<PAGE> 1
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 January 31, 2000
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- ]
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Attached for filing are the unaudited, interim, consolidated financial
statements of the registrant, Dransfield China Paper Corporation, and its
subsidiaries for the nine months ended December 31, 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: February 4, 2000
2
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INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
DRANSFIELD CHINA PAPER CORPORATION AND SUBSIDIARIES:
Consolidated Balance Sheets as of March 31, 1999 and
December 31, 1999 2
Consolidated Statements of Income (unaudited) for the nine months ended December 31,
1998 and December 31 , 1999 3
Condensed Consolidated Statements of Cash Flows (unaudited) for the nine months ended
December 31, 1998 and December 31, 1999 4
Notes to Consolidated Financial Statements 5 - 10
</TABLE>
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DRANSFIELD CHINA PAPER CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1999 AND DECEMBER 31, 1999
(Amounts in thousands, except number of shares and per share data)
<TABLE>
<CAPTION>
(Unaudited)
Notes 3/31/99 12/31/99 12/31/99
HK$ HK$ US$
<S> <C> <C> <C> <C>
ASSETS
Current assets
Cash and bank balances 1,203 9,814 1,261
Accounts receivable, net 430 57 7
Inventories, net 4 1,415 2,403 309
Prepaid expenses 863 879 112
Income tax recoverable 92 92 12
------- ------- ------
Total current assets 4,003 13,245 1,701
Fixed assets 186,642 198,877 25,563
Loan to a related company 5 14,350 14,350 1,844
Deposit for fixed assets 3,143 -- --
Other assets 200 200 26
------- ------- ------
208,338 226,672 29,134
======= ======= ======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable 571 348 45
Accrued liabilities 1,527 2,259 290
Due to a minority shareholder 2,421 -- --
------- ------- ------
Total current liabilities 4,519 2,607 335
Due to holding company 6 44,009 46,014 5,914
Loan from a related company 5 14,350 14,350 1,844
------- ------- ------
62,878 62,971 8,093
Shareholders' equity:
Common Stock, no par value,
40,000,000 shares authorized;
16,399,210 shares issued, 153,584 175,559 22,565
and fully paid up
Contributed surplus 7 3,653 3,926 505
Accumulated deficit (11,777) (15,784) (2,029)
------- ------- ------
Total shareholders' equity 145,460 163,701 21,041
------- ------- ------
Total liabilities and shareholders' equity 208,338 226,672 29,134
======= ======= ======
</TABLE>
The accompanying notes form an integral part of these
consolidated financial statements.
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DRANSFIELD CHINA PAPER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
FOR THE NINE MONTHS ENDED DECEMBER 31, 1998 AND DECEMBER 31, 1999
(Amounts in thousands, except number of shares and per share data)
<TABLE>
<CAPTION>
Three Months Ended December 31 Nine Months Ended December 31
Notes
1998 1999 1999 1998 1999 1999
HK$ HK$ US$ HK$ HK$ US$
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales:
Hygienic paper
- third parties -- -- -- -- -- --
- fellow subsidiaries 271 106 14 271 422 54
Other paper products to third parties 644 190 24 4,033 691 89
----------- ----------- ----------- ----------- ----------- -----------
915 296 38 4,304 1,113 143
Cost of sales:
Hygienic paper (271) (106) (14) (271) (422) (54)
Other paper products (736) (232) (30) (3,875) (682) (88)
----------- ----------- ----------- ----------- ----------- -----------
(1,007) (338) (44) (4,146) (1,104) (142)
Gross profit (92) (42) (6) 158 9 1
Selling general and administrative expenses
- third parties (755) (823) (106) (3,269) (2,549) (328)
- fellow subsidiaries (457) (203) (26) (1,761) (1,051) (135)
----------- ----------- ----------- ----------- ----------- -----------
(1,212) (1,026) (132) (5,030) (3,600) (463)
Interest income -- 14 2 -- 14 2
Interest expense -- -- -- (3) -- --
----------- ----------- ----------- ----------- ----------- -----------
-- 14 2 (3) 14 2
Other income / (expenses)
- compensation from supplier -- -- -- -- -- --
- loss on disposal of subsidiaries -- -- -- -- -- --
- corporate promotion expenses 8 (280) (323) (42) (291) (474) (61)
- others 1 8 1 15 44 6
----------- ----------- ----------- ----------- ----------- -----------
(279) (315) (41) (276) (430) (55)
Loss before income taxes (1,583) (1,369) (177) (5,151) (4,007) (515)
Provision for income taxes 3
- Current -- -- -- -- -- --
- Deferred -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
-- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Net loss (1,583) (1,369) (177) (5,151) (4,007) (515)
=========== =========== =========== =========== =========== ===========
Basic and diluted net loss per share (cents) (10.16) (8.35) (1.08) (33.05) (24.43) (3.14)
=========== =========== =========== =========== =========== ===========
Shares used in computation of
basic and diluted loss per share 15,585,000 16,399,210 16,399,210 15,585,000 16,399,210 16,399,210
=========== =========== =========== =========== =========== ===========
</TABLE>
The accompanying notes form an integral part of these
consolidated financial statements.
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DRANSFIELD CHINA PAPER CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE NINE MONTHS ENDED DECEMBER 31, 1998 AND DECEMBER 31, 1999
(Amounts in thousands, except number of shares and per share data)
<TABLE>
<CAPTION>
Nine months Ended December 31
1998 1999 1999
HK$ HK$ US$
<S> <C> <C> <C>
Net cash provided by operating activities 350 287 37
Cash flows from investing activities :
Acquisition of fixed assets 2,023 (1,461) (188)
Acquisition of further interest in a subsidiary -- -- --
Proceeds from disposal of subsidiaries -- -- --
-------- -------- --------
Net cash used in investing activities 2,023 (1,461) (188)
-------- -------- --------
Cash flows from financing activities :
Advances from holding company -- 2,918 375
Repayment of loan to holding company (3,395) (4,300) (553)
Repayment of loan to a minority shareholder -- (894) (115)
New issue of common stock -- 12,061 1,550
Bank loans and overdrafts, secured -- -- --
-------- -------- --------
Net cash provided by financing activities (3,395) 9,785 1,257
-------- -------- --------
Net (decrease) in cash and cash equivalents (1,022) 8,611 1,106
Cash and cash equivalents, at beginning
of period 2,065 1,203 155
-------- -------- --------
Cash and cash equivalents, at end of period 1,043 9,814 1,261
======== ======== ========
</TABLE>
The accompanying notes form an integral part of these
consolidated financial statements.
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DRANSFIELD CHINA PAPER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE NINE MONTHS ENDED DECEMBER 31, 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 nine months period ended December
31, 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 December 31, 1999 which was US$1.00 =
HK$7.78. No representation is made that the Hong Kong dollar amounts could
have been, or could be, converted into US$ at that rate or any other
certain rate on December 31, 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.
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.
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DRANSFIELD CHINA PAPER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE NINE MONTHS ENDED DECEMBER 31, 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 Jiangsu Dransfield
Paper Co. Ltd. ("JDP"), a wholly foreign owned venture formed in the PRC in
which the Company has a 80% interest, are subject to PRC income taxes at
the applicable tax rate of 33% for Sino-foreign joint venture enterprises.
These two 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 either not
commenced operation or just commenced operation as at December 31, 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>
(Unaudited)
Nine months ended December 31
1998 1999 1999
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)
3/31/99 12/31/99 12/31/99
HK$ HK$ US$
<S> <C> <C> <C>
Tax losses carried forward 1,292 1,933 248
Valuations allowance (1,292) (1,933) (248)
------ ------ ------
-- -- --
====== ====== ======
</TABLE>
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DRANSFIELD CHINA PAPER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Nine Months ended December 31, 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)
3/31/99 12/31/99 12/31/99
HK$ HK$ US$
<S> <C> <C> <C>
Raw materials 814 1,708 220
Finished goods 1,106 1,111 142
Less: Allowance for obsolescence (505) (416) (53)
------ ------ ------
Inventories, net 1,415 2,403 309
====== ====== ======
</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 owned 100% interest in Jiangsu Dransfield Paper Co.
Ltd. ("JDP"), a PRC company principally engaged in paper manufacturing.
DBPHL has committed to contribute an amount of US$9.26 million
(approximately HK$72 million) to JDP, 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$1,844 (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 JDP 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.
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DRANSFIELD CHINA PAPER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Nine Months ended December 31, 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$1,844) to
Broadsino for the capital injection in JDP, which is classified as a loan
to a related company. The same amount of HK$14,350 (US$1,844) 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,
2000.
7. CONTRIBUTED SURPLUS
The amount represents a net compensation of HK$1,530 (US$197) from a
minority shareholder, which was accounted for as a capital transaction in
1998, and stock compensation expenses of HK$1,184 (US$152) and HK$939
(US$121) recognized for the years ended March 31, 1998 and 1999,
respectively.. And, HK$273 (US$35) recognized as stock compensation for the
nine months ended December 31, 1999.
8. CORPORATE PROMOTION EXPENSES
The Company became a listed company on Nasdaq in April 1997. An amount of
approximately HK$474 (US$61) has been incurred and expended during the nine
months period to December 31, 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.
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DRANSFIELD CHINA PAPER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Nine Months ended December 31, 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 nine months ended December 31, 1998
and 1999 were computed by dividing net loss applicable to common stock, by
the weighted average number of 15,585,000 and 16,395,510 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.
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DRANSFIELD CHINA PAPER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Nine Months ended December 31, 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.
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