U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K/A
----------
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): March 31, 2000
COMMISSION FILE NUMBER: 000-26029
ASIAN STAR DEVELOPMENT, INC.
--------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NEVADA
--------
(STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION)
86-0866395
---------------------
(I.R.S. EMPLOYER IDENTIFICATION NUMBER)
Room 930, Block B, East Wing
New World Office Building
Tsimshatsui, Kowloon, Hong Kong
Tel. (852) 2721-0936
--------------------------------------------
(ADDRESS AND PHONE NUMBER OF PRINCIPAL OFFICES)
NONE
--------------------------------
(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
On March 28 2000, Registrant and one of its subsidiary companies entered into
agreements with Harmonic Hall Investment Holdings Limited and its subsidiaries
("Harmonic or Harmonic Group") whereby Registrant acquired 51.68% of the total
outstanding shares of Harmonic Group in exchange for 2,313,625 shares of the
Registrant's Restricted Common Stock at par value of USD0.001 and approximately
USD650,000 cash.
To supplement Form 8-K, filed on April 11, 2000, Registrant submits the
following financial statements, pro-forma financial information and exhibits:
A) A reconciliation of net assets and results of Harmonic Hall Investment
Holdings Limited in conformance with the generally accepted accounting
principles in Hong Kong ("HKGAAP") and the generally accepted accounting
principles in the United States of America ("USGAAP") for the years ended
June 30, 1998 and 1999, based on the audited financial statements issued
by Harmonic's previous auditors, Ernst & Young. A copy of the audited
accounts for the year ended June 30, 1999 is included as Exhibit 99.
B) The unaudited financial statements of Harmonic for the 9 month ended March
31, 1999 and March 31, 2000 prepared in accordance with HKGAAP and a
reconciliation of its net assets and results between HKGAAP and USGAPP.
C) The unaudited pro-forma income statements of Registrant for the 12 months
ended December 31, 1999 and the three months ended March 31, 2000, as if
the acquisition of Harmonic took place on January 1, 1999.
D) The unaudited pro-forma balance sheet of Registrant, as at March 31, 2000,
as if the acquisition of Harmonic took place on March 31, 2000.
<PAGE>
A) RECONCILIATION OF NET ASSETS AND RESULTS OF HARMONIC - JUNE 30, 1998 AND 1999
<TABLE>
<CAPTION>
CONDENSED AUDITED BALANCE SHEETS AS AT
JUNE 30, 1999 & June 30, 1998
JUNE 30, 1999 JUNE 30, 1998
PER HKGAAP PER HKGAAP
USD USD
------------- -------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents 305,786 343,867
Accounts receivable, net 3,506,534 3,602,082
Due from a director 32,163 -
Inventories 3,486,925 3,708,121
Film Rights 177,260 262,915
---------------- ------------------
Total currents assets 7,508,668 7,916,985
Interest in associated Companies 561,982 549,214
Goodwill - -
Land usage rights - -
Land improvement - -
Deferred development costs 920,179 -
Deferred expenditure 176,362 203,577
Construction in progress - -
Property and equipment, net 34,082,144 39,276,196
---------------- ------------------
Total assets 43,249,335 47,945,972
================ ==================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Bank overdraft - secured 3,029,253 3,263,057
Bank loans - secured 6,241,213 5,161,548
Leasing loan 1,424,613 1,233,297
Trust receipt loans, secured 1,511,307 4,853,338
Other loans - -
Due to a shareholder - -
Due to a related company 300,776 625,184
Accounts payable 2,536,315 2,810,967
Provision for taxation - 437
---------------- -----------------
Total current liabilities 15,043,477 17,947,827
LONG TERM LIABILITIES
Bank loans - secured 2,911,644 1,760,334
Long term portion of finance lease payables 1,739,350 2,695,288
Due to a director - 34,874
Deferred taxation 978,628 978,628
---------------- -----------------
Total long term liabilities 5,629,622 5,469,124
MINORITY INTEREST 642,081 1,177,265
SHAREHOLDERS EQUITY
Common stock 1,006 1,006
Reserves 16,057,933 15,891,606
Retained earnings 5,875,216 7,459,144
---------------- -----------------
Total shareholders' equity 21,934,155 23,351,756
Total liabilities and shareholders' equity 43,249,335 47,945,972
================ =================
</TABLE>
<PAGE>
A) RECONCILIATION OF NET ASSETS AND RESULTS OF HARMONIC - JUNE 30, 1998 AND 1999
(CONTINUED)
RECONCILIATION OF NET ASSETS OF HARMONIC HALL INVESTMENT HOLDINGS LIMITED
BETWEEN HKGAAP AND USGAAP AS AT JUNE 30, 1999 AND JUNE 30, 1998 ARE AS FOLLOWS:
<TABLE>
<CAPTION>
JUNE 30, 1999 JUNE 30, 1998
USD USD
------------- -------------
<S> <C> <C>
NET ASSETS PER MANAGEMENT ACCOUNTS
PREPARED IN ACCORDANCE WITH HKGAAP 21,934,156 23,351,756
USGAAP ADJUSTMENTS
Unprovided deferred tax (103,083) (103,083)
Overstatement of depreciation 844,303 675,442
Write off deferred expenditure & deferred development costs (1,096,542) (203,577)
Reversal of property revaluation reserves (8,442,899) (8,442,899)
---------------- -----------------
ADJUSTED NET ASSETS BALANCE UNDER USGAAP 13,135,935 15,277,639
================ =================
</TABLE>
<TABLE>
<CAPTION>
CONDENSED AUDITED PROFIT AND LOSS ACCOUNTS FOR THE YEARS
ENDED JUNE 30, 1999 AND JUNE 30, 1998
JUNE 30, 1999 JUNE 30, 1998
PER HK GAAP PER HK GAAP
USD USD
------------- -------------
<S> <C> <C>
Turnover 18,663,418 20,179,614
================= =================
Operating loss (1,548,049) (819,853)
Share of profits less losses of associated companies 12,768 80,772
----------------- -----------------
Loss before taxation (1,535,281) (739,081)
Taxation (262) 5,752
----------------- -----------------
Loss after taxation but before minority interest (1,535,543) (733,329)
Minority interests (48,385) (38,194)
----------------- -----------------
Net loss attributable to shareholders (1,583,928) (771,523)
================= =================
Retained profits at beginning of year 7,459,144 8,230,667
Retained profits at end of year 5,875,216 7,459,144
================= =================
</TABLE>
<PAGE>
A) RECONCILIATION OF NET ASSETS AND RESULTS OF HARMONIC - JUNE 30, 1998 AND 1999
(CONTINUED)
RECONCILIATION OF NET RESULTS OF HARMONIC HALL INVESTMENT HOLDINGS LIMITED
BETWEEN HKGAAP AND USGAAP FOR THE YEARS ENDED JUNE 30, 1999 AND JUNE 30, 1998
ARE AS FOLLOWS :
<TABLE>
<CAPTION>
JUNE 30, 1999 JUNE 30, 1998
USD USD
------------- -------------
<S> <C> <C>
NET RESULTS PER MANAGEMENT ACCOUNTS
PREPARED IN ACCORDANCE WITH HKGAAP (1,583,928) (771,523)
USGAAP ADJUSTMENTS
Adjustment of depreciation charge 168,861 168,861
Write off deferred expenditures &
deferred development cost (892,965) (203,577)
Underprovided deferred taxation - (103,083)
----------------- -----------------
ADJUSTED NET RESULTS FOR THE YEAR UNDER USGAAP (2,308,032) (909,322)
================= =================
1) The accounts of Harmonic for the years ended June 30 1998 and 1999 were
audited by Ernst and Young CPAs which were prepared under HKGAAP. We have
performed limited review procedures on the reconciliation of its net assets and
results to conform with USGAPP for the respective years.
2) Major reconciling items are the reversal of property revaluation reserve,
adjustment on overstatement of depreciation charge arising from the revaluation
and the write off of development costs and deferred expenditures which were
capitalized for HKGAAP reporting purposes.
</TABLE>
<PAGE>
B) UNAUDITED FINANCIAL STATEMENTS OF HARMONIC - 9 MONTHS AND ITS RECONCILIATION
OF NET ASSETS AND RESULTS
<TABLE>
<CAPTION>
CONDENSED UNAUDITED BALANCE SHEETS AS AT
MARCH 31, 2000 AND MARCH 31 ,1999
MARCH 31, 2000 MARCH 31, 1999
PER HKGAAP PER HKGAAP
USD USD
-------------- --------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents 179,668 577,079
Accounts Receivable, net 3,307,024 4,273,584
Due from a director 1,446,874 -
Inventories 4,411,445 4,627,226
Film Rights 120,265 397,026
----------------- ------------------
Total currents assets 9,465,276 9,874,915
Interest in Associated Companies - 549,214
Goodwill - -
Land usage rights - -
Land improvement - -
Deferred development costs 664,446 1,271,818
Deferred expenditure 1,111,749 -
Construction in progress - -
Property and equipment, net 31,044,370 35,409,780
----------------- ------------------
Total assets 42,285,841 47,105,727
================= ==================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Bank overdraft - secured 2,499,904 2,867,818
Bank loans - secured 5,819,012 6,454,450
Leasing loan 1,677,840 1,404,864
Trust receipt loans, secured 2,106,681 2,113,561
Other loans - -
Due to a shareholder - -
Due to a related company - -
Accounts payable 3,188,120 3,397,437
Provision for taxation (462) (462)
----------------- ------------------
Total current liabilities 15,291,095 16,237,668
LONG TERM LIABILITIES
Bank loans - secured 4,814,606 3,307,142
Long term portion of finance lease payables 1,277,133 2,102,429
Due to a director - 43,534
Deferred taxation 978,628 978,628
----------------- ------------------
Total long term liabilities 7,070,367 6,431,733
MINORITY INTEREST 529,350 789,517
SHAREHOLDERS EQUITY
Common stock 1,006 1,006
Reserves 16,057,933 15,891,606
Retained earnings 3,336,090 7,754,197
----------------- ------------------
Total shareholders' equity 19,395,029 23,646,809
Total liabilities and shareholders' equity 42,285,841 47,105,727
================= ==================
</TABLE>
<PAGE>
B) UNAUDITED FINANCIAL STATEMENTS OF HARMONIC - 9 MONTHS AND ITS RECONCILIATION
OF NET ASSETS AND RESULTS (CONTINUED)
RECONCILIATION OF NET ASSETS OF HARMONIC HALL INVESTMENT HOLDINGS LIMITED
BETWEEN HKGAAP AND USGAAP AS AT MARCH 31, 2000 AND MARCH 31,1999 ARE AS FOLLOWS:
<TABLE>
<CAPTION>
MARCH 31,2000 MARCH 31,1999
USD USD
------------- -------------
<S> <C> <C>
NET ASSTES PER MANAGEMENT ACCOUNTS
PREPARED IN ACCORDANCE WITH HKGAAP 19,395,029 23,646,809
USGAAP ADJUSTMENTS
Unprovided deferred tax (103,083) (103,083)
Overstatement of depreciation 970,949 802,088
Write off deferred expenditure & (1,776,195) (1,271,818)
deferred development cost
Reversal of property revaluation reserves (8,442,899) (8,442,899)
------------------ ------------------
ADJUSTED NET ASSETS BALANCE UNDER USGAAP 10,043,801 14,631,097
================== ==================
</TABLE>
<TABLE>
<CAPTION>
CONDENSED UNAUDITED PROFIT AND LOSS ACCOUNTS FOR
9 MONTHS ENDED MARCH 31 ,2000 AND MARCH 31 , 1999
9 MONTHS TO 9 MONTHS TO
MARCH 31, 2000 MARCH 31, 1999
PER HK GAAP PER HK GAAP
USD USD
-------------- --------------
<S> <C> <C>
NET SALES 11,569,165 14,611,607
COST OF SALES (10,895,867) (10,637,203)
----------------- ------------------
GROSS PROFITS 673,298 3,974,404
6% 27%
- -
OTHER INCOME 433,641 620,520
- -
EXPENSES - -
----------------- ------------------
Selling & marketing expenses 234,324 357,678
General & Admin expenses 2,103,115 2,468,144
Interest expenses 1,228,936 1,418,176
----------------- ------------------
3,566,375 4,243,998
- -
- -
----------------- ------------------
OPERATING PROFITS / ( LOSS ) (2,459,436) 350,926
Share of associated companies' profits - -
Loss on disposal of an associated company (192,422) -
----------------- ------------------
OPERATING PROFITS/ ( LOSS ) BEFORE TAXATION (2,651,858) 350,926
Taxation - (154)
----------------- ------------------
PROFIT / ( LOSS ) AFTER TAXATION (2,651,858) 350,772
Less: Minority interest (112,732) 55,719
----------------- ------------------
NET PROFIT / ( LOSS )ATTRIBUTABLE TO THE SHAREHOLDERS (2,539,126) 295,053
Dividends - -
----------------- ------------------
(2,539,126) 295,053
Retained profit b/f 5,875,216 7,459,144
----------------- ------------------
RETAINED PROFIT C/F 3,336,090 7,754,197
================= ==================
</TABLE>
<PAGE>
B) UNAUDITED FINANCIAL STATEMENTS OF HARMONIC - 9 MONTHS AND ITS RECONCILIATION
OF NET ASSETS AND RESULTS (CONTINUED)
RECONCILIATION OF NET RESULTS OF HARMONIC HALL INVESTMENT HOLDINGS LIMITED
BETWEEN HKGAAP AND USGAAP FOR THE 9 MONTHS PERIOD ENDED MARCH 31 2000 AND 31
MARCH 1999 ARE AS FOLLOWS :
<TABLE>
<CAPTION>
9 MONTHS TO 9 MONTHS TO
MARCH 31, 2000 MARCH 31 , 1999
USD USD
-------------- ---------------
<S> <C> <C>
NET RESULTS AS PER MANAGEMENT ACCOUNT
PREPARED IN ACCORDANCE WITH HKGAAP (2,539,126) 295,053
USGAAP ADJUSTMENTS
Adjustment of depreciation charge 126,645 126,645
Write off deferred expenditures & deferred development costs (679,654) (1,068,241)
-----------------------------------------
ADJUSTED NET RESULTS FOR THE 9 MONTHS UNDER USGAAP (3,092,135) (646,543)
=========================================
1. Similar reconciling items were made for the 9 months accounts to conform with
the unaudited accounts prepared in accordance with the HKGAPP to USGAPP.
</TABLE>
<PAGE>
C) UNAUDITED PRO-FORMA INCOME STATEMENTS OF ASTV FOR THE 12 MONTHS ENDED
DECEMBER 31 1999 AND 3 MONTHS ENDED MARCH 31 2000
As detailed in previous filing of Form 8-K, ASTV acquired 51.68% equity interest
in Harmonic. The consideration paid by ASTV was cash USD650,000 plus 2,313,625
shares of the registrant's Common stock with a fair value of USD9,288,000. The
fair value per share was determined based on the average two months trading
share prices on the stock exchange. The effective date of the transactions was
on or before 15 April 2000.
The Harmonic acquisition was accounted for under the purchase method of
accounting and operating results of Harmonic are included as if the acquisition
has occurred on January 1 1999 as follows:
<TABLE>
<CAPTION>
PRO-FORMA ACCOUNTS FOR THE THREE MONTHS
ENDED MARCH 31 , 2000
(EXPRESSED IN US DOLLARS)
PRO-FORMA
HISTORICAL ADJUSTMENTS TOTAL
---------- ----------- -----
<S> <C> <C> <C>
Revenue, net 370,447 3,226,349 3,596,796
Cost of sales (379,134) (4,714,241) (5,093,375)
-------------- --------------- ---------------
Gross loss (8,687) (1,487,892) (1,496,579)
EXPENSES
Selling expenses (2,660) (116,568) (119,228)
General and administrative expenses (209,589) (736,239) (945,828)
Interest expenses - (442,448) (442,448)
-------------- --------------- ---------------
(212,249) (1,295,255) (1,507,504)
Other income, net 463,063 168,859 631,922
-------------- --------------- ---------------
Share of associated companies's profit - - -
--------------- --------------- ---------------
Operating profit before tax 242,127 (2,614,288) (2,372,161)
Income tax provision - - -
--------------- --------------- ---------------
Net profit / (loss) before minority interest 242,127 (2,614,288) (2,372,161)
Less : Profit / (loss) in a subsidiary attributable to
Minority interest - (1,292,523) (1,292,523)
--------------- --------------- ---------------
Net profit / (loss) attributable to common shareholders 242,127 (1,321,765) (1,079,638)
=============== =============== ===============
</TABLE>
<PAGE>
C) UNAUDITED PRO-FORMA INCOME STATEMENTS OF ASTV FOR THE 12 MONTHS ENDED
DECEMBER 31 1999 AND 3 MONTHS ENDED MARCH 31 2000 (CONTINUED)
<TABLE>
<CAPTION>
PRO-FORMA ACCOUNTS FOR 12 MONTHS
ENDED DECEMBER 31 , 1999
(Expressed In US Dollars)
Twelve Months ended December 31, 1999
-------------------------------------
Pro-forma
Historical Adjustments Total
---------- ----------- -----
<S> <C> <C> <C>
Revenue, net 41,926 17,797,780 17,839,706
Cost of sales (104,214) (16,902,024) (17,006,238)
-------------- --------------- ---------------
Gross profit / (loss) (62,288) 895,756 833,468
EXPENSES
Selling expenses (84,547) (473,666) (558,213)
General and administrative expenses (1,071,710) (2,958,974) (4,030,684)
Interest expenses - (1,793,411) (1,793,411)
--------------- --------------- ---------------
(1,156,257) (5,226,051) (6,382,308)
Other income, net 60,400 818,628 879,028
-------------- --------------- ---------------
Exceptional items
Gain on disposal of fixed assets - 391,327 391,327
Loss on disposal of an associated Co. - (196,939) (196,939)
-------------- --------------- ---------------
- 194,388 194,388
Share of associated companies' profit - 12,768 12,768
-------------- --------------- ---------------
Operating profit before tax - (3,304,511) (4,462,656)
Income tax provision - (147) (147)
-------------- --------------- ---------------
Net loss before minority interest (1,158,145) (3,304,658) (4,462,803)
Less : Loss / (Profit) in a subsidiary attributable to
Minority interest - (1,460,382) (1,460,382)
-------------- --------------- ---------------
Net profit / (loss) attributable to common shareholders (1,158,145) (1,844,276) (3,002,421)
============== =============== ===============
</TABLE>
Notes
1. Pro-forma operating results are presented as if ASTV and Harmonic were
combined at January 1 1999 and include estimates for goodwill amortization over
a period of 20 years.
Commentary on the operating results for the 9 months ended December 31 1999 and
3 months ended March 31 2000
Harmonic group of companies are mainly engaged in the following principal
activities:
a. replication of the audio CD, VCD, CD ROM, DVD and LD;
b. duplication of audio cassettes;
c. manufacture and sales of CD recordable (CDR) and CD rewritable (CD-RW);
d. stamping which represents the production of a stampler from an original VHS
tape;
e. packaging which represents the sales of plastic packaging and packaging
services carried out for customers; and
f. film distributors which represents income form distribution of film rights.
About 60% of Harmonic group's turnover has been generated from the replication
business. In mid 1999, the business of Harmonic was changed to produce CDR and
CD-RW which is a substitute for floppy disk. The change was in line with the
advance in technology and the increased usage in internet which demand for
higher capacity storage. However, the business of replication activities became
less profitable due to more severe competition by smaller suppliers in the
market and the presence of pirated/ counterfeitd products.
<PAGE>
C) UNAUDITED PRO-FORMA INCOME STATEMENTS OF ASTV FOR THE 12 MONTHS ENDED
DECEMBER 31 1999 AND 3 MONTHS ENDED MARCH 31 2000 (CONTINUED)
During the 3 months ended March 31 2000, gross profit margin decreased as a
result of decrease in both sales and average unit selling price for CD, VCD and
DVD. On average, the selling price of products decreased by about 30% to 60%
from 97/98 to 99/00. Besides, there was decrease in sales to music house as they
had used cheaper CD producers. One of the major competitors in Taiwan for the
production of CDR has entered into a cut-throat war by lowering its selling
price by about 39% to 60%.
Cost of sales mainly include manufacturing overheads such as depreciation on
plant and machinery, amortized deferred expenditures and development costs,
electricity and direct wages. For the year ended December 31 1999, it includes a
provision for stock obsolescence of USD516,000 and severance payments of
USD167,700 for the redundancy of workers.
Other income mainly represents interest income, rental income, management fee
income, packing income. For the 12 months ended March 31 2000, there was a gain
on disposal of 2 sets of machinery of USD425,700. It also includes consultancy
income of USD777,315 in respect of the provision of consultancy services to a
related company City Records Ltd for development of "Media Safe" in June 1999, a
new technology for the prevention of the pirated CD and VCD. No such items are
noted in Year 2000. In addition, it includes gain on disposal of subsidiaries of
ASTV amounting to USD461,687.
Selling expenses mainly represents carriage outwards and bad debts provisions.
General and administrative expenses for the 12 months ended December 31 1999
mainly represents depreciation charge on fixed assets, rental expenses and
services fee paid to a related company, Wide Light International Ltd and staff
bonus. Directors remuneration of USD384K mainly represents directors salaries
and directors quarters paid to 3 directors, Mr Stephen Yiu, Edward Ho and Poon
Siu Sin. Decrease in balance for 1999 is mainly due to no directors remuneration
was paid to Mr Poon upon his resignation in August 1999 and decrease in monthly
directors salaries paid to Stephen Yiu with effect from July 1999
Others mainly represents travelling expenses, entertainment, building management
fees, staff welfare, government rates , motor vehicles expenses and other
offices supplies. No unusual items are noted.
Interest expenses mainly represents the mortgage loan interest, leasing loan
interest and TR loan interests.
Minority interest mainly represents the share of profit and loss of 48.32%
minority interest of Harmoinc and its subsidiaries Guangzhou Anwell, Harmonic
Hall Optical Disc Ltd (HHOD), Siam, Harmonic Hall Recordable Media Ltd and the .
Share of loss is mainly due to the loss position of Harmonic.
<PAGE>
D) UNAUDITED PRO-FORMA BALANCE SHEET OF ASTV AS IF THE ACQUISITION OF HARMONIC
ON MARCH 31 2000
The Harmonic acquisition was accounted for under the purchase method of
accounting and the pro-forma balance sheet as at March 31 2000 is included as if
the acquisition had occurred on March 31 2000 as follows:
<TABLE>
<CAPTION>
PRO-FORMA ACCOUNTS AS AT
MARCH 31, 2000
(EXPRESSED IN US DOLLARS)
PRO-FORMA (HHI) PRO-FORMA
HISTORICAL ADJUSTMENTS BALANCES
---------- ----------- --------
MARCH 31, 2000 MARCH 31, 2000 MARCH 31, 2000
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents 112,788 179,668 292,456
Accounts receivable, net - 3,307,024 3,307,024
Due from director - 1,446,874 1,446,874
Prepayments 326,245 - 326,245
Inventories 9,030 4,411,445 4,420,475
Other assets 1,073,410 - 1,073,410
Film Rights - 120,265 120,265
---------------------------------------------------
Total currents assets 1,521,473 9,465,276 10,986,749
Interest in associated Companies - - -
Goodwill 86,983 4,747,524 4,834,507
Land usage rights 469,814 - 469,814
Land improvement 4,297,445 - 4,297,445
Deferred development costs - - -
Deferred expenditure - - -
Construction in progress 1,363,369 - 1,363,369
Property and equipment, net 1,698,910 23,572,419 25,271,329
---------------------------------------------------
Total assets 9,437,994 37,785,219 47,223,213
===================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Bank overdraft - secured - 2,499,904 2,499,904
Bank loans - secured - 5,819,012 5,819,012
Leasing loan - 1,677,840 1,677,840
Trust receipt loans, secured - 2,106,681 2,106,681
Other loans - -
Due to a shareholder 1,045,926 - 1,045,926
Due to a related company - - -
Accounts payable 681,228 3,188,120 3,869,348
Other payables 410,277 650,160 1,060,437
Accrued liabilities 197,167 - 197,167
Provision for taxation - (462) (462)
---------------------------------------------------
Total current liabilities 2,334,598 15,941,255 18,275,853
LONG TERM LIABILITIES
Bank loans - secured - 4,814,606 4,814,606
Long term portion of finance lease payables - 1,277,133 1,277,133
Due to a director - - -
Deferred taxation - 1,081,711 1,081,711
-------------------------------------------------
Total long term liabilities - 7,173,450 7,173,450
MINORITY INTEREST - 5,382,514 5,382,514
SHAREHOLDERS EQUITY
Common stock, $0.001 par value:
25,000,000 shares authorized, 15,581,015
shares issued and outstanding
Common stock 13,268 2,313 15,581
Additional paid-in capital 9,017,661 9,285,687 18,303,348
Reserves - - -
Accumulated profit / (losses) (1,927,533) - (1,927,533)
---------------------------------------------------
Total shareholders' equity 7,103,396 9,288,000 16,391,396
Total liabilities and shareholders' equity 9,437,994 37,785,219 47,223,213
===================================================
</TABLE>
<PAGE>
D) Unaudited pro-forma balance sheet of ASTV as if the acquisition of Harmonic
on March 31 2000 (continued)
Property and equipment mainly comprise net book value of investment properties
of USD433,787, leasehold properties of USD 8.93 million, plant and machinery of
USD 13.1 million and other fixed assets. The investment properties represents a
unit at Success Industrial Building in Hong Kong which has been leased out to a
third party. The leasehold properties comprise 18th and 19th floor of Cable TV
Tower in Hong Kong which is held for own use. The properties is held under a
medium term lease expiring in 2047. Depreciation is charged over the lease
period of 50 years to write off the cost of the property.
Although the fast technological change in the business, management considers
that no provision for the carrying value of the plant and machinery is necessary
as ASTV has the technical expertise to convert plant and machinery from
producing one type of product to another type. Accordingly, there is no
impairment in value of the underlying assets and thus no provision is necessary.
Goodwill arising on acquisitions of Harmonic Group of companies and a cafeteria
represents the excess of the purchase consideration paid for the acquired
companies over the fair values ascribed to their underlying assets at the date
of acquisition. In January 2000, a subsidiary of ASTV entered into a purchase
and sales agreement to acquire the entire equity interest of two Hong Kong
incorporated companies which operate a cafeteria business in Hong Kong.
Investment in associated companies represents the group's share of the NAV of
the following associated companies:
<TABLE>
<CAPTION>
<S> <C>
Pacific Fair Industrial Limited 20% (dormant)
Speedy Video Distributors Sdn. Bdh. 9.1%
</TABLE>
Harmonic Group had disposed of its share of Speedy investment at December 31
1999 with a consideration of approx. USD481,944 (equivalent Malaysian dollar
1,820k). The estimated loss on disposal ( based on the share of net asset value
as at March 31 1999) and other losses amounted to approximately USD192,422.
Deferred development costs represents expenditure incurred on projects to
develop new products, mainly CD-R. These expenses are amortized using the
straight-line basis over the commercial lives of the underlying products not
exceeding three years, commencing from the date when the products are put into
commercial production. Under US GAAP, all the research and development expenses
have been expensed directly to the profit and loss account.
Deferred expenditure represent pre-operating expenses incurred in setting up and
testing of the production line of CDR prior to the commencement of commercial
operations in July 1999. These balances are amortized, using the straight-line
basis, over periods not exceeding three years from the date of commencement of
commercial operations.
The amount due from directors in March 31 2000 mainly represents loan granted to
the director, Stephen Yiu for the repayment of his mortgage loans. During the
year, Stephen had pledged its personal properties to First Pacific Bank to
obtain new banking facilities to the Group amounting to USD2.45 million. The
Group has partly used these bank loans to finance Stephen for repayment of the
outstanding mortgage. The terms of the loans are unsecured, interest bearing at
prime rate + 1% and have no fixed terms of repayment.
<PAGE>
D) Unaudited pro-forma balance sheet of ASTV as if the acquisition of Harmonic
on March 31 2000 (continued)
Inventories mainly comprise raw materials, finished goods and spare parts. Raw
materials and spare parts are valued at the purchased costs. Raw materials stock
is composed of plastic compound, targets (metal mixture) and coating materials.
Spare parts represent base stock of replacement parts for the production
machinery. Cost of the finished goods comprises direct materials, direct labor
and an appropriate portion of overheads. Due to the fast technological change in
the products and the dumping of products by the company's competitors in the
market, some stocks have carrying value less than the estimated selling prices.
Management has made adequate provision to write down the carrying value of
stocks to its net realizable value.
Finished goods mainly represents CDR and CD - RW which are the major products of
the Group. Management considers that no provision is necessary as these products
have established strong penetration in the market.
Film rights represent payments for obtaining the rights to manufacture laser
discs, video cassette tapes and VCD and DVD of film titles for distribution in
specified geographical area and time periods under the licensing arrangement
with film producers or agents. These balances are charged to the profit and loss
account upon the release the products.
The normal credit period granted to customers range from 30 days or 60 days.
Debtors days as at March 31 2000 were 52 days which is comparable to the debtors
day for the 9 months ended March 31 1999 of 51 days. Local customers are settled
by open accounts while most of the overseas customers are settled by L/C. The
debtors turnover days are within normal credit period and have been improved at
31 March 2000.
According to the ageing analysis, all of the long outstanding debts have been
adequately covered by the specific provision. Majority of the debts due over 90
days represent those due to the overseas customers. Since these are covered by
L/C settlement, no recoverability problem is anticipated.
Other assets comprise the following:
- USD335,400 receivable from partial disposal of investment in Speedy
- USD180,600 loan (plus interest receivable) to employees
- USD129,000 advance payment on leasing loan
- USD645,000 deposits paid to suppliers for the purchase of raw materials,
insurance prepayments and sundry debtors.
Accounts payable comprises payable to suppliers for raw materials and accrued
staff costs and manufacturing overheads.
All the bank loans are secured by the following:
(a) 18/F and 19/F of Wharf Cable Tower;
(b) Personal properties of the Director, Stephen Yiu;
(c) Investment property at Tuen Mun;
(d) Certain plant and machinery of the Group; and
(e) Personal guarantee from directors
At March 31 2000, the Group has utilized USD18 million out of the total
facilities of USD18.9 million.
<PAGE>
D)Unaudited pro-forma balance sheet of ASTV as if the acquisition of Harmonic on
March 31 2000 (continued)
Minority interest represents share of 48.32% of its holding in Harmonic and
minority interests of the following subsidiaries:
<TABLE>
<CAPTION>
<S> <C>
Harmonic Hall Optical Disc Ltd 5%
Harmonic Hall Recordable Media Ltd 5%
Siam Orchid International Ltd 5%
Guangzhou Anwell Moulding injection Industrial Ltd 10%
</TABLE>
Deferred taxation represents provision of the deferred liabilities arising from
timing difference of capital allowance net off against the tax losses carried
forward.
<TABLE>
<CAPTION>
Equity movement
Additional
Common Stock Amount Paid in capital
No. of shares USD USD
------------- ------ ---------------
<S> <C> <C> <C>
As at Dec 31 1999 12,955,530 12,956 8,510,311
Private placement 50,000 50 62,450
Purchase of a cafeteria 261,860 262 444,900
Harmonic acquisition 2,313,625 2,313 9,285,687
---------- ------ ----------
As at Mar 31 2000 15,581,015 15,581 18,303,348
========== ====== ==========
</TABLE>
Registrant issued 50,000 restricted shares if its common stock to an accredited
investor and 261,860 restricted shares of its common stock in exchange for 100%
equity interests of two Hong Kong incorporated companies which operate a
cafeteria business in Hong Kong for the three months ended March 31 2000.
By assuming the acquisition of Harmonic had occurred as at March 31 2000,
additional restricted common shares of 2,313,625 were issued. As at March 31
2000, there were 15,581,015 issued restricted common shares.
Liquidity and Cash Resources
Although the company has invested substantial funds in the development of
properties in China, in light of the current over supply in China properties,
management has not proceeded to pursue a fast progress in these property
development projects. Management focus its effort on the newly acquired Harmonic
Group which is engaged in high technology manufacture business.
Harmonic Group has been able to generate positive cash flow from operations. The
CD manufacture being a capital intensive business, has a high proportion of its
cost of production relates to depreciation of the invested plant and machinery.
<PAGE>
D) Unaudited pro-forma balance sheet of ASTV as if the acquisition of Harmonic
on March 31 2000 (continued)
Management considers to set up production lines in China to reduce production
costs. Some properties which have tied up funds may be sold in order to obtain
working capital for the Group. In addition, there are signs which indicate that
the selling price of CD is increasing which definitely will provide more profits
and cash flows to the Harmonic Group. In light of the continued support from
both the Harmonic and ASTV shareholders together with private placements of its
equity securities, ASTV Group will have sufficient resources to meet its working
capital and other financing requirements.
<PAGE>
SIGNATURES
==========
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934,
REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED HEREUNTO DULY AUTHORIZED.
ASIAN STAR DEVELOPMENT, INC.
DATED: JUNE 9, 2000 BY: /S/STEPHEN CHOW
--------------------------
Stephen Chow
President
