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 March 31, 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 33-18834-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 (I.R.S. 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)
852-2541-1999
-------------------------
(Issuer's telephone number)
N/A
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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 X No
------ -------
As of May 12, 1998, 35,991,954 shares of Common Stock of the issuer were
outstanding.
<PAGE>
OPAL TECHNOLOGIES, INC.
FORM 10-QSB
INDEX
Page
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PART I - FINANCIAL INFORMATION
ITEM 1 . Financial Statements
Consolidated Balance Sheets as of March 31, 1998 and
December 31, 1997.................................................. 3
Unaudited Consolidated Statements of Operations-for the
three months ended March 31, 1998 and 1997........................ 4
Unaudited Consolidated Statements of Cash Flows-for the
three months ended March 31, 1998 and 1997........................ 5
Notes to Consolidated Financial Statements......................... 6
ITEM 2. Management's Discussion and Analysis or Plan of Operations.... 7
PART II - OTHER INFORMATION............................................ 9
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
OPAL TECHNOLOGIES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEET
December 31,
March 31, 1998 1997
---------------- -------------
US$`000 US$`000
---------------- -------------
ASSETS:
Current assets:
Cash and bank deposits $ 83 $ 1,453
Accounts receivable, net 2,765 2,590
Due from a shareholder 383 412
Due from a director (1) 2
Due from a related company -
Prepayments and other current assets 35 26
Inventories, net 841 642
---------- ----------
Total current assets 4,106 5,125
Property, machinery and equipment, net 8,929 2,123
Construction-in-progress 5,706 11,626
Licensing costs, net 895 907
Goodwill, net 183 186
---------- ----------
Total assets 19,819 19,967
========== ==========
LIABILITIES AND MINORITY INTERESTS AND
SHAREHOLDERS' EQUITY
Current liabilities:
Short-term borrowings 1,627 1,239
Accounts payable 380 625
Accrued liabilities 103 201
Taxation payable 38 38
---------- ----------
Total current liabilities 2,148 2,103
Non-current payable 2,700 2,877
Loans from PRC joint partner 640 639
Loans from a shareholder - -
---------- ----------
Total liabilities 5,488 5,619
---------- ----------
Minority interests 2,635 2,649
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Shareholders' equity:
Common stock; par value US$0.001:
- authorized - 49,000,000 shares
as of December 31, 1997 and
1998
- outstanding and fully paid -
35,991,954 shares as of December
31, 1997 and March 31, 1998 36 36
Preferred stock, par value US$0.001:
- authorized - 1,000,000 shares as of
December 31, 1997 and 1998
- outstanding and fully paid -
100,000 shares as of December 31,
1997 and 1998 -
Additional paid-in capital 12,213 12,213
Accumulated losses (524) (506)
Cumulative translation adjustments (29) (44)
----------- ----------
Total shareholders' equity $ 11,696 $ 11,699
----------- ----------
Total liabilities, minority interests
and shareholders' equity $ 19,819 $ 19,967
=========== ==========
See Notes to Unaudited Consolidated Financial Statements
3
<PAGE>
OPAL TECHNOLOGIES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
For the three months
ended
March 31,
----------------------------------
1998 1997
------------- --------------
US$`000 US$`000
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Net sales $ 440 $ 412
Cost of goods sold (220) (142)
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Gross profit 220 270
Selling, general and administrative expenses (216) (197)
Interest expense (36) -
Interest income - 1
Other expenses, net - -
------------- --------------
Loss before income taxes (32) 74
Provision for income taxes - -
------------- --------------
Profit (loss) before minority interests (32) 74
Minority interest 14 (12)
------------- --------------
Net income/(loss) (18) 62
============= ==============
Weighted Average Number of Shares Outstanding 35,991,954 13,591,964
Loss per common share (0.00) 0.00
============= ==============
See Notes to Unaudited Consolidated Financial Statements
4
<PAGE>
OPAL TECHNOLOGIES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
For the three months ended
March 31,
---------------------------------
1998 1997
--------------- ---------------
US$`000 US$`000
--------------- ---------------
<S> <C> <C>
Cash flow from operating activities
Net income/(losses) (18) 62
Adjustments to reconcile net income /(loss) to net cash provided by /
(used in) operating activities -
Depreciation of property, machinery & equipment 21 24
Amortization of good will 3 2
Amortization of licensing costs 12 13
Minority interest (14) 12
(Increase)/Decrease in operating assets -
Accounts receivable, net (175) (399)
Prepayments, and other current assets (9) (99)
Inventories, net (199) 31
Increase /(Decrease) in operating liabilities -
Accounts payables (245) 172
Accrued liabilities (98) (37)
Taxation payable - -
Non-current payable (177) -
------------ -----------
Net cash provided by/(used in) operating activities (898) (219)
------------ -----------
Cash flows from investing activities
Acquisition of property, machinery & equipment (908) (6)
(Advance to) Repayment from a shareholder 29 -
(Advance to) Repayment from a director 3 (5)
(Advance to) Repayment from a related company - 90
------------ -----------
Net cash provided by/(used in) investing activities (876) 79
------------ -----------
Cash flows from financing activities
Issuance of common shares - -
New loans from a shareholder - 161
New loans from PRC joint venture partner 1 (2)
Net short-term bank loan 364 -
Other loans 24
Repayment of loans from a shareholder
------------ -----------
Net cash provided by/(used in) financing activities 389 159
------------ -----------
Effect of cumulative translation adjustments 15 46
Net increase / (decrease) in cash and bank deposits (1,370) 65
------------ -----------
Cash and bank deposits, as of beginning of period 1,453 67
------------ -----------
Cash and bank deposits, as of end of period 83 132
============ ===========
</TABLE>
See Notes to Unaudited Consolidated Financial Statements
5
<PAGE>
OPAL TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS
1. INTERIM PRESENTATION
The interim financial statements were prepared pursuant to the requirements
for reporting on Form 10-QSB. The December 31, 1997 balance sheet data was
derived from audited financial statements but does not include all
disclosures required by generally accepted accounting principles. 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, 1997. 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. ACQUISITION OF OPERATING BUSINESSES
The acquisition of Opal Agriculture Development Limited and Triple Star
Holding Limited 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 (49,000,000 common
shares and 1,000,000 preferred shares) and the issuance of Series A
preferred stock. The Series A preferred stock has a vote on all corporate
matters equal to thirty percent of the total vote, is not subject to
redemption and has a liquidation preference of $.001 per share.
3. MINORITY INTEREST
The minority interest reflects the 45% interest held by a non-related party
in Beijing Opal Agriculture Biochemistry, Co. Ltd., a PRC joint-venture
engaged in the manufacture and production of organic agricultural
fertilizer.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
Material Changes in Results of Operations
Three Months Ended September 30, 1997 Compared to the Three Months Ended
September 30, 1996.
Net Sales. Net sales for the three months ended March 31, 1998 increased by
US$28,000 or 7% to US$440,000 from US$412,000 for the three months ended March
31, 1997. This increase resulted from increased production of liquid fertilizer
made possible by the new manufacturing facility.
Gross Profits. Gross profits for the three months ended March 31, 1998 decreased
by US$50,000 or 18% to US$220,000 from US$270,000 for the same period last year.
The gross profit as a percent of sale for the three months ended March 31, 1998
dropped to 50% compared to 65% for the three months ended March 31, 1997. The
decrease in gross profit as a percent of sale is due to a one-off special
discount from the supplier of a key raw materials in the first quarter of 1997
which was not available in the current year.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses for the three months ended March 31, 1998 increased by
US$19,000 or 10% to US$216,000 from US$197,000 for the corresponding period of
the prior year due to additional sales expenses and additional supervisory costs
associated with the dry fertilizer line now being installed.
Net Loss. The net loss for the three months ended March 31, 1998 was US$18,000
compared with net profit of US$62,000 for the corresponding period of the prior
year. The net loss is attributable to a combination of lower gross profit
margins, higher selling, general and administrative expenses and a small
increase in interest expense.
Changes in Financial Condition, Liquidity and Capital Resources
For the past twelve months, the Company has funded its operations and
capital requirements with loans from the parent company and its PRC
joint-venture partner, the sale of common stock and a bank loan. As of March 31,
1998, the Company had cash US$83,000 and working capital of US$1,958,000. This
compares with cash of US$132,000 and working capital of US$858,000 as of March
31, 1997.
Net cash used in operating activities increased to US$898,000 for the three
months ended March 31, 1998 from US$219,000 for the three months ended March 31,
1997. This increase resulted from an increase in the loss from operations,
accounts receivable, other assets and inventories and a decrease in accounts
payable, accrued liabilities and non-current payables.
Net cash used in investing activities increased to US$876,000 for the three
months ended March 31, 1997. This increase is primarily due to additional
expenditures for the acquisition of machinery and equipment which was partially
offset by an advance from a shareholder.
Net cash provided by financing activities increased to US$389,000 for the
three months ended March 31, 1998 from US$159,000 for the three months ended
March 31, 1997. This increase is attributable to proceed from a bank loan and
other loans.
The Company is currently installing its solid fertilizer production line
and anticipates having this line operational during the third quarter of 1998.
The Company anticipates that this will require approximately US$2,250,000 for
completion of the solid fertilizer line and the additional working capital
needed to operate this line. For this purpose, the Company has arranged a
short-term loan from a related party. Apart from this loan, the Company does not
believe it will require additional capital for the next twelve months unless it
accelerates its plan to build an additional facility.
7
<PAGE>
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
1. Form 8-K of the Company dated January 16, 1998 reporting on the
change in the Registrant's Certifying Accountant.
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: May 15, 1998 By:
--------------------------------
John K. C. Koon
President and Chief Executive
Officer
Dated: May 15, 1998 By:
--------------------------------
Kenneth Poon
Chief Financial Officer
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-mos
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 83
<SECURITIES> 0
<RECEIVABLES> 2,765
<ALLOWANCES> 0
<INVENTORY> 841
<CURRENT-ASSETS> 4,106
<PP&E> 14,634
<DEPRECIATION> 0
<TOTAL-ASSETS> 19,819
<CURRENT-LIABILITIES> 2,148
<BONDS> 3,340
0
0
<COMMON> 36
<OTHER-SE> 11,660
<TOTAL-LIABILITY-AND-EQUITY> 19,819
<SALES> 440
<TOTAL-REVENUES> 440
<CGS> 220
<TOTAL-COSTS> 220
<OTHER-EXPENSES> 252
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (32)
<INCOME-TAX> 0
<INCOME-CONTINUING> (18)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (18)
<EPS-PRIMARY> .00
<EPS-DILUTED> .00
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