SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT OF 1934
For the transition period from to .
---------- ---------
Commission File Number 33-8964
AM-PAC INTERNATIONAL, INC.
---------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Nevada 16-1260971
- ------------------------------- -------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or jurisdiction) Identification Number)
Suite 2014-21, Sun Hung Kai Centre
30 Harbour Road, Wanchai, Hong Kong
---------------------------------------
(Address of principal executive offices)
(852) 2591-6928
--------------------------
(Issuer's telephone number)
431 East Central Boulevard, Suite 900, Orlando, Florida 32801
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(Former name, former address and formal fiscal year,
if changed since last report)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
twelve (12) months (or such shorter period that the registrant was required to
file such reports) and (2) has been subject to such filing requirements for the
past ninety (90) days. Yes No
As of November 20, 1998, 18,749,583 shares of common stock of the issuer
were outstanding.
<PAGE>
AM-PAC INTERNATIONAL, INC.
INDEX
Page
------
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
Consolidated Balance Sheets - June 30, 1998
and December 31, 1997....................................... 3
Consolidated Statements of Operations -Three months
and six months ended June 30, 1998 and 1997................. 4
Consolidated Statements of Cash Flows - Six months ended
June 30, 1998 .............................................. 5
Notes to Consolidated Financial Statements.................. 6
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 7
PART II - OTHER INFORMATION ............................................ 7
ITEM 6. Exhibits and Reports on Form 8-K............................ 7
Signatures ...................................................... 8
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AM-PAC INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
(000)
June 30, December 31,
1998 1997
---------------- --------------
(unaudited)
ASSETS
Current Assets:
Cash and bank deposits $ 17 $ 14
Accounts receivable, net - 2,870
Deposit and prepayments 214 162
Inventory - 761
Receivables from related company 1,377 -
--------------- ---------------
1,608 3,807
Fixed Assets 24,652 24,642
--------------- ---------------
Total assets $ 26,260 $ 28,449
=============== ===============
LIABILITY, MINORITY INTERESTS
AND SHAREHOLDERS' EQUITY
Current Liabilities:
Miscellaneous payables $ 149 $ 149
Due to a related company - 4,745
Taxes payable 125 125
--------------- ---------------
274 5,019
Long term loans 3,731 3,731
Long term loans from directors 11,823 11,823
--------------- ---------------
Total liabilities 15,828 20,573
--------------- ---------------
Minority interest 4,484 4,484
--------------- ---------------
Shareholders' Equity:
Share capital 19 50
Additional Paid In Capital 31 --
Retained earnings 5,890 3,334
Cumulative translation adjustment 8 8
--------------- ---------------
Total shareholders' equity 5,948 3,392
--------------- ---------------
Total liabilities, minority interest and
shareholders' equity $ 26,260 $ 28,449
=============== ===============
See Accompanying Notes to Consolidated Financial Statements
3
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AM-PAC INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(000)
<TABLE>
Three Months Ended Six Months Ended
June 30 June 30
---------------------------------- ------------------------------------
1998 1997 1998 1997
---------------- -------------- --------------- -----------------
(Proforma) (Proforma)
<S> <C> <C> <C> <C>
Net Sales $ 21,358 $ 11,938 $ 33,845 $ 29,629
Cost of goods sold 19,526 11,197 30,375 27,605
-------------- ------------- ------------- ------------
1,832 741 3,470 2,024
Selling, general and administrative (523) (529) (941) (991)
expenses
Interest income (expense)/net - 135 - (21)
Other income (expense) - 94 - (94)
-------------- ------------- ------------- -------------
Income before income tax 1,309 441 2,556 918
Provision for income tax - 146 - 225
-------------- ------------- ------------- -------------
Net income $ 1,309 $ 295 $ 2,556 $ 693
============== ============= ============= =============
(Loss) earnings per common share .07 .07 $ .14 $ .04
============== ============= ============= =============
Weighted average number of common shares 18,749,583 18,749,583 18,749,583 18,749,583
outstanding ============== ============= ============= =============
</TABLE>
4
<PAGE>
AM-PAC INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
For the Three Months Ended
(000)
June 30, 1998
------------------
Cash flows from operating activities:
Net income $ 2,556
(Decrease)increase in operating assets:
Inventories, net 3,569
------------------
Net cash used in operating activities 6,125
------------------
Cash flows from financing activities:
Decrease in payables to a related company (6,122)
------------------
Net cash used in financing activities (6,122)
------------------
Net increase (decrease) in cash 3
Cash at beginning of period 14
------------------
Cash at end of period $ 17
==================
See Accompanying Notes to Consolidated Financial Statements
5
<PAGE>
AM-PAC INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
March 31, 1998
1. The interim financial statements have been prepared pursuant to the
requirements for reporting on Form 10-QSB. The June 30, 1998 balance sheet
was derived from unaudited financial statements and does not include all of
the disclosures required by generally accepted accounting principles. The
interim financial statements and notes thereto should be read in
conjunction with the financial statements and footnotes thereto included in
the Company's report on Form 8-K/A, Amendment No. 1 dated November 30,
1998. In the opinion of management, the interim financial statements
reflect all adjustments of a normal receiving nature necessary for a fair
statement of the results for the interim period.
2. On May 7, 1998, the Company acquired all of the issued and outstanding
stock of Sun East International Development Limited ("Sun East") in
exchange for 15,349,583 shares of the Company's common stock. Simultaneous
therewith, the Company redeemed 5,320,222 shares of its common stock held
by its two principal shareholders in exchange for all of the assets,
subject to all of the liabilities of the Company. Both transactions were
given retroactive effect to the close of business on December 31, 1997.
This acquisition has been treated as a reverse acquisition since Sun East
and its subsidiaries are the continuing entities as a result of the
recapitalization and restructuring. On this basis, the historical financial
statements prior to January 1, 1998 represent the financial statements of
Sun East and its subsidiaries. The historic shareholders equity accounts of
the Company as of December 31, 1997 have been retroactively restated to
reflect the issuance of 15,349,583 shares of common stock and the
redemption of shares of common stock.
6
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This release contains forward looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended and Section 21E of the Securities
Exchange Act of 1934, as amended. The Company's actual results could differ
materially from those set forth on the forward looking statements as a result of
the risks set forth in a Company's filings with the Securities and Exchange
Commission in general economic conditions and changes in the assumptions used in
making such forward looking statements.
Background
On May 7, 1998, the Company acquired all of the issued and outstanding
stock of Sun East International Development Limited ("Sun East") in exchange for
15,349,583 shares of the Company's common stock. Simultaneous therewith, the
Company redeemed 5,320,222 shares of its common stock held by its two principal
shareholders in exchange for all of the assets, subject to all of the
liabilities of the Company. Both transactions were given retroactive effect to
the close of business on December 31, 1997. This acquisition has been treated as
a reverse acquisition since Sun East and its subsidiaries are the continuing
entities as a result of the recapitalization and restructuring. On this basis,
the historical financial statements prior to January 1, 1998 represent the
financial statements of Sun East and its subsidiaries. The historic shareholders
equity accounts of the Company as of December 31, 1997 have been retroactively
restated to reflect the issuance of 15,349,583 shares of common stock and the
redemption of 5,320,222 shares of common stock.
Three Months Ended June 30, 1998 Compared to Three Months Ended June 30, 1997
Net Sales. Net sales for the three months ended June 30, 1998 increased by
$9,420 or 79% to $21,358 compared to $11,938 for the corresponding period of the
prior year. This increase resulted from both new customers and a broader product
line.
Cost of Goods Sold. Cost of goods sold for the three months ended June 30, 1998
increased by $8,329 or 74% to $19,526 from $11,197 for the corresponding period
of the prior year. The increase in cost of goods sold is attributable to the
increased sales and sales of products with higher profit margins. Cost of goods
sold as a percentage of sales decreased to 91.4% for the three months ended June
30, 1998 compared to 93.8% for the corresponding period of the prior year.
Selling, General and Administrative Expenses. Selling general and administrative
expenses for the three months ended June 30, 1998 decreased by $6 or 1% to $523
from $529 for the corresponding period of the prior year. This decrease is
attributable to better cost controls implemented by the Company which was
partially offset by booking interest expenses to commission paid to sales agents
of the Company.
Interest Expense/net. Interest expense, net for the three months ended June 30,
1998 decreased by $135 to $0 from $135 for the corresponding period of the prior
year. This decrease resulted because this expense is now included in commissions
paid to sales agents of the Company.
Other Income (Expenses). Other income for the three months ended June 30, 1998
increased by $94 to $94 from $0 for the corresponding period of the prior year.
This increase is attributable to the Company generating third party commissions.
Income Tax Expense. Income tax expense for the three months ended June 30, 1998
decreased by $146 or 100% from $146 for the corresponding period of the prior
year. This decrease resulted because the Company's sales now occur offshore and
are not subject to taxation.
Six Months Ended June 30, 1998 Compared to Six Months Ended June 30, 1997
Net Sales. Net sales for the six months ended June 30, 1998 increased by $4,216
or 14% to $33,845 from $29,629 for the corresponding period of the prior year.
This increase is attributable to both new customers and a broader product line.
Cost of Goods Sold. Cost of goods sold for the six months ended June 30, 1998
increased by $2,770 or 10% to $30,375 from $27,605 for the corresponding period
of the prior year. This increase is attributable to increased sales and sales of
products with high profit margins. Cost of goods sold as a percentage of sales
decreased to 89.7% for the six months ended June 30, 1998 compared to 93.2% for
the corresponding period of the prior year.
7
<PAGE>
Selling, General and Administrative Expenses. Selling, general and
administrative expenses for the six months ended June 30, 1998 decreased by $77
or 8% to $914 from $991 for the corresponding period of the prior year. This
decrease is attributable to better cost controls implemented by the Company
which was partially offset by booking interest expenses to commissions paid to
sales agents of the Company.
Interest Expense/net. Interest expenses, net for the six months ended June 30,
1998 decreased by $21 or 100% to $0 from $21 for the corresponding period of the
prior year. This decrease resulted because such expenses are now charged against
commissions paid to sales agents of the Company.
Other Income $94 for the corresponding period of the prior year. This decrease
is attributable to the Company generating third party commissions which offset
commission expense.
Income Tax Expense. Income tax expenses for the six months ended June 30, 1998
decreased by $225 or 100% to $0 from $225 for the corresponding period of the
prior year. This decrease resulted because the Company's sales now occur
offshore and are not subject to taxation.
Year 2000 Issues
The Company's computer system is completely new and is fully YK2000
compliant.
LIQUIDITY & CAPITAL RESOURCES
At June 30, 1998 the Company had working capital of $1,334 and cash of $17
compared to a deficit in working capital of $1,212 and cash of $14 as of
December 31, 1997. The change in working capital is attributable to the earnings
of the Company and a net decrease in operating assets which was substantially
offset by a decrease in payables to a related party.
If the Company is to expand its operations, it must have additional capital
to fund letters of credit necessary to purchase the goods which are delivered to
customers in the People's Republic of China. Because of this, the Company plans
a public offering of its shares in early 1999.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27.1 Financial Data Schedule
(b) Reports on Form 8-K
None
8
<PAGE>
SIGNATURES
In accordance with 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.
AM-PAC INTERNATIONAL, INC.
Date: November 30, 1998 By: /s/ Xinnan Li
----------------------------
Xinnan Li
Chief Executive Officer
Dated: November 30, 1998 By:/s/ Lawrence Tsui
----------------------------
Lawrence Tsui
Chief Financial Officer
9
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-mos
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 17
<SECURITIES> 0
<RECEIVABLES> 1,377
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,608
<PP&E> 24,652
<DEPRECIATION> 0
<TOTAL-ASSETS> 26,260
<CURRENT-LIABILITIES> 274
<BONDS> 3,731
0
0
<COMMON> 19
<OTHER-SE> 5,929
<TOTAL-LIABILITY-AND-EQUITY> 26,280
<SALES> 33,845
<TOTAL-REVENUES> 33,845
<CGS> 30,375
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 941
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,556
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,556
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,556
<EPS-PRIMARY> .14
<EPS-DILUTED> .14
</TABLE>
