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, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to .
--------------- ---------------
Commission File No. 33-18834-LA
OPAL TECHNOLOGIES, INC.
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(Exact name of small business issuer as specified in its charter)
Nevada 87-0306464
- ------------------------------- ---------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
Suite 4704, Central Plaza, 18 Harbour Road, Wanchai, Hong Kong
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(Address of principal executive offices) (Zip Code)
852-2541-1999
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(Issuer's telephone number)
Opal Technologies, Inc.
9025 South 700 West, Sandy, Utah 84070
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Check whether the issuer (1) filed all reports required to be 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 reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes X No
--- ---
As of September 1, 1997, 24,991,954 shares of Common Stock of the issuer
were outstanding.
<PAGE>
OPAL TECHNOLOGIES, INC.
INDEX
Page
Number
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Unaudited Condensed Consolidated Balance Sheets -
June 30, 1997 and December 31, 1996......................... 3
Unaudited Condensed Consolidated Statements of Operations -
For the three months and six months ended June 30, 1997
and 1996.................................................... 4
Unaudited Condensed Consolidated Statements of Cash
Flows - For the six months ended June 30, 1997 and 1996..... 5
Notes to Unaudited Consolidated Financial Statements........ 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations..................... 7
PART II. OTHER INFORMATION........................................... 9
SIGNATURES................................................... 9
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
OPAL TECHNOLOGIES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
June 30 December 31
1997 1996
------------ -----------
US$`000 US$`000
------------ -----------
<S> <C> <C>
CURRENT ASSETS:
Cash $ 1,522 $ 67
Accounts receivable 2,047 537
Inventories 1,109 835
Due from related company/director - 91
Prepayments, etc. 60 19
------- -------
Total current assets 4,738 1,549
Property, plant and equipment, net 8,933 8,788
Licensing costs, net 930 962
Goodwill, net 191 196
------- -------
Total assets 14,792 11,495
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts Payable 633 814
Accrued Expenses 300 188
------- -------
Total current liabilities 933 1,002
Loans from PRC joint venture - 122
Loans from parent company 9,250 7,044
------- -------
Total liabilities 10,183 8,168
------- -------
Minority interest 3,873 2,806
------- -------
Shareholder equity
Common stock; $0.001 par value; 49,000,000 shares
authorized, 13,591,964 issued and outstanding shares 14 14
Preferred stock, $0.001 par value; 1,000,000 shares
authorized, 100,000 issued and outstanding shares - -
Additional paid-in capital 989 989
Cumulative translation adjustments (71) (49)
Retained earnings (196) (433)
------- -------
Total shareholders' equity 736 521
------- -------
Total liabilities and shareholders' equity $14,792 $11,495
======= =======
</TABLE>
See Notes to Unaudited Consolidated Financial Statements
3
<PAGE>
OPAL TECHNOLOGIES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the three months For the six months
ended ended
June 30, June 30,
----------------------- ------------------------
1997 1996 1997 1996
---------- ---------- ---------- ----------
US$`000 US$`000 US$`000 US$`000
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net Sales $ 1,449 $ - $ 1,938 $ -
Cost of Goods Sold (950) - (1,217) -
---------- ---------- ---------- ----------
Gross Profit 499 - 721 -
General and administrative expenses (227) (37) (443) (59)
---------- ---------- ---------- ----------
Income/(Loss) from continuing operations 272 (37) 278 (59)
Loss from discontinuing operations - (78) - (166)
---------- ---------- ---------- ----------
Income/(Loss) before minority interest 272 (115) 278 (225)
Minority interest (54) - (41) -
---------- ---------- ---------- ----------
Net income/(loss) 218 (115) 237 (225)
========== ========== ========== ==========
Weighted Average Number of Shares Outstanding 13,591,964 13,591,964 13,591,964 13,591,964
========== ========== ========== ==========
Net Income (Loss) Per Share 0.02 (0.01) 0.02 (0.02)
========== ========== ========== ==========
</TABLE>
See Notes to Unaudited Consolidated Financial Statements
4
<PAGE>
OPAL TECHNOLOGIES, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the six months ended
June 30,
------------------------
1997 1996
------- -------
US$`000 US$`000
------- -------
<S> <C> <C>
Cash flow from operating activities
Net income/(loss) $ 237 $ (225)
Adjustments to reconcile net income to net cash - -
provided by/(used in) operating activities - -
Depreciation of property, machinery & equipment 40 26
Amortization of good will 5 -
Amortization of licensing costs 32 -
Minority interest 1,067 -
------- -------
$ 1,381 $ (199)
(Increase)/Decrease in operating assets
Inventories, net (274) (291)
Accounts receivable, net (1,510) 9
Prepayments, and other current assets (41) (10)
Due from related company 91 -
(Decrease)/Increase in operating liabilities
Accounts payable (181) (2)
Accrued expenses 112 19
------- -------
Net cash provided by/(used in) operating activities $ (422) $ (474)
Cash flows from investing activities
Acquisition of property, machinery & equipment (185) (479)
Effect of translation adjustment (22) (252)
------- -------
Net cash provided by/(used in) investing activities $ (207) $ (731)
Cash flows from financing activities
Increase in loans from related companies 2,084 1,168
Repayment of loans - (25)
Issuance of common shares - 50
------- -------
Net cash provided by/(used in) financing activities 2,084 1,193
Net increase/(decrease) in cash and bank deposits 1,455 (12)
Cash and bank deposits as of beginning of period 67 19
------- -------
Cash and bank deposits as of end of period $ 1,522 $ 7
======= =======
</TABLE>
See Notes to Unaudited Consolidated Financial Statements
5
<PAGE>
OPAL TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTE TO UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS
1. The interim financial statements were prepared pursuant to the requirements
for reporting on Form 10- QSB. The interim financial statements and notes
thereto should be read in conjunction with the financial statements and
notes thereto included in the Company's report on Form 10-KSB for the year
ended December 31, 1996. In the opinion of management, the interim
financial statements reflect all adjustments of a normal recurring nature
necessary for a fair statement of the results for the interim periods
presented.
2. The acquisition of two operating companies by the Company on June 6, 1997
was treated as a recapitalization of the acquired companies with the
acquired entities considered the acquirer (a reverse acquisition).
Accordingly, the historical consolidated financial statements of the
Company prior to June 6, 1997 are those of the combined financial
statements of two acquired companies. The shareholders equity of the
Company as of December 31, 1996 has been retroactively restated to reflect
the one for ten reverse stock split, the reauthorization of 50,000,000
shares of common stock and the issuance of Series A preferred stock.
6
<PAGE>
MATERIAL CHANGES IN RESULTS OF OPERATIONS (US$`000)
Three Months Ended June 30, 1997 Compared to the Three Months Ended June 30,
1996.
Net Sales. Net sales for the three months ended June 30, 1997 increased by
$1,449 from $0 for the three months ended June 30, 1996. This increase is the
result of the Company beginning the commercial production and sale of
fertilizer.
Gross Profits. Gross profits for the three months ended June 30, 1997 increased
by $499 from $0 for the three months ended June 30, 1996. This increase is the
result of the Company beginning the commercial production and sale of
fertilizer.
General and Administrative Expenses. General and administrative expenses for the
three months ended June 30, 1997 increased by $190 or 513.5% to $227 from $37
for the three months ended June 30, 1996. This increase resulted from the
Company staffing its operations to begin the commercial production and sale of
fertilizer.
Net Income. Net income for the three months ended June 30, 1997 increased by
$333 to $218 from a loss of $115 for the three months ended June 30, 1996. This
increase is the result of the Company beginning the commercial production and
the sale of fertilizer. This increase is partially attributable to a loss of $78
from discounted operations in the corresponding period of the prior year and $54
of net income attributable to the minority interest. There was no minority
interest for the corresponding period of the prior year.
Six Months Ended June 30, 1997 Compared to the Six Months Ended June 30, 1996.
Net Sales. Net sales for the six months ended June 30, 1997 increased by $1,938
from $0 for the six months ended June 30, 1996. This increase is the result of
the Company beginning the commercial production and sale of fertilizer.
Gross Profit. Gross profits for the six months ended June 30, 1997 increased by
$ 721 from $0 for the six months ended June 30, 1996. This increase is the
result of the Company beginning the commercial production and sale of
fertilizer..
General and Administrative Expenses. General and administrative expenses for the
six months ended June 30, 1997 increased by $387 or 655% to $443 from $59. This
increase resulted from the Company staffing its operations to begin the
commercial production and sale of fertilizer.
Net Income. Net income for the six months ended June 30, 1997 increased by $462
($503 before minority interest) to $237 from a loss of $225 for the six months
ended June 30, 1996. This increase is the result of the Company beginning the
commercial production and trading of fertilizer. This increase is partially
attributable to a loss of $166 from discounted operations in the corresponding
period of the prior year and $41 of net income attributable to the minority
interest. There was no minority interest for the corresponding period of the
prior year.
Changes in Financial Condition, Liquidity and Capital Resource.
For the past twelve months, the Company has funded its operations and capital
requirements with loans from an affiliated company and the sale of common stock.
As of June 30, 1997, the Company had cash of $1,522 and working capital of
$3,805.
Net cash used in from operating activities decreased to $(422) from $(474) for
the six months ended June 30, 1997 and 1996, respectively. The decrease resulted
from profitable operations but was offset by increases in receivables and
inventory and a decrease in accounts payable and accrued expenses.
Net cash used in investing activities decreased to $(207) from $(731) for the
six months ended June 30, 1997 and 1996 respectively. This decrease resulted
from less dollars being expended for the acquisition of machinery and equipment
and less of an effect from translation adjustments.
7
<PAGE>
Net cash provided by financing activities increased to $2,084 from $1,193 for
the six months ended June 30, 1997 and 1996, respectively. This increase is
attributable to an increase in loans from a related company.
At June 30, 1997, the Company had long-term debt of $9,250 all payable to the
parent company. It is anticipated that this debt will be converted to equity
during the quarter ended September 30, 1997.
On July 1, 1997 the Company issued 15,600,000 shares of common stock for $7,800.
These funds will be used for working capital and the acquisition of additional
property, plant and equipment and further acquisitions and investments. With the
capitalization of the loan from its affiliate and the funds from the sale of
shares, the Company believes it has sufficient working capital for the next
twelve months.
New Production Facilities: On August 8, a new production facility in Beijing
under the management of the Company's Beijing joint-venture subsidiary was
commissioned.
The Joint-venture is also constructing another production facility in Beijing.
It is expected that this new facility will be completed by the end of 1997 with
a production capacity of about 75,000 metric tons of organic fertilizer
granules.
8
<PAGE>
PART II - OTHER INFORMATION
None
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.
OPAL TECHNOLOGIES, INC.
Date: September 19, 1997 By: /s/ illegible
-------------------------------------
John K. C. Koon
President and Chief Executive Officer
Dated: September 19, 1997 By: /s/ illegible
-------------------------------------
Kings Poon
Chief Financial Officer
9
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> APR-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 1,522
<SECURITIES> 0
<RECEIVABLES> 2,047
<ALLOWANCES> 0
<INVENTORY> 1,109
<CURRENT-ASSETS> 4,738
<PP&E> 8,933
<DEPRECIATION> 0
<TOTAL-ASSETS> 14,792
<CURRENT-LIABILITIES> 10,183
<BONDS> 0
0
0
<COMMON> 14
<OTHER-SE> (267)
<TOTAL-LIABILITY-AND-EQUITY> 736
<SALES> 1,449
<TOTAL-REVENUES> 1,449
<CGS> 950
<TOTAL-COSTS> 950
<OTHER-EXPENSES> 227
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 218
<INCOME-TAX> 0
<INCOME-CONTINUING> 218
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 218
<EPS-PRIMARY> 0.02
<EPS-DILUTED> 0.02
</TABLE>
