U.S. Securities and Exchange Commission
Washington, DC 20549
Form 10-Q SB
(Mark One)
( X )QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
( )TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE EXCHANGE ACT
For the transition period from ______________ to ________________
Commission File Number: 0-15937
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GREATER CHINA CORPORATION
-----------------------------------
(Exact name of small business issuer as specified in its charter)
Delaware 22-3057451
------------------ -----------------------
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
27 East 61st Street New York, New York 10021
-------------------------------------------------------------
(Address of principal executive offices)
(212) 935-0561
-----------------------
(Issuer's telephone number)
----------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Check whether the issuer (1) filed all reports required to filed by Section
13 or 15(d) of the Exchange Act during the past 12 months ( or for such
shorter period that the registrant was required to file such report), and
(2) has been subject to such filing requirements for the past 90 days.
Yes............ No....X......
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15 (d) of the Exchange Act after the
distribution of securities under a plan confirmed by a court.
Yes.......... No..........
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: August 10, 1998,
20,179,773
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<PAGE>
Greater China Corporation
and Subsidiaries
FORM 10-Q SB
FOR THE QUARTER ENDED JUNE 30, 1998
INDEX PAGE
Part I Financial Information
Item 1. Financial Statements 3
Condensed Consolidated Balance Sheet at June 30, 1998 4
Condensed Consolidated Statements of Operations for
the Period from October 1, 1997 through June 30, 1998
and from October 1, 1996 through June 30, 1997 6
Condensed Consolidated Statements of Operations for
the Period from April 1, 1997 through June 30, 1998
and from April 1, 1996 through June 30, 1997 7
Notes to Consolidated Financial Statements 8
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations 10
Information
Item 1. Legal Proceedings ------------------------------------ 13
Item 2. Changes in Securities ---------------------------------- 13
Item 3. Defaults Upon Senior Securities ------------------------ 13
Item 4. Submissions of Matters to a Vote of Securities Holders 13
Item 5. Other Information--------------------------------------- 13
Signatures ------------------------------------------------------14
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<PAGE>
Greater China Corporation
and Subsidiaries
FORM 10-Q SB
FOR THE QUARTER ENDED JUNE 30, 1998
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements.
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<PAGE>
Greater China Corporation
and Subsidiaries
Unaudited Condensed Consolidated Balance Sheet
at June 30, 1998
June 30, 1998
ASSETS (Unaudited)
CURRENT ASSETS
Cash $ 160,000
Accounts Receivable 6,319,000
Inventory 859,000
Other receivable 8,000
---------
Total Current Assets 7,346,000
Property and equipment 512,000
----------
Total Assets $7,858,000
----------
LIABILITIES AND STOCKHOLDERS' EQUITY
(Deficit)
CURRENT LIABILITIES
Overdrafts $ 56,000
Short Term Loans 600,000
Accounts payable and
accrued expenses 6,539,000
Miscellaneous Payables 388,000
------------
Total Current Liabilities 7,583,000
------------
LONG TERM LIABILITES
Loans 961,000
Pension Fund Loans 144,000
Lease Financing 15,000
----------
Total Long-term Liabilities 1,120,000
----------
Total Liabilities 8,703,000
----------
Minority Interest 275,000
----------
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<PAGE>
Greater China Corporation
and Subsidiaries
Unaudited Condensed Consolidated Balance Sheet
at June 30, 1998
Stockholders' Deficit:
Common stock 402,000
Additional paid-in capital 2,385,000
Accumulated deficit (3,869,000)
Treasury stock (38,000)
-----------
Total Stockholders' (845,000)
Deficit ------------
Total Liabilities and $7,858,000
Stockholders' Deficit ------------
[FN]
See accompanying notes to unaudited condensed consolidated financial
statements.
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<PAGE>
Greater China Corporation
and Subsidiaries
Unaudited Condensed Consolidated Statements of Operations for
the period October 1, 1997 to June 30, 1998 and
from
October 1, 1996 to June 30, 1997
1998 1997*
-------- -------
Revenues, net $6,184,000
Cost of Sales 4,922,000
----------
Gross Profit 1,262,000
Selling, general and
administrative expenses 1,475,000
Depreciation and amortization 23,000
---------
Loss from operations (236,000)
Other income (expense):
Other income 212,000
Interest expense
Financial charges (510,000)
----------
Income before income taxes
and minority interest (534,000)
Income Taxes 0
Minority Interest 94,000
---------
Net Loss (628,000)
Income (loss) per share - Basic ($0.03)
Income (loss) per share - Diluted ($0.02)
*These figures are currently not available. They will be filed by amendment
as soon as possible.
[FN]
See accompanying notes to unaudited condensed consolidated financial
statements.
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<PAGE>
Greater China Corporation
and Subsidiaries
Unaudited Condensed Consolidated Statements of Operations for
the Period from April 1, 1998 to June 30, 1998
and
From April 1, 1997 to June 30, 1997
1998 1997*
------- --------
Revenues, net $ 6,814,000
Cost of Sales 4,922,000
-----------
Gross Profit 1,262,000
Selling, General and
administrative expenses 1,244,000
Depreciation and Amortization 23,000
----------
Income (Loss) from operations (5,000)
Other income (expense):
Other income 212,000
Interest expense
Financial charges (228,000)
----------
Income (Loss) before income taxes
and minority interest (21,000)
Income Taxes 0
Minority Interest 94,000
---------
Net Loss $(115,000)
Income (Loss) per share - Basic ($ #)
Income (Loss) per share - Diluted ($ #)
#Less than ($0.01) per share
*These figures are currently unavailable. They will be filed by amendment as
soon as possible.
[FN]
See accompanying notes to unaudited condensed consolidated financial
statements.
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<PAGE>
Greater China Corporation
and Subsidiaries
June 30, 1998
Notes to Condensed Consolidated Financial Statements
Note 1 -- Basis of Presentation
The unaudited interim condensed consolidated financial statements of
Greater China Corporation and its subsidiaries (the" Company") have been
prepared pursuant to the rules and regulations of the Securities and
Exchange Commission. Accordingly, certain information and footnote
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted. These interim consolidated financial statements
should be read in conjunction with the Company's audited financial
statements.
In the opinion of management, the interim consolidated financial statements
reflect all adjustments necessary for fair presentation of the interim
periods. The results of operations for the interim period are not
indicative of results of operations to be expected for the full year.
NOTE 2 - - MERGER WITH THE INTERNATIONAL TECHNOLOGY GROUP
The merger between Greater China Corporation and The International
Technology Group has been accounted for as a reverse acquisition.
NOTE 3 -- CONTINGENCIES
The company is engaged in various legal proceedings incidental to its
normal business activities. See Part II, Item 1, "Legal Proceedings".
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<PAGE>
Greater China Corporation
and Subsidiaries
June 30, 1998
Notes to Condensed Consolidated Financial Statements
(continued)
NOTE 4 - - EARNINGS (LOSS) PER SHARE
The following represents the calculation of earnings per share:
FOR THE FOR THE
THREE MONTHS NINE MONTHS
ENDED JUNE 30 ENDED JUNE 30
BASIC 1998 1998
-------- ------- ------
Net income $ (115,000) $(628,000)
Less preferred stock dividends -- ---
----------- -----------
Weighted average common shares 20,179,773 20,179,773
Basic Earnings per share ($ *) ($0.03)
---------- ------------
DILUTED
----------
Net income applicable
to common shareholders $ (115,000) $(628,000)
Preferred stock dividend -- --
----------- ----------
Net income available
to common shareholders
Plus assumed conversion $ (115,000) $(628,000)
----------- -----------
Weighted average number of common shares 20,179,773 20,179,773
Common stock equivalent shares representing
Shares issuable as of June 30, 1998 4,291,741 4,291,741
Common stock equivalent shares representing
Shares issuable upon exercise of stock
Options 108,572 108,572
Common stock equivalent shares representing
Shares issuable upon exercise of warrants 775,458 775,458
Common stock equivalent shares representing
Shares issuable upon conversion of debt 615,250 615,250
----------- ----------
Weighted average number of shares used in
Calculation of diluted income per share 25,970,794 25,970,794
----------- ------------
Diluted earnings per share ($ *) ($0.02)
* Less than $0.01
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GREATER CHINA CORPORATION AND SUBSIDIARIES
June 30, 1998
FORM 10Q-SB
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
This report, including the disclosures below, contains forward-looking
statements that involve substantial risks and/or uncertainties. When used
herein, the terms "anticipates", "expects", "estimates", and similar
expressions, as they relate to the Company or its management,
are intended to identify such forward-looking statements. The Company's
actual results, performance or achievements may differ materially from
those expressed or implied by such forward-looking statements.
Results of Operations:
Nature of Business
Greater China Corporation, through its subsidiary companies in China, Hong
Kong and Europe manufactures and distributes a wide range of fiber optic
products used primarily in the fiber optic and cable industries.
Revenues and costs of revenues
On 27 March 1998, Greater China Corporation acquired 100% of the stock of
The International Technology Group Limited, in a transaction intended to
bring all of the operating subsidiaries of The International Technology
Group Limited ("ITG"') into the ownership of Greater China Corporation
("GCC"). Two sets of figures are presented. The first set of figures
shows operating revenues and costs for GCC for the period October 1, 1997
to June 30, 1998 and for ITG for the period April 1, 1998 to June 30, 1998.
The second set of figures are for GCC and ITG for the quarter April 1, 1998
to June 30, 1998 in order to give a representative picture of the
consolidated company as it currently exists and as it has operated since
the acquisition at the end of March 1998.
The company's consolidated net revenues were $6,184,000 for the quarter
April 1, 1998 to June 30, 1998 and for the period October 1, 1997 to June
30, 1998. Prior to the acquisition on March 27, 1998 GCC had no revenues
and no operating companies in its ownership. Pre-acquisition revenues of
the International Technology Group Limited for the quarter January 1, 1998
to March 31, 1998 were $ 1,604,000. The increase in revenues between the
two quarters is directly attributable to the provision of a $600,000 Senior
Bridge Loan secured by the company to provide increased working capital for
two of its key operating companies in China, Arnhem
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<PAGE>
GREATER CHINA CORPORATION AND SUBSIDIARIES
June 30, 1998
FORM 10Q-SB
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
Technology Limited (``ATL'') and Shenzhen Unigel Telecommunications Company
Limited ("SUTCO" ). Both operating companies were able to increase
revenues significantly and increase market share as a result. Revenues of
$265,000 were generated in European markets.
Consolidated cost of sales were $4,922,000 for the quarter 1 April 1998 to
30 June 1998 and for the period 1 October 1997 to 30 June 1998. Gross
margins held stable through the quarter in the manufacturing company SUTCO
and improved slightly at the distribution company ATL. Management plans to
increase revenues and margins during the remainder of 1998 assuming that
funding is available as detailed below.
Selling, general and administrative
Selling, general and administrative expenses for the quarter 1 April 1998
to 30 June 1998 were $1,244,000. Management intends to control tightly and
reduce expenses particularly with expected increases in head count in line
with increased revenues forecasted for the remainder of 1998.
Extraordinary, unusual and infrequent expenses
During the quarter April 1, 1998 to June 30, 1998, extraordinary expenses
associated with the acquisition of ITG by GCC included $86,000 in
investment banking fees and bank charges, $23,000 in professional and legal
fees and $14,000 in investment banking services.
Depreciation and amortization
Depreciation and amortization remained steady through the quarter April 1,
1998 to June 30, 1998 at $23,000.
Income Taxes
The Company does not currently have any tax liabilities and retains some
loss carry forward against which future earnings can be applied.
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<PAGE>
GREATER CHINA CORPORATION AND SUBSIDIARIES
June 30, 1998
FORM 10Q-SB
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
Net Income
Operations for the quarter April 1, 1998 to June 30, 1998 generated a net
loss of $115,000, although extraordinary and non-recurring expenses related
to the acquisition of ITG by GCC noted above were $123,000.
Liquidity and capital resources
During the period April 1, 1998 to June 30, 1998 the Company received
$600,000 of financing that was utilized directly by its operating
subsidiaries to increase sales. The Company is currently seeking a further
$1.4 million bridge loan prior to a private equity offering which, it is
envisaged, will be placed before the end of 1998.
Outlook
The company intends to increase its activities in the telecommunications
and fiber optics sectors in China in line with rapid market growth and
infrastructure development. The outlook in China remains robust despite the
current situation in other Asian countries. The Chinese economy is cooling
slightly and it is possible that a modest devaluation of the RMB may occur,
although Chinese export markets are generally markedly different from those
of its more developed neighbors. The Company expects exports from it
operations in China to help balance any negative effect of a devaluation.
Based upon past experience, infrastructure projects in China are unlikely
to be affected for 1-2 years following any currency devaluation. A
devaluation would, in fact, make the Company's products manufactured in
China more competitive. The Company believes the current outlook in China
remains very positive.
In addition, the Company anticipates expanding its operations in Europe
from its UK based plant and expects to use its office in the United States
to penetrate North American markets during the next 12 months.
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<PAGE>
GREATER CHINA CORPORATION AND SUBSIDIARIES
June 30, 1998
FORM 10Q-SB
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
On August 5, 1998, the Company settled all outstanding litigation
with a former service provider. As a result, the Company will
issue to the service provider 96,129 new shares and agreed to
release 208,729 shares which had been previously issued.
Item 2. Changes in Securities.
N/A
Item 3. Defaults Upon Senior Securities.
N/A
Item 4. Submissions of matter to a Vote of Security Holders.
None
Item 5. Other Information.
During the period October 1, 1997 to June 30, 1998, the Company
issued a series of long term revolving notes in the amount of
$535,000. These notes bear an interest rate of 15% per annum. In
addition, noteholders receive one share of the Company's common
stock for each ten dollars of note value outstanding for each
ninety (90) day period.
On May 14, 1998, the Company issued Senior Secured One Year
Promissory notes totaling $600,000. These notes carry an annual
interest rate of 15%. In addition, investors will receive a
total of 240,000 shares of the Company's common stock at maturity
of these notes.
The above notes were issued to accredited investors pursuant to
an exemption from registration under Section 4 (2) of the
Securities Act of 1933.
Effective August 5, 1998, the Company retained the accounting
firm of Hein + Associates, LLP to serve as the Company's
principal accountant to audit the Company's financial statements.
Prior to its engagement as the Company's principal independent
accountant, Hein + Accociates, LLP had not been consulted by the
Company either with respect to the application of accounting
principals to a specified transaction or the type of audit
opinion that might be rendered on the Company's financial
statement or on any other matter which was the subject of any
prior disagreement between the Company and its previous
certifying accountants.
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<PAGE>
GREATER CHINA CORPORATION AND SUBSIDIARIES
June 30, 1998
FORM 10Q-SB
SIGNATURE
E
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
August 14, 1998 /s/ PETER R. BARKER
-------------------------- --------------------------------
DATE BY: Peter R. Barker
Executive Vice President
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<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> JUN-30-1998
<CASH> 160,000
<SECURITIES> 0
<RECEIVABLES> 6,327,000
<ALLOWANCES> 0
<INVENTORY> 859,000
<CURRENT-ASSETS> 7,346,000
<PP&E> 512,000
<DEPRECIATION> 23,000
<TOTAL-ASSETS> 7,858,000
<CURRENT-LIABILITIES> 8,703,000
<BONDS> 0
0
0
<COMMON> 402,000
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 7,858,000
<SALES> 6,184,000
<TOTAL-REVENUES> 6,184,000
<CGS> 4,922,000
<TOTAL-COSTS> 6,397,000
<OTHER-EXPENSES> 510,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (534,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (628,000)
<EPS-PRIMARY> $0.03
<EPS-DILUTED> $0.02
</TABLE>
