SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-KSB
(X) ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended June 1997
( ) TRANSITION REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 33-3272-W
LOTUS PACIFIC, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State of Organization)
52-1947160
(I.R.S. Employer Identification Number)
200 Centennial Avenue, Suite 201, Piscataway, New Jersey 08854
(Address of principal executive offices)
(732) 885-1750
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
Check whether the issuer (1) filed all reports required 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 reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes ____X____ No ________
The aggregate market value of the common stock held by non-affiliates
as of June 30, 1997: $ 55 million based on the day's settlement price.
Shares outstanding of the issuer's common stock as
of June 30, 1997: 40,737, 054 shares.
The issuer had net income of $ 43,390 for the year ended June 30, 1997.
Part I
Item 1. Description of Business.
(a) General Development of Business
Lotus Pacific, Inc. (the "Registrant" or "Company"), was incorporated
under the laws of the State of Delaware on June 25, 1985. The
Registrant was organized to raise capital and to investigate and
acquire any suitable asset, property or other business opportunity
which, in the opinion of management, would be in the best interests
of the Company.
In April 1987, the Company completed a public offering of securities
registered on Form 3-18 with the Securities and Exchange Commission.
The Company completed a business acquisition in January 1991, and
pursued a specified business program until March 1993. In June 1993,
the company disposed of all of its interests in other entities and
ceased to have any business operations.
In September 1994, the Company completed a transaction wherein it sold
7,000,000 shares of its common stock (after giving effect to a 1 for 50
reverse stock split) for $7,000, and sold 4,300 shares of Series A
Preferred Stock for $43,000 to Lotus International Holdings Corp.
The company also sold 1,000,000 shares of common stock to other persons
for $1,000. In connection with said transactions the Company appointed
new officers and directors and changed its corporate name to Lotus
Pacific, Inc.
In March 1995, the Company issued another 18,000,000 shares of its
common stock to Lotus International Holdings Corp. for $180,000.
In September 1995, the Company entered into a Stock Exchange Agreement
wherein it acquired a 70% equity interest in Shanghai Union Auto-Bicycle
Co., Ltd. ("Shanghai Union"), a company located in Shanghai, China.
The registrant issued 560,000 restricted shares of its common stock as
the sole consideration given for the 70% interest in Shanghai Union.
In June 1996, the registrant entered into a second Stock Exchange
Agreement wherein it exchanged the 70% equity interest in Shanghai
Union with a Hong Kong company for 112,000 shares of common stock
of Rightiming Electronics Corp., a Delaware corporation. In May 6, 1997,
the registrant sold the 112,000 shares of Common Stock of Rightiming
Electronics Corporation for US $571,200. This divestment was part of
the Company's overall investment adjustment.
The Company changed all of directors and officers as a result of the
change in the majority ownership in January 1997,. In the same month
the Company set up two wholly owned subsidiaries, Richtime Far East
Ltd. in Hong Kong. and Regent Electronics Corp. in the State of Delaware.
Following the change of Board of Directors and officers and the formation
of the two subsidiaries, the Registrant chose to make the company
operational. In June, 1997, the Company, through its direct subsidiary
Regent Electronics Corp., acquired Amiga-based, multimedia technology
related assets and rights from Rightiming Electronics Corp., a NJ-based
high-tech company, for an aggregate consideration of US $5 million plus
8 million shares of Common Stock of Regent Electronics Corp. The acquired
assets included all Commodore-Amiga's patents, licenses, trademarks, and
copyrights to be registered and used in China, Taiwan, Hong Kong, Macao
and the bordering countries between China and the former Soviet Union.
Over the past years Rightiming developed a series of multimedia and
multi-functional TV set top box, including Wonder TV A-6000.
To finance the purchase for Regent Electronics, the Company raised needed
capital by issuing 10 million shares of Common Stock to Evernew
International Ltd. on April 21, 1997, and 3.1 million shares of Common
Stock to Evolving Investments Ltd. on May 5, 1997 for total consideration
of $5.1 millions. The registrant also issued to Evolving Investments Ltd.
8 million redeemable shares of Common Stock Purchasing Warrants
for $80,000. The Warrants will be exercisable for a period of five years
voiding after May 5, 2002. Each warrant is entitled the holder to purchase
one share of Common Stock of the Company at a price of $3.00 per share.
Richtime Far East Ltd., the other subsidiary of the Company, started
its high-quality garment import and export business in January 1997 in
Hong Kong. The Company receives customer orders from Europe and North
America, and contract the orders to garment manufacturers mainly in
Nanjing, Jiansu, China. The Company then shipped the products overseas.
As of June 30, 1997, the Company had 40,737,054 shares of Common Stock
issued and outstanding, 4,300 shares of Series A Preferred Stock and
8,000,000 Common Stock Purchasing Warrants issued and outstanding,
and 1,090,000 stock options execisable at $ 6.00 per share and being
expired in May 2002.
(b) Results of Operations
Regent Electronics Corp., with 70% shares owned by the Company, started
its full operation in June 1997. Based on the prototype of Amiga
technology based multimedia and multi-functional TV set top box developed
by Rightiming Electronics Corp., the computer and software engineers of
Research & Development Department of the Regent Electronics Corp. are
finalising the first of its serial products Wonder TV A-6000. Wonder
TV A-6000 features an all-in-one box system with combined functions of
a multimedia personal computer, a fax machine, a Karaoke machine, an Internet
box, and audio CD player, a video CD player and an electronic game machine.
The Company has applied for the registration of its patents in China.
Starting from January 1997, Richtime Far East Ltd., the Company's wholly
owned subsidiary, operates import and export business in garment in
Hong Kong. As the first step of its business plan, Richtime focuses on
import and export of high-quality sports wear, in which the management
of Richtime has many years of experiences. In business operation,
Richtime takes customer orders mainly from the US. and European countries,
and contracted the orders to the manufactures located in Nanjing City,
Jiangsu Province and other Chinese cities.
For the first six months of 1997, Richtime Far East Ltd. had a net income
of $ 187 thousand. For the first quarter, its sales was $ 590 thousand
and revenue $ 65 thousand. For the second quarter, its sales reached
about $ 1.4 million and revenue $ 148 thousand.
In May 1997, the Company received a net cash of $571,200 by selling
112,000 shares of Common Stock of Rightiming Electronics Corporation.
The Company received the 112,000 shares from a Hong Kong company by
offering 70% equity interest in Shanghai Union Auto-Bicycle Co. Ltd.
(Shanghai Union) to that company in June 1996. The Company held the
70% equity interest in Shanghai Union for about 9 months between
September 1995 and June 1996. Shanghai Union is incorporated in China
and licensed to manufacture and sell bicycles, bicycle wheel hub
motors and related parts. Its main products include three models
of motorized bicycles: TH 938-ZII 24", TH 938-ZIII 24" and TH 958-Z 22".
During those three quarters while the Company held 70% equity interest,
the gross sales of Shanghai Union was $140 thousand, $350 thousand
and $250 thousand respectively, and net income or loss was $ 874 loss,
$31,000 income and $6,000 loss respectively. As Shanghai Union
did not generate sufficient revenues and profits, the management
of the Company decided to unload its equity interest in that
company.
(c) Trademarks, Copyrights and Licenses
The Company holds all right, title, and interest in to the trademarks,
copyrights, patent license of Amiga/Commodore for registration and use in
the People's Republic of China, Taiwan, Hong Kong, Macao and the Asian
bordering countries between the People's Republic of China and the Former
Soviet Union.
Item 2. Properties.
The Company principal executive offices are located at 200 Centennial
Avenue, Piscataway, New Jersey. The following table summarises the lease
agreement held by the Company's subsidiaries relating to offices and
other facilities:
Location Lease Term Commence Date Expiration Date Annual Rent
Piscataway 5 years June 5, 1997 June 4, 2002 $ 80,400
New Jersey
Middlesex 1 year June 5, 1997 June 4, 1998 $ 20,700
New Jersey
Exton 1 year June 5, 1997 June 4, 1998 $ 10,500
Pennsylvania
Overseas, Richtime Far East, Ltd. maintains an office space in Block B, 6/F,
Hung To Road, Kwun Tong, Kowloon, Hong Kong with monthly rent of HK$ 5,000.
Item 3. Legal Proceedings.
There are not currently any material pending legal proceedings, to which
the registrant is a party or to which any of its property is subject and
no such proceedings are known to be the registrant to be threatened or
contemplated by or against it.
Item 4. Submission of Matters to a Vote of Security Holders.
No matter was submitted to a vote of the security holders, through
solicitation of proxies or otherwise during the fiscal year covered by
this report.
Part II
Item 5. Market for Common Equity and Related Stockholder Matters
(a) Market Information.
The registrant's common stock is traded on OTC Electronic Bulletin
Board, and there are currently five market makers for the stock of the
Company.
(b) Holders.
The number of registered holders of the Company's common stock as of
June 30, 1997 is 497.
(c) Dividends.
The registrant has not paid any cash dividends to date and does not
anticipate or contemplate paying dividends in the foreseeable future.
It is the present intention of management to utilise all available funds
for the development of the Company's business.
Item 6. Management's Discussion and Analysis or Plan of Operation.
The Company has changed its business direction and started its new business
operations since January 1997 by setting up two wholly owned subsidiaries,
one conducting research, design and manufacture of multimedia consumer
electronic products and the other apparel wholesale trade. Initial result
of business operation was to the satisfaction of the Company's management.
The management of the company foresees cash flow requirement for a high
tech company like Regent Electronics Corp. in its project of continues
research & development. The investment in Richtime Fareast Ltd. by
the company is expected to generate income for the company, which could
help to solve the cash flow issue in part. The Company, through its
subsidiary Richtime Far East, Ltd., will continue to look for business
opportunities for expansion. While currently focusing on sports wear,
the Company plans to increase its types of wholesale in garment to other
high-quality casual wear. The Company will also look for garment
manufacturing bases in China other than the one in Nanjing, China.
In the 1997-98 fiscal year, the Company, through its subsidiary Regent
Electronics Corp., will actively look for business opportunities in China
and its bordering countries to manufacture and market multimedia product
Wonder TV A6000. The Company has been contacting several big TV
manufacturers in China seeking a contractor for such purpose.
The management of the company is confident in its market potential of the
Wonder TV A6000 based on the continuation of economic growth and the
increasing demand for Internet and multimedia entertainment in China. It
is part of the Company's business strategy to use the revenues generated
from sales of Wonder TV A6000 to finance the company's research and
development in its set top box which will be marketed in world market.
The Company is conducting research and development in additional
software programs and accessories for Wonder TV A6000, and the next
generation of products for multimedia home entertainment.
Some international companies with capability of producing similar products
are also trying to enter into the China's multimedia entertainment market.
To improve its competitiveness, the Company focuses on products that are
accustomed to Chinese cultural tradition and the Company will persist in
its aggressive drive to reduce business costs. While subject to many
variables, the management of the Company anticipates revenue increases in
the coming fiscal year.
The Company will continue to raise capital necessary for its expansionary
operations, research and development.
Item 7. Financial Statements.
See attached audited financial statements.
Item 8. Changes In and Disagreements with Accounting and Financial
Disclosure.
The Company appointed the accounting firm of Schiffman, Hughes & Brown to
serve as the independent auditors of its year end financial statements
starting from its fiscal year of 1995. To the best knowledge of current
management, the Company did not use an auditor for its fiscal year prior to
1995 and therefore had no auditors.
To the best knowledge of current management, no adverse opinion,
disclaimer of opinion, qualification or modification as to uncertainty,
audit scope or accounting principles exists in any report of any prior
auditors on the financial statements of the Company except with respect to
the Company's ability to go forward as a going concern.
Part III
Item 9. Directors, Executive officers, Promoters and Control
Persons; Compliance with Section 16(a) of the Exchange Act.
(a) Identification of directors and executive officers.
Following the changes in the Board of Directors of Lotus International
Holdings Corp., the largest shareholder of the Company, the Board of
Directors of the Company was reelected on January 28, 1997. James Yao,
Chairman of Lotus International Holdings Corp., was elected as Chairman
of the Board of Directors and President of the Company.
Effective as of May 30, 1997, Cheng Wang resigned from the Board of
Directors for personal reasons, and the registrant elected Jeremy Wang
as a director to the Board.
The current directors of the registrant, who will serve until next
annual meeting, or until their successors are elected or appointed and
qualified, and the current executive officers are set forth below:
Name Age Date Appointed Position
James Yao 43 January 1997 Chairman,President & Director
James Liu 42 January 1997 Vice President & Director
David Leung 52 January 1997 Vice President & Director
Jeremy Wang 42 May 1997 Director
Gu Huang 42 January 1997 Secretary and Treasurer
(b) Significant employees.
The registrant has no significant employees.
(d) Business Experience.
(1) Background
James Yao. Mr. Yao is President of Yao Investment Corp. Currently,
he is also serving as Chairman and President of Lotus International
Holdings Corp. He was President of Shanghai Haohua Garment Co., Ltd.
from 1980 to 1985. He graduated from Miya Gawa University in Tokyo, Japan.
James Liu. Mr. Liu is President of JBL International Inc. in New York
City. He is a director of Lotus International Holdings Corp. From 1983
to 1990, he was a manager in charge of international trade in Jiangsu
Provincial Government of the People's Republic of China. He graduated with
a B.A. degree from Nanjing University, China.
David Leung. David Leung was General Manager of Shenzhen New Technology
Development Co., Ltd. in Shenzhen, China. He is a director of Lotus
International Holdings Corp. He worked as a research fellow at Electronics
Research Institute in Guangzhou, China under Academia Sinica from 1984 to
1992. Mr. Leung had a BS from Beijing Institute of Technology.
Jeremy Wang. Jeremy Wang is currently director of Evernew International
Ltd. In the past ten years, he worked at AT&T Bell Laboratories and Merck &
Co. designing hardware and software systems. He held various
responsibilities in system engineering, development and product management
in the telecommunications industry. Mr. Wang had a MS in Chemical
Engineering from University of Virginia, and a MS in Computer Science from
New Jersey Institute of Technology.
Gu Huang. Mr. Huang was a Financial Analyst with Rightiming Electronics
Corp. He served as a financial analyst in China Finance & Investment Corp.
from 1992 to 1994. He was a research fellow at Economic Research Institute,
Chinese Academy of Social Sciences in Beijing. He held an MBA in finance
from University of New Haven in 1992, and an MA in Economics from Yale
University in 1987.
(2) Directorships
Except as described herein none of the registrant's directors, not any
person nominated or chosen to become a director holds any other
directorships in any other company with class of securities registered
pursuant to Section 12 of the Exchange Act or subject to the requirements
of Section 15(d) of such Act or any company registered as an investment
company under the Investment Company Act of 1940.
(e) Involvement in Certain Legal Proceedings.
None of the officers or directors have been involved in any material legal
proceedings which occurred within the last five years of any type as
described in Section 401(f) or Regulation S-K.
Item 10. Executive Compensation.
Officers & Cash Compensation Stock Options Others
Directors For Six Month (Note 1) Compensations
Ending June 1997
James Yao $ 32,000 180,000 None
James Liu $ 0 180,000 None
David Leung $ 0 500,000 None
Jeremy Wang $ 0 180,000 None
Gu Huang $ 18,000 None None
(Note 1: The company issued, as part of the compensation plans to its
directors and officers, 910,000 stock options to James Yao (180,000),
James Liu (180,000), David Leung (500,000) and Cheng Wang (50,000) on
May 15, 1997. The options are exercisable at $6.00 per share and shall
be expired on May 15, 2002. The Company issued 180,000 stock options
to Jeremy Wang on May 30, 1997. The options are exercisable at $6.00
per share and shall be expired on May 30, 2002.)
Item 11. Security Ownership of Certain Beneficial Owners & Management.
The Company has 40,737,054 shares of common stock issued and outstanding
and 4,300 shares of Series A Preferred Stock issued and outstanding.
All of the series A Preferred Stock and 25,000,000 shares of the common
stock are owned by Lotus International Holding Corp. The following
companies and individuals hold 5% or more of the Company's common stock
shares:
Evolving Investments Ltd. 3,100,000 shares 7.6%
Ziliang Liu 2,100,000 shares 5.2%
None of the Company's officers and directors own shares individually.
Each share of Series A Preferred Stock has one vote per person.
James Yao and James Liu constitute the two sole directors of Lotus
International Holdings Corp. and are also principal shareholders of
that entity.
There are no arrangements including pledges by any person of securities
of the Company, the operation of which may at a subsequent date result
in a change in control of the Company.
Item 12. Certain Relationships & Related Transactions.
In September 1994, the company issued 7,000,000 shares of common stock
for $7,000 and 4,300 shares of Series A Preferred Stock for $43,000 to
Lotus International Holding Corp. ("LIHC"), which became the majority
shareholder of the Company. In April 1995, LIHC purchased an additional
18,000,000 shares of common stock for $180,000.
Item 13. Exhibits and Reports on Form 8-K.
(a) The following documents are filed as a part of this report:
1. Audited Financial Statements for the year ended June 30, 1997 and
1996 are included as part of this report.
2. Financial Statement Schedules.
None.
3. Exhibits.
None.
(b) Reports on form 8-K.
The Registrant filed a Form 8-K report as of January 28, 1997, wherein
it reported under Item 1, effective January 28, 1997, the election of
all new directors and officers. and resignation of all previous directors
and officers.
The Registrant filed a Form 8-K as of April 21, 1997, wherein it reported
under Item 1, issuance of 10,000,000 shares of common stock with par value
of $ 0.001 per share to Evernew International Ltd. for aggregate
consideration of $2,000,000.
The Registrant filed a Form 8-K as of May 15, 1997, wherein it reported
under Item 2, issuance of 3,100,000 shares of common stock with par value
of $ 0.001 per share to Evolving Investments Ltd. for aggregate
consideration of $ 3,100,000, and 8,000,000 common stock purchasing
warrants for aggregate consideration of $80,000, the warrants will be
exercisable for a period of five years commencing from the issuing date
and each warrant is entitled to purchase one share of common stock at a
price of $3.00 per share. It also reported under Item 2 the sale of its
5% interest in Rightiming Electronics Corp. for $ 571,000.
The Registrant filed a Form 8-K as of June 3, 1997 and Form 8-K/A as of
June 10, 1997, wherein it reported under Item 1 & 6, the election of
Jeremy Wang to the board of directors and resignation of Cheng Wang as a
director, and under Item 2, acquisition of Amig/Commodore technology
for its subsidiary Regent Electronic Corp.
**********
LOTUS PACIFIC, INC. AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1997 AND 1996
*********
SCHIFFMAN HUGHES BROWN
A PROFESSIONAL CORPORATION
CERTIFIED PUBLIC ACCOUNTS
*********
SCHIFFMAN HUGHES BROWN
A PROFESSIONAL CORPORATION
CERTIFIED PUBLIC ACCOUNTS
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders
of Lotus Pacific, Inc. and Subsidiaries
We have audited the accompanying balance sheets of Lotus pacific, Inc.
and Subsidiaries as of June 30, 1997 and 1996 and the related statements of
operations, stockholders' equity, and cash flows for the years then ended.
These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by the management, as well as
evaluating the overall financial statements presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Lotus Pacific, Inc.
and Subsidiary as of June 30, 1997 and 1996, and the results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
/s/
Schffman Hughes Brown
Blue Bell, Pennsylvania
September 2, 1997
790 PENLLYN PIKE, SUITE 302, BLUE BELL, PENNSYLVANIA 19422
(215) 646-2000 FAX (215) 646-1937
LOTUS PACIFIC, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1997 AND 1996
ASSETS
1997 1996
Current Assets:
Cash $ 268,679 $213,082
Advances 2,354
Total current assets 271,033 213,082
Investments (Note 4) 600,000 172,395
Property and equipments:
Furniture and office equipment 90,000
Equipment 1,502,120
Leasehold improvements 1,041
1,593,161
Less: accumulated depreciation 26,623
1,566,538
Other assets:
Intangible asset, net of accumulated
amortization of $ 28,480 in 1997 5,781,520
Deposit 1,700
5,783,220
$8,220,791 $385,477
LIABILITY AND STOCKHOLDERS' EQUITY
Current liabilities:
Account payable $ 14,946
Payroll taxes payable 25,771
Income taxes payable (Note 5) 123,392
Total current liabilities 146,109
Minority interest in subsidiary (Note 4)2,317,815
Stockholders' equity:
Common stock (Note 3) 40,737 $ 26,937
Preferred stock, Series A (Note 3) 4 4
Additional paid-in capital 6,188,348 892,148
Accumulated deficit (490,222) (533,612)
5,738,867 385,477
$8,220,791 $385,477
See notes to financial statements
LOTUS PACIFIC, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED JUNE 30, 1997 AND 1996
1997 1996
Sales $ -0- $ -0-
Operating expenses 310,241 17,934
Operating loss (310,241) (17,934)
Other income (expenses):
Interest income 11,186 11,008
Research and development (14,703)
Gain on sale of investment 398,805
Equity in earnings of
unconsolidated subsidiary 29,090
395,288 40,098
Net income before income taxes
and minority interest in income
of consolidated subsidiary 85,047 22,164
Income taxes (Note 5) (123,842)
Minority interest in loss of
consolidated subsidiary 82,185
Net income $43,390 $22,164
Earnings per share $ .00 $ .00
Weighted average shares 29,238,081 26,799,387
See notes to financial statements
LOTUS PACIFIC, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED IN JUNE 30, 1997 AND 1996
Common Preferred Additional
Shares Shares Paid-in
Outstanding Outstanding Amount Capital Deficit Total
Balance, June 30, 1995
26,347,054 4,300 $26,351 $746,433 $(555,776) $217,008
Issuance of common stock
590,000 590 145,715 146,305
Net income for the year
ended June 30, 1996 22,164 22,164
Balance, June 30, 1996
26,937,054 4,300 26,941 892,148 (533,612) 385,477
Issuance of common stock
13,800,000 13,800 5,296,200 5,310,000
Net income for the year
ended June 30, 1996 43,390 43,390
Balance, June 30, 1997
40,737,054 4,300 $40,741 $6,188,348 $(490,222)$5,738,867
See notes to financial statements
LOTUS PACIFIC, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 1997 AND 1996
1997 1996
Cash flows from operating activities:
Net income $ 43,390 $ 22,164
Adjustments to reconcile income (loss) to
net cash provided by operating activities:
Depreciation and amortization 55,103
Equity in earnings of unconsolidated subsidiary (29,090)
Gain on sale of investment (398,805)
Changes in assets and liabilities:
Increase in advances (2,354)
Increase in deposit (1,700)
Increase (decrease) in accounts payable 14,946 (4,400)
Increase in payroll taxes payable 25,771
Increase in income tax payable 123,392
Increase in minority interest in subsidiary 2,317,815
Net cash provided by (used in) operating activities 2,177,558 (11,326)
Cash flows from investing activities:
Purchase of property and equipment (1,593,161)
Purchase of intangible asset (5,801,000)
Net cash used in investing activities (7,403,161)
Cash flows from financing activities:
Issuance of common stock 5,310,000 3,000
Proceeds from sale of investment 571,200
Acquisition of investment (600,000)
Net cash provided by financing activities 5,281,200 3,000
Net cash increase (decrease) in cash 55,597 (8,326)
Cash, beginning 213,082 221,408
Cash, ending $ 268,679 $ 213,082
Supplemental disclosure of cash flow information:
Cash paid for taxes $ 150 $ 0
Supplemental disclosure of non-cash financing activities:
Issuance of common stock for services $ 0 $ 3,000
See notes to financial statements
LOTUS PACIFIC, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997 AND 1996
1. Organization:
The Company's original business was to seek one or more potential business
ventures, which, in the opinion of management may warrant involvement by
the Company. In January, 1997, the Company changed its business to that
operated by its subsidiaries. The Company was a holding company during
the years ended June 30, 1997 and 1996. During the year ended June 30,
1996 the Company acquired a 70% interest in Shanghai Union Auto Bicycle
Co., Ltd. which it exchanged for a 5% interest in Rightiming Electronics
Co. and acquired a 70% interest in Regent Electronics Corp. in January,
1997, the Company set up a wholly owned subsidiary, Richtime Far East,
Ltd. (a Hong Kong company operated in Hong Kong). The Company is
continuing to investigate business opportunities.
2. Summary of significant accounting policies:
Principle of consolidation:
The accompanying financial statements include the accounts of Lotus
Pacific, Inc. and its 70% owned subsidiary, Regent Electronics Corp.
The 30% non-owned portion of Regent Electronics Corp. appear as minority
interest in subsidiary on the balance sheet in accordance with generally
accepted accounting principles. All intercompany transactions have been
eliminated in consolidation.
Cash and cash equivalents:
For purposes of reporting cash flows, the Company considers all cash
accounts which are not subject to withdrawal restrictions or penalties
to be cash or cash equivalents.
Equipment and depreciation:
Property and equipment are stated at cost. Depreciation is calculated
using the straight-line method over their estimated useful lives from 3
to 10 years. Depreciation expense for the years ended June 30, 1997
and 1996 was $26,623 and $-0-, respectively.
Intangible asset:
Intangible asset consists of the acquisition of patents by the Company
in June 1997. The patents are carried at cost and amortized over the
useful life of 17 years.
LOTUS PACIFIC, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1997 AND 1996
2. Summary of significant accounting policies (continued):
Reclassification of financial statement presentation:
Certain reclassification have been made to the 1996 financial statement
to conform with the 1997 financial statement presentation. Such
reclassification have had no effect on net income as previously reported.
Research and development:
Research and development costs consist of expenditures incurred by the
Company during the course of planned search and investigation aimed at
the discovery of new knowledge which will be used to develop and improve
its Internet access product. The Company expenses all such research and
development costs as they are incurred.
Income taxes:
Income taxes are provided for the tax effects of transactions reported in
the financial statements and consist of taxes currently due plus deferred
taxes related primarily to differences between the basis of balance sheet
items for financial and income tax reporting. There is no difference
between the basis for financial and income reporting.
Investment in unconsolidted subsidiary:
The Company recorded its investment in Richtime Far East, Ltd. (a Hong
Kong company) at cost.
3. Issuance of stock:
The Company, on September 13, 1994, effected a 1 for 50 reverse stock
split, lowering shares outstanding from 17,352,7000 to 347,054, along with
amending its Certification of Incorporation to authorize 50,000,000 shares
of common stock at $.001 par value, 100,000 shares of preferred stock
at $.001 par value and 4,300 shares of Series A preferred stock at $.001
par value. The Series A preferred stock has a preference of a $10 per
share stated value upon liquidation of the Company.
On September 26, 1994, the Company sold 7,000,000 shares of its common
stock and 4,300 shares of its Series A preferred stock to Lotus
International Holdings Corp. for aggregate consideration of $50,000.
All shares authorized have a par value of $.001 per share.
LOTUS PACIFIC, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1997 AND 1996
3. Issuance of stock (continued):
On September 27, 1994, the Company issued 320,000 shares of its common
stock to 10 various individuals and another 680,000 shares of its common
stock to U.S. Securities & and Futures Corp. for $.001 per share for total
consideration of $1,000.
The Company sold 18,000,000 shares of its common stock at $.001 per share
to Lotus International Holdings Corp. on March 28, 1995 for aggregate
consideration of $ 180,000.
On September 25, 1995 the Company issued 590,000 shares of its common stock
in exchange for an interest in common stock of another company and fees.
4. Acquisitions and dispositions:
Shanghai Union Auto Bicycle Co., Ltd.:
On September 25, 1995 the Company exchanged 560,000 shares of its common
stock for a seventy percent equity interest in Shanghai Union (Shanghai
Union) Auto Bicycle Co., Ltd. in Shanghai People's Republic of China.
At September 25, 1995 Shanghai Union had stockholder's equity
of $ 204,721, 70% thereof was $143,305.
On June 28, 1996 the Company exchanged its investment in Shanghai Union
for 5% of the outstanding common stock of Rightiming Electronics Corp.
(Rightiming). Rightiming was incorporated on January 4, 1996 to design
and manufacture electronic software and other products to be marketed
in the Far East. Five percent of Rightiming's stockholder's equity
was $268,018 upon the date of acquisition. The Company recorded its
investment in Rightiming at the value of its investment in Shanghai
Union, on the date of the exchange, $172,395. On May 6, 1997, the Company
sold its 5% interest in Rightiming Electronics Corp. for $571,200.
Regent Electronics Corp.:
In April 1997, the Company also acquired 70% of the stock of Regent
Electronics Corp. for $5,388,000. Regent Electronics Corp. was incorporated
to manufacture electronic Internet access software equipment to be
marketed and sold in the Far East. The accounts of Regent Electronics
Corp. are consolidated with the parent's (Lotus Pacific, Inc.) accounts.
LOTUS PACIFIC, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1997 AND 1996
Richtime Far East, Ltd.:
In April 1997, the Company acquired 100% of the stock of Richtime Far
East, Ltd. (a Hong Kong corporation) for monetary consideration of
$600,000. The management of Lotus Pacific, Inc. has limited operational
input upon the operations of Richtime Far East, Ltd. and carries the
investment at cost. Richtime Far East, Ltd. is not consolidated with
Lotus Pacific, Inc. in accordance with generally accepted accounting
principles.
Pertinent financial information for Richtime Far East, Ltd. is as follows:
Unaudited
Sales $1,990,480
Gross Profit $ 213,717
Net Income $ 177,742
5. Income taxes:
Income taxes for years ended June 30, 1997 and 1996 consisted of the
following:
1997 1996
Current:
Federal $92,120 $ -0-
State 31,722 -0-
$123,842 $ -0-
6. Financial instrument:
Cash accounts are secured by the Federal Deposit Insurance Corporation up
to $100,000. At June 30, 1997 and June 30, 1996, the uninsured balance
was $56,199 and $-0- respectively.
LOTUS PACIFIC, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1997 AND 1996
7. Condensed financial statements for Regent Electronics Corp.
at June 30, 1997:
BALANCE SHEET
ASSETS
Current assets $ 205,035
Property and equipment 1,564,334
Other assets 5,783,220
$ 7,552,589
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities $ 38,539
Stockholders' deficit:
Common stock 26,000
Additional paid-in capital 7,762,000
Accumulated deficit (273,950)
7,514,050
$ 7,552,589
STATEMENT OF OPERATIONS
Interest income $ 2,563
Operating costs and expenses (276,513)
Net Loss $ (273,950)
STATEMENT OF CASH FLOWIn September 1995
Cash flows used in operating activities (235,411)
Cash flows used in investing activities (7,347,554)
Cash flows from financing activities $ 7,788,000
Net increase in cash $ 205,035
Signature
Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, the registrant had duly caused this registration statement
to be signed on its behalf by the undersigned, thereto duly authorised.
Date: August 15, 1997 Lotus Pacific, Inc.
/S/ James Yao, Chairman & President
/S/ Gu Huang, Secretary & Treasurer
Pursuant to the requirements of the Securities Exchange Act 1934,
this report has been signed below by the following persons on behalf of
the registrants and in capacities and on the dates indicated.
/S/ James Liu, Director & Vice President
/S/ Jeremy Wang, Director
/S/ David Leung, Director & Vice President
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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