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Wednesday, August 17, 2005

China Digital Media (CDGT) 8-Ks

4/21/2005: $15K settlement in lawsuit against Company.

4/21/2005: Roth shuts down the 3 Florida beauty salons. Is this a Corleone thing?

4/26/2005: The reverse merger which amazingly took place in the future.
On December 28, 2005, Hairmax International, Inc., a Nevada corporation and predecessor of the Registrant (“Hairmax”), executed a Plan of Exchange (the “Agreement”), among Hairmax, Arcotect Digital Technology, Ltd., a corporation organized and existing under the laws of the Hong Kong SAR of the Peoples’ Republic of China (“Arcotect”), the Arcotect Shareholders and the Majority Shareholders (as defined) of Hairmax.
Feb 18, 2005: name change to China Digital Media Corp, registered with NV, got ticker from NASDAQ.

March 31, 2005: 1.5 million shares issued to Arcotect shareholders in HK. Acquisition done. Arcotect financial statement follows, audited by Jimmy C.H. Cheung & Co. of HK. Unqualified opinion.

Arcotect, as endorsed by Microsoft. Sort of. Chinese website.

Balance sheet (Dec 31, 2004): [US?]$6.6 million in assets. Nearly all property (set-top boxes and smart cards) with some inventory (probably same, but not in customer hands), AR, and a little cash. 0.3 current ratio. $3 million in liabilities, all current, nearly all AP. $3.2 million equity.

Income statement (fy 2004): $2.6 million digitization of TV signals revenue. $59K software devel revenue. $1.2 million government grant (explained elsewhere, to cover set top boxes for customers etc.). Insanely high 79% gross margins (partly due to grant being revenue). $400K SG&A. $415K deprec. $1.9 million income. Shares outstanding: 2 [two point zero]. Take that, Warren Buffett!

Cash flow (fy 2004): $4.7 million from operations. Capital expenses of $5.8 million. $1.1 million proceeds from stock. Some related party stuff.

Car depreciation period is 10 years (hey, that's how long I normally drive my cars!).

I'm getting ahead of myself again. Digitized TV in Nanhai. Smart cards and set-top boxes are loaned or sold to customers. Some installation fees. Government of Nanhai offers a grant each year for $1.2 million for set-top boxes and smart cards. Grant is recognized as revenue.

No allowances in AR number!

$5.6 million in STBs and smart cards loaned to customers.
$39K of cars.
$196K furniture and office equip.
less than 10% depreciated.

The usual PRC laws and taxes apply (I dealt with this somewhat in July).

85% of purchases from one supplier.

The two founders (each owned 1 share) surrender shares to Hairmax and own 91% of the common stock of Hairmax. Had not closed by Feb 3, 2005.

The pro forma merger financial statements help resolve some issues (NOTE: pro forma means "as if"). It's 4/5 of the way to the bottom.

Lots of questions remain such as Why the big change in depreciation from 2004 to 2005? Supposedly due to acquisition of equip and property. Other questions, too.

30 million shares of common and about 2 million shares of preferred outstanding on May 11, 2005 (convertable into about 4 million common shares post-split). UPDATE: It looks like the 2 million pfd shares are convertable into 400 million common shares. The End.

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