UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 1998
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 000-24999
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)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the proceeding 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.
(1) Yes X No _____ (2)* Yes X No _____
Indicate the number of shares outstanding of each of the Registrant's
classes of common stock, as of the latest practicable date (October 26,
1998).
Class Number of Shares
Common Stock 47,499,306
Par Value $.001 Per Share
___________________________
* Registrant became subject to the filling requirements of the Securities
Exchange Act of 1934 on June 30, 1998, when its assets exceed $10 million
and it has a class of equity securities held of record by 500 or more
persons. Registrant filed Form 10, a general form for registration of
Securities pursuant to Section 12 (b) or (g) of the Securities Exchange Act
of 1934, with the Securities and Exchange Commission on October 27, 1998.
LOTUS PACIFIC, INC.
INDEX
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of September 30,1998
(Unauduited) and June 30, 1998 (audited)
Condensed Consolidated Statements of Operations (Unaudited) for
the Quarter ended September 30, 1998 and September 30, 1997
Condensed Consolidated Statements of Cash Flows (Unaudited) for
the Quarter ended September 30, 1998 and September 30, 1997
Notes to Condensed Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Item 3. Quantitative and Qualitative Disclosure About Market Risk
PART II OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities and Use of Proceeds
Item 3. Defaults upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signatures
LOTUS PACIFIC, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
ASSETS
Sept. 30, 1998 June 30, 1998
Current Assets
Cash $2,618,594 $3,193,127
Accounts Receivable (note 3) 6,800,806 4,979,759
Prepaid Expenses 2,874 833,087
Deposit 22,175
Total Currents Assets 9,444,449 8,933,181
Property and Equipment 1,630,353 1,631,403
Leasehold Improvement 1,041 75,612
1,631,394 1,707,015
Less: Accu. Depreciation 511,921 348,286
Investments 600,000
Intangible Assets, net of accumulated
amortization of $455,686 5,086,356 5,439,523
Total Assets 15,650,278 16,404,225
LIABILITIES AND STOCKHOLDERS EQUITY
Current Liabilities
Account Payable $663,668 1,755,654
Loans Payable 120,000
Salaries Payable 60,489 63,819
Payroll Taxes Payable 23,001 32,234
Income Taxes Payable 42,110
Total Current Liabilities 747,158 2,013,817
Minority Interest in Equity of
Consolidated Subsidiary 6,136,670 6,569,544
Stockholders' Equity
Preferred Stock, Class A, $.001 par value,
4,300 shares authorized; 4,300 shares
issued and outstanding 4 4
Common Stock, $.001 par value, 60 million
shares authorized, 47,499,304 shares
issued and outstanding 47,499 47,387
Stock Warrants 80,000 80,000
Additional paid-in capital 11,050,628 10,240,740
Accumulated Deficit (2,411,681) (2,547,267)
Total Stockholders' Equity 8,766,450 7,820,864
Total Liabilities &
Stockholders' Equity $15,650,278 $16,404,225
See accompanying notes to consolidated condensed financial statements
LOTUS PACIFIC, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
For the Quarter Ended September 30, 1998
(Unaudited)
Sept. 30, 1998 Sept. 30, 1997
Net Sales $5,314,308
Royalty Income $1,000,000
Cost of Sales 3,953,775
Gross Profit 1,360,533 1,000,000
Operating Expenses 1,133,548 1,295,159
Operating Income 226,985 (295,159)
Other Income (Expenses)
Interest Income 8,736 467
Research and Development (177,267) (57,453)
Gain on sale of investment 100,000
Net Income before income taxes
and minority interest in income
of consolidated subsidiary 158,454 (352,145)
Minority Interest of Income
Consolidated Subsidiaries 22,868 (22,398)
Net Income $135,586 $(329,747)
Earnings Per Share
Basic $0.00 $0.00
Diluted $0.00 $0.00
Weighted Average Shares 47,476,804 42,785,054
See accompanying notes to consolidated condensed financial statements
LOTUS PACIFIC, INC. AND SUBSIDIARY
STATEMENT OF CASH FLOWS
For the Quarter Ended September 30, 1998
(Unaudited)
Sept. 30, 1998 Sept. 30, 1997
CASH FLOW FROM OPERATING ACTIVITIES
Net Income $135,586 $(329,747)
Adjustments to reconcile net income to
net cash used in operating activities:
Depreciation & amortization 248,572 79,714
Common stock issued for service 135,000
Gain on sale of investment (100,000)
Changes in assets & liabilities:
Increase in accounts receivable (1,821,047) (471)
Decrease in Prepaid Expenses 757,421 (20,995)
Increase in deposit 50,617 100,000
Decrease in accounts payable (1,008,496) 667,001
Increase in minority interest 277,193 62,877
(1,460,740) 888,126
Net cash used in operating activities (1,325,154) 558,379
CASH FLOW FROM
INVESTING ACTIVITIES:
Purchase of equipment (2,603)
Sale of equipment 1,050
Sale of leasehold improvement 74,571
Net cash used in investing activities 75,621 (2,603)
CASH FLOW FROM
FINANCING ACTIVITIES:
Issuance of common stock 675,000 216,000
Issuance of stock warrants 80,000
Net cash provided by
financing activities 75,000 296,000
Net increase (decrease) in cash (574,533) 851,776
Cash, beginning 3,193,127 268,679
Cash, ending $2,618,594 $1,120,455
Supplemental disclosure of
non-cash financing activities:
Issuance of common stock for service $135,000
See accompanying notes to consolidated condensed financial statements
LOTUS PACIFIC, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998 (UNAUDITED)
1. Description of Business:
Lotus Pacific, Inc. (the "Company") is a holding company for Regent
Electronics Corp. ("Regent"). The Company, through its subsidiary Regent,
designs, engineers, develops, provides and markets the Internet-related
electronics products and services to electronics manufactures, commercial
cable TV networks, and general individual customers. Regent also generates
its income from granting its technology or licenses to electronic
manufactures and commercial cable TV networks. The Company owns 87.3% of
Regent's equity interest.
The Company also uses its Internet research and development capabilities,
including the TeleWeb broadcasting system, Internet set-top boxes and WonderTV
series products to provide on-line commerce services. The services include:
(a) providing retail services over the Internet to general customers for
purchasing a variety of merchandises, and (b) offering information and other
electronic commerce services. The information provided may be derived either
directly from the Internet or from the Company's own sources. The electronic
commerce services consist of advertising sales and initiating business
transactions over the Internet, such as home shopping, online stock trading
and online utility bill payments.
In order to concentrate on its Internet related electronics products and
services, the Company sold all of its ownership in LPF International Corp.
and Richtime Far East Ltd., including all assets and assumption of all
liabilities, to Clarinet Overseas Ltd. on September 30, 1998, for an
aggregation consideration of $900,000 in cash. At the same time, the Company
took back its capital investment and business loan of $1.6 million in cash
from LPF International Corp.
LPF International Corp. was set up by the Company to expand its existing
textile and apparel business worldwide. Richtime Far East Ltd. ("Richtime"),
a Hong Kong-based subsidiary of the Company, was then merged into LPF.
2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have
been prepared by the Company pursuant to the rules and regulations of the
Securities and Exchange Commission regarding interim financial reporting.
Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements and should be read in conjunction with the financial statements
and notes included in the Company's Annual Report on Form 10-K for the year
ended June 30, 1998. The accompanying condensed financial statements reflect
all adjustments (consisting of normal, recurring adjustments) which are, in
the opinion of management, necessary for a fair presentation of the results
for the interim periods presented. The results of operations for the quarter
ended September 30, 1998 are not necessarily indicative of the results to be
expected for the full year.
Principle of Consolidation
The accompanying financial statements include the accounts of Lotus Pacific,
Inc. and its 87.3% owned subsidiary, Regent Electronics Corp (a Delaware
corporation). The 12.7% non-owned portion of Regent Electronics Corp. appears
as minority interest on the balance sheet in accordance with generally
accepted accounting principles. All the inter-company transactions were
eliminated in consolidation.
LPF International Corp., a wholly owned subsidiary of the Company, was sold
to Clarinet Overseas Ltd. on September 30, 1998. The balance sheet accounts
of LPF were not included in the consolidated financial statements. However,
the accounts of Income statement of LPF were consolidated with the Company.
Cash and cash equivalents
For purpose of reporting cash flows, the Company considers all cash accounts
that are not subject to withdrawal restrictions or penalties to be cash or
cash equivalents.
Accounts Receivable
The allowance for doubtful is based on management's evaluation of outstanding
accounts receivable at the end of this fiscal quarter. No allowance for
doubtful accounts has been provided, since management believes all accounts
are collectable.
Concentration of Credit Risk
Statement of Financial Accounting Standards (SFAS) No. 105, Disclosure of
Information about Financial Instruments with Concentrations of Credit Risk,
requires disclosures of any significant off-balance-sheet and credit risk
concentrations. The Company has no significant concentrations of credit risk
such as foreign currency exchange contracts, options contracts or other
foreign hedging arrangements. The Company occasionally maintains deposits
in excess of federally insured limits. The risk is managed by maintaining
all deposits in high quality financial institutions.
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 40
years. Depreciation expense for the quarter ended September 30, 1998 was
$163,001.
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.
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 that will be used to develop and improve its
Internet access products. 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.
For the quarter ended September 30, 1998, no income taxes have been provided
since those income taxes liabilities could be offset by the Company's net
operating losses (NOLs) incurred in previous years.
Use of Estimates:
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect certain reported amounts and disclosures. Accordingly, actual
results could differ from those estimates.
Earnings Per Share:
Primary earnings per share are computed by dividing net income (loss) by the
weighted average number of shares of common stock and equivalent number of
common shares of convertible preferred stock. Fully diluted earnings per
share reflect the dilutuive effect of stock options and warrants.
3. Accounts Receivable
The accounts receivable in consolidated financial statements includes
$900,000 of proceeds from sale of equity interest of LPF.
4. Issuance of Stock:
During the quarter ended September 30, 1998, the Company issued an aggregate
of 112,500 shares of its common stock. 90,000 shares of common stock were
issued for cash consideration of $675,000, 22,500 shares of common stock were
issued for consulting services rendered.
5. Disposition of subsidiary:
In February 1998, the Company set up a new wholly owned subsidiary LPF
International Corp. LPF International Corp. was incorporated to be a fashion
designer and a broker in the worldwide textile and apparel business. In order
to concentrate on its Internet related electronics products and services, the
Company entered into a Stock Purchase Agreement on September 30, 1998 with
Clarinet Overseas Ltd. Under the Agreement, the Company sold all of its
ownership in LPF and Richtime, including all assets and liabilities, to
Clarinet Overseas Ltd. for an aggregation consideration of $900,000 in cash.
At the same time, the Company took back its capital investment and business
loan of $1.6 million in cash from LPF International Corp.
6. Financial Instrument:
Cash accounts are secured by the Federal Deposit Insurance Corporation up
to $100,000. At September 30, 1998 and June 30, 1998, the uninsured balance
was $2,318,594 and $3,153,127 respectively.
7. Capital Stock:
Common stock - $.001 par value, 60,000,000 shares authorized, 47,499,304
shares issued and outstanding as of September 30, 1998.
Preferred stock - $.001 par value, 100,000 shares authorized, no shares
issued and outstanding as of September 30, 1998.
Preferred stock, Series A - $.001 par value, 4,300 shares authorized,
4,300 shares issued and outstanding as of September 30, 1998.
Common stock warrants - 8,000,000 warrants issued and outstanding. Each
warrant entitled the holder to purchase one share of the Company's common
stock at $3.00 per share. Warrants expire May 5, 2002. As of September 30,
1998, no warrants have been exercised.
8. Significant customers:
For the quarter ended September 30, 1998, the Company had four customers
with billings in excess of 10% of total revenues.
9. Condensed Financial Statements for Regent Electronics Corp.:
BALANCE SHEET
ASSETS
Sept. 30, 1998 June 30, 1998
Current assets $6,268,322 $7,232,436
Property and equipment 1,1188,123 1,281,029
Other assets 5,086,356 5,461,930
$12,472,801 $13,975,395
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities $721,257 $2,134,683
Stockholders' equity:
Common stock 26,000 26,000
Preferred stock 1,500 1,500
Stock warrants 1,500 1,500
Additional paid-in capital 13,760,500 13,760,500
Accumulated deficit (1,743,998) (1,948,788)
11,751,544 11,840,712
$12,472,801 $13,975,395
STATEMENT OF OPERATIONS
For the Quarter ended September 30
1998 1997
Sales $2,420,000
Cost of sales (1,198,000)
Interest income 5,604 $666
Royalty income 1,000,000
Operating costs and expenses (1,051,699) (1,290,502)
Net Income (Loss ) $175,905 $(289,835)
STATEMENT OF CASH FLOWS
For the Quarter ended September 30
Cash flows used
in operating activities $(1,995,931) $(3,914,716)
Cash flows used
in investing activities (38,083)
Cash flows from
financing activities (435,000) 6,436,500
Net increase (decrease) in cash $(2,430,931) $2,483,701
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
The following Management's Discussion and Analysis of Financial Condition and
Results of Operations should be read in conjunction with the Company's
Consolidated Financial Statements as of September 30, 1998 included herein
this Report on Form 10-Q for the fiscal quarter ended September 30, 1998.
GENERAL
The Company is a holding company for Regent Electronics Corp. ("Regent").
Regent designs, engineers, develops, provides and markets Internet related
electronics products and services to electronics manufactures, commercial
cable TV networks, and general individual customers. Regent also generates
its income from granting its technology or licenses to electronic manufactures
and commercial cable TV networks. The Company owns 87.3% of Regent's equity
interest.
The Company also uses its Internet research and development capabilities,
including the TeleWeb broadcasting system, Internet set-top boxes and
WonderTV series products to provide on-line commerce services. The services
include: (a) providing retail services over the Internet to general customers
for purchasing a variety of merchandises, and (b) offering information and
other electronic commerce services. The information provided may be derived
either directly from the Internet or from the Company's own sources. The
electronic commerce services consist of advertising sales and initiating
business transactions over the Internet, such as home shopping, online stock
trading and online utility bill payments. The management of the Company
believes that its targeted market of consumers represents an attractive and
rapidly growing segment of the Web commerce industry.
The Company's products include the TeleWeb System and WonderTV series
products. The TeleWeb system is a WWW broadcasting system to send Internet
contents and selected commercial information through the existing cable TV
network subscribers. Based on the technology of the TeleWeb system, WonderTV
series products were developed by the Company: WonderTV A6000, A6060, A8000,
and A9000.
1. Results of Operations
The following table sets forth certain results of operations as a percentage
of total revenue:
Three Months Ended Sept. 30 Six Months Ended Sept. 30
1998 1997 1998 1997
Net revenue 100.0% 100.0% 100.0% 100.0%
Cost of revenue 74.3 0.0 68.4 0.0
Gross profit 25.7 100.0 31.6 100.0
Operating expenses:
Depreciation and amortization 4.7 8.0 3.1 22.0
Research and development 3.3 5.7 5.0 84.8
General and administrative 16.7 115.8 16.8 56.0
Total operating expenses 24.7 129.5 24.9 162.8
Net income (loss) 1.0 (29.5) 6.7 (62.8%)
Before other income
Other income 2.0 0.0 1.0 0.3
Minority interest (0.4) 2.3 0.2 (11.0)
Net income 2.6% (27.2%) 7.5% (51.5%)
Net Revenues
Sales for the quarter ended September 30, 1998 decreased to $5.3 million
from $10.9 million for the quarter ended June 30, 1998. Sales from its
electronics subsidiary Regent decreased 60% to $2.42 million for the quarter
from $6.16 million in the previous quarter. Sales from the Company's textile
and apparel subsidiary LPF decreased from $4.83 million for the quarter ended
June 30, 1998, to $2.89 million for this quarter. The decreases in sales were
due primarily to the slow sales in Asian markets. In order to restructure its
business, the Company sold all its equity interest in LPF to Clarinet Overseas
Ltd. on September 30, 1998. The Company had $100,000 gain on sale of its
investment in LPF.
Operating Expenses
Operating expenses consist primarily of general and administrative expenses,
such as salaries, employee benefits, travel, selling, communications,
management, administrative and office rents. For the quarter ended September
30, 1998, operating expenses decreased by 21%, or approximately $300,000,
to $1.1 million from $1.4 million for the quarter ended June 30, 1998. The
decrease in such expenses was due primarily to the lower expenses on
consulting fees.
Net Income
Net income decreased from $787,000 for the quarter ended June 30, 1998 to
$136,000 for the quarter ended September 30, 1998. This is a result of lower
sales in the Asian markets from Regent and LPF in this quarter.
Recent Developments
In order to concentrate on its Internet related electronics products and
services, the Company entered into a Stock Purchase Agreement on September 30,
1998 with Clarinet Overseas Ltd. Under the Agreement, the Company sold all of
its ownership in LPF and Richtime, including all assets and liabilities, to
Clarinet Overseas Ltd. for an aggregation consideration of $900,000 in cash.
At the same time, the Company took back its capital investment and business
loan of $1.6 million in cash from LPF International Corp. See"Pro Forma
Financial Information" in "Item 6. Exhibits and Reports on Form 8-K".
Liquidity and Capital Resources
The Company ended this fiscal quarter with a cash position of approximately
$2.62 million.
During the quarter ended September 30, 1998, the Company used approximately
$1.46 million of cash for operations. The Company's accounts payable
decreased for more than $1 million during the quarter, and accounts
receivable was increased by $1.82 million during this quarter because of
delay in customer payments due to the weakening Asian economies.
As of September 30, 1998, the Company's working capital was approximately
$8.70 million. The Company generated $675,000 of cash from financing
activities in this quarter by issuing 90,000 shares of the Company's
common stock in private placements. As of September 30, 1998 the Company
had 47,499,306 shares of Common Stock with par value $.001 per share and
4,300 shares of Series A Preferred Stock issued and outstanding.
The Company believes that its available funds and cash flows expected to
be generated from operations, will be adequate to meet its current and
planed operations through at least the next twelve months. Although the
Company's operating activities may generate cash to cover its operating
costs, the Company's continuing operating and investing activities may
require the Company to obtain additional sources of financing.
ITEM 3. Quantitative and Qualitative Disclosure about Market Risk
The Company has not entered into any transactions using derivative
financial instruments or derivative commodity instruments and believes
that its exposure to market risk associated with other financial
instruments are not material.
PART II OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in the Rights of the Registrant's Holders
None.
Item 3. Defaults by the Registrants on its Senior Securities
None.
Item 4. Submission of Matters to A Vote of Securities Holders
The Company is scheduled to have its Annual Meeting of Shareholders on
Wednesday, December 2, 1998, at 2:00 p.m., the Eastern Time. The meeting
will be held at 200 Centennial Avenue, Suite 201, Piscataway, NJ 08854.
At the Annual Meeting, the shareholders of the Company will be asked to
consider and vote upon the following proposals: (i) the election of six (6)
directors of the Company, and (ii) the ratification of Schiffman, Hughes
Brown as independent auditors of the Company for the fiscal year ending
June 30, 1999. During the meeting, shareholders will have the opportunity
to ask questions about the Company that may be of general interest to
shareholders.
The Notice of Annual Meeting of Shareholders, Annual Report of the Company
on Form 10-K for the year ended June 30, 1998, and the Company's Proxy
Statement have been sent to shareholders of the Company.
Item 5. Other Information
Shareholders who desire to bring a proposal before the 1999 Annual Meeting
of the Shareholders must cause written notice of the proposal to be received
by the Secretary of the Company at the executive offices of the Company at
200 Centennial Avenue, Suite 201, Piscataway, New Jersey 08854 by no later
than July 31, 1999.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits: None
(b) Reports on Form 8-K
The Company filed a Form 8-K with the Commission on October 14, 1998
regarding the sale of the Company's wholly owned subsidiary LPF
International Corp. to Clarinet Overseas Ltd.
(c) Pro Forma Financial Information
The following condensed pro forma consolidated financial statement of Lotus
Pacific, Inc. and Subsidiary gives effect to the disposition of LPF
International Corp., a wholly owned subsidiary of the Company, as though it
had occurred at June 30, 1998.
In order to concentrate on its Internet related electronics products and
services, the Company entered into a Stock Purchase Agreement on September 30,
1998 with Clarinet Overseas Ltd. Under the Agreement, the Company sold all of
its ownership in LPF and Richtime, including all assets and liabilities, to
Clarinet Overseas Ltd. for an aggregation consideration of $900,000 in cash.
At the same time, the Company took back its capital investment and business
loan of $1.6 million in cash from LPF International Corp.
(1)
Pro Forma Condensed Balance Sheet
As of June 30, 1998
(In Thousands)
Pro Forma Pro Forma
ASSETS Actual Adjustments Statement
Current Assets
Cash (note 1) 3,193 1,160 4,353
Accounts Receivable 5,812 (1,246) 4,566
Total current assets 9,005 8,919
Property & Equipment, net 1,359 (76) 1,283
Investment (note 2) 600 600
Intangible Assets 5,440 5,440
Total Assets 16,404 16,242
LIABILITIES & SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable 1,756 (173) 1,583
Other current liabilities 258 258
(note 3)
Total current liabilities 2,014 1,841
Minority Interest 6,570 6,570
Capital stock 127 127
Paid-in Capital 10,241 10,241
Retained Earnings (note 4) (2,547) (2,537)
Total stockholders' equity 7,821 7,831
Total Liabilities &
Stockholders' Equity $16,405 $16,242
Notes to Pro Forma Condensed Balance Sheet:
Note 1. The pro forma cash adjustments for the sale of LPF are:
Withdrawal of investments $1,300,000
Gain on sale of investment 100,000
Note 2. 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 Company carries the investment at cost, and Richtime Far East
Ltd. is not consolidated with Lotus Pacific, Inc. in accordance with general
accepted accounting principles.
Note 3. No provision for income taxes has been reflected on the gains
applicable to the sale of LPF, since those gains could be offset by the
Company's net operating losses (NOLs) incurred in previous years.
Note 4. A adjustment has been made for $90,000 of LPF's retained earnings
and $100,000 gain on sale of LPF.
(2) Pro Forma Condensed Statement of Operations
For the Quarter Ended September 30, 1998
The following pro forma statement of operation for the quarter ended
September 30, 1998 has been prepared to reflect the sale of LPF. The
statement is based on the assumption that the sale of LPF was consummated
at July 1, 1998, the beginning of the fiscal year of Lotus Pacific, Inc.
This pro forma statement of operation should be read in conjunction with
other financial statements included elsewhere herein and the Company's
annual report 10-K, which has been filed with the SEC.
Pro Forma Pro Forma
(In Thousand dollars) Actual Adjustments Statement
Net Sales $5,314 ($2,894) $2,420
Cost of Sales 3,953 (2,755) 1,198
Gross Profit 1,361 1,223
Operating Expenses 1,134 (38) 1,096
Operating Income 227 127
Other Income (expenses) (69) (69)
Net Income before
Minority Interest 158 58
Minority Interest 23 23
Net Income $135 $35
Earnings Per Share (note 1) $.00 $.00
Note to Pro Forma Condensed Statement of Operation:
Note 1. Pro forma earnings per share are based on the exercise of all
outstanding stock options and warrants, and it is fully diluted.
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant had duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
LOTUS PACIFIC, INC.
Date: Nov. 12, 1998 By: /S/ James Yao
James Yao, Chairman & President
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/
David Leung, Director & Vice President
/S/
James Liu, Director & Vice President
/S/
Gary Huang, Chief Financial Officer
& Secretary
/S/
Jeremy Wang, Director
/S/
Simon Gu, Director
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<TOTAL-COSTS> 5,264,590
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 135,586
<INCOME-TAX> 0
<INCOME-CONTINUING> 35,586
<DISCONTINUED> 100,000
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 135,586
<EPS-PRIMARY> .00
<EPS-DILUTED> .00
</TABLE>
