8-K 1 wyomingoil_8k-062305.txt ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): JUNE 15, 2005 ------------------------ WYOMING OIL & MINERALS, INC. (Exact Name of Registrant as Specified in Its Charter) ------------------------ WYOMING 0-791 84-0217330 (State or Other Jurisdiction of (Commission File Number) (I.R.S. Employer Incorporation) Number) Identification Block B, G/F., Prince Industrial Building, 106 King Fuk Street, San Po Kong, Kowloon, Hong Kong ---------------------------------------------------------------------------- (Address of principal executive offices) (852) 2321 6108 --------------- (Registrant's telephone number, including area code) 5525 ERINDALE DR., SUITE 201, COLORADO SPRINGS, COLORADO, 80918 (Former name or former address, if changed since last report) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligations of the registrant under any of the following provisions. |_| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14d-2(b) |_| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b) |_| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c) ================================================================================ ITEM 2.01. CHANGES IN CONTROL OF REGISTRANT. On June 15, 2005, Bestip Development International Limited, an International Business Company organized under the laws of the British Virgin Islands ("Bestip"), completed the reverse acquisition of the Registrant, pursuant to which the Registrant has acquired all of the outstanding capital shares of Bestip in exchange for a controlling interest in the Registrant (the "Reorganization"). Pursuant to the Securities Purchase Agreement and Plan of Reorganization dated May 2, 2005 by and among the Registrant, Bestip and the shareholders of Bestip (the "Purchase Agreement"), at the closing of the Purchase Agreement, the shareholders of Bestip transferred to the Registrant all of the outstanding capital shares of Bestip in exchange for the Registrant's issuance of 28,000,000 shares of its common stock to the shareholders of Bestip (representing approximately 95% of the Registrant's total capital stock outstanding after giving effect to its acquisition of Bestip). Bestip Development International Limited was incorporated in the British Virgin Islands on April 26, 1994 by Mr. Shi Kai Biu, Simon as the investment holding company of the Sun Motor Technology group of companies ("Sun Motor"). Sun Motor designs, manufactures and markets micro motors for a wide range of applications including automobile components, home appliances, power tools, multimedia, personal care, and business equipment. Its clients include several European and US based multinational corporations. Pursuant to the Purchase Agreement, Bill M. Conrad, Jubal S. Terry and Raymond E. McElhaney, have resigned as directors of the Registrant effective as of the closing and have been replaced by Shi Kai Biu (Simon) and Shi Kai Bon, Jeffrey as the directors of the Registrant (the "Incoming Directors"). In addition, the following individuals were appointed to serve as officers of the Registrant(1) (the "Incoming Officers"): NAME OF OFFICER POSITION --------------- -------- Shi Kai Biu (Simon) Chairman of the Board and Chief Executive Officer Ho Koon Lun Chief Operations Officer Wong Kwong Ling (Eric) Chief Financial Officer Within approximately the next 30 days, the Registrant expects to change its name to Sun Motor Technology, Inc. ITEM 3.02. UNREGISTERED SALES OF EQUITY SECURITIES. The common shares issued by the Registrant pursuant to the terms of the Purchase Agreement were issued pursuant to Section 4(2) of the Securities Act of 1933, as amended (the "Act"), and Rule 506 thereunder. Certificates representing the common shares issued pursuant to the Purchase Agreement bear a legend restricting transfer in accordance with the Act. ITEM 5.01. CHANGES IN CONTROL OF REGISTRANT. Please see Item 2.01 above. ITEM 5.02. DEPARTURE OF DIRECTORS OR PRINCIPAL OFFICERS; ELECTION OF DIRECTORS; APPOINTMENT OF PRINCIPAL OFFICERS. Please see Item 2.01 above. (c)(2) and (d)(2): The following information summarizes the business experience of the Incoming Directors and Incoming Officers for at least the last five years: SHI KAI BIU (SIMON). In 1983, Mr. Shi founded the Sun Motor Technology group of companies, which were reorganized with Bestip as the holding company for this group of companies. Since 2000, Mr. Shi has served as Chairman and a director of Bestip. Also during this time, Mr. Shi served as director of Ever Top Financial Corporation; and) Milifast International Limited . As Chairman of Bestip, he is responsible for strategic analysis and business development of the Sun Motor affiliates. Mr. Shi has over twenty-five (25) years of marketing and production experience in the electrical products and micro motor industries. Currently, Mr. Shi is president of the Hong Kong Small and Medium Enterprises Association, president of China National Micro Motor Industry Association, and vice chairman of Hong Kong Productivity Council - Hong Kong Automotive Industry Group. In 1995, Mr. Shi received the Young Industrialist Award of Hong Kong, and the Governor's Award for Industry. In 1977, Mr. Shi received a diploma in electrical engineering from The Hong Kong Polytechnic University (formerly known as The Hong Kong Technical College). SHI KAI BON, JEFFREY. In 2001, Mr. Jeffery Shi joined Sun Motor Industrial Company Limited as a Director. Since 2003, Mr. Jeffery Shi has managed Sun Motor's metal parts operations. He is also responsible for marketing and business development of Sun Motor Industrial. Prior to joining Sun Motor, Mr. Jeffery Shi was employed by Rockwell Automation Australia Limited ("Rockwell") from January 2001 through December 2001. In 1999, Mr. Jeffery Shi received a bachelor's degree in Computer Science from the University of Monash in Australia. Mr. Jeffrey Shi is Mr. Simon Shi's son. HO KOON LUN. Mr. Ho joined Sun Motor Industrial in 1998. Currently, he manages product development and production engineering for Sun Motor Industrial. In addition, Mr. Ho serves as Vice-General Manager of Sun Micro Motor Industrial, where he also supervises product development and production engineering. Mr. Ho holds a bachelor's degree in electrical engineering from the National Taiwan University. WONG KWONG LING (ERIC). In June 2004, Mr. Wong joined Sun Motor Micro Motor Technology Limited as the Financial controller. Currently, he manages Sun Motor Technology financing activities and accounting function. From July of 2000 through February 2004, Mr. Wong served as the financial controller for The Optical Centre Co. Limited, a private company organized under the laws of Hong Kong. Mr. Wong holds a bachelor's degree in Business Administration from the Chinese University of Hong Kong (Hong Kong), a post-graduate degree in Accounting and Financial Management from the University of New England (Australia), and a MBA from Heriot Watt University (United Kingdom). Mr. Wong is also a Certified Public Accountant (Australian Society of Certified Practicing Accountants and Hong Kong Institute of Certified Public Accountants). ITEM 7.01. REGULATION FD DISCLOSURE. On June 17, 2005, the Registrant issued a press release announcing the consummation of the Reorganization. The press release is attached as an exhibit to this Current Report on Form 8-K and is incorporated herein by reference. ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS. (a)-(b) Financial Statements and Pro Forma Financial Information. -------------------------------------------------------- Audited Financial Statements of Bestip as of and for the two years ended March 31, 2004. Unaudited Financial Statements of Bestip as of and for the nine months ended December 31, 2004. Unaudited Pro Forma Combined Statements of Income of the Registrant and Bestip as of February 28, 2005 and for the twelve months ended February 28, 2005. (c) Exhibits. -------- 2.1 Securities Purchase Agreement and Plan of Reorganization dated May 2, 2005 by and among the Registrant, Bestip, and the shareholders of Bestip. (1) 99.1 Press Release dated June 17, 2005. --------------- (1) Previously filed as part of the Registrant's Current Report on Form 8-K filed with the Securities and Exchange Commission on May 6, 2005. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Wyoming Oil & Minerals, Inc. (Registrant) Date: June 24, 2005 By: /s/ Shi Kai Biu, (Simon) -------------------------------- Shi Kai Biu, (Simon), Chief Executive Officer BESTIP DEVELOPMENT INTERNATIONAL LTD. CONSOLIDATED FINANCIAL STATEMENTS BESTIP DEVELOPMENT INTERNATIONAL LTD. CONSOLIDATED FINANCIAL STATEMENTS CONTENTS PAGES Report of Independent Registered Public Accounting Firm 1 Consolidated Balance Sheets 2 Consolidated Statements of Operations 3 Consolidated Statements of Stockholders' Equity 4 Consolidated Statements of Cash Flows 5 Notes to Consolidated Financial Statements 6 - 19 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the sole director and stockholders of Bestip Development International Ltd. We have audited the accompanying balance sheets of Bestip Development International Ltd. as of March 31, 2004 and 2003, and the related statements of operations, stockholders' equity and cash flows for the years ended March 31, 2004, 2003 and 2002. 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 of America). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits 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 Bestip Development International Ltd. as of March 31, 2004 and 2003, and the results of their operations and their cash flows for the years ended March 31, 2004, 2003 and 2002, in conformity with accounting principles generally accepted in the United States of America. PKF Certified Public Accountants Hong Kong August 13, 2004 -1- BESTIP DEVELOPMENT INTERNATIONAL LTD. CONSOLIDATED BALANCE SHEETS MARCH 31, ----------------------- 2003 2004 USD USD ASSETS Current assets Cash and cash equivalents 388,377 702,662 Short-term bank deposits, pledged (Note 11(b)) 919,720 1,116,100 Accounts receivable, net (Note 3) 8,235,651 10,298,282 Inventories, net (Note 4) 6,873,791 5,791,062 Prepayments, deposits and other receivables (Note 5) 393,091 399,918 Income tax recoverable 121,559 124,396 Amounts due from related companies (Note 10) - 4,013 Amount due from a director (Note 6) 3,340,007 2,534,016 Amount due from ultimate holding company (Note 7) 123,009 123,009 ---------- ---------- Total current assets 20,395,205 21,093,458 Property, plant and equipment, net (Note 8) 9,619,598 11,307,032 Deposits for acquisition of property, plant and equipment 461,882 2,769,295 Other investment 29,069 29,069 Deferred tax assets (Note 14) 67,102 136,391 ---------- ---------- Total assets 30,572,856 35,335,245 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Accounts payable 5,043,192 6,493,002 Accrued expenses and other payables (Note 9) 3,030,404 2,707,247 Amount due to a related company (Note 10) 154,753 166,575 Bank overdrafts (Note 11(b)) 2,227,398 2,649,736 Current maturities of bank borrowings (Note 11) 5,717,925 7,361,321 Current maturities of capital lease obligations (Note 12) 663,339 851,164 Income tax payable - 6,113 ---------- ---------- Total current liabilities 16,837,011 20,235,158 Bank borrowings, less current maturities (Note 11) 256,410 - Capital lease obligations, less current maturities (Note 12) 773,871 884,354 Deferred tax liabilities (Note 14) 1,080,697 1,487,516 ---------- ---------- Total liabilities 18,947,989 22,607,028 ---------- ---------- Minority interests 160,244 184,683 ---------- ---------- Stockholders' equity Common stock, par value USD1 per share: 50,000 shares authorised 100 shares issued and outstanding 100 100 Additional paid-in-capital 1,183,128 1,183,128 Other comprehensive income 19,774 19,774 Retained profits 10,261,621 11,340,532 ---------- ---------- Total stockholders' equity 11,464,623 12,543,534 ---------- ---------- Total liabilities and stockholders' equity 30,572,856 35,335,245 ========== ========== See Notes to consolidated financial statements -2-

BESTIP DEVELOPMENT INTERNATIONAL LTD. CONSOLIDATED STATEMENTS OF OPERATIONS YEAR ENDED MARCH 31, -------------------------------------------- 2002 2003 2004 USD USD USD Total net sales 31,820,879 36,771,467 39,965,957 Cost of sales (24,012,676) (28,384,468) (30,984,440) ------------ ------------ ------------ Gross profit 7,808,203 8,386,999 8,981,517 Depreciation and amortization (391,820) (446,776) (447,538) Selling, general and administrative expenses (5,962,464) (6,957,713) (7,071,515) ------------ ------------ ------------ Operating income 1,453,919 982,510 1,462,464 Other income (Note 13) 542,524 430,272 529,018 Interest and capital lease charges (443,607) (438,378) (514,644) Gain on disposal of interest in a jointly controlled entity 492,889 - - Share of results of a jointly controlled entity (2,479) - - ------------ ------------ ------------ Income before income tax 2,043,246 974,404 1,476,838 Income tax expenses (Note 14) (220,632) (225,647) (373,488) Minority interests (21,402) (22,469) (24,439) ------------ ------------ ------------ Net income 1,801,212 726,288 1,078,911 ============ ============ ============ Basic net income per share (Note 15) 1,801,212 7,336 10,789 ============ ============ ============ See Notes to consolidated financial statements -3-

BESTIP DEVELOPMENT INTERNATIONAL LTD. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY COMMON STOCK ADDITIONAL OTHER ----------------------------- PAID-IN COMPREHENSIVE RETAINED SHARES AMOUNT CAPITAL INCOME PROFITS TOTAL USD USD USD USD USD At April 1, 2001 1 1 1,183,128 19,774 7,734,121 8,937,024 Net income - - - - 1,801,212 1,801,212 ------------- ------------- ------------- ------------- ------------- ------------- At March 31, 2002 and April 1, 2002 1 1 1,183,128 19,774 9,535,333 10,738,236 Issue of common stock at par 99 99 - - - 99 Net income - - - - 726,288 726,288 ------------- ------------- ------------- ------------- ------------- ------------- At March 31, 2003 and April 1, 2003 100 100 1,183,128 19,774 10,261,621 11,464,623 Net income - - - - 1,078,911 1,078,911 ------------- ------------- ------------- ------------- ------------- ------------- At March 31, 2004 100 100 1,183,128 19,774 11,340,532 12,543,534 ============= ============= ============= ============= ============= ============= See Notes to consolidated financial statements -4-

BESTIP DEVELOPMENT INTERNATIONAL LTD. CONSOLIDATED STATEMENTS OF CASH FLOWS YEAR ENDED MARCH 31, ----------------------------------------- 2002 2003 2004 USD USD USD Cash flows from operating activities : Net income 1,801,212 726,288 1,078,911 Adjustments to reconcile net income to net cash provided by operating activities : Depreciation and amortization 2,000,956 2,746,742 1,965,736 Interest income from a director (166,579) (237,161) (311,674) Gain on disposal of property, plant and equipment - (8,718) (7,949) Share of results of a jointly controlled entity 2,479 - - Gain on disposal of interest in a jointly controlled entity (492,889) - - Allowance for doubtful accounts 489,039 240,285 506,859 Allowance for obsolete inventories 69,976 - - Increase in deferred tax assets (3,301) (50,478) (69,289) Increase in deferred tax liabilities 114,669 243,003 406,819 Increase in minority interests 21,402 22,469 24,439 Changes in operating assets and liabilities : Increase in accounts receivable, prepayments, deposits and other receivables (126,758) (1,547,210) (2,576,317) Decrease/(increase) in inventories 887,252 (2,544,900) 1,082,729 Decrease in amount due to a jointly controlled entity (11,214) - - (Decrease)/increase in accounts payable, accrued expenses and other payables (1,249,294) 3,211,377 1,126,653 Decrease in income tax recoverable (55,610) (42,084) (2,837) (Decrease)/increase in income tax payable (57,090) (13,120) 6,113 ----------- ----------- ----------- Net cash provided by operating activities 3,224,250 2,746,493 3,230,193 ----------- ----------- ----------- Cash flows from investing activities : Proceeds from disposal of property, plant and equipment - 8,718 7,949 Acquisition of property, plant and equipment (1,865,166) (2,949,355) (1,939,029) Increase in deposits for acquisition of property, plant and equipment (377,355) (461,882) (205,192) Acquisition of other investment (29,069) - - ----------- ----------- ----------- Net cash used in investing activities (2,271,590) (3,402,519) (2,136,272) ----------- ----------- ----------- Cash flows from financing activities : New bank loans raised 1,517,612 384,615 961,539 Repayment of bank loans (560,292) (1,127,883) (1,284,986) Increase in bank overdrafts 450,938 192,144 422,338 (Decrease)/increase in bills payable and trust receipt loans (152,105) 1,938,800 1,710,433 Repayment of capital lease obligations (356,602) (623,494) (953,951) Advances from related companies 13,975 140,779 7,809 Advance to a director (1,678,056) (224,835) (1,446,438) Advance to ultimate holding company - (550) - (Increase)/decrease in short term bank deposits (98,291) 112,702 (196,380) ----------- ----------- ----------- Net cash (used in)/provided by financing activities (862,821) 792,278 (779,636) ----------- ----------- ----------- Net decrease in cash and cash equivalents 89,839 136,252 314,285 Cash and cash equivalents, beginning of year 162,286 252,125 388,377 ----------- ----------- ----------- Cash and cash equivalents, end of year 252,125 388,377 702,662 =========== =========== =========== See Notes to consolidated financial statements -5-

BESTIP DEVELOPMENT INTERNATIONAL LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. DESCRIPTION OF BUSINESS Bestip Development International Ltd. (the "Company") was established in the British Virgin Islands with limited liability. The Company and its subsidiaries (collectively the "Group") are principally engaged in the manufacturing and trading of electric motors for toys and electrical appliances. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of the Company and its subsidiaries. All significant inter-company balances and transactions have been eliminated. USE OF ESTIMATES In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the dates of the financial statements, as well as the reported amounts of revenues and expenses during the reporting years. These accounts and estimates include, but are not limited to, the valuation of accounts receivable, inventories, deferred income taxes and the estimation on useful lives of property, plant and machinery. Actual results could differ from those estimates. ACCOUNTS RECEIVABLE The Company extends unsecured credit to customers in the normal course of business and believes all accounts receivable in excess of the allowance for doubtful accounts to be fully collectible. If accounts receivable in excess of the provided allowance are determined uncollectible, they are charged to expense in the year that determination is made. The Company does not accrue interest on trade accounts receivable. Accounts receivable are due 30 to 180 days after the invoice date. INVENTORIES Inventories are valued at the lower of cost or market with cost determined on a weighted average basis. -6- BESTIP DEVELOPMENT INTERNATIONAL LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D) PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are stated at cost less accumulated depreciation and amortization. Maintenance, repairs and betterments, including replacement of minor items, are charged to expense; major additions to physical properties are capitalized. Depreciation and amortization are provided using the straight-line method over the estimated useful lives at the following annual rates :- FOR THE YEARS ENDED FOR THE YEAR ENDED MARCH 31, 2002 AND 2003 MARCH 31, 2004 Land Over the term of the lease Over the term of the lease Buildings 4% 4% Building improvements 20% 20% Machinery and equipment 10% - 30% 10% - 20%

During the year ended March 31, 2004, the depreciation rate for machinery and equipment was changed from 10% - 30% to 10% - 20%. The management considered that the revised deprecation rate reflected more fairly the expected useful lives of the machinery and equipment. The change in the accounting estimate as a result of the revision of the depreciation rate of machinery and equipment increased the income for the year ended March 31, 2004 by approximately USD412,000 and the basic net income per share by USD4,120. OTHER INVESTMENT Other investment includes equity investment made in a private company. The investment represents less than 20% equity in such company and is accounted for using the cost method of accounting. No impairment write down has been made on the investment cost. IMPAIRMENT OF ASSETS The Company's policy is to periodically review and evaluate whether there has been a permanent impairment in the value of long-lived assets. Factors considered in the evaluation include current operating results, trends and anticipated undiscounted future cash flows. An impairment loss is recognized to the extent that the sum of undiscounted estimated future cash flows that is expected to result from the use of the asset, or other measure of fair value, is less than the carrying value. There have been no impairment losses in 2002, 2003 or 2004. -7- BESTIP DEVELOPMENT INTERNATIONAL LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D) REVENUE RECOGNITION Revenues are recognized upon shipment of product, at which time title of goods has been transferred to the buyer. The Company's five largest customers accounted for approximately 39%, 46% and 33% respectively, of net sales during 2002, 2003 and 2004. No other customers accounted for sales of 10% or more during the year. INCOME TAXES The Company utilizes the asset and liability method of accounting for income taxes whereby deferred taxes are determined based on the temporary differences between the financial statements and tax bases of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. CONCENTRATION OF CREDIT RISK Concentration of credit risk is limited to accounts receivable and is subject to the financial conditions of major customer. The Company does not require collateral or other security to support accounts receivable. The Company conducts periodic reviews of its clients' financial condition and customer payment practices to minimize collection risk on accounts receivable. FINANCIAL INSTRUMENTS The carrying amounts of all financial instruments approximate fair value. The carrying amounts of cash, accounts receivable, accounts payable, and accrued expenses approximate fair value due to the short-term nature of these items. The carrying amounts of bank borrowings approximate the fair value based on the Company's expected borrowing rate for debt with similar remaining maturities and comparable risk. FOREIGN CURRENCY TRANSLATION Assets and liabilities of the Company and its subsidiaries that operate in a local currency environment are translated to USD at exchange rates in effect at the balance sheet dates, with the resulting translation adjustments directly recorded to a separate component of accumulated other comprehensive income/loss. Income and expense accounts are translated at average exchange rates during the years. During 2002, 2003 and 2004, there have been no significant change in exchange rates. Accordingly, there are no changes in other comprehensive income. -8- BESTIP DEVELOPMENT INTERNATIONAL LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D) NEW ACCOUNTING PRONOUNCEMENTS SFAS 150 In May 2003, the FASB issued Statement of Financial Accounting Standards (SFAS) No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity." SFAS No. 150 is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. SFAS No. 150 requires the classification as a liability of any financial instruments with a mandatory redemption feature, an obligation to repurchase equity shares, or a conditional obligation based on the issuance of a variable number of its equity shares. The Company does not have any financial instruments as defined by SFAS No. 150. The adoption of SFAS No. 150 did not have a material effect on the Company's consolidated financial statements. FIN NO. 46 In January 2003, the FASB issued FASB Interpretation No. 46, "Consolidation of Variable Interest Entities" (FIN 46). FIN 46 states that companies that have exposure to the economic risks and potential rewards from another entity's assets and activities have a controlling financial interest in a variable interest entity and should consolidate the entity, despite the absence of clear control through a voting equity interest. The consolidation requirements apply to all variable interest entities created after January 31, 2003. For variable interest entities that existed prior to February 1, 2003, the consolidation requirements are effective for annual or interim periods beginning after December 15, 2003. Disclosure of significant variable interest entities is required in all financial statements issued after January 31, 2003, regardless of when the variable interest was created. The adoption of FIN 46 did not have a material effect on the Company's consolidated financial statements. SFAS 132 In December 2003, the FASB issued SFAS 132 (revised 2003), "Employer's Disclosure about Pensions and Other Post Retirement Benefits". SFAS 132 (revised) revised employer's disclosure about pension plans and other post-retirement benefit plans. SFAS 132 (revised) requires additional disclosures in annual financial statements about the types of plan assets, investment strategy, measurement dates, plan obligations, cash flows, and components of net periodic benefit cost of defined benefit pension plans and other post-retirement benefit plans. The annual disclosure requirements are effective for fiscal years ended after December 15, 2003. SFAS 132 (revised) also requires interim disclosure of the elements of net periodic benefit cost and the total amount of contributions paid or expected to be paid during the current fiscal year if significantly different from amounts previously disclosed. The interim disclosure requirements of SFAS 132 (revised) are effective for interim periods beginning after December 15, 2003. -9- BESTIP DEVELOPMENT INTERNATIONAL LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D) NEW ACCOUNTING PRONOUNCEMENTS (CONT'D) SFAS 132 (CONT'D) The adoption of this statement had no significant impact on the Company's results of operation or financial position. The details of the Group's pension plans are disclosed in note 16 to the consolidated financial statements. CASH AND CASH EQUIVALENTS Cash equivalents are highly liquid investments and have maturities of three months or less at the date of purchase. 3. ACCOUNTS RECEIVABLE, NET MARCH 31, -------------------------- 2003 2004 USD USD Accounts receivable 9,539,605 12,109,095 Less : Allowance for doubtful accounts (1,303,954) (1,810,813) ----------- ----------- 8,235,651 10,298,282 =========== =========== The Company incurred USD489,039, USD240,285 and USD506,859 of doubtful debt expense during 2002, 2003 and 2004 respectively. 4. INVENTORIES, NET MARCH 31, -------------------------- 2003 2004 USD USD Raw materials 5,827,541 4,688,225 Work in progress 277,741 349,882 Finished goods 1,496,944 1,481,390 ----------- ----------- 7,602,226 6,519,497 Less : Allowance for obsolete inventories (728,435) (728,435) ----------- ----------- 6,873,791 5,791,062 =========== =========== The Company charged USD69,976 of allowance for inventories to expense during 2002 which was included in cost of sales. No such allowance was made for 2003 and 2004. -10- BESTIP DEVELOPMENT INTERNATIONAL LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 5. PREPAYMENTS, DEPOSITS AND OTHER RECEIVABLES At March 31, 2003 and 2004, the balances comprised of the following :- MARCH 31, ------------------------ 2003 2004 USD USD Prepayments 38,070 11,307 Rental and other deposits 229,083 219,518 Deposits for purchases of raw materials 77,617 126,326 Other receivables 48,321 42,767 ----------- ----------- 393,091 399,918 =========== =========== 6. AMOUNT DUE FROM A DIRECTOR The amount due from a director, Mr. Shi Kai Bui, is unsecured, bears interest calculated based on the cost of funding of the Group plus 1.5% per annum which approximates 8% per annum for both 2003 and 2004 and is repayable on demand. 7. AMOUNT DUE FROM ULTIMATE HOLDING COMPANY The amount is interest-free, unsecured and repayable on demand. 8. PROPERTY, PLANT AND EQUIPMENT, NET MARCH 31, ------------------------ 2003 2004 USD USD Land and buildings 1,470,043 1,470,043 Building improvements 244,276 244,276 Machinery and equipment 24,569,479 28,168,802 ----------- ----------- 26,283,798 29,883,121 Less : Accumulated depreciation and amortization (16,664,200) (18,576,089) ----------- ----------- 9,619,598 11,307,032 =========== =========== -11- BESTIP DEVELOPMENT INTERNATIONAL LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 8. PROPERTY, PLANT AND EQUIPMENT, NET (CONT'D) (i) Machinery and equipment with net book values of USD1,865,089 (cost of USD2,639,525 less accumulated depreciation of USD774,436) and USD2,240,936 (cost of USD2,938,771 less accumulated depreciation of USD697,835) were under capital lease obligations at March 31, 2003 and 2004 respectively. Depreciation on machinery and equipment under capital lease obligations amounted to USD288,858, USD428,037 and USD241,506 for 2002, 2003 and 2004 respectively. (ii) At March 31, 2004, land and buildings with carrying amounts of USD1,462,959 were pledged to banks for banking facilities granted to the Group (Note 11(b)). (iii) Depreciation and amortization expenses for 2002, 2003 and 2004 were USD2,000,956, USD2,746,742 and USD1,965,736 respectively and USD1,609,136, USD2,299,966 and USD1,518,198 of these expenses were included in cost of sales. (iv) During 2003 and 2004, machinery and equipment with nil carrying amounts were disposed of at considerations of USD8,718 and USD7,949 resulting in gains of the same amounts respectively. There was no disposal of property, plant and equipment in 2002. 9. ACCRUED EXPENSES AND OTHER PAYABLES At March 31, 2003 and 2004, accrued expenses and other payables comprised of the following :- MARCH 31, ------------------------- 2003 2004 USD USD Acquisitions of property, plant and equipment 109,234 136,359 Auditors' remuneration 48,487 39,230 Utilities, consumables and other operating expenses 992,714 525,919 Customers' and other deposits received 240,675 191,215 Payroll and other staff costs 830,498 720,220 Receipt in advance for sales of scrap materials 327,370 494,931 Rental expense 238,163 230,397 Others 243,263 368,976 ----------- ----------- Total 3,030,404 2,707,247 =========== ===========

10. AMOUNTS DUE FROM/TO RELATED COMPANIES These amounts are interest-free, unsecured and repayable on demand. -12- BESTIP DEVELOPMENT INTERNATIONAL LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 11. BANK BORROWINGS (a) Bank borrowings composed of the followings :- MARCH 31, ------------------------- 2003 2004 USD USD Bank loans 1,126,096 802,649 Bills payable and trust receipt loans 4,848,239 6,558,672 ----------- ----------- 5,974,335 7,361,321 =========== ===========

The Group is obliged to make the following principal payments :- MARCH 31, ------------------------- 2003 2004 USD USD Years ending March 31 :- 2004 5,717,925 - 2005 (no borrowings are repayable beyond 2005) 256,410 7,361,321 ----------- ----------- 5,974,335 7,361,321 =========== ===========

(b) At March 31, 2004, the Group's available banking facilities to the extent of approximately USD14 million were secured by the followings:- (i) The Group's short-term bank deposits; (ii) The Group's land and buildings (Note 8); (iii) Personal guarantees put up by the sole director of the Company; and (iv) A joint and several guarantee executed by the director and his spouse which is supported by the residual value of an all money legal charge over the property jointly owned by the director and his spouse. In addition, the Company was obliged to meet the covenants of maintaining tangible net worth and gearing and debt equity ratios at certain levels. The Company was not in breach of any such covenants throughout the years. At March 31, 2004, the amount of unused available banking facilities, including unused letters of credit of approximately USD2million, was approximately USD4 million. The interest rates of bank borrowings were Hong Kong best lending rate plus 0.25% to 2%. -13- BESTIP DEVELOPMENT INTERNATIONAL LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 12. CAPITAL LEASE OBLIGATIONS The Group leases certain machinery and equipment under non-cancelable leases classified as capital leases. The following is a schedule of future minimum lease payments for capital leases together with the present value of the net minimum lease payments :- MARCH 31, ------------------------ 2003 2004 USD USD Years ending March 31 :- 2004 719,942 - 2005 504,061 916,011 2006 286,937 696,447 2007 14,838 171,665 2008 (no capital leases are repayable beyond 2008) - 48,349 ---------- ---------- Total minimum lease payments 1,525,778 1,832,472 Less : Capital lease charges (88,568) (96,954) ---------- ---------- Present value of lease payments 1,437,210 1,735,518 Less : current maturities (663,339) (851,164) ---------- ---------- 773,871 884,354 ========== ==========

Details of capitalized assets are set out in note 8(i). 13. OTHER INCOME Other income included the followings :- YEAR ENDED MARCH 31, ------------------------------- 2002 2003 2004 USD USD USD Bank interest income 18,375 16,972 5,500 Gain on disposal of property, plant and equipment - 8,718 7,949 Interest income from a director 166,579 237,161 311,674 Other income 357,570 167,421 203,895 --------- --------- --------- 542,524 430,272 529,018 ========= ========= ========= -14- BESTIP DEVELOPMENT INTERNATIONAL LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 14. INCOME TAXES The income tax expenses consists of the following : YEAR ENDED MARCH 31, -------------------------------------- 2002 2003 2004 USD USD USD Current tax : Hong Kong 109,264 33,122 35,958 Deferred tax : Hong Kong 111,368 192,525 337,530 ---------- ---------- ---------- Total expenses for income tax 220,632 225,647 373,488 ========== ========== ==========

Provision for Hong Kong profits tax is made at 16% for 2002 and 2003 and 17.5% for 2004 respectively on the estimated assessable profits of the respective years. No provision for PRC enterprise income tax is made as the subsidiary operating in the PRC has no assessable profits throughout the years. Income tax expenses vary from the amount computed by applying the statutory income tax rate to income before income tax as follow : YEAR ENDED MARCH 31, -------------------------------------- 2002 2003 2004 USD USD USD Income before income tax 2,043,246 974,404 1,476,838 ========== ========== ========== Expected income tax expenses at Hong Kong income tax rate of 16%, 16% and 17.5% during 2002, 2003 and 2004 326,919 155,905 258,447 Income/expenses not taxable/deductible for tax purposes (134,992) 41,935 5,201 Increase in opening deferred tax due to increase in Hong Kong income tax rate - - 95,034 PRC and Hong Kong tax rates differential (37,089) (32,812) (20,460) (Over)/under-provision of current tax for previous years (37,836) 173 (2,941) Valuation allowances 71,996 63,693 43,559 Others 31,634 (3,247) (5,352) ---------- ---------- ---------- Income tax expenses 220,632 225,647 373,488 ========== ========== ==========

-15- BESTIP DEVELOPMENT INTERNATIONAL LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 14. INCOME TAXES (CONT'D) The major components of deferred tax recognized in the consolidated balance sheets as of March 31, 2003 and 2004 are as follows :- MARCH 31, ------------------------ 2003 2004 USD USD Excess of tax depreciation expenses over book depreciation expenses (1,052,993) (1,451,570) ---------- ---------- Expenses that are reported in financial statements prior to becoming deductible for tax purposes - 56,090 ---------- ---------- Tax losses 285,492 334,008 Less : Valuation allowances (246,094) (289,653) ---------- ---------- 39,398 44,355 ---------- ---------- (1,013,595) (1,351,125) ========== ========== The deferred tax recognized can be analyzed as follows :- MARCH 31, ------------------------ 2003 2004 USD USD Deferred tax assets 67,102 136,391 Deferred tax liabilities (1,080,697) (1,487,516) ---------- ---------- (1,013,595) (1,351,125) ========== ========== At March 31, 2004, the Company had tax losses carried forward amounting to USD1,131,193. USD253,457 of these tax losses can be utilized for an unlimited period of time and the remaining USD877,736 can be carried forward for five years from the year of loss. The management determined that the tax losses of USD877,736 incurred by a subsidiary did not meet the realization criteria and thereby a valuation allowance of USD289,653 was made against the deferred tax asset. -16- BESTIP DEVELOPMENT INTERNATIONAL LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 15. BASIC NET INCOME PER SHARE The calculation of basic net income per share is based on the net income of USD1,801,212, USD726,288 and USD1,078,911 and the weighted average number of 1, 99 and 100 shares in issue during 2002, 2003 and 2004. The diluted net income per share is not presented as there is no dilutive effect throughout the years. 16. PENSION PLANS The Group participates in a defined contribution pension scheme under the Mandatory Provident Fund Schemes Ordinance ("MPF Scheme") for all its eligible employees in Hong Kong. The MPF Scheme is available to all employees aged 18 to 64 with at least 60 days of service in the employment in Hong Kong. Contributions are made by the Group's subsidiary operating in Hong Kong at 5% of the participants' relevant income with a ceiling of HK$20,000. The participants are entitled to 100% of the Group's contributions together with accrued returns irrespective of their length of service with the Group, but the benefits are required by law to be preserved until the retirement age of 65. As stipulated by the PRC government regulations, the Group's subsidiary operating in the PRC is required to contribute to PRC insurance companies organized by the PRC government which are responsible for the payments of pension benefits to retired staff. The monthly contribution was equal to 28.5% of the salaries of the staff. The Group has no obligation for the payment of pension benefits beyond the annual contributions described above. The assets of the schemes are controlled by trustees and held separately from those of the Group. Total pension cost was USD73,771, USD82,679 and USD58,473 during 2002, 2003 and 2004 respectively. -17- BESTIP DEVELOPMENT INTERNATIONAL LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 17. COMMITMENTS (i) The Group leases office and factory premises under various non-cancelable operating lease agreements that expire at various dates through years 2005 to 2011. Minimum future commitments under these agreements with term in excess of one year as of March 31, 2004 were as follows :- YEAR USD 2005 330,159 2006 330,159 2007 325,866 2008 321,572 2009 321,572 Thereafter 991,515 ----------- 2,620,843 =========== Rental expense was USD598,368, USD861,095 and USD951,455 during 2002, 2003 and 2004, respectively. (ii) At March 31, 2004, the Group has capital commitments in respect of acquisition of property, plant and equipment, which are contracted for but not provided in the financial statements, amounting to USD349,308. 18. SUPPLEMENTAL CASH FLOW INFORMATION YEAR ENDED MARCH 31, ------------------------------------ 2002 2003 2004 USD USD USD Interest paid 443,607 438,378 514,644 Income tax paid 221,964 88,325 32,682 Non-cash activities Property, plant and equipment acquired under capital lease obligations 919,079 1,207,513 1,252,259 Deposits for acquisition of property, plant and equipment settled via current account with a director - - 2,564,103 Interest income settled via current account with a director 166,579 237,161 311,674 ========== ========== ==========

-18- BESTIP DEVELOPMENT INTERNATIONAL LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 19. RELATED PARTY TRANSACTIONS The Group entered into the following transactions with its related parties during the years ended March 31, 2002, 2003 and 2004 :- (i) Jointly controlled entity ("JCE") YEAR ENDED MARCH 31, --------------------------------- 2002 2003 2004 USD USD USD Sales of raw materials to JCE 9,997 - - Purchases of finished goods from JCE 123,141 - - ========= ========= ========= The above transactions were carried out at terms mutually agreed by both parties. (ii) A director of the Company (a) Interest income amounting to USD166,579, USD237,161 and USD311,674 were received from the director during the years ended March 31, 2002, 2003 and 2004. The interest was calculated based on the cost of funding of the Group plus 1.5% per annum, which approximates 8.125%, 8% and 8% for 2002, 2003 and 2004 respectively, on the outstanding amount. (b) At March 31, 2004, in order to secure the banking facilities granted to the Group :- - The director and his spouse have issued a joint and several guarantee each for USD2.18 million to a bank. The guarantee is supported by the residual value of an all money legal charge over the property jointly owned by the director and his spouse; - The director has issued a personal guarantee amounting to USD5.13 million to a bank; and - The director has given unlimited personal guarantee to two banks. (c) On February 29, 2004, the Group entered into an agreement with a company controlled by the director whereby the Group agreed to acquire machinery and equipment from this related company at a consideration of approximately USD2,615,000. The consideration was determined by reference to a valuation report prepared by an independent professionally qualified valuer. On March 31, 2004, the deposit of USD2,564,103 was settled by the Group via the current account with the director. 20. SUBSEQUENT EVENT On June 30, 2004, the Company declared an interim dividend of USD30,769 per share totaling USD3,076,923. -19- BESTIP DEVELOPMENT INTERNATIONAL LTD. CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED DECEMBER 31, 2004 BESTIP DEVELOPMENT INTERNATIONAL LTD. CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED DECEMBER 31, 2004 CONTENTS PAGES Consolidated Balance Sheets 1 Consolidated Statements of Operations 2 Consolidated Statements of Cash Flows 3 Notes to Consolidated Financial Statements 4 - 12 BESTIP DEVELOPMENT INTERNATIONAL LTD. CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2004 MARCH 31, 2004 USD USD (UNAUDITED) (AUDITED) ASSETS Current assets Cash and cash equivalents 238,349 702,662 Restricted short-term bank deposits 982,813 1,116,100 Accounts receivable, net (Note 4) 11,990,371 10,298,282 Inventories, net (Note 5) 6,228,891 5,791,062 Prepayments, deposits and other receivables (Note 6) 869,099 399,918 Income tax recoverable 1,466 124,396 Amounts due from related companies (Note 9) 27,627 4,013 Amount due from a director (Note 7) 447,136 2,534,016 Amount due from ultimate holding company (Note 8) 123,560 123,009 ------------ ------------ Total current assets 20,909,312 21,093,458 Property, plant and equipment, net 14,024,821 11,307,032 Deposits for acquisition of property, plant and equipment 440,739 2,769,295 Other investment 29,069 29,069 Deferred tax assets 102,764 136,391 ------------ ------------ Total assets 35,506,705 35,335,245 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Accounts payable 9,414,261 6,493,002 Accrued expenses and other payables 2,855,928 2,707,247 Amount due to a related company (Note 9) 350,494 166,575 Bank overdrafts 2,146,410 2,649,736 Current maturities of bank borrowings 6,952,474 7,361,321 Current maturities of capital lease obligations 732,235 851,164 Income tax payable 56,799 6,113 ------------ ------------ Total current liabilities 22,508,601 20,235,158 Capital lease obligations, less current maturities 659,678 884,354 Deferred tax liabilities 1,760,507 1,487,516 ------------ ------------ Total liabilities 24,928,786 22,607,028 ------------ ------------ Minority interests 198,193 184,683 ------------ ------------ Stockholders' equity Common stock, par value USD1 per share: 50,000 shares authorised 100 shares issued and outstanding 100 100 Additional paid-in-capital 1,183,129 1,183,128 Other comprehensive income 19,774 19,774 Retained profits 9,176,723 11,340,532 ------------ ------------ Total stockholders' equity 10,379,726 12,543,534 ------------ ------------ Total liabilities and stockholders' equity 35,506,705 35,335,245 ============ ============ see Notes to consolidated financial statements -1-

BESTIP DEVELOPMENT INTERNATIONAL LTD. CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE NINE MONTHS ENDED DECEMBER 31, ---------------------------- 2004 2003 USD USD (UNAUDITED) (UNAUDITED) ------------ ------------ Total net sales 37,493,427 30,454,768 Cost of sales (29,236,132) (23,349,430) ------------ ------------ Gross profit 8,257,295 7,105,338 Depreciation and amortization (253,627) (335,653) Selling, general and administrative expenses (6,539,712) (7,105,338) ------------ ------------ Operating income 1,463,955 1,382,271 Other income 152,258 337,134 Interest and capital lease charges (416,599) (381,487) ------------ ------------ Income before income tax 1,199,615 1,377,918 Income tax expenses (Note 10) (272,990) (354,335) Minority interests (13,511) (18,329) ------------ ------------ Net income 913,114 1,005,254 ============ ============ Basic net income per share (Note 11) 9,131 10,053 ============ ============ see Notes to consolidated financial statements -2- BESTIP DEVELOPMENT INTERNATIONAL LTD. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED DECEMBER 31, -------------------------- 2004 2003 USD USD (UNAUDITED) (UNAUDITED) Cash flows from operating activities : Net income 913,114 1,005,254 Adjustments to reconcile net income to net cash provided by operating activities : Depreciation and amortization 1,493,381 2,320,138 Interest income from a director (39,810) (233,756) Allowance for doubtful accounts - 506,859 Increase in deferred tax assets (4,385) (35,191) Increase in deferred tax liabilities 272,991 34,940 Increase in minority interests 13,510 18,329 Changes in operating assets and liabilities : Increase in accounts receivable, prepayments, deposits and other receivables (1,929,152) (4,953,951) (Increase)/decrease in inventories (437,829) 2,284,080 Increase in accounts payable, accrued expenses and other payables 3,069,940 704,055 Decrease/(increase) in income tax recoverable 127,288 (37,324) Increase in income tax payable 50,686 - ----------- ----------- Net cash provided by operating activities 3,529,734 1,613,433 ----------- ----------- Cash flows from investing activities : Acquisition of property, plant and equipment (4,211,170) (1,764,818) Increase in deposits for acquisition of property, plant and equipment (235,547) (624,394) ----------- ----------- Net cash used in investing activities (4,446,717) (2,389,212) ----------- ----------- Cash flows from financing activities : New bank loans raised - 1,766,398 Repayment of bank loans (802,649) (1,127,182) (Decrease)/ increase in bank overdrafts (503,326) 337,223 Increase in bills payable and trust receipt loans 393,802 1,627,375 Repayment of capital lease obligations (343,605) (812,004) Advances from/(repayment to) related companies 160,305 (81,075) Advance from/(to) a director 1,415,407 (897,580) (Repayment to)/ advance from ultimate holding company (551) 98 Decrease/( increase) in short term bank deposits 133,287 (167,733) ----------- ----------- Net cash provided by financing activities 452,670 645,520 ----------- ----------- Net decrease in cash and cash equivalents (464,313) (130,259) Cash and cash equivalents, beginning of period 702,662 388,377 ----------- ----------- Cash and cash equivalents, end of period 238,349 258,118 =========== =========== see Notes to consolidated financial statements -3-

BESTIP DEVELOPMENT INTERNATIONAL LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements of Bestip Development International Ltd. (the "Company") and its subsidiaries (together the "Group") have been prepared in accordance with generally accepted accounting principles in the United States of America for interim consolidated financial information. Accordingly, they do not include all the information and notes necessary for comprehensive consolidated financial statements. In the opinion of the management of the Company, all adjustments, which are of a normal recurring nature, necessary for a fair presentation of the financial position and the results of operations and cash flows for the interim periods have been included. Interim results are not necessarily indicative of results for a full year. 2. DESCRIPTION OF BUSINESS The Company was established in the British Virgin Islands with limited liability. The Group is principally engaged in the manufacturing and trading of electronic motors for toys and electrical appliances. 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of the Company and its subsidiaries. All significant inter-company balances and transactions have been eliminated in consolidation. USE OF ESTIMATES The preparation of the 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 disclosures of contingent assets and liabilities at the dates of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates required to be made by management include the recoverability of long-lived assets , accounts receivable and inventories. Actual results could differ from those estimates. CASH AND CASH EQUIVALENTS Cash equivalents are highly liquid investments and have maturities of three months or less at the date of purchase. -4- BESTIP DEVELOPMENT INTERNATIONAL LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ACCOUNTS RECEIVABLE The Company extends unsecured credit to customers in the normal course of business and believes all accounts receivable in excess of the allowances for doubtful accounts to be fully collectible. If accounts receivable in excess of the provided allowance are determined uncollectable, they are charged to expense in the year that determination is made. The Company does not accrue interest on trade accounts receivable. Accounts receivable are due 30 to 180 days after the invoice date. INVENTORIES Inventories are valued at the lower of cost or market with cost determined on a weighted average basis. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are stated at cost less accumulated depreciation and amortization. Maintenance, repairs and betterments, including replacement of minor items, are charged to expense; major additions to physical properties are capitalized. Depreciation and amortization are provided using the straight-line method over the estimated useful lives at the following annual rates :- Land Over the term of the lease Buildings 4% Building improvements 20% Machinery and equipment 10% - 20% OTHER INVESTMENT Other investment includes equity investment made in a private company. The investment represents less than 20% equity in such company and is accounted for using the cost method of accounting. No impairment write down has been made on the investment cost. IMPAIRMENT OF ASSETS The Company's policy is to periodically review and evaluate whether there has been a permanent impairment in the value of long-lived assets. Factors considered in the evaluation include current operating results, trends and anticipated undiscounted future cash flows. An impairment loss is recognized to the extent that the sum of undiscounted estimated future cash flows that is expected to result from the use of the asset, or other measure of fair value, is less than the carrying value. There have been no impairment losses for the reporting periods. REVENUE RECOGNITION Revenues are recognized upon shipment of product, at which time title of goods has been transferred to the buyer. -5- BESTIP DEVELOPMENT INTERNATIONAL LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Company's five largest customers accounted for approximately 48% and 50% respectively, of net sales during the 2003 and 2004 reporting periods. INCOME TAXES The Company utilizes the asset and liability method of accounting for income taxes whereby deferred taxes are determined based on the temporary differences between the financial statements and tax bases of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. CONCENTRATION OF CREDIT RISK Concentration of credit risk is limited to accounts receivable and is subject to the financial conditions of major customer. The Company does not require collateral or other security to support accounts receivable. The Company conducts periodic reviews of its clients' financial condition and customer payment practices to minimize collection risk on accounts receivable. FINANCIAL INSTRUMENTS The carrying amounts of all financial instruments approximate fair value. The carrying amounts of cash, accounts receivable, accounts payable, and accrued expenses approximate fair value due to the short-term nature of these items. The carrying amounts of bank borrowings approximate the fair value based on the Company's expected borrowing rate for debt with similar remaining maturities and comparable risk. FOREIGN CURRENCY TRANSLATION The functional currencies of the Group are Hong Kong dollars and Renminbi ("RMB") respectively and RMB is not freely convertible into foreign currencies. The Company and its subsidiaries maintain their financial statements in their respective functional currencies. Monetary assets and liabilities denominated in currencies other than their respective functional currencies are translated into their respective functional currencies at rates of exchange prevailing at the balance sheet date. Transactions denominated in currencies other than their respective functional currencies are translated into their respective functional currencies at the exchanges rates prevailing at the dates of the transaction. Exchange gains or losses arising from foreign currency transactions are included in the determination of net income for the respective period. -6- BESTIP DEVELOPMENT INTERNATIONAL LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES FOREIGN CURRENCY TRANSLATION For financial reporting purposes, the financial statements of subsidiaries which are prepared using their functional currencies have been translated into United States dollars. Assets and liabilities are translated at the exchange rates at the balance sheet dates and revenue and expenses are translated at the average exchange rates and stockholders' equity is translated at historical exchange rates. Any translation adjustments resulting are not included in determining net income but are included in foreign exchange adjustment, a component of stockholders' equity. NEW ACCOUNTING PRONOUNCEMENTS SFAS 151 In November 2004, the FASB issued SFAS No. 151, "Inventory costs - an amendment of ARB No. 43, Chapter 4." ("SFAS 151"). SFAS 151 amends ARB 43, Chapter 4 to clarify that "abnormal" amounts of idle freight, handling costs and spoilage should be recognized as current period charges. SFAS 151 is effective for inventory costs incurred during fiscal years beginning after June 15, 2005. We do not anticipate that the adoption of this standard will have a material impact on our financial statements. SFAS 123R In December 2004, the FASB issued a revised Statement 123 (SFAS 123R"), "Accounting for Stock-Based Compensation" requiring public entities to measure the cost of employee services received in exchange for an award of equity instruments based on grant date fair value. The cost will be recognized over the period during which an employee is required to provide service in exchange for the award - usually the vesting period. The effective date for this statement is as of the first interim period that begins after June 15, 2005 (after December 15, 2005 for small business filers). We do not anticipate that the adoption of this standard will have a material impact on our financial statements. STATEMENT NO. 153 In December 2004, FASB issued Statement No. 153, "Exchange of Nonmonetary Assets". This statement addresses the measurement of exchanges of nonmonetary assets and eliminates the exception from fair value measurement for nonmonetary exchanges of similar productive assets and replaces it with an exception for exchanges that do not have commercial substance. A nonmonetary exchange has commercial substance if future cash flows of the entity are expected to change significantly as a result of the exchange. This Statement is effective for periods beginning after June 15, 2005. The Company does not expect the application of Statement No. 123 to have a material impact on our financial statements -7- BESTIP DEVELOPMENT INTERNATIONAL LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 4. ACCOUNTS RECEIVABLE, NET Amend the breakdown to those of 31.3.2004 DECEMBER 31, MARCH 31, 2004 2004 USD USD Accounts receivable 13,801,184 12,109,095 Less : Allowance for doubtful accounts (1,810,813) (1,810,813) ------------- ------------- 11,990,371 10,298,282 ============= ============= The Company incurred nil and USD506,859 of doubtful debt expense during the nine months ended December 31, 2004 and 2003 respectively. 5. INVENTORIES, NET DECEMBER 31, MARCH 31, 2004 2004 USD USD Raw materials 4,879,654 4,688,225 Work in progress 394,158 349,882 Finished goods 1,683,514 1,481,390 ------------- ------------- 6,957,326 6,519,497 Less : Allowance for obsolete inventories (728,435) (728,435) ------------- ------------- 6,228,891 5,791,062 ============= ============= No allowance for inventories was made for the reporting periods. 6. PREPAYMENTS, DEPOSITS AND OTHER RECEIVABLES At December 31, 2004 and March 31, 2004, the balances comprised of the following :- DECEMBER 31, MARCH 31, 2004 2004 USD USD Prepayments 12,966 11,307 Rental and other deposits 171,362 219,518 Deposits for purchases of raw materials 98,381 126,326 Other receivables 586,390 42,767 ------------- ------------- 869,099 399,918 ============= ============= -8- BESTIP DEVELOPMENT INTERNATIONAL LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 7. AMOUNT DUE FROM A DIRECTOR The amount due from a director, Mr. Shi Kai Bui, is unsecured, bears interest calculated based on the cost of funding of the Group plus 1.5% per annum which approximates 8% per annum for the reporting periods and is repayable on demand. 8. AMOUNT DUE FROM ULTIMATE HOLDING COMPANY The amount is interest-free, unsecured and repayable on demand. 9. AMOUNTS DUE FROM/TO RELATED COMPANIES These amounts are interest-free, unsecured and repayable on demand. 10. INCOME TAXES The income tax expenses consists of the following : FOR THE NINE MONTHS ENDED DECEMBER 31, ------------------------- 2004 2003 USD USD Current tax : Hong Kong 56,799 26,969 Deferred tax : Hong Kong 216,191 327,366 --------- --------- Total expenses for income tax 272,990 354,335 ========= ========= Provision for Hong Kong profits tax is made at 17.5% and 16% respectively on the estimated assessable profits of the nine months ended December, 2004 and 2003 respectively. No provision for PRC enterprise income tax is made as the subsidiary operating in the PRC has no assessable profits throughout the reporting periods. -9- BESTIP DEVELOPMENT INTERNATIONAL LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 11. BASIC NET INCOME PER SHARE The calculation of basic net income per share is based on the net income of USD913,114and USD1,005,254and the weighted average number of 100 shares in issue during the nine months ended December 31, 2004 and 2003 respectively. The diluted net income per share is not presented as there is no dilutive effect throughout the reporting periods. 12. PENSION PLANS The Group participates in a defined contribution pension scheme under the Mandatory Provident Fund Schemes Ordinance ("MPF Scheme") for all its eligible employees in Hong Kong. The MPF Scheme is available to all employees aged 18 to 64 with at least 60 days of service in the employment in Hong Kong. Contributions are made by the Group's subsidiary operating in Hong Kong at 5% of the participants' relevant income with a ceiling of HK$20,000. The participants are entitled to 100% of the Group's contributions together with accrued returns irrespective of their length of service with the Group, but the benefits are required by law to be preserved until the retirement age of 65. As stipulated by the PRC government regulations, the Group's subsidiary operating in the PRC is required to contribute to the PRC insurance companies organized by the PRC Government which are responsible for the payments of pension benefits to retired staff. The monthly contribution was equal to 28.5% of the salaries of the staff. The Group has no obligation for the payment of pension benefits beyond the annual contributions described above. The assets of the schemes are controlled by trustees and held separately from those of the Group. Total pension cost was USD43,619 and USD53,077 respectively during the nine months ended December 31, 2004 and 2003. -10- BESTIP DEVELOPMENT INTERNATIONAL LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 13. COMMITMENTS The Group leases office and factory premises under various non-cancelable operating lease agreements that expire at various dates through years 2005 to 2011. Minimum future commitments under these agreements with term in excess of one year as of December 31, 2004 were as follows :- YEAR USD Three months ending March 31, 2005 82,540 2006 330,159 2007 325,866 2008 321,572 2009 321,572 Thereafter 991,515 ------------ 2,373,224 ============ Rental expense was USD658,009 and USD717,211during the nine months ended December 31, 2004 and 2003 respectively. 14. SUPPLEMENTAL CASH FLOW INFORMATION FOR THE NINE MONTHS ENDED DECEMBER 31, 2004 2003 USD USD Interest paid 416,599 381,487 Income tax paid 56,799 26,969 Non-cash activities Property, plant and equipment acquired under capital lease obligations - 1,263,058 Deposits for acquisition of property, plant and equipment settled via current account with a director 3,076,923 - Interest income settled via current account with a director 39,810 233,795 ========== ========== -11- BESTIP DEVELOPMENT INTERNATIONAL LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 15. RELATED PARTY TRANSACTIONS The Group entered into the following transactions with its related parties during the reporting periods :- A director of the Company (a) Interest income amounting to USD39,810 and USD233,756were received from the director during the nine months ended December 31, 2004 and 2003 respectively. The interest was calculated based on the cost of funding of the Group plus 1.5% per annum, which approximates 8% for both reporting periods, on the outstanding amount. (b) At December 31, 2004, in order to secure the banking facilities granted to the Group :- - The director and his spouse have issued a joint and several guarantee each for USD2.18 million to a bank. The guarantee is supported by the residual value of an all money legal charge over the property jointly owned by the director and his spouse; - The director has issued a personal guarantee amounting to USD5.13 million to a bank; and - The director has given unlimited personal guarantee to two banks. -12- WYOMING OIL & MINERALS, INC. UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS WYOMING OIL & MINERALS, INC. UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS Contents Pages Unaudited pro forma combined balance sheet 1 Unaudited pro forma combined statement of operations 2 Notes to unaudited pro forma combined financial statements 3 WYOMING OIL & MINERALS, INC. UNAUDITED PRO FORMA COMBINED BALANCE SHEET AS AT FEBRUARY 28, 2005 ------------------------------------ WYOMING OIL & MINERALS, INC. BESTIP PRO FORMA ------------------------------------ DEVELOPMENT COMBINED PER AUDITED ADJUSTED INTERNATIONAL PRO FORMA BALANCE ACCOUNTS REALLOCATION BALANCE LIMITED NOTE ADJUSTMENTS SHEET USD USD USD USD USD USD ---------- ---------- ---------- ---------- ---------- ---------- ---------- ASSETS Current assets Cash and cash equivalents 318,859 - 318,859 238,349 557,208 Short-term bank deposits, pledged - - - 982,813 982,813 Accounts receivable, net - - - 11,990,371 11,990,371 Inventories, net - - - 6,228,891 6,228,891 Prepayments, deposits and other receivables 271 - 271 869,099 869,370 Income tax recoverable - - - 1,466 1,466 Amounts due from related companies - - - 27,627 27,627 Amount due from a director - - - 447,136 447,136 Amount due from ultimate holding company - - - 123,560 123,560 ---------- ---------- ---------- ---------- ---------- Total current assets 319,130 - 319,130 20,909,312 21,228,442 Property, plant and equipment, net 81,370 - 81,370 14,024,821 14,106,191 Other assets 1,350 - 1,350 - 1,350 Deposits for acquisition of property, plant and equipment - - - 440,739 440,739 Other investment - - - 29,069 29,069 Deferred tax assets - - - 102,764 102,764 Prepaid expenses - 10,764 10,764 - 10,764 ---------- ---------- ---------- ---------- ---------- Total assets 401,850 10,764 412,614 35,506,705 35,919,319 ========== ========== ========== ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Accounts payable 2,770 - 2,770 9,414,261 9,417,031 Accrued expenses and other payables 30,399 - 30,399 2,855,928 2,886,327 Amount due to a related company - - - 350,494 350,494 Bank overdrafts - - - 2,146,410 2,146,410 Current maturities of bank borrowings 24,832 - 24,832 6,952,474 6,977,306 Current maturities of capital lease obligations - - - 732,235 732,235 Income tax payable - - - 56,799 56,799 ---------- ---------- ---------- ---------- ---------- Total current liabilities 58,001 - 58,001 22,508,601 22,566,602 Bank borrowings, less current maturities 17,221 - 17,221 - 17,221 Capital lease obligations, less current maturities - - - 659,678 659,678 Deferred tax liabilities - - - 1,760,507 1,760,507 ---------- ---------- ---------- ---------- ---------- Total liabilities 75,222 - 75,222 24,928,786 25,004,008 ---------- ---------- ---------- ---------- ---------- Minority interests - - - 198,193 198,193 ---------- ---------- ---------- ---------- ---------- Stockholders' equity Common stock 12,976 - 12,976 100 2(a) 279,900 292,976 Additional paid-up capital 2,852,537 - 2,852,537 1,183,129 2(b) & (c) (2,808,021) 1,227,645 Other comprehensive income - - - 19,774 19,774 Deferred stock compensation (10,764) 10,764 - - - Retained profits/(accumulated deficit) (2,528,121) - (2,528,121) 9,176,723 2(b) 2,528,121 9,176,723 ---------- ---------- ---------- ---------- ---------- Total stockholders' equity 326,628 10,764 337,392 10,379,726 10,717,118 ---------- ---------- ---------- ---------- ---------- Total liabilities and stockholders' equity 401,850 10,764 412,614 35,506,705 35,919,319 ========== ========== ========== ========== ========== -1-

WYOMING OIL & MINERALS, INC. UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS FOR THE YEAR ENDED FEBRUARY 28, 2005 BESTIP PRO FORMA WYOMING DEVELOPMENT COMBINED OIL & INTERNATIONAL PRO FORMA STATEMENT OF MINERALS, INC. LIMITED NOTE ADJUSTMENTS OPERATIONS USD USD USD USD ------------ ------------ ------------ ------------ ------------ Revenue - 37,493,427 37,493,427 Cost of revenue - (29,236,132) (29,236,132) ------------ ------------ ------------ Gross profit - 8,257,295 8,257,295 Depreciation and amortization (18,458) (253,627) (272,085) Stock compensation (114,236) - (114,236) Selling, general and administrative expenses (718,035) (6,539,712) (7,257,747) ------------ ------------ ------------ Operating income (850,729) 1,463,956 613,227 Other income 59,219 152,258 211,477 Interest and capital lease charges (23,592) (416,599) (440,191) ------------ ------------ ------------ Income before income tax (815,102) 1,199,615 384,513 Income tax expenses - (272,990) (272,990) ------------ ------------ ------------ Income (loss) from operations (815,102) 926,625 111,523 Minority interests - (13,511) (13,511) ------------ ------------ ------------ Net income (loss) (815,102) 913,114 98,012 ============ ============ ============ Weighted average shares outstanding 29,297,562 ============ Income per share 0.003 ============ -2-

WYOMING OIL & MINERALS, INC. NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS FOR THE YEAR ENDED FEBRUARY 28, 2005 1. BASIS OF PREPARATION (a) On May 2, 2005, Wyoming Oil & Minerals, Inc. ("WYOI") executed an agreement to acquire all the issued and outstanding capital stock of Bestip Development International Limited ("Bestip"). Pursuant to the terms of the agreement, WYOI will issue a total of 28,000,000 shares of its common stock for all of the capital stock of Bestip. If the acquisition contemplated by the agreement is consummated, WYOI will undergo a change in control such that the stockholders of Bestip will be holding a majority of the outstanding voting stock of WYOI. Accordingly, the purchase method under reverse takeover accounting is adopted for the preparation of these pro forma combined financial statements. It means that the pro forma combined financial statements of the combined entity are issued under the name of the legal parent, WYOI, but a continuation of the combined financial statements of Bestip. (b) The pro forma combined balance sheet as at February 28, 2005 has been prepared assuming the acquisition occurred on February 28, 2005 and based on the audited balance sheet of WYOI at February 28, 2005 and the unaudited balance sheet of Bestip at December 31, 2004. Bestip has a different fiscal year end of March 31 with WYOI and its latest financial statements were prepared upto the latest practicable date of December 31, 2004. (c) The pro forma combined statement of operations for the year ended February 28, 2005 has been prepared assuming the acquisition occurred at the beginning of the year presented. It is based on the results of continuing operation as disclosed in the audited statement of operations of WYOI for the year ended February 28, 2005 and the unaudited statement of operations of Bestip for the period from April 1, 2004 to December 31, 2004. As mentioned earlier, the latest financial statements of Bestip were prepared upto December 31, 2004. (d) The pro forma combined financial statements presented may not be indicative of the financial position or operations that would have occurred if the acquisition had been in effect on the dates indicated or of the financial position or operating results that may be obtained in the future. 2. PRO FORMA ADJUSTMENTS (a) The issued common stock in the pro forma combined balance sheet is that of WYOI immediately prior to the acquisition plus the value of shares issued by WYOI to acquire Bestip. (b) The additional paid-in capital and accumulated deficit of WYOI up to the date of the acquisition are eliminated. (c) The difference between the par value of WYOI common stock issued for the acquisition and the net assets of WYOI at the date of the acquisition are recognized in additional paid-in capital. -3-

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