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FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
For the month of December 22 , 1999
------------------
Dransfield China Paper Corporation
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(Registrant's name)
8th Floor, North Wing, Kwai Shun Industrial Centre
51-63 Container Port Road, Kwai Chung
New Territories, Hong Kong, China
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(Address of principal executive offices)
[Indicate by check mark whether the registrant files or will file
annual reports under cover Form 20-F or Form 40-F.]
Form 20-F X Form 40-F
--- ---
[Indicate by check mark whether the registrant by furnishing the
information contained in this Form is also thereby furnishing the information to
the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
1934.]
Yes No X
--- ---
[If "Yes" is marked, indicate below the file number assigned
to the registrant in connection with Rule 12g3-2(b):82-_________]
<PAGE> 2
Attached for filing are the unaudited, interim, consolidated financial
statements of the registrant, Dransfield China Paper Corporation, and its
subsidiaries for the six months ended September 30, 1999.
SIGNATURES
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, thereunto duly authorized.
DRANSFIELD CHINA PAPER CORPORATION
By: /s/ Thomas J. Kenan
-------------------------------------
Thomas J. Kenan, Director
Date: December 22, 1999
2
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FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1999
DRANSFIELD CHINA PAPER CORPORATION AND SUBSIDIARIES
Dec 22, 99
<PAGE> 4
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
DRANSFIELD CHINA PAPER CORPORATION AND SUBSIDIARIES:
Consolidated Balance Sheets as of March 31, 1999 and
September 30, 1999 2
Consolidated Statements of Income (unaudited) for the six months ended September 30,
1998 and September 30, 1999 3
Condensed Consolidated Statements of Cash Flows (unaudited) for the six months ended
September 30, 1998 and September 30, 1999 4
Notes to Consolidated Financial Statements 5 - 10
</TABLE>
1
Dec 22, 99
<PAGE> 5
DRANSFIELD CHINA PAPER CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1998 AND SEPTEMBER 30, 1999
(Amounts in thousands, except number of shares and per share data)
<TABLE>
<CAPTION>
(unaudited) (unaudited)
Notes 3/31/99 9/30/99 9/30/99
HK$ HK$ US$
<S> <C> <C> <C> <C>
ASSETS
Current assets
Cash and bank balances 1,203 1,921 247
Accounts receivable, net 430 27 3
Inventories, net 4 1,415 2,216 285
Prepaid expenses 863 1,309 168
Income tax recoverable 92 92 12
------- ------- ------
Total current assets 4,003 5,565 715
Fixed assets 186,642 191,648 24,665
Loan to a related company 5 14,350 14,350 1,847
Deposit for fixed assets 3,143 -- --
Other assets 200 200 26
------- ------- ------
208,338 211,763 27,253
======= ======= ======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable 571 317 41
Accrued liabilities 1,527 730 93
Due to a minority shareholder 2,421 -- --
------- ------- ------
Total current liabilities 4,519 1,047 134
Due to holding company 6 44,009 53,322 6,862
Loan from a related company 5 14,350 14,350 1,847
------- ------- ------
62,878 68,719 8,843
Shareholders' equity:
Common Stock, no par value,
40,000,000 shares authorized;
15,585,000 shares issued, 153,584 153,584 19,766
and fully paid up
Contributed surplus 7 3,653 3,875 499
Accumulated deficit (11,777) (14,415) (1,855)
------- ------- ------
Total shareholders' equity 145,460 143,044 18,410
------- ------- ------
Total liabilities and shareholders' equity 208,338 211,763 27,253
======= ======= ======
</TABLE>
The accompanying notes form an integral part of these
consolidated financial statements.
Dec 22, 99
2
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DRANSFIELD CHINA PAPER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1998 AND SEPTEMBER 30, 1999
(Amounts in thousands, except number of shares and per share data)
<TABLE>
<CAPTION>
Six Six Six
months months months
ended ended ended
Notes 9/30/98 9/30/99 9/30/99
HK$ HK$ US$
<S> <C> <C> <C> <C>
Net Sales:
Paper hankerchiefs
- third parties -- -- --
- fellow subsidiaries -- 316 41
Other paper products to third parties 3,389 501 64
---------- ---------- ----------
3,389 817 105
Cost of sales:
Paper handkerchiefs -- -- --
Other paper products (3,139) (766) (99)
---------- ---------- ----------
(3,139) (766) (99)
Gross profit 250 51 6
Selling, general and administrative
expenses
- third parties (2,514) (1,726) (222)
- fellow subsidiaries (1,304) (848) (109)
---------- ---------- ----------
(3,818) (2,574) (331)
Interest income -- -- --
Interest expense (3) -- --
---------- ---------- ----------
(3) -- --
Other income/(expenses)
- compensation from supplier -- -- --
- loss on disposal of subsidiaries -- -- --
- corporate promotion expenses 8 (11) (151) (19)
- others 14 36 5
---------- ---------- ----------
3 (115) (14)
Loss before income taxes (3,568) (2,638) (339)
Provision for income taxes 3
- Current -- -- --
- Deferred -- -- --
---------- ---------- ----------
-- -- --
---------- ---------- ----------
Net loss (3,568) (2,638) (339)
========== ========== ==========
Basic and diluted net loss per
share (cents) (22.89) (16.93) (2.18)
========== ========== ==========
Shares used in computation of basic
and diluted loss per share 15,585,000 15,585,000 15,585,000
========== ========== ==========
</TABLE>
The accompanying notes form an integral part of these
consolidated financial statements.
Dec 22, 99
3
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DRANSFIELD CHINA PAPER CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1998 AND SEPTEMBER 30, 1999
(Amounts in thousands, except number of shares and per share data)
<TABLE>
<CAPTION>
Six Six Six
months months months
ended ended ended
9/30/98 9/30/99 9/30/99
HK$ HK$ US$
---------- ---------- ----------
<S> <C> <C> <C>
Net cash provided by operating activities 180 223 28
Cash flows from investing activities:
Acquisition of fixed assets (1,486) (462) (59)
Acquisition of further interest in
a subsidiary -- -- --
Proceeds from disposal of subsidiaries -- -- --
---------- ---------- ----------
Net cash used in investing activities (1,486) (462) (59)
---------- ---------- ----------
Cash flows from financing activities:
Advances from holding company -- 1,851 238
Repayment of loan to holding company (519) -- --
Repayment of loan to a minority shareholder
New issue of common stock -- (894) (115)
Bank loans and overdrafts, secured -- -- --
---------- ---------- ----------
Net cash provided by financing activities (519) 957 123
---------- ---------- ----------
Net (decrease) in cash and cash equivalents (1,825) 718 92
Cash and cash equivalents, at beginning
of period 2,065 1,203 155
---------- ---------- ----------
Cash and cash equivalents, at end of period 240 1,921 247
========== ========== ==========
</TABLE>
The accompanying notes form an integral part of these
consolidated financial statements.
Dec 22, 99
4
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DRANSFIELD CHINA PAPER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1999
(Amounts in thousands, unless otherwise stated and
except number of shares and per share data)
1. BASIS PRESENTATION
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting
principles for interim financial information and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for
complete financial statements. In the opinion of the management, all
adjustments (consisting of normal recurring accruals) considered
necessary for a presentation have been included. Operating results for
the six months period ended September 30, 1999 are not necessarily
indicative of the results that may be expected for the year ending
March 31, 2000. For further information, refer to the consolidated
financial statements and footnotes thereto for the year ended March 31,
1999 included in the previous Registration Statement.
2. FOREIGN CURRENCY EXCHANGE
The financial information has been prepared in Hong Kong dollars
("HK$"), the official currency of Hong Kong. Solely for the convenience
of the reader, the financial statements have been translated into
United States dollars ("US$") prevailing on September 30, 1999 which
was US$1.00 = HK$7.77. No representation is made that the Hong Kong
dollar amounts could have been, or could be, converted into US$ at that
rate or any other certain rate on September 30, 1999.
3. INCOME TAXES
The Company was incorporated in the British Virgin Islands and, under
current law of the British Virgin Islands, is not subject to tax on
income or on capital gains.
Grandom Dransfield (International) and Company Limited and Dransfield
Paper (HK) Trading Limited ("DPT"), wholly-owned subsidiaries of the
Company, were incorporated in Hong Kong and under the current Hong Kong
tax law, any income arising in and deriving from business carried on in
Hong Kong is subject to Hong Kong tax. No tax is charged on dividends
received and capital gains earned.
Dec 22, 99
5
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DRANSFIELD CHINA PAPER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1999
(Amounts in thousands, unless otherwise stated and
except number of shares and per share data)
3. INCOME TAXES (continued)
Guangzhou Dransfield Paper Limited, a co-operative joint venture formed
in the PRC in which the Company has a 100% interest, and Jiang Ying
Dransfield Paper Co. Ltd. ("JYDP"), an equity joint venture formed in
the PRC in which the Company has a 48% interest, are subject to PRC
income taxes at the applicable tax rate of 33% for Sino-foreign joint
venture enterprises. These two joint ventures are eligible for full
exemption from joint venture income tax for the first two years
starting from its first profitable year of operations followed by a 50%
deduction from the third to fifth year. Under the Income Tax Law
applicable to Sino-foreign joint ventures, no PRC income tax was levied
on the above companies as they have not commenced operation as at
September 30, 1999.
Total income tax expense differs from the amount computed by applying
Hong Kong statutory income tax rate of 16% (1998: 16%) to income before
taxes as follows:
<TABLE>
<CAPTION>
Six months Six months Six months
ended ended ended
9/30/98 9/30/99 9/30/99
HK$ HK$ US$
<S> <C> <C> <C>
Computed expected income taxes 571 -- --
Non-deductible losses of subsidiaries (201) -- --
Valuations allowance (370) -- --
---------- ---------- ----------
-- -- --
========== ========== ==========
</TABLE>
Deferred tax asset is comprised of the following :
<TABLE>
<CAPTION>
(unaudited) (unaudited)
3/31/99 9/30/99 9/30/99
HK$ HK$ US$
<S> <C> <C> <C>
Tax losses carried forward 1,292 2,638 340
Valuations allowance (1,292) (2,638) (340)
---------- ---------- ----------
-- -- --
========== ========== ==========
</TABLE>
Dec 22, 99
6
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DRANSFIELD CHINA PAPER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Six Months ended September 30, 1999
(Amounts in thousands, unless otherwise stated and
except number of shares and per share data)
4. INVENTORIES, NET
Inventories are comprised of:
<TABLE>
<CAPTION>
(Unaudited) (Unaudited)
3/31/99 9/30/99 9/30/99
HK$ HK$ US$
<S> <C> <C> <C>
Raw materials 814 1,072 137
Finished goods 1,106 1,675 216
Less: Allowance for obsolescence (505) (531) (68)
---------- ---------- ----------
Inventories, net 1,415 2,216 285
========== ========== ==========
</TABLE>
5. LOANS WITH A RELATED COMPANY
In May 1995, the Company entered into an agreement with a third party,
Broadsino Investment Company Limited ("Broadsino") to establish
Dransfield Broadsino Paper Holdings Limited ("DBPHL"), a company which
is 80% owned by the Company. DBPHL then entered into an agreement to
establish a Sino-foreign equity joint venture company, JYDP, which is
60% owned by DBPHL and is principally engaged in paper manufacturing.
DBPHL has committed to contribute an amount of US$9.26 million
(approximately HK$72 million) to JYDP, to be financed by a
shareholders' loan.
The Company, DBPHL and Broadsino entered into a loan agreement whereby
the Company and Broadsino agreed to make an interest-free shareholders'
loan of US$9.26 million (approximately HK$72 million) (the
"shareholders' Loan") to DBPHL. Pursuant to another agreement, the
Company agreed to make a loan of US$1,847 (approximately HK$14 million)
to Broadsino, bearing compound interest at the rate of 6 percent per
annum, to finance its share of the Shareholders' Loan to DBPHL. DBPHL
has pledged all its assets with the Company and Broadsino for the
repayment in full of the Shareholders' Loan. In addition, DBPHL also
undertakes to apply any amounts, including dividends, which may be
distributed by JYDP to it to repay, in full, the Shareholders' Loan.
Broadsino has pledged both its 20 percent shareholding in DBPHL and any
amount it may receive from DBPHL as repayment of its proportion of the
Shareholders' Loan to secure the repayment, in full, of the loan from
the Company. A promissory note has been issued by a wholly owned
subsidiary of Broadsino in favour of the Company.
Dec 22, 99
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DRANSFIELD CHINA PAPER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Six Months ended September 30, 1999
(Amounts in thousands, unless otherwise stated and
except number of shares and per share data)
5. LOANS WITH A RELATED COMPANY (Continued)
As at September 30, 1998, the Company advanced HK$14,350 (US$1,847) to
Broadsino for the capital injection in JYDP, which is classified as a
loan to a related company. The same amount of HK$14,350 (US$1,847) is
recorded in the consolidated financial statements as long term loan
payable to Broadsino by DBPHL. The loan to and loan from a related
company have no fixed repayment terms.
6. DUE TO HOLDING COMPANY
The long term liability balance, which is used to finance the Group's
capital investment, is unsecured and interest-free. The holding company
has agreed that it will not demand payment of the amount prior to
October 1, 1999.
7. CONTRIBUTED SURPLUS
The amount represents a net compensation of HK$1,530 (US$198) from a
minority shareholder, which was accounted for as a capital transaction
in 1998, and stock compensation expenses of HK$1,184 (US$153) and
HK$939 (US$121) recognized for the years ended March 31, 1998 and 1999,
respectively.. And, HK$222 (US$28) recognized as stock compensation for
the six months ended September 30, 1999.
8. CORPORATE PROMOTION EXPENSES
The Company became a listed company on Nasdaq in April 1997. An amount
of approximately HK$151 (US$19) has been incurred and expended during
the six months period to September 30, 1999 for corporate expenses
incurred in relation to various expenses associated with reporting,
communicating to shareholders and investors and the maintenance costs
associated with the various compliance filings as required by various
authorities.
Dec 22, 99
8
<PAGE> 12
DRANSFIELD CHINA PAPER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Six Months ended September 30, 1999
(Amounts in thousands, unless otherwise stated and
except number of shares and per share data)
9. LOSS PER SHARE
In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, "Earnings Per Share" In accordance with this
statement, the Company changed the method previously used to computed
net income/loss per share and restated all prior periods presented.
Basic net income/loss per share is computed using the weighted average
number of common shares outstanding during the periods. Diluted net
income/loss per share is computed using the weighted average number of
common and potentially dilutive common shares during the periods,
except those that are antidilutive.
The basic net loss per share for the six months ended September 30,
1998 and 1999 were computed by dividing net loss applicable to common
stock, including the cumulative dividends in arrears , by the weighted
average number of 15,585,000 and 15,585,000 shares of common stock,
respectively, which were outstanding during the two years on the
assumption that the 9.3 million shares of common stock issued to DHL
upon the effectiveness of the merger had existed at April 1, 1996.
The effect of employee stock options, warrants and the preferred stock
outstanding during the two periods is anti-dilutive.
10. FINANCIAL INSTRUMENTS
The carrying amount of the Company's cash and bank balances approximate
their fair value because of the short maturity of those instruments.
The carrying amount of the Company's borrowing approximate their fair
value based on the borrowing rates currently available for borrowings
with similar terms and average maturities, except for the loans from
holding company, which, due too their nature, the fair value is not
determinable.
Dec 22, 99
9
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DRANSFIELD CHINA PAPER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Six Months ended September 30, 1999
(Amounts in thousands, unless otherwise stated and
except number of shares and per share data)
11. CONCENTRATION OF RISK
Concentration of credit risk:
The Group's principal activities are distribution of fine paper and
paper handkerchiefs. The Group has long standing relationships with
most of its customers. The Group performs ongoing credit evaluation of
its customers' financial conditions and, generally does not require
collateral.
The allowance for doubtful accounts the Group maintains is based upon
the expected collectibility of all accounts receivable.
Current vulnerability due to certain concentrations:
The Group has investments in the PRC. The value of the Group's
investment may be adversely affected by significant political, economic
and social uncertainties in the PRC. Although the PRC government has
been pursuing economic reform policies for the past 18 years, no
assurance can be given that the PRC government will continue to pursue
such policies or that such policies may not be significantly altered,
especially in the event of a change in leadership, social or political
disruption or unforeseen circumstances affecting the PRC's political,
economic and social life. There is also no guarantee that the PRC
government's pursuit of economic reforms will be consistent or
effective.
Dec 22, 99
10
