<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT SECTION 13 OF 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999.
[ ] TRANSITION REPORT PURSUANT SECTION 13 OF 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission file number 1-8334
ASIA RESOURCES HOLDINGS LIMITED
(Exact name of small business as specified in its charter)
Delaware 75-1071589
- --------------------------------- -------------------
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
52/F, Bank of China Tower,
No.1 Garden Road,
Central, Hong Kong.
(Address of principal executive offices)
(852) 2844-2988
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act 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 filing requirements for the past 90 days.
Yes X No
--- ---
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable dated : October 31, 1999, 597,139 shares.
Transitional Small Business Disclosure Format (check one) :
Yes No X
--- ---
<PAGE>
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
PAGE
----
ITEM 1 - FINANCIAL STATEMENTS
Consolidated Statements of Operations
for the nine months ended September 30, 1999
and 1998 (Unaudited) 1
Consolidated Balance Sheets at September 30, 1999 (Unaudited)
and December 31,1998 2
Consolidated Statements of Cash Flows
for the nine months ended June 30, 1999
and 1998 (Unaudited) 3
Notes to Consolidated Financial Statements 4 - 16
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATION 17- 20
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS 21
ITEM 2 - CHANGE IN SECURITIES 21
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES 21
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE
OF SECURITY HOLDERS 21
ITEM 5 - OTHER INFORMATION 21
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K 21
<PAGE>
<TABLE>
ASIA RESOURCES HOLDINGS LIMITED AND SUBSIDIARIES
------------------------------------------------
(formerly known as Regal International, Inc. and Subsidiaries)
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
AS OF SEPTEMBER 30, 1999 (UNAUDITED) AND 1998
(Amounts in thousands)
<CAPTION>
Nine Months Three Months
Ended September 30 Ended September 30
----------------------------------------- --------------------------
1999 1999 1998 1999 1998
--------- --------- --------- --------- ---------
US$ Rmb Rmb Rmb Rmb
<S> <C> <C> <C> <C> <C>
Toll revenue 5,071 41,988 37,950 14,433 15,016
General and administrative expenses (3,577) (29,619) (35,791) (10,083) (12,138)
Interest income 66 543 468 30 87
Interest expense (5,362) (44,398) (54,677) (13,067) (22,536)
Exchange gain, net 13 111 119 108 15
--------- --------- --------- --------- ---------
LOSS BEFORE INCOME TAXES AND
MINORITY INTERESTS (3,789) (31,375) (51,931) (8,579) (19,556)
Provision for income taxes - - - - -
--------- --------- --------- --------- ---------
LOSS BEFORE MINORITY INTERESTS (3,789) (31,375) (51,931) (8,579) (19,556)
Minority interests 902 7,465 16,372 2,226 6,417
--------- --------- --------- --------- ---------
NET LOSS (2,887) (23,910) (35,559) (6,353) (13,139)
========= ========= ========= ========= =========
Loss per common share (Basic): (4.83) (40.04) (59.55) (10.64) (22.00)
========= ========= ========= ========= =========
Weighted average common
shares outstanding 597,139 597,139 597,139 597,139 597,139
========= ========= ========= ========= =========
</TABLE>
Translations of amounts from Renminbi (Rmb) into United States Dollars (US$) for
the convenience of the reader has been made at the unified exchange rate quoted
by the People's Bank of China on September 30, 1999 of US$1.00 = Rmb8.28. No
representation is made that the Renminbi amounts could have been, or could be,
converted into United States Dollars at that rate on September 30, 1999 or at
any other certain rate.
The accompanying notes are an integral part of these
consolidated statements of operation.
-1-
<PAGE>
<TABLE>
ASIA RESOURCES HOLDINGS LIMITED AND SUBSIDIARIES
------------------------------------------------
(formerly known as Regal International, Inc. and Subsidiaries)
CONSOLIDATED BALANCE SHEETS
---------------------------
AS OF SEPTEMBER 30, 1999 (UNAUDITED) AND
AS OF DECEMBER 31, 1998 (AUDITED)
(Amounts in thousands)
<CAPTION>
September September December
30, 1999 30, 1999 31, 1998
------------- ------------- -------------
US$ Rmb Rmb
ASSETS
- ------
<S> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents 674 5,582 17,769
Prepayments 67 559 921
Other receivables and other current assets 186 1,536 587
Due from a related company 0 0 680
------------- ------------- -------------
TOTAL CURRENT ASSETS 927 7,677 19,957
Notes receivable 1,422 11,775 11,373
Property, plant and equipment, net 87,162 721,702 738,334
------------- ------------- -------------
TOTAL ASSETS 89,511 741,154 769,664
============= ============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES
Long-term bank loans - current portion 4,589 38,000 50,000
Accounts payable 884 7,319 18,288
Accrued expenses and other payables 273 2,256 6,594
Due to a related company 0 0 10
Taxes other than income 33 274 287
------------- ------------- -------------
TOTAL CURRENT LIABILITIES 5,779 47,849 75,179
Long-term bank loans 42,813 354,498 344,526
Convertible note payable 29,994 248,349 248,451
Due to Chinese joint venture partner 10,467 86,664 80,156
Due to ultimate holding company 5,724 47,393 33,576
------------- ------------- -------------
TOTAL LIABILITIES 94,777 784,753 781,888
------------- ------------- -------------
Minority interests 14,155 117,204 124,669
SHAREHOLDERS' DEFICIT:
Common stock 6 49 6,806
Additional paid-in capital 2,721 22,530 15,773
Accumulated deficit (22,148) (183,382) (159,472)
------------- ------------- -------------
TOTAL SHAREHOLDERS' DEFICIT (19,421) (160,803) (136,893)
------------- ------------- -------------
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT 89,511 741,154 769,664
============= ============= =============
</TABLE>
Translations of amounts from Renminbi (Rmb) into United States Dollars (US$) for
the convenience of the reader has been made at the unified exchange rate quoted
by the People's Bank of China on September 30, 1999 of US$1.00 = Rmb8.28. No
representation is made that the Renminbi amounts could have been, or could be,
converted into United States Dollars at that rate on September 30, 1999 or at
any other certain rate.
The accompanying notes are an integral part of these
consolidated balance sheets.
-2-
<PAGE>
<TABLE>
ASIA RESOURCES HOLDINGS LIMITED AND SUBSIDIARIES
------------------------------------------------
(formerly known as Regal International, Inc. and Subsidiaries)
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
-------------------------------------------------
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(Amounts in thousands)
<CAPTION>
1999 1999 1998
--------- --------- ---------
US$ Rmb Rmb
<S> <C> <C> <C>
Cash flows from operating activities:
Net Loss (2,888) (23,910) (35,559)
Adjustments to reconcile net loss to
net cash used in operations:
Minority interests (902) (7,465) (16,373)
Depreciation and amortization 2,009 16,632 22,089
Unrealized exhange gain on convertible note
payable (12) (102) 0
(Increase)/Decrease in assets:
Prepayments 44 362 105
Other receivables and other current assets (115) (949) 109
Due from a related company 82 680 28
Increase/(Decrease) in liabilities:
Accounts payable (1,325) (10,969) 27,341
Accrued expenses and other payables (524) (4,338) (20,270)
Taxes other than income (2) (13) 158
--------- --------- ---------
Net cash used in operating activities (3,632) (30,072) (22,372)
--------- --------- ---------
Cash flows used in from investing activities
(Increase) Decrease in note receivable (49) (402) 0
Prepayments for construction-in-progress 0 0 830
Acquisition of property, plant and equipment 0
--------- --------- ---------
Net cash (used) in/provided by investing activities (49) (402) 830
--------- --------- ---------
Cash flows from financing activities:
(Repayment) Proceeds of long term bank loans (245) (2,028) 35,000
Increase in due to a related company (1) (10)
Increase in due to Chinese joint venture partner 786 6,508 5,380
Increase in due to Ultimate holding company 1,669 13,817 (2,176)
--------- --------- ---------
Net cash provided by financing activities 2,209 18,287 38,204
--------- --------- ---------
Net decrease in cash and cash equivalents (1,472) (12,187) 16,662
Cash and cash equivalents, at beginning of period 2,146 17,769 19,875
--------- --------- ---------
Cash and cash equivalents, at end of period 674 5,582 36,537
========= ========= =========
</TABLE>
Translations of amounts from Renminbi (Rmb) into United States Dollars (US$) for
the convenience of the reader has been made at the unified exchange rate quoted
by the People's Bank of China on September 30, 1999 of US$1.00 = Rmb8.28. No
representation is made that the Renminbi amounts could have been, or could be,
converted into United States Dollars at that rate on September 30, 1999 or at
any other certain rate.
The accompanying notes are an integral part of these
consolidated statements of cash flows.
-3-
<PAGE>
ASIA RESOURCES HOLDINGS LIMITED AND SUBSIDIARIES
(formerly known as Regal International, Inc. and Subsidiaries)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(Amounts in thousands, except number of shares,
per share data and unless otherwise stated)
1. ORGANIZATION AND PRINCIPAL ACTIVITIES
-------------------------------------
Asia Resources Holdings Limited ("Asia Resources" or the "Company"),
formerly known as Regal International, Inc., was incorporated in the State
of Delaware, the United States of America and is listed on the National
Association of Securities Dealers ("NASD "Over-the-Counter" Bulletin
Board") with an authorized share capital of US$2,500 representing
150,000,000 shares of common stock of US$0.01 each and 10,000,000 shares
of preferred stock of US$0.1 each. Pursuant to a resolution passed by the
shareholders of the Company dated October 27, 1998, the Company changed
its name from Regal International, Inc. to Asia Resources Holdings Limited
with effect from February 8, 1999.
On February 19, 1999, the Company effected a 1-for-138 reverse stock split
of its common stock and increased the authorized capital to 1,100,000,000
shares of common stock, per value of US$0.01 per share. The 1-for-138
reverse stock split and the amendment to the company's certificate of
incorporation to increase authorized common stock was approved by the
Company's shareholders at the special meeting held on October 27, 1998.
Pursuant to an Acquisition Agreement dated February 8, 1996 between Asia
Resources, Acewin Profits Limited ("AP"), a British Virgin Islands
corporation, and China Strategic Holdings Limited ("CSH"), a company
incorporated in Hong Kong and listed on The Stock Exchange of Hong Kong
Limited, Asia Resources acquired all the issued and outstanding shares of
AP at a consideration of US$13.5 million satisfied through the issuance of
a US$13.5 million Convertible Note (the "Convertible Note A") by Asia
Resources to Horler Holdings Limited ("Horler"), a British Virgin Islands
corporation and a wholly-owned subsidiary of CSH, bearing interest at 9%
per annum after an initial 6-month interest-free period. AP was also a
wholly-owned subsidiary of CSH before the transfer and AP's sole asset was
a 55% equity interest in Wuxi CSI Vibration Isolator Co. Ltd., a
Sino-foreign equity joint venture incorporated in the People's Republic of
China (the "PRC"), held through an intermediate Hong Kong company, China
Machine (Holdings) Limited.
Pursuant to another Asset Purchase Agreement ("the Agreement") dated
February 8, 1996 between Asia Resources and Regal (New) International,
Inc. ("New Regal"), the Company sold and transferred the operating assets
and real property of Asia Resources existing as of January 31, 1996 to New
Regal in exchange for US$2.5 million and New Regal's assumption of all
liabilities incurred, accrued or arising from the operations of Asia
Resources prior to the closing date of this transaction, other than the
Convertible Note A.
-4-
<PAGE>
Pursuant to the Agreement, the US$2.5 million portion of the purchase
price was paid US$800 in cash and the balance by delivery of two
promissory notes with a total principal amount of US$1,700 (see also Note
6). On March 8, 1996, Horler purchased 40,500,000 shares of common stock
representing 49.51% of the then issued and outstanding share capital of
Asia Resources from a major shareholder of the Company thus becoming its
major and controlling shareholder.
In connection with an Acquisition Agreement dated September 10, 1996
between Asia Resources and Westronix Limited ("WL"), another wholly owned
subsidiary of CSH, Asia Resources acquired all the issued and outstanding
shares of WL at a consideration of US$30 million to be satisfied through
the issuance of a US$30 million Convertible Note (the "Convertible Note
B") by Asia Resources to Horler bearing interest at 9% per annum after an
initial 6-month interest-free period and due and payable on September 10,
1999. The Convertible Note B is secured by all assets of WL and its
subsidiaries. The principal and any unpaid interest owing on the
Convertible Note B can be converted into shares of the common stock of
Asia Resources at a conversion price of US$4.1676 per share (the
conversion price has been adjusted to reflect the 1-for-138 reverse stock
share split). On conversion, CSH would indirectly hold approximately
96.10% of the outstanding stock of the Company. WL's sole asset is a 51%
equity interest in Hangzhou Zhongce Huantong Development Co. Ltd., a
Sino-foreign equity joint venture incorporated in the PRC, held through an
intermediate Hong Kong company, China Construction Holdings Limited.
Pursuant to a Purchase Agreement dated September 11, 1996 between Asia
Resources, an unrelated company incorporated in the Netherlands and CSH,
Asia Resources sold all the issued and outstanding shares of AP at a
consideration of US$13.95 million. The proceeds were then used to repay
the principal of the Convertible Note A of US$13.5 million on September
13, 1996.
During 1998, Horler agreed to reduce the interest rate of the Convertible
Note B from 9% to 5% per annum for the year ended December 31, 1997.
Subsequent to 1998, Horler agreed that no principal repayment of the
Convertible Note B would be demanded until the Company is financially
capable of doing so. However, the Convertible Note B continues to bear
interest at 9% per annum.
As of September 30, 1999, the Company had the following subsidiaries
(together with the Company, collectively referred to as the "Group"):
Westronix Limited ("WL") - a holding company incorporated in the British
Virgin Islands.
China Construction Holdings Limited ("CCHL") - a company incorporated in
Hong Kong, formerly known as China Construction International Group
Limited.
Hangzhou Zhongche Huantong Development Co., Ltd. ("Hangzhou Toll Road") -
a Sino-foreign equity joint venture located in Hangzhou, Zhejiang
Province, the PRC.
The Company holds a 100% interest in WL. WL holds a 100% interest in CCHL
which in turn holds a 51% interest in Hangzhou Toll Road.
-5-
<PAGE>
Hangzhou Toll Road is a Sino-foreign equity joint venture enterprise
established on June 23, 1993, which formally began business operations in
September 1993 in the PRC. The total cash consideration paid by CCHL for
its interest in Hangzhou Toll Road amounted to Rmb102,000. Tolls collected
from the first phase of the toll road, which was injected by Hangzhou City
Transportation Development Company, the Chinese joint venture partner, as
its share of the registered capital in the joint venture, as well as cash
injected by CCHL, were utilized to finance the construction of the second
and third phases of the toll road (the "Projects"). The Projects were
completed by the end of 1997 and Hangzhou Toll Road commenced to collect
tolls from all three phases in 1998.
Key provisions of the joint venture agreement of Hangzhou Toll Road
include:
o the joint venture period is 30 years from the date of formation;
o the profit and loss sharing ratio is the same as the percentage of
equity interest; and
o the Board of Directors consists of 7 members : 4 designated by CCHL
and 3 designated by Hangzhou City Transportation Development
Company.
The acquisition of Hangzhou Toll Road by CCHL was accounted for by the
purchase method of accounting. The tangible assets were valued at their
estimated fair values. The results of Hangzhou Toll Road are included in
the consolidated statements of operations from the date of formation of
the joint venture, June 23, 1993. No revenue was generated from the toll
road before the formation of the joint venture.
Pursuant to a supplemental shareholders' agreement (the "Guaranteed
Distribution Agreement") dated May 18, 1998 between CCHL and the Chinese
joint venture partner of Hangzhou Toll Road (the "Chinese Partner"), the
Chinese Partner agreed to pay CCHL a fixed annual distribution of
Rmb15,300 (the "Guaranteed Distribution") from January 1, 1998 through the
expiration of the joint venture period of Hangzhou Toll Road. Any surplus
income generated from Hangzhou Toll Road in excess of the amount of the
Guaranteed Distribution would belong to the Chinese Partner and any
shortfall would be made up by the Chinese Partner. In addition, as part of
the Guaranteed Distribution Agreement, an amount of Rmb178,500 would be
paid to CCHL upon the expiration of the joint venture period of Hangzhou
Toll Road and the assets of the joint venture would be surrendered to the
Chinese Partner at no further consideration. This Guaranteed Distribution
Agreement is subject to approvals by the authorities which originally
approved the set up of the joint venture.
To date, the approvals from the relevant government authorities have not
been obtained despite efforts by the management of the joint venture and
the Company. The Board of Directors of the Company are currently of the
view that the necessary approvals may not be obtained and the agreement
cannot be effectuated without such approvals. Accordingly, the Company has
continued to consolidate Hangzhou Toll Road for the year ended December
31, 1998 and the nine months end September 30, 1999 and has not reflected
the Guaranteed Distribution Agreement in the accounts.
On September 28, 1999, the Company announced that it had entered into an
acquisition agreement to purchase Far Beyond Investments Ltd., a sino
foreign joint venture, Heilongjiang Asibao Chemical Fibre Co. Ltd., one of
the largest manufacturers of polyester fiber and filament in China.
Subsequently, the Company and Horler will enter into a disposal agreement
pursuant to which the Company will sell to Horler Holdings Limited in full
and final settlement of the outstanding indebtedness owed to Horler
Holdings Limited by the Company under a 9% secured convertible promissary
note of US$30,000,000.00, the entire share capital of WL. The above
transactions will be subject to shareholders approval.
-6-
<PAGE>
2. BASIS OF PRESENTATION
---------------------
The accompanying consolidated financial statements were prepared in
accordance with generally accepted accounting principles in the United
States of America ("U.S. GAAP"). This basis of accounting differs from that
used in the statutory financial statements of Hangzhou Toll Road, which
were prepared in accordance with the accounting principles and the relevant
financial regulations applicable to joint venture enterprises as
established by the Ministry of Finance of China ("PRC GAAP").
The principal adjustments made to conform the statutory financial
statements of Hangzhou Toll Road to U.S. GAAP included the following:
o Provision of depreciation on roads and bridges.
o Recognition of toll profit on the accrual basis and upon the
commencement of operations as toll profit has been deferred until
the commencement of operations of the entire toll road under PRC
GAAP.
Under PRC GAAP, toll revenue was recognized on receipt basis but the toll
operating profit (representing toll revenue less all operating expenses)
was offset against construction-in-progress up to December 31, 1997, as
agreed with the local government, until the commencement of operation of
the entire toll road in 1998. Under U.S. GAAP, toll revenue was also
recognized on the receipt basis. However, the toll operating profit is
recorded in the statements of operations of Hangzhou Toll Road in the
respective years. This is different from the accounting treatment under
PRC GAAP.
The transfer of CSH's equity interests in CCHL to WL and the transfer of
CSH's equity interests in WL to Asia Resources were accounted for as
reorganizations of companies under common control similar to a pooling of
interests. The accompanying consolidated financial statements of the
Company have been restated to present the transfers of CSH's interests in
CCHL to WL and in WL to Asia Resources as if they had occurred on the date
of formation of Hangzhou Toll Road, June 23, 1993. The acquisition of
Hangzhou Toll Road was financed by advances from CSH. In 1996, the
advances payable to CSH in relation to the above acquisition were
capitalized and treated as an increase in additional paid-in capital. Due
to the specific requirements of U.S. GAAP for transfers of assets between
entities under common control, the difference of Rmb147,600 between the
historical cost of the investment of CSH in Hangzhou Toll Road and the
Company's acquisition cost was treated as a deemed dividend paid to CSH in
1993. This, together with the annual profits and losses, has resulted in
the Company recording total shareholders' deficit of Rmb136,893 and
Rmb160,803 as of December 31, 1998 and September 30, 1999 respectively.
-7-
<PAGE>
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
a. Basis of Consolidation
----------------------
The consolidated financial statements include the financial statements
of the Company and its majority owned and controlled subsidiaries. All
material intercompany balances and transactions have been eliminated on
consolidation.
b. Toll Revenue
------------
Toll revenue represents the gross receipts at the toll stations, net of
business tax calculated at 5% of the gross toll receipts.
c. Cash and Cash Equivalents
-------------------------
Cash and cash equivalents include cash on hand and demand deposits with
banks an original maturity of three months or less. Cash and cash
equivalents included United States Dollar deposits of US$556 (Rmb4,602)
and US$251 (Rmb2,078) as of December 31, 1998 and September 30,1999
respectively.
d. Property, Plant and Equipment
-----------------------------
Property, plant and equipment are stated at cost less accumulated
depreciation. Depreciation of property, plant and equipment is computed
using the straight line method over the assets' estimated useful lives,
taking into account the estimated residual value of 10% (except for
roads and bridges which have no residual value) of the cost of fixed
assets. Depreciation of fixed assets commences when commercial
operations related to the fixed assets begin. The estimated useful
lives are as follows:
Land use rights 30 years
Roads and bridges 30 years
Buildings 20 years
Machinery and equipment 5 years
Motor vehicle 5 years
Furniture, fixtures and office equipment 5 years
Safety equipment 8 years
Construction in progress ("CIP" see Note 4) represents new roads and
bridges under construction and/or plant and machinery pending
installation. This includes the costs of construction, the costs of
plant and machinery and interest charges (net of interest income),
arising from borrowings used to finance these assets during the period
of construction or installation. No interest was capitalized for the
year ended December 31, 1998 and the nine months ended September 30,
1999.
-8-
<PAGE>
Hangzhou Toll Road retains the ownership interest in the road and
bridges constructed during the joint venture period of 30 years from
the date of formation. Upon expiration of the joint venture period, in
accordance with the joint venture agreement, the roads and bridges
owned by the Hangzhou Toll Road will be surrendered to the Chinese
joint venture partner at no consideration.
e. Impairment of Long-lived Assets
-------------------------------
Statement of Financial Accounting Standard ("U.S. FAS") No. 121
requires entities to perform separate calculations for assets to be
held and used to determine whether recognition of an impairment loss is
required, and if so, to measure the impairment. If the sum of expected
future cash flows, undiscounted and without interest charges, is less
than an asset's carrying value, an impairment loss is recognized; if
the sum of the expected future cash flows is greater than an asset's
carrying value, an impairment loss cannot be recognized. Measurement of
an impairment loss is based on the fair value of the asset. U.S. FAS
No. 121 also generally requires long-lived assets and certain
identifiable intangibles to be disposed of to be reported at the lower
of the carrying value or fair value less cost to sell. Based on an
assessment by the Company of the potential impact of U.S. FAS No. 121,
there was no impairment loss as of December 31, 1998 and September 30,
1999.
f. Taxation : Income Taxes
-----------------------
No provision for withholding or U.S. federal income taxes or tax
benefits on the undistributed earnings of the subsidiaries and/or
losses of Hangzhou Toll Road has been provided as the earnings of the
subsidiaries have been reinvested and, in the opinion of management,
will continue to be reinvested indefinitely.
WL was incorporated under the laws of the British Virgin Islands, and
under current British Virgin Islands laws, WL is not subject to tax on
income or on capital gains.
The Company and its subsidiaries (except WL and Hangzhou Toll Road)
provide for Hong Kong profits tax on the basis of their income for
financial reporting purposes, adjusted for income and expense items
which are not assessable or deductible for profits tax purposes. As of
December 31, 1998, and September 30, 1999, the Company and its
subsidiaries did not have any assessable profits and accordingly, no
provision for Hong Kong profits tax was made.
Hangzhou Toll Road is subject to Chinese income taxes at the applicable
tax rate for Sino-foreign equity joint venture enterprises (currently
33%) on the taxable income as reported in its statutory accounts
adjusted in accordance with the relevant income tax laws. Since it has
a joint venture term of more than 10 years and is engaged in
infrastructure construction, Hangzhou Toll Road will be fully exempted
from the Chinese state income tax of 30% as well as the local income
tax of 3% for two years starting from the first profit-making year
followed by a 50% reduction of the Chinese state unified income tax for
the next three years ("tax holiday").
No income tax provision was required for the year ended December 31,
1998 and for the nine months ended September 30, 1999 as Hanghzou Toll
Road did not have any assessable income.
-9-
<PAGE>
The Company provides for deferred income taxes using the liability
method, by which deferred income taxes are recognized for all
significant temporary differences between the tax and financial
statement bases of assets and liabilities. The tax consequences of
those differences are classified as current or non-current based upon
the classification of the related assets or liabilities in the
financial statements.
g. Taxation : Business Tax
-----------------------
Hangzhou Toll Road is subject to business tax, which is the principal
direct tax on the toll revenue generated. The business tax rate
applicable to Hangzhou Toll Road is 5% for the years ended December 31,
1998, and the nine months ended September 30, 1999.
h. Foreign Currency Translation
----------------------------
The functional currency of the Group and the Company is Renminbi.
Hangzhou Toll Road maintains its books and records in Renminbi. Foreign
currency transactions are translated into Renminbi at the applicable
rates of exchange quoted by the People's Bank of China ("the unified
rates of exchange") prevailing at the dates of the transactions.
Monetary assets and liabilities denominated in foreign currencies are
translated into Renminbi using the applicable unified rates of exchange
prevailing at the balance sheet dates. The resulting exchange
differences are included in the determination of income (loss) of
Hangzhou Toll Road.
The Company maintains its books and records in United States Dollars.
For consolidation purposes, its financial statements are remeasured
into Renminbi to produce the same result as if the Company's books and
records had been initially recorded in Renminbi. Monetary assets and
liabilities denominated in foreign currencies are remeasured into
Renminbi at the applicable unified rates of exchange prevailing at the
dates of the transactions. Monetary assets and liabilities denominated
in foreign currencies are remeasured into Renminbi using the applicable
unified rates of exchange prevailing at the balance sheet dates. The
resulting exchange differences are included in the determination of
income.
The Company's registered capital is denominated in the United States
Dollars. For financial reporting purposes, the United States Dollars
capital injection amounts have been translated into Renminbi at the
unified rate of exchange as quoted by the People's Bank of China as of
December 31, 1995.
i. Dedicated Capital
-----------------
In accordance with the relevant laws and regulations for Sino-foreign
equity joint venture enterprises, Hangzhou Toll Road maintains
discretionary dedicated capital, which includes a general reserve fund,
an enterprise expansion fund and a staff welfare and incentive bonus
fund. The board of directors of Hangzhou Toll Road will determine on an
annual basis the amount of the annual appropriations to dedicated
capital. For the period from January 1, 1996 to September 30, 1999,
Hangzhou Toll Road did not report any profits in the statutory
financial statements, and accordingly, no appropriation to dedicated
capital has been made.
-10-
<PAGE>
j. Use of Estimates
----------------
The preparation of financial statements in conformity with generally
accepted accounting principles in the United States of America requires
management to make estimates and assumptions that affect certain
reported amounts and disclosures. Accordingly, actual results could
differ from those estimates.
k. Loss per Common Share
---------------------
The calculation of basic loss per common share is based on the weighted
average number of common shares outstanding during the nine month ended
September 30, 1998, and 1999 and adjusted retroactively for a 1-for-138
reverse stock split (see Notes 1 and 11). No diluted loss per common
share is calculated because the effect is anti-dilutive.
l. Fair Value of Financial Instruments
-----------------------------------
The Company values its financial instruments as required by U.S. SAS
No. 107, "Disclosures about Fair Value of Financial Instruments". The
estimated fair value amounts have been determined by the Company, using
available market information and appropriate valuation methodologies.
The estimates presented herein are not necessarily indicative of
amounts that the Company could realize in a current market exchange.
The carrying amounts of cash and cash equivalents, notes receivables
and convertible note payable are reasonable estimates of their fair
values. The interest rate on the Company's convertible note payable
approximates that which would have been available at December 31, 1998
and September 30, 1999 for debt of similar remaining maturity.
The estimated fair values of notes receivable were Rmb10,317 and
Rmb10,549 as of December 31, 1998 and September 30, 1999 respectively,
representing the net present values computed based on estimated current
market rates for similar instruments. The carrying values of these
notes receivable were Rmb11,373 and Rmb11,775 as of December 31, 1998
and September 30, 1999 respectively.
m. Comprehensive Income
--------------------
The Company adopted U.S. SAS No. 130, "Reporting Comprehensive Income"
which requires the components of comprehensive income to be disclosed
in the financial statements. Comprehensive income consists of net
income and other gains and losses affecting shareholders' equity that,
under generally accepted accounting principles, are excluded from net
income. For the Company, comprehensive income only represents its net
income and the adoption of U.S. SAS No. 130 did not have a material
effect on the Company's primary financial statements.
-11-
<PAGE>
n. Segment Information
-------------------
The Company adopted U.S. SAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information" which requires certain information
to be reported about operating segments on a basis consistent with the
Company's internal organization structure. The adoption of U.S. SAS No.
131 did not have a material effect on the Company's primary financial
statements, but did affect the disclosure of segment information
contained in Note 14.
4. PROPERTY, PLANT AND EQUIPMENT
-----------------------------
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
------------------ ------------------
Rmb'000 Rmb'000
<S> <C> <C>
Land use rights 10,541 10,541
Road and bridges 756,638 754,084
Buildings 4,391 4,391
Machinery and equipment 4,187 4,187
Motor vehicles 3,811 3,811
Furniture, fixtures and office equipment 106 106
Safety equipment 14,129 14,129
Construction-in-progress 7,391 6,403
Less : Accumulated depreciation and
Amortization (79,492) (59,318)
------------------ ------------------
Net book value 721,702 738,334
================== ==================
</TABLE>
5. LONG-TERM BANK LOANS
--------------------
Long-term bank loans, all of which are unsecured, bear average interest
rates of approximately 9.19% as of December 31, 1998 and 6.47% as of
September 30, 1999 respectively and are repayable as follows:
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
------------------ ------------------
Rmb'000 Rmb'000
<S> <C> <C>
1999 38,000 50,000
2000 130,579 120,500
2001 134,658 134,658
2002 49,761 49,868
2003 39,500 39,500
------------------ ------------------
Total 392,498 394,526
================== ==================
</TABLE>
-12-
<PAGE>
Long-term bank loans included United States Dollar loans of US$3,560
(Rmb29,526) and US$3,560 (Rmb29,526) as of December 31, 1998 and September
30, 1999 respectively. Loans amounting to Rmb394,526 as of December 31,1998
and Rmb392,498 as of September 30, 1999 respectively are guaranteed by a
related company.
6. NOTES RECEIVABLE
----------------
As mentioned in Note 1, the Company sold and transferred its operating
assets and real property as of January 31, 1996 to New Regal. As part of
the consideration of the sale, the Company received two promissory notes
from New Regal, one in the principal amount of US$900 (the "US$900 Note")
and another in the principal amount of US$800 (the "US$800 Note"). The
US$900 Note bears interest at 9% per annum and is payable in sixty equal
monthly installments of principal and interest. The US$800 Note bears no
interest and is due and payable in one installment on February 1, 2001.
Both promissory notes are secured by all the outstanding shares of New
Regal registered in the name of Harlequin Investment Holdings Limited
("Harlequin"), the immediate holding company of New Regal.
Pursuant to a Deed of Variation dated July 27, 1998 among the Company, New
Regal and Harlequin, Harlequin agreed and undertook to assume all the
obligations and liabilities of New Regal under the US$800 Note in
consideration of the Company's agreement to release New Regal from all
obligations relating to the US$800 Note. All other terms of the US$800 Note
remains unchanged.
During 1998, New Regal re-negotiated the terms of the US$900 Note with the
Company and revised payment schedule was reached. Under the revised payment
schedule, the payment of several monthly installments by New Regal in 1998
and 1999 were suspended and the payment of the outstanding principal
balance of US$573 was to be settled by sixty equal monthly installments
commencing March 1999. Purusant to an agreemant of the parties concerned,
the date of repayment was further amended to January 2000.
The Company believes that no provision is required for the two notes.
7. DISTRIBUTION OF PROFITS
-----------------------
Dividends from the Hangzhou Toll Road will be declared based on the profits
as reported in the statutory financial statements. Such profits will be
different from the amounts reported under U.S. GAAP. As of December 31,
1998 and September 30, 1999, the Hangzhou Toll Road had no available
retained earnings for distribution according to its statutory financial
statements.
8. PROVISION FOR INCOME TAXES
--------------------------
The reconciliation of the effective income tax rate based on loss before
income taxes and minority interests stated in the consolidated statements
of operations to the statutory income tax rates in Hong Kong, the British
Virgin Islands, the PRC and the U.S. is as follows:
-13-
<PAGE>
<TABLE>
<CAPTION>
Jan-Sept Jan-Sept
1999 1998
---------------- -----------------
<S> <C> <C>
Weighted average statutory tax rate 33.0% 33.0%
Establishment of a valuation allowance (33.0%) (33.0%)
---------------- -----------------
Effective tax rate - -
================ =================
Provision for income taxes consists of:
Jan-Sept Jan-Sept
1999 1998
---------------- -----------------
Rmb Rmb
Current - -
Deferred 368 6,704
Adjustment of valuation allowance (368) (6,704)
---------------- -----------------
- -
================ =================
</TABLE>
The valuation allowance refers to the portion of the deferred tax assets
that are not "more likely than not" going to be realized. The realization
of these benefits depends upon the ability of the Group to generate income
in future years. No provision or benefit for deferred income taxes was
recognized for the year and December 31,, 1998 and the six months ended
September 30, 1999.
9. RELATED PARTY TRANSACTIONS AND ARRANGEMENTS
-------------------------------------------
Hangzhou Toll Road guaranteed bank borrowings of a related company of CSH
in an amount of Rmb93 million as of December 31, 1998 and September 30,
1999.
The Company paid management fees of US$155 (Rmb1,283) and US$78 (Rmb642) to
CSH during 1998 and the nine months ended September 30, 1999 for
administrative services rendered to the Company by CSH.
Amounts due to immediate holding company represented interest payable on
Convertible Note B mentioned in Note 1.
Amounts due to ultimate holding company are unsecured and non-interest
bearing.
CSH has committed to provide continuing financial support to the Company to
the extent of CSH's interest in the Company for a period ending on December
31, 1999.
-14-
<PAGE>
10. DUE TO CHINESE JOINT VENTURE PARTNER
------------------------------------
Balances due to the Chinese joint venture partner as at December 31, 1998
and September 30, 1999 represented money borrowed from the Chinese joint
venture partner to finance the construction of the Projects of Hangzhou
Toll Road. These amounts are unsecured and bear interest at 13.18% per
annum.
11. COMMON AND PREFERRED STOCK
--------------------------
Pursuant to resolutions passed by the shareholders of the Company dated
October 27, 1998, the Company effected on February 19, 1999 a 1-for-138
reverse stock split for the common stock and increased its authorized
capital stock to 1,100,000,000 shares of common stock par value at US$0.01
per share by amending its Certificate of Incorporation which was filed with
the Secretary of State of the State of Deloware on February 8, 1999.
As a result of the 1-for-138 reverse stock split, the then outstanding
81,764,456 shares of common stock with a par value of US$0.01 each have
become 597,139 shares of common stock with a par value of US$0.01 each. In
this connection, an amount of approximately US$812 (equivalent to
approximately Rmb6,757) was transferred from outstanding common stock to
additional paid-in capital. All references in the accompanying consolidated
financial statements to number of shares and per share amount of common
stock have been adjusted retroactively for this 1-for-138 reverse stock
split.
12. STOCK OPTIONS
-------------
The following tables summarize the movement of share options of the Company
which are ten-year stocks issued in 1989 in connection with an arrangement
for additional financing and extension of debt.
<TABLE>
Common stock options
<CAPTION>
1999 1998
------------------- ------------------
<S> <C> <C>
Shares under option as at January 1, 150,000 150,000
Expired - -
------------------- ------------------
Shares under option as at September 30, 150,000 150,000
=================== ==================
Average exercise price of outstanding options US$21.528 US$21.528
=================== ==================
Exercisable at end of period 150,000 150,000
=================== ==================
</TABLE>
13. RETIREMENT PLANS
----------------
As stipulated by the regulations of the Chinese government, all of the
local staff of Hangzhou Toll Road are entitled to an annual pension on
retirement, which is equal to their basic salaries at their retirement
dates. The Chinese government is responsible for the pension liability to
retired staff. Hangzhou Toll Road is only required to make specified
contributions to the state-sponsored retirement plan calculated at 23% of
the basic salary of the staff. The expenses included in the financial
statements of Hangzhou Toll Road related to these arrangements was Rmb570
and Rmb637 for the nine months ended September 30, 1998 and 1999
respectively.
-15-
<PAGE>
14. SEGMENT INFORMATION
-------------------
The Group operates soley, through its Hangzhan Toll Road, in the toll road
construction and management business in Hangzhou, Zhejiang Province, the
PRC. Accordingly, it has only one reportable segment. All intercompany
transactions have been eliminated in the following segment information
disclosures. Corporate identifiable assets include primarily cash and cash
equivalents and notes receivable (see Note 6).
<TABLE>
<CAPTION>
September 30 September 30
1 9 9 9 1 9 9 8
------------------------------- -------------------------------
Hangzhou Hangzhou
Toll Road Corporate Total Toll Road Corporate Total
--------- --------- ------- --------- --------- -------
<S> <C> <C> <C> <C> <C> <C>
Toll revenue 41,988 - 41,988 37,950 - 37,950
Depreciation and amortization (16,632) - (16,632) (22,089) - (22,089)
Interest expense (30,596) (13,802) (44,398) (37,833) (16,834) (54,677)
Loss before minority
Interests (15,240) (16,135) (31,375) (33,407) (18,524) (51,931)
Identifiable assets 727,298 13,856 741,154 770,313 17,752 788,065
Capital expenditures - - - - - -
</TABLE>
15. OTHER SUPPLEMENTAL INFORMATION
------------------------------
The following item is included in the consolidated statements of operations:
Jan-Sept Jan-Sept
1999 1998
----------------- -----------------
Rmb Rmb
Business tax 2,256 2,037
16. CONTINGENCY
-----------
Hangzhou Toll Road has obtained an approval from the local government to
offset the toll profit collected from the first and second phases of the
toll road against the construction-in-progress balances under PRC GAAP
until the Projects were completed in 1998. Thus, the tax holiday has been
deferred until the Projects are completed. As such, Hangzhou Toll Road
reported zero net profits in its statutory financial statements starting
from the commencement of operations in 1993 to 1997. The Company and
Hangzhou Toll Road plan to record the net profits offset against the
Projects during 1993 to 1997 as income in its financial statements prepared
in accordance with PRC GAAP in the first two years after commencement of
the tax holiday. However, this treatment is subject to the approval of the
local tax bureau. In the opinion of the directors, it is not probable that
such a liability will arise. Hangzhou Toll Road reported losses in its
statutory accounts for the nine months ended September 30, 1999 and
accordingly, the tax holiday will not commence until its first profit
making year.
-16-
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
PRELIMINARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
ALL FORWARD-LOOKING STATEMENTS CONTAINED HEREIN ARE DEEMED BY THE COMPANY TO BE
COVERED BY AND TO QUALIFY FOR THE SAFE HARBOR PROTECTION PROVIDED BY THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995. SHAREHOLDERS AND
PROSPECTIVE SHAREHOLDERS SHOULD UNDERSTAND THAT SEVERAL FACTORS GOVERN WHETHER
ANY FORWARD - LOOKING STATEMENT CONTAINED HEREIN WILL BE OR CAN BE ACHIEVED. ANY
ONE OF THOSE FACTORS COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE
PROJECTED HEREIN. THESE FORWARD - LOOKING STATEMENTS INCLUDE PLANS AND
OBJECTIVES OF MANAGEMENT FOR FUTURE OPERATIONS, INCLUDING PLANS AND OBJECTIVES
RELATING TO THE PRODUCTS AND THE FUTURE ECONOMIC PERFORMANCE OF THE COMPANY.
ASSUMPTIONS RELATING TO THE FOREGOING INVOLVE JUDGMENTS WITH RESPECT TO, AMONG
OTHER THINGS, FUTURE ECONOMIC, COMPETITIVE AND MARKET CONDITIONS, FUTURE
BUSINESS DECISIONS, AND THE TIME AND MONEY REQUIRED TO SUCCESSFULLY COMPLETE
DEVELOPMENT PROJECTS, ALL OF WHICH ARE DIFFICULT OR IMPOSSIBLE TO PREDICT
ACCURATELY AND MANY OF WHICH ARE BEYOND THE CONTROL OF THE COMPANY. ALTHOUGH THE
COMPANY BELIEVES THAT THE ASSUMPTIONS UNDERLYING THE FORWARD - LOOKING
STATEMENTS CONTAINED HEREIN ARE REASONABLE, ANY OF THOSE ASSUMPTIONS COULD PROVE
INACCURATE AND, THEREFORE, THERE CAN BE NO ASSURANCE THAT THE RESULTS
CONTEMPLATED IN ANY OF THE FORWARD - LOOKING STATEMENTS CONTAINED HEREIN WILL BE
REALIZED. BASED ON ACTUAL EXPERIENCE AND BUSINESS DEVELOPMENT, THE COMPANY MAY
ALTER ITS CAPITAL EXPENDITURE PLANS OR OTHER BUDGETS, WHICH MAY IN
TURN AFFECT THE COMPANY'S RESULTS OF OPERATIONS. IN LIGHT OF THE SIGNIFICANT
UNCERTAINTIES INHERENT IN THE FORWARD LOOKING STATEMENTS INCLUDED THEREIN, THE
INCLUSION OF ANY SUCH STATEMENT SHOULD NOT BE REGARDED AS A REPRESENTATION BY
THE COMPANY OR ANY OTHER PERSON THAT THE OBJECTIVES OR PLANS OF THE COMPANY WILL
BE ACHIEVED.
Overview:
As of September 30, 1999, the Company had the following subsidiaries
(together with the Company, collectively referred to as the "Group"):
Westronix Limited ("WL") - a holding company incorporated in the British
Virgin Islands.
China Construction Holdings Limited ("CCHL") - a company incorporated in
Hong Kong, formerly known as China Construction International Group
Limited.
Hangzhou Zhongche Huantong Development Co., Ltd. ("Hangzhou Toll Road") - a
Sino-foreign equity joint venture located in Hangzhou, Zhejiang Province,
the PRC.
The Company holds a 100% interest in WL. WL holds a 100% interest in CCHL
which in turn holds a 51% interest in Hangzhou Toll Road.
Hangzhou Toll Road is a Sino-foreign equity joint venture enterprise
established on June 23, 1993, which formally began business operations in
September 1993 in the PRC. The total cash consideration paid by CCHL for
its interest in Hangzhou Toll Road amounted to Rmb102 million. Tolls
collected from the first phase of the toll road, which was injected by
Hangzhou City Transportation Development Company, the Chinese joint venture
partner, as its share of the registered capital in the joint venture, as
well as cash injected by CCHL, were utilized to finance the construction of
the second and third phases of the toll road (the "Projects"). The Projects
were completed by the end of 1997 and Hangzhou Toll Road commenced to
collect tolls from all three phases in 1998.
Key provisions of the joint venture agreement of Hangzhou Toll Road
include:
o the joint venture period is 30 years from the date of formation;
o the profit and loss sharing ratio is the same as the percentage of
equity interest; and
o the Board of Directors consists of 7 members : 4 designated by CCHL
and 3 designated by Hangzhou City Transportation Development Company.
The acquisition of Hangzhou Toll Road by CCHL was accounted for by the
purchase method of accounting. The tangible assets were valued at their
estimated fair values. The results of Hangzhou Toll Road are included in
the consolidated statements of operations from the date of formation of the
joint venture, June 23, 1993. No revenue was generated from the toll road
before the formation of the joint venture.
-17-
<PAGE>
Pursuant to a supplemental shareholders' agreement (the "Guaranteed
Distribution Agreement") dated May 18, 1998 between CCHL and the Chinese
joint venture partner of Hangzhou Toll Road (the "Chinese Partner"), the
Chinese Partner agreed to pay CCHL a fixed annual distribution of Rmb15
million (the "Guaranteed Distribution") from January 1, 1998 through the
expiration of the joint venture period of Hangzhou Toll Road. Any surplus
income generated from Hangzhou Toll Road in excess of the amount of the
Guaranteed Distribution would belong to the Chinese Partner and any
shortfall would be made up by the Chinese Partner. In addition, as part of
the Guaranteed Distribution Agreement, an amount of Rmb178.5 million would
be paid to CCHL upon the expiration of the joint venture period of Hangzhou
Toll Road and the assets of the joint venture would be surrendered to the
Chinese Partner at no further consideration. This Guaranteed Distribution
Agreement is subject to approvals by the authorities which originally
approved the set up of the joint venture.
To date, the approvals from the relevant government authorities have not
been obtained despite efforts by the management of the joint venture and
the Company. The Board of Directors of the Company are currently of the
view that the necessary approvals may not be obtained and the agreement
cannot be effectuated without such approvals. Accordingly, the Company has
continued to consolidate Hangzhou Toll Road for the year/period ended
December 31, 1998 and the nine months ended September 30, 1999 and has not
reflected the Guaranteed Distribution Agreement in the accounts.
On September 28, 1999, the Company announced that it had entered into an
acquisition agreement to purchase Far Beyond Investments Ltd., a sino
foreign joint venture, Heilongjiang Asibao Chemical Fibre Co. Ltd., one of
the largest manufacturers of polyester fiber and filament in China.
Subsequently, the Company and Horler will enter into a disposal agreement
pursuant to which the Company will sell to Horler Holdings Limited in full
and final settlement of the outstanding indebtedness owed to Horler
Holdings Limited by the Company under a 9% secured convertible promissary
note of US$30,000,000.00, the entire share capital of WL. The above
transactions will be subject to shareholders approval.
Results of operation:
Summary financial information
-----------------------------
<TABLE>
<CAPTION>
Nine months
Ended September 30,
-------------------
1999 1998
---- ----
Rmb'000 Rmb'000
<S> <C> <C>
Toll revenue 41,988 37,950
General and administrative expenses 29,619 35,791
Interest income 543 468
Interest expense 44,398 54,677
Exchange gain, net 111 119
Net loss (23,910) (35,559)
</TABLE>
-18-
<PAGE>
Toll revenue
Toll revenue increased by 10.64% or Rmb4,038,000 in the nine months ended
September 30, 1999 as compared with the same period in last year. This was
primarily attributable to an increase in traffic volume for the first nine
months ended of 1999.
General and Administrative Expenses
During the nine months ended September 30, 1999, general and administrative
expenses decreased by 17.24% to Rmb29,619,000 from Rmb35,791,000 for the
nine months ended September 30, 1999 as compared to the same period in
1998. This is due to the fact that tighter cost control in the toll
operation has been implemented.
Interest Income
Interest income was mainly derived from bank deposits.
Interest Expense
As compared with last period, interest expense decreased by 18.8% to
Rmb44,398,000. No significant change in finance structure of the Group
during the nine month ended September 30, 1999.
Net Loss
During the nine months ended September 30, 1999, net loss of the Company
decreased by 32.76% to a net loss of Rmb35,559,000 from a net loss of
Rmb23,910,000 for the nine months ended September 30, 1998. This is due to
improved toll revenue and tighter cost control in the toll operation has
been implemented.
Liquidity and Capital Resources
For the nine months ended September 30, 1999, net cash used in operating
activities and investing activities was approximately Rmb 30.07 million and
Rmb 0.4 million respectively. Net cash provided by financing activities
amounted to Rmb 18.29 million, resulting in a net decrease in cash and cash
equivalents of approximately Rmb 12.19 million for the nine months ended
September 30, 1999.
Effects of Inflation
The general inflation rate in terms of the Retail Price Index in China was
approximately 6.3%, 0.8% and -2.6% for 1996, 1997 and 1998, respectively.
Management believes that inflation would not have significant impact on the
Group.
-19-
<PAGE>
The Year 2000 Issue
The Company recognizes that the Year 2000 issue exists because many
computer systems and application currently use two-digit date fields to
designate a year. As the century date occurs, date sensitive computers will
recognize the year 2000 at 1900 or not at all. The inability to properly
treat the year 2000 may cause computers to process financial and
operational information incorrectly.
To Ensure that the Company's computer system is able to cope with the Year
2000 issue, the management has assessed carefully the risks and
uncertainties involved with this problem. Technical support from service
provider and experts has been obtained and upgrading of our accounting
software has been completed. According to the service provider, the
upgraded version has been extensively tested for Year 2000 compliance as
part of its rigorous testing procedures carries out before a product is
released.
Unless unforeseeable situations appear, the Year 2000 issue will not pose
any significant operational problems to the Company and the Company
believes no significant expenses will be incurred for the Year 2000
compliance.
-20-
<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
NONE
-21-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Exchange Act, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
ASIA RESOURCES HOLDINGS LIMITED
(Registrant)
Date: November 19, 1999 /S/ Catherine Ma
---------------------------------------
Catherine Ma, President
Date: November 19, 1999
/S/ Lien Kait Long
---------------------------------------
Lien Kait Long, Chief Financial Officer
-22-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 674
<SECURITIES> 0
<RECEIVABLES> 186
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 927
<PP&E> 87,162
<DEPRECIATION> 0
<TOTAL-ASSETS> 89,511
<CURRENT-LIABILITIES> 5,779
<BONDS> 0
0
0
<COMMON> 6
<OTHER-SE> (19,427)
<TOTAL-LIABILITY-AND-EQUITY> 89,511
<SALES> 5,071
<TOTAL-REVENUES> 5,071
<CGS> 0
<TOTAL-COSTS> 3,577
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,362
<INCOME-PRETAX> (3,789)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,789)
<DISCONTINUED> 0
<EXTRAORDINARY> 902
<CHANGES> 0
<NET-INCOME> (2,887)
<EPS-BASIC> (4.83)
<EPS-DILUTED> (4.83)
</TABLE>
