<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 2000.
[ ] TRANSITION REPORT PURSUANT SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ________ to ________
Commission file number 1-8334
ASIA FIBER HOLDINGS LIMITED
(Exact name of small business as specified in its charter)
Delaware 75-1071589
- ----------------------------- ------------------------
(State or other jurisdiction of IRS Employer
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 date: March 31, 2000, 9,952,234 shares.
Transitional Small Business Disclosure Format (check one):
Yes No X
--- ---
<PAGE>
ASIA FIBER HOLDINGS LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED INCOME STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(Amounts in thousands, except share and per share data)
<TABLE>
<S> <C>
PART I - FINANCIAL INFORMATION............................................ 1
ITEM 1 - FINANCIAL STATEMENTS............................................. 1
Condensed Consolidated Income Statements (Unaudited) for the three
months ended March 31, 2000 and 1999................................... 1
Condensed Consolidated Balance Sheet as of March 31, 2000 and
December 31, 1999...................................................... 2
Consolidated Statements of Changes in Shareholders' Equity (Unaudited)
for the three months ended March 31, 2000.............................. 3
Condensed Consolidated Statements of Cash Flows (Unaudited) for the
three months ended March 31, 2000 and 1999............................. 4
Notes to Consolidated Financial Statements (Unaudited)................. 5
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS............................................ 7
PART II - OTHER INFORMATION................................................ 9
ITEM 1. LEGAL PROCEEDINGS............................................. 9
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS..................... 9
ITEM 3. DEFAULTS UPON SENIOR SECURITIES............................... 10
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS........... 10
ITEM 5. OTHER INFORMATION............................................. 10
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.............................. 10
</TABLE>
<PAGE>
ASIA FIBER HOLDINGS LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED INCOME STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(Amounts in thousands, except share and per share data)
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
2000 1999 2000
---- ---- ----
RMB RMB US$
<S> <C> <C> <C>
SALES 104,676 104,278 12,642
COST OF SALES (81,334) (85,106) (9,823)
--------- --------- ---------
GROSS PROFIT 23,342 19,172 2,819
SELLING AND ADMINISTRATIVE EXPENSES (5,004) (4,264) (604)
PROVISION FOR DOUBTFUL DEBTS - (3,000) -
FINANCIAL EXPENSES, NET (1,067) (2,676) (129)
--------- --------- ---------
INCOME BEFORE INCOME TAXES 17,271 9,232 2,086
INCOME TAXES (1,387) - (167)
--------- --------- ---------
INCOME BEFORE MINORITY INTERESTS 15,884 9,232 1,919
MINORITY INTERESTS (5,131) (2,865) (620)
--------- --------- ---------
NET INCOME 10,753 6,367 1,299
========= ========= =========
BASIC AND DILUTED EARNINGS PER SHARE 1.10 0.68 0.13
========= ========= =========
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING* 9,794,749 9,355,102 9,794,749
========= ========= =========
</TABLE>
See notes to condensed consolidated financial statements.
1
<PAGE>
ASIA FIBER HOLDINGS LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 2000 AND DECEMBER 31, 1999
(Amounts in thousands, except share and per share data)
<TABLE>
<CAPTION>
March 31, December 31, March 31,
2000 1999 2000
RMB RMB US$
Notes (Unaudited) (Note) (Unaudited)
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents 19,264 8,427 2,327
Trade receivables 58,617 56,868 7,079
Bills receivable 450 1,300 54
Other receivables, deposits and prepayments 490 561 59
Inventories 3 37,934 26,789 4,581
Amount due from a minority joint venture partner 303,837 261,070 36,696
Amounts due from related companies 23,125 29,161 2,793
---------- ---------- ----------
TOTAL CURRENT ASSETS 443,717 384,176 53,589
FIXED ASSETS 4 130,341 133,642 15,741
INVESTMENT 13,390 13,390 1,617
DEFERRED INCOME TAXES 2,042 2,042 247
---------- ---------- ----------
TOTAL ASSETS 589,490 533,250 71,194
========== ========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Bank loans 182,880 177,880 22,087
Accounts payable 437 4,315 52
Deposits from customers 72,267 44,280 8,728
Accrued liabilities and other payables 30,626 29,677 3,699
Amount due to a director 5,448 5,734 658
Amounts due to related companies 20,053 12,098 2,422
Income taxes payable 1,923 536 232
Dividend payable 19,961 19,961 2,411
---------- ---------- ----------
TOTAL CURRENT LIABILITIES 333,595 294,481 40,289
MINORITY INTERESTS 27,119 21,988 3,275
---------- ---------- ----------
TOTAL LIABILITIES AND MINORITY
INTERESTS 360,714 316,469 43,564
---------- ---------- ----------
SHAREHOLDERS' EQUITY
Common stock, par value of US$0.1 each
Authorized: 30,000,000 shares in 2000 and
1,100,000,000 1999
Issued and outstanding - 9,952,234 shares in 2000
and 597,132 shares in 1999 1,864 622 225
Preferred stock, par value of US$0.1 each
Authorized: 10,000,000 shares in 2000 and 1999
Additional paid-in capital 69,931 69,931 8,446
Reserves 15,845 15,845 1,914
Retained earnings 140,755 130,002 16,999
Accumulated other comprehensive income 381 381 46
---------- ---------- ----------
TOTAL SHAREHOLDERS' EQUITY 228,776 216,781 27,630
---------- ---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY 589,490 533,250 71,194
========== ========== ==========
</TABLE>
Translations of amounts from Renminbi (Rmb) into United States Dollars (US$)
for the convenience of the reader has been made at the unified exchange rate
quoted by the People's Bank of China on March 31, 2000 of US$1.00 = Rmb8.28.
No representation is made that the Renminbi amounts could have been, or could
be, converted into United States Dollars at that rate on March 31, 2000 or at
any other certain rate.
The accompanying notes are an integral part of these consolidated balance
sheets.
2
<PAGE>
ASIA FIBER HOLDINGS LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2000
(Amounts in thousands)
<TABLE>
<CAPTION>
Accumulated
Additional other
Common paid-in Retained comprehensive
stock capital Reserves earnings income Total
RMB RMB RMB RMB RMB RMB
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 2000 622 69,931 15,845 130,002 381 216,781
Issuance of common stock 1,242 - - - - 1,242
Net income - - - 10,753 - 10,753
------ ------ ------ ------- --- -------
Balance at March 31, 2000 1,864 69,931 15,845 140,755 381 228,776
====== ====== ====== ======= === =======
</TABLE>
Translations of amounts from Renminbi (Rmb) into United States Dollars (US$) for
the convenience of the reader has been made at the unified exchange rate quoted
by the People's Bank of China on March 31, 2000 of US$1.00 = Rmb8.28. No
representation is made that the Renminbi amounts could have been, or could be,
converted into United States Dollars at that rate on March 31, 2000 or at any
other certain rate.
3
<PAGE>
ASIA FIBER HOLDINGS LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(Amounts in thousands)
<TABLE>
<CAPTION>
Three Months Ended March 31,
---------------------------------------
2000 1999 2000
---- ---- ----
RMB RMB US$
<S> <C> <C> <C>
Net cash provided by/(used in) operating activities 47,465 (1,955) 5,732
INVESTING ACTIVITIES
Purchases of fixed assets (103) (126) (12)
Advances to a minority joint venture partner (42,767) - (5,165)
Repayment from a minority joint venture partner - 7,234 -
---------- ---------- ----------
Net cash provided by/(used in) investing activities (42,870) 7,108 (5,177)
---------- ---------- ----------
FINANCING ACTIVITIES
Proceeds from bank borrowings 5,000 - 604
Issuance of common stock 1,242 - 150
---------- ---------- ----------
Net cash provided by financing activities 6,242 - 754
---------- ---------- ----------
NET INCREASE IN CASH AND CASH
EQUIVALENTS 10,837 5,153 1,309
Cash and cash equivalent, at beginning of period 8,427 5,456 1,018
---------- ---------- ----------
Cash and cash equivalent, at end of period 19,264 10,609 2,327
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated statements of
cash flows.
4
<PAGE>
1. DISPOSAL AND ACQUISITION TRANSACTIONS
On January 24, 2000, pursuant to an Acquisition Agreement dated as of
September 10, 1999 (the "Far Beyond Acquisition Agreement") by and
among the Company, Horler Holdings Limited ("Horler"), Far Beyond
Investments Limited ("Far Beyond") and the shareholders of Far Beyond
(the "FB Shareholders"), the FB Shareholders transferred all of the
issued and outstanding shares of the capital stock of Far Beyond to the
Company in exchange for 8,757,951 shares of the Common Stock of the
Company, representing approximately 88% of the outstanding shares of
the Common Stock of the Company.
Concurrently with and as a condition of the closing of the Far Beyond
Acquisition Agreement, pursuant to a Disposal Agreement between the
Company and Horler and an Assignment Agreement between the Company and
China Strategic Holdings Limited, the Company disposed of all of its
assets other than approximately US$150,000 in cash or cash equivalents
and all of its liabilities.
2. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
of the Company and its subsidiaries have been prepared as a
continuation of the financial statements of Far Beyond and not of the
Company. The comparative figures presented in the condensed
consolidated financial statements are those of Far Beyond and not the
Company.
The 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-Q 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,
2000, are not necessarily indicative of the results that may be
expected for the year ending December 31, 2000.
5
<PAGE>
3. INVENTORIES
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
RMB RMB
<S> <C> <C>
Raw materials 16,821 21,453
Work in progress 3,637 2,480
Finished goods 19,383 4,763
---------- ----------
39,841 28,696
Less: Provision for inventories (1,907) (1,907)
---------- ----------
37,934 26,789
========== ==========
</TABLE>
4. FIXED ASSETS
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
RMB RMB
<S> <C> <C>
At cost:
Plant, machinery and equipment 188,329 188,226
Motor vehicles 1,418 1,418
---------- ----------
189,747 189,644
Accumulated depreciation (59,406) (56,002)
---------- ----------
Net book value 130,341 133,642
========== ==========
</TABLE>
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
On January 24, 2000, pursuant to an Acquisition Agreement dated as of
September 10, 1999 (the "Far Beyond Acquisition Agreement") by and among the
Company, Horler Holdings Limited ("Horler"), Far Beyond Investments Limited
("Far Beyond") and the shareholders of Far Beyond (the "FB Shareholders"), the
FB Shareholders transferred all of the issued and outstanding shares of the
capital stock of Far Beyond to the Company in exchange for 8,757,951 shares of
the Common Stock of the Company, representing approximately 88% of the
outstanding shares of the Common Stock of the Company.
Concurrently with and as a condition of the closing of the Far Beyond
Acquisition Agreement, pursuant to a Disposal Agreement between the Company and
Horler and an Assignment Agreement between the Company and China Strategic
Holdings Limited, the Company disposed of all of its assets other than
approximately $150,000 in cash or cash equivalents and all of its liabilities.
The financial information presented below is that of Far Beyond and not
the Company.
RESULTS OF OPERATIONS
The following table shows the selected unaudited condensed consolidated
income statement data of the Company and its subsidiaries for the three months
ended March 31, 2000 and 1999. The data should be read in conjunction with the
unaudited Condensed Consolidated Financial Statements of the Company and related
notes thereto.
The discussions below are presented in the Company's primary operating
currency, which is the Renminbi Yuan ("RMB"). For information purposes only, the
amounts may be translated into U.S. dollars at an exchange rate of $1.00 =
RMB8.28, which represents the approximate single rate of exchange as quoted by
the People's Bank of China on March 31, 2000. No representation is made that RMB
amounts could have been, or could be, converted into U.S. dollars at that rate
or any other rate.
<TABLE>
<CAPTION>
(Amounts in thousands) Three Months Ended March 31,
----------------------------
2000 1999
RMB RMB
<S> <C> <C>
Sales 104,676 104,278
Cost of sales (81,334) (85,106)
---------- ----------
Gross profit 23,342 19,172
Gross profit margin (%) 22.3 18.4
Income before income taxes 17,271 9,232
Income taxes (1,387) -
---------- ----------
Income before minority interest 15,884 9,232
Minority interests (5,131) (2,865)
---------- ----------
Net income 10,753 6,367
========== ==========
</TABLE>
7
<PAGE>
SALES AND GROSS PROFIT MARGIN
Total sales for the first quarter of 2000 increased by RMB397,000
(US$48,000) or 0.4% to RMB104.7 million (US$12.6 million), compared to RMB104.3
million (US$12.6 million) for the corresponding period in 1999. The positive
influence of the anti-smuggling campaigns and expansionary fiscal policies
launched by the PRC government in 1999 persists in 2000. This has resulted in
the selling price of the polyester fiber products generally increasing by
approximately 1%-12% for the first quarter of 2000 compared to those of first
quarter of 1999. Gross profit margin increased from 18.4% for the first quarter
of 1999 to 22.3% for the corresponding period in 2000, resulting from the
increase in selling prices. However, sales volume decreased by 25% in 2000
compared to that of the corresponding period in 1999 as a large amount of
finished products were not yet delivered to the customers as at March 31, 2000.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling and administrative expenses increased by RMB740,000
(US$89,000) or 17.4% to RMB5.0 million (US$604,000) for the first quarter of
2000 from RMB4.3 million (US$515,000) for the corresponding period in 1999.
The increase was mainly due to an increase in legal and professional fees
which amounted to approximately RMB600,000 (US$72,000) relating to the
disposal and acquisition transactions as detailed in Note 1 of the financial
statements occurred in the first quarter of 2000.
FINANCIAL EXPENSES, NET
Net financial expenses decreased by RMB1.6 million (US$194,000) or
60.2% from RMB2.7 million (US$323,000) for the first quarter of 1999 to
RMB1.1 million (US$129,000) for the corresponding period in 2000. The
decrease was mainly attributable to an increase in interest income received
on the amount due from Heilongjiang Longdi Group Co., Ltd. a 30% interest
minority shareholder of Harbin Asibao Chemical Fiber Co. Limited ("Asibao").
INCOME TAXES
The Company, through Far Beyond, owns a 70% interest in Asibao which
is governed by the Income Tax Laws of the PRC. Being a Sino-foreign joint
venture established in the Harbin Economic Development Zone and being awarded
the status of "advanced technology enterprise", Asibao is exempted from
income taxes for a period of two years commencing from its first profitable
year and is entitled to a preferential income tax rate of 15% for the
remaining years of the Joint Venture with a 50% reduction for three
consecutive years commencing from its third profitable year. 1999 and 2000
are the fourth and fifth profitable years, respectively, and the income taxes
are provided accordingly, based on the preferential income tax rate of 15%.
Asibao has, however, successfully claimed a 3 years' tax-free holiday
in 1999 under certain tax regulations for advanced technology enterprises issued
by the local government. Accordingly, the income taxes provided in 1998 were
reversed in 1999.
8
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's and its subsidiaries' primary liquidity needs are to fund
inventories and trade receivables and to expand business operations. The Company
has financed its working capital requirements primarily through internally
generated cash.
The Company had a working capital surplus of approximately RMB110
million (US$13.3 million) as of March 31, 2000, compared to that of
approximately RMB90 million (US$10.8 million) as of December 31, 1999. Net cash
provided by operating activities for the three months ended March 31, 2000 was
approximately RMB47.5 million (US$5.7 million), as compared to net cash used in
operating activities of approximately RMB2.0 million (US$236,000) for the
corresponding period in 1999. Net cash flows from the Company's operating
activities are attributable to the Company's income and changes in operating
assets and liabilities.
There has been no other significant change in financial condition and
liquidity since the fiscal year ended December 31, 1999. The Company believes
that internally generated funds will be sufficient to satisfy its anticipated
working capital needs for at least the next twelve months.
YEAR 2000 ISSUE
The Year 2000 issue is the result of information technology systems and
embedded systems using a two-digit format, as opposed to four digits, to
indicate the year. The Company and its subsidiaries use a limited amount of
computer software primarily in connection with their accounting and financial
reporting systems. Such programs have been upgraded so that they are year 2000
compatible. In addition to software issues, certain of the computer hardware of
the Company and its subsidiaries have been replaced with more current
technology.
As of March 31, 2000, the Company has not experienced any disruptions
or failures to its normal operations as a result of the transition into calendar
year 2000.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGE IN SECURITIES AND USE OF PROCEEDS
On January 24, 2000, pursuant to an Acquisition Agreement dated as
of September 10, 1999 (the "Far Beyond Acquisition Agreement") by and among
the Company, Horler Holdings Limited ("Horler"), Far Beyond Investments
Limited ("Far Beyond") and the shareholders of Far Beyond (the "FB
Shareholders"), the FB Shareholders transferred all of the issued and
outstanding shares of the capital stock of Far Beyond to the Company in
exchange for 8,757,951 shares of the Common Stock of the Company,
representing approximately 88% of the outstanding shares of the Common Stock
of the Company. The total number of issuees was six. Additionally,
concurrently with the issuance of the shares to the FB Shareholders, the
Company
9
<PAGE>
issued 347,133 shares to a financial advisor. The issuance of the shares to
the Far Beyond Shareholders and the financial advisor was pursuant to Rule
506 of Regulation D.
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) Exhibits:
27 Financial Data Schedule
(b) Reports on Form 8-K
None.
10
<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 FIBER HOLDINGS LIMITED
(Registrant)
Date: May 12, 2000 /s/Rui Min Zhao
---------------------- ----------------------------------------------
Rui Min Zhao
President and Vice Chairman of the Board
Date: May 12, 2000 /s/ Feng Jie Liu
---------------------- ----------------------------------------------
Feng Jie Liu
Chief Financial Officer and Director
(principal financial and accounting officer)
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FORM
10-QSB REPORT OF ASIA FIBER HOLDINGS LIMITED FOR THE THREE MONTHS ENDED MARCH
31, 2000 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-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<EXCHANGE-RATE> 8.28
<CASH> 19,264
<SECURITIES> 0
<RECEIVABLES> 58,617
<ALLOWANCES> 0
<INVENTORY> 37,934
<CURRENT-ASSETS> 589,490
<PP&E> 189,747
<DEPRECIATION> 59,406
<TOTAL-ASSETS> 589,490
<CURRENT-LIABILITIES> 333,595
<BONDS> 0
0
0
<COMMON> 1,864
<OTHER-SE> 226,912
<TOTAL-LIABILITY-AND-EQUITY> 589,490
<SALES> 104,676
<TOTAL-REVENUES> 104,676
<CGS> 81,334
<TOTAL-COSTS> 81,334
<OTHER-EXPENSES> 5,004
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,067
<INCOME-PRETAX> 17,271
<INCOME-TAX> 1,387
<INCOME-CONTINUING> 10,753
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,753
<EPS-BASIC> 1.42
<EPS-DILUTED> 1.42
</TABLE>
