U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] Quarterly report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarter period ended March 31, 1998
[ ] Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ___________ to _____________
OVM INTERNATIONAL HOLDING CORP.
(Exact Name of Small Business Issuer as specified in its Charter)
Nevada 88-0344135
(State or other Jurisdiction (IRS Employer
of incorporation) Identification No.)
West 516 Sprague Avenue
Spokane, Washington 99204
(Address of Principal Executive Office)
(509) 747-8590
(Issuer's Telephone Number, Including Area Code)
Check whether the registrant: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such requirements for the past 90 days.
(1) Yes X No (2) Yes X No
------ ------ ------ ------
State the number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date: 12,050,000 shares of common stock,
$0.0001 par value, as of May 13, 1998.
Traditional Small Business Disclosure Format: Yes [ ] No [x]
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
OVM INTERNATIONAL HOLDING CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED INCOME STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
(Amounts in thousands, except share and per share data)
<TABLE>
<CAPTION>
Three Months Ended March 31,
---------------------------
1998 1997 1998
---- ---- ----
RMB RMB USD
(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C>
SALES 28,495 25,985 3,441
COST OF SALES (17,259) (16,103) (2,084)
------------- -------------- -------------
GROSS PROFIT 11,236 9,882 1,357
SELLING AND ADMINISTRATION
EXPENSES (8,919) (8,096) (1,077)
INTEREST INCOME/(EXPENSES),
NET 76 (1,069) 9
OTHER INCOME, NET 398 946 48
------------- ------------- -------------
INCOME BEFORE INCOME
TAXES 2,791 1,663 337
INCOME TAXES (626) - (76)
------------- ------------- -------------
NET INCOME AFTER INCOME
TAXES 2,165 1,663 261
SHARE OF PROFIT OF AN
ASSOCIATED COMPANY 5 35 1
------------- ------------- -------------
NET INCOME BEFORE MINORITY
INTEREST 2,170 1,698 262
MINORITY INTERESTS (1,101) (522) (133)
------------- -------------- --------------
NET INCOME 1,069 1,176 129
============= ============== ==============
EARNINGS PER SHARE 0.09 0.10 0.01
============= ============== ==============
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING 12,050,000 12,050,000 12,050,000
============= ============== ==============
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
2
<PAGE>
OVM INTERNATIONAL HOLDING CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1998 AND DECEMBER 31, 1997
(Amounts in thousands)
<TABLE>
<CAPTION>
March 31, December 31, March 31,
1998 1997 1998
RMB RMB USD
Notes (unaudited) (audited) (unaudited)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and bank balances 17,080 13,956 2,063
Accounts receivable, net of allowance
of RMB13,076 (1997: RMB13,076) 106,167 113,671 12,822
Inventories 2 37,721 34,745 4,556
Prepayments, deposits and other 22,349 14,026 2,699
receivables
Due from related parties 52,028 46,501 6,284
---------- ---------- ----------
Total current assets 235,345 222,899 28,424
Interest in an associated company 4,421 4,416 534
Property, machinery and equipment, net 3 13,000 12,738 1,570
Deferred asset 675 1,833 81
Goodwill 3,588 3,622 433
Intangible assets 3,103 3,132 375
---------- ---------- ----------
Total assets 260,132 248,640 31,417
========== ========== ==========
LIABILITIES, MINORITY INTERESTS
AND STOCKHOLDERS' EQUITY
Current liabilities:
Bank loans 41,420 41,420 5,002
Accounts payable 69,672 70,666 8,415
Advance payments by customers 12,386 10,705 1,496
Other payables and accrued liabilities 25,739 22,334 3,109
Due to related parties 6,686 2,231 807
Sales taxes payable 12,159 12,488 1,468
Income taxes payable 626 - 76
---------- ---------- ----------
Total current liabilities 168,688 159,844 20,373
Long term loan from a related party 3,857 3,381 466
Minority interests 27,382 26,281 3,307
---------- ---------- ----------
Total liabilities and minority interests 199,927 189,506 24,146
---------- ---------- ----------
Stockholders' equity:
Common stock 10 10 1
Authorized:
40,000,000 (1997: 40,000,000) shares,
par value of US$0.0001 each
Issued and fully paid:
12,050,000 (1997: 12,050,000) shares,
par value of US$0.0001 each
Additional paid-in capital 30,795 30,795 3,719
Exchange reserve 68 66 8
Retained earnings 29,332 28,263 3,543
---------- ---------- ----------
Total stockholders' equity 60,205 59,134 7,271
---------- ---------- ----------
Total liabilities, minority interests and
Stockholders' equity 260,132 248,640 31,417
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
3
<PAGE>
OVM INTERNATIONAL HOLDING CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
(Amounts in thousands)
<TABLE>
<CAPTION>
Three months ended March 31,
1998 1997 1998
RMB RMB USD
(unaudited)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income 1,069 1,176 129
Adjustments to reconcile net income to
net cash provided by operating activities:
Share of profit of an associated company (5) (35) (1)
Minority interests 1,101 522 133
Depreciation 1,803 397 218
Amortization of goodwill 34 34 4
Amortization of intangible assets 31 29 4
Decrease/(increase) in assets:
Accounts receivable 7,504 (1,745) 906
Inventories (2,976) (5,151) (359)
Prepayments, deposits and other receivables (8,323) 1,839 (1,005)
Due from related parties (5,527) 6,718 (668)
Deferred asset 1,158 - 140
Increase/(decrease) in liabilities:
Accounts payable (994) 208 (120)
Advance payments by customers 1,681 (2,258) 203
Other payables and accrued liabilities 3,405 1,450 411
Due to related parties 4,455 (533) 538
Sales taxes payable (329) (926) (40)
Income taxes payable 626 - 76
---------- ---------- ----------
Net cash provided by/(used in) operating activities 4,713 1,725 569
---------- ---------- ----------
Cash flows from investing activities:
Acquisition of property, machinery and equipment (2,065) (52) (249)
---------- ---------- ----------
Net cash provided by/(used in) financing activities (2,065) (52) (249)
---------- ---------- ----------
Cash flows from financing activities:
Repayments of bank loans - (2,500) -
Advance/(repayments) of long term loan from a 476 (7,003) 57
related party
---------- ---------- ----------
Net cash provided by/(used in) financing activities 476 (9,503) 57
---------- ---------- ----------
Net increase/(decrease) in cash and cash equivalent 3,124 (7,830) 377
Cash and cash equivalent, at beginning of period 13,956 22,526 1,686
---------- ---------- ----------
Cash and cash equivalent, at end of period 17,080 14,696 2,063
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
4
<PAGE>
OVM INTERNATIONAL HOLDING CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions
to Form 10-QSB 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 management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three months period ended
March 31, 1998, are not necessarily indicative of the results that may
be expected for the year ending December 31, 1998.
For the convenience of the reader, amounts in Renminbi ("RMB") have
been translated into United States dollars ("US$") at the rate of
US$1.00 = RMB8.28 quoted by the People's Bank of China as at March 31,
1998. No representation is made that the RMB amounts could have been,
or could be, converted into US$ at that rate.
2. INVENTORIES
<TABLE>
<CAPTION>
March 31 December 31,
1998 1997
RMB RMB
(unaudited) (audited)
<S> <C> <C>
Raw materials 13,957 11,411
Work in progress 6,413 5,632
Finished goods 17,351 17,702
---------- ----------
37,721 34,745
========== ==========
</TABLE>
3. PROPERTY, MACHINERY AND EQUIPMENT, NET
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
RMB RMB
(unaudited) (audited)
<S> <C> <C>
At cost:
Buildings 5,963 4,221
Plant and machinery 14,452 14,129
---------- ----------
20,415 18,350
---------- ----------
Accumulated depreciation:
Buildings 1,371 969
Plant and machinery 6,044 4,643
---------- ----------
7,415 5,612
---------- ----------
Property, machinery and equipment, net 13,000 12,738
========== ==========
</TABLE>
5
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
THREE MONTHS ENDED MARCH 31, 1998 COMPARED TO THREE MONTHS ENDED MARCH 31, 1997
NET SALES AND GROSS PROFIT. Net sales increased by RMB2,510,000
(US$303,000) or 9.7% to RMB28,495,000 (US$3,441,000) in the three months ended
March 31, 1998 from RMB25,985,000 (US$3,138,000) in the corresponding period of
the prior year. Sales revenues are recognized upon delivery of goods to
customers. The increase in net sales revenue was primarily due to more sales
contracts received and completed during the period.
Gross profits increased by RMB1,354,000 (US$164,000) or 13.7% to
RMB11,236,000 (US$1,357,000) for the three months ended March 31, 1998 compared
to RMB9,882,000 (US$1,193,000) in the corresponding period of the prior year.
The increase in gross profit was primarily due to the increase in net sales.
SELLING AND ADMINISTRATIVE EXPENSES. Selling and administrative
expenses increased by RMB823,000 (US$99,000) or 10.2% to RMB8,919,000
(US$1,077,000) for the three months ended March 31, 1998 as compared to
RMB8,096,000 (US$978,000) in the corresponding period in 1997. The increase was
primarily related to the increased costs associated with the Company's effort to
promote sales. In addition, more legal and professional fees were incurred by
the Company during the current period as compared to the prior period.
PROVISION FOR BAD DEBT EXPENSES. No additional provision for bad debt
expenses was charged to the income statements during the three months period
ended March 31, 1998 and 1997 because the management considered that the
period-end allowance for doubtful accounts was adequate.
INTEREST INCOME/EXPENSES, NET. Interest expenses decreased
significantly by RMB1,145,000 (US$138,000) or 107%, resulting in a net interest
income of RMB76,000 (US$9,000) for the three months ended March 31 ,1998 as
compared to a net interest expense of RMB1,069,000 (US$129,000) in the
corresponding period in 1997. The increase in net interest income in the three
months period ended March 31, 1998 was due primarily to more interest income
being recorded from related parties during the current period as compared to the
corresponding period in 1997 because of the increase in the amounts due from the
related parties.
OTHER INCOME. Other income decreased by RMB548,000 (US$66,000) or 57.9%
from RMB946,000 (US$114,000) for the three months ended March 31, 1997 to
RMB398,000 (US$48,000) for the corresponding period in 1998. The decrease was
primarily related to less income being earned from leasing of equipment for the
current period as compared to the corresponding period in 1997.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary liquidity needs are to fund inventories, accounts
receivable and capital expenditures. The Company has financed its working
capital requirements through a combination of internally generated cash, short
term bank loans and advances from affiliates.
The Company has a working capital surplus of RMB66,657,000
(US$8,050,000) as of March 31, 1998 compared to RMB63,055,000 (US$7,615,000) as
of December 31, 1997. Net cash provided by operating activities for the three
months ended March 31, 1998 was RMB4,713,000 (US$569,000) as compared to
RMB1,725,000 (US$208,000) for the corresponding period in 1997. Net cash flows
from the Company's operating activities are attributable to the Company's income
and changes in operating assets and liabilities.
6
<PAGE>
There has been no other significant change in financial condition and
liquidity since the fiscal year ended December 31, 1997. The Company believes
that internally generated funds together with available bank credit, will be
sufficient to satisfy its anticipated working capital needs for at least the
next twelve months.
7
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS:
NONE
ITEM 2. CHANGES IN SECURITIES:
NONE
ITEM 3. DEFAULTS UPON SENIOR SECURITIES:
NONE
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS:
NONE
ITEM 5. OTHER INFORMATION
NONE
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 27 - Financial Data Schedule (Electronic filing only).
(b) During the three months ended March 31, 1998, the Company filed no current
Reports on Form 8-K.
8
<PAGE>
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.
OVM INTERNATIONAL HOLDING CORP.
May 19, 1998 By:/s/ Ching Lung Po
-----------------------------------
Ching Lung Po, President
By:/s/Kwok Kwan Hung
-----------------------------------
Kwok Kwan Hung, Principal Fianancial
and Accounting Officer
9
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FORM
10-QSB REPORT OF OVM INTERNATIONAL HOLDING CORP. FOR THE QUARTERLY PERIOD ENDED
MARCH 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH REPORT.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> RENMINBI YUAN
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<EXCHANGE-RATE> 8.28
<CASH> 17,080
<SECURITIES> 0
<RECEIVABLES> 106,167
<ALLOWANCES> 13,076
<INVENTORY> 37,721
<CURRENT-ASSETS> 235,345
<PP&E> 13,000
<DEPRECIATION> 7,415
<TOTAL-ASSETS> 260,132
<CURRENT-LIABILITIES> 168,688
<BONDS> 0
0
0
<COMMON> 10
<OTHER-SE> 60,195
<TOTAL-LIABILITY-AND-EQUITY> 260,132
<SALES> 28,495
<TOTAL-REVENUES> 28,974
<CGS> 17,259
<TOTAL-COSTS> 26,178
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,791
<INCOME-TAX> 626
<INCOME-CONTINUING> 2,165
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,069
<EPS-PRIMARY> 0.09
<EPS-DILUTED> 0.09
</TABLE>
