Gardner Electronics
Corporation *
	 	 	4,481,625	 	 	 	4,365,523	 	 	 	3,560,749	 
	Management fee charged by
Eastech Electronics (M) Sdn.
Bhd. **
	 	 	132,740	 	 	 	149,114	 	 	 	113,200	 
	Purchase of goods from Eastech
Electronics (M) Sdn. Bhd. **
	 	 	4,041,554	 	 	 	5,042,581	 	 	 	3,449,529	 
	Purchase of property and
equipment from Eastech
Electronics (M) Sdn. Bhd. **
	 	 	0	 	 	 	0	 	 	 	13,158	 
	Rental of premises charged by
Eastech Electronics (M) Sdn.
Bhd. **
	 	 	51,340	 	 	 	51,340	 	 	 	51,340	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 








 




			
	*	 	A substantial shareholder which holds 50% of the equity interest in the
Company.
	 
	**	 	A substantial shareholder which holds 50% of the equity interest in the
Company.






Page 12