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 September 30, 1999
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 December 15, 1999, 60,911,954 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 September 30, 1999 and
December 31, 1998................................................ 3
Consolidated Statements of Operations-for the three months
and nine months ended September 30, 1999 and 1998................ 4
Consolidated Statements of Cash Flows- for the nine months
ended September 30, 1999 and 1998................................ 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
CONSOLIDATED BALANCE SHEET
<TABLE>
September 30, 1999 December 31, 1998
------------------- -----------------
US$'000 US$'000
------------------- -----------------
<S> <C> <C>
ASSETS
Current assets
Cash and bank deposits 27 384
Accounts receivable, net 319 289
Due from a related company - 5
Prepayments and other current assets 177 148
Inventories, net 1,285 1,164
--------------- --------------
Total current assets 1,808 1,990
Property, machinery and equipment, net 8,467 8,454
Construction-in-progress 7,647 7,719
Licensing costs, net 816 856
Goodwill, net 168 176
Investment 5,040
--------------- --------------
Total assets 23,946 19,195
=============== ==============
LIABILITIES, MINORITY INTERESTS AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term borrowings 3,013 2,473
Accounts payable 399 762
Accrued liabilities 408 300
Due to a director 8 3
Taxation payable 38 38
--------------- --------------
Total current liabilities 3,866 3,576
Non-current payable 2,491 2,491
Loans from PRC joint venture partner 680 680
Loans from a shareholder 2,504 1,856
--------------- --------------
Total liabilities 9,541 8,603
--------------- --------------
Minority interests 2,172 2,391
--------------- --------------
Shareholders' equity:
Common stock, par value US$0.001:
- - authorized - 49,000,000 shares as of December
31, 1998 and September 30, 1999
- - outstanding and fully paid - 35,991,964 shares
as of December 31, 1998 and September 30, 1999 62 36
Preferred stock, par value US$0.001:
- - authorized - 1,000,000 shares as of December
31, 1998 and September 30, 1999
- - outstanding and fully paid - 100,000 shares of
December 31, 1998 and
September 30, 1999 - -
Additional paid in capital 17,325 12,306
Accumulated losses (5,102) (4,089)
Cumulative translation adjustments (52) (52)
--------------- --------------
Total shareholders' equity 12,233 8,201
--------------- --------------
Total liabilities, minority interest and shareholders' equity 23,946 19,195
=============== ==============
</TABLE>
See Notes to Unaudited Consolidated Financial Statements
3
<PAGE>
OPAL TECHNOLOGIES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
For the three months ended For the nine months ended
September 30 September 30
-------------------------- --------------------------
1999 1998 1999 1998
-------- ---------- ---------- --------
US$'000 US$'000 US$'000 US$'000
-------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Net sales 54 31 268 847
Cost of goods sold (26) (10) (171) (417)
-------- ---------- ---------- ----------
Gross profit 28 21 97 430
Selling, general and administrative expenses (345) (250) (1,161) (717)
Interest expenses, net (51) (41) (167) (120)
-------- ---------- ---------- ----------
Profit/(loss) before income taxes (368) (270) (1,231) (407)
Provision for income taxes 0 0 0 0
-------- ---------- ---------- ----------
Profit / (loss) before minority interests (368) (270) (1,231) (407)
Minority interest 67 43 218 58
-------- ---------- ---------- ----------
Net income / (loss) (301) (227) (1,013) (349)
======== ========== ========== ==========
Profit/(loss) per common share 0 0 0 0
======== ========== ========== ===========
</TABLE>
See Notes to Unaudited Consolidated Financial Statements
4
<PAGE>
OPAL TECHNOLOGIES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
For the nine months ended
September 30,
--------------------------------
1999 1998
------------- ------------
US$`000 US$`000
------------- -------------
<S> <C> <C>
Cash flow from operating activities
Net income/(losses) (1,013) (122)
Adjustments to reconcile net income /(loss) to net
cash provided by /
(used in) operating activities -
Depreciation of property, machinery & equipment 76 60
Amortization of good will 40 27
Amortization of licensing costs 8 5
Minority interest (219) (15)
(Increase)/Decrease in operating assets -
Accounts receivable, net (30) (491)
Prepayments, and other current assets (29) (40)
Inventories, net (121) (149)
Increase /(Decrease) in operating liabilities -
Accounts payables (363) (125)
Accrued liabilities 108 (129)
Taxation payable 0 0
------------- -------------
Net cash provided by/(used in) operating activities (1,543) (979)
------------- -------------
Cash flows from (used in) investing activities
Acquisition of property, machinery & equipment (17) (1,610)
(Advance to) Repayment from a shareholder 394
(Advance to) Repayment from a director 20 2
(Advance to) Repayment from a related company 5 0
------------- -------------
Net cash provided by/(used in) investing activities 8 (1,214)
------------- -------------
Cash flows from financing activities
Short-term bank loan 603 592
Other loans (63) 145
Increase / (Decrease) in non-current payable 0 (177)
Loans from PRC joint venture partner 0 1
Loans from a shareholder 648 282
------------- -------------
Net cash provided by/(used in) financing activities 1,178 843
------------- -------------
Effect of cumulative translation adjustments 0 31
------------- -------------
Net increase / (decrease) in cash and bank deposits (357) (1,319)
Cash and bank deposits, as of beginning of period 384 1,453
------------- -------------
Cash and bank deposits, as of end of period 27 134
============= =============
</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, 1998 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, 1998. 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. 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 OR PLAN OF OPERATIONS
This report 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.
Material Changes in Results of Operations
Three Months Ended September 30, 1999 Compared to the Three Months Ended
September 30, 1998
Net Sales. Net sales for the three months ended September 30, 1999 increased by
US$23,000 or 74.2% to US$54,000 from US$31,000 for the three months ended
September 30, 1998. This increase reflects more normal levels of sales of the
Company's liquid fertilizers. The Company is currently not producing granular
fertilizer because of a lack of working capital.
Gross Profit. Gross profit for the three months ended September 30, 1999
increased by US$7,000 or 33.3% to US$28,000 from US$21,000 for the corresponding
period of the prior year. This increase is attributable to increased sales.
Gross profit as a percent of sales declined to 51.9% for the three months ended
September 30, 1999 compared to 67.7% for the corresponding period of the prior
year. This decrease in gross profit percentage is attributable to liquids which
have a lower profit margin being a higher percentage of total sales.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses for the three months ended September 30, 1999 increased
by US$95,000 to US$345,000 from US$250,000 for the corresponding period of the
prior year. This increase resulted from the Company adding additional sales and
administrative personnel in anticipation of full production on the dry
fertilizer line.
Interest Expense, Net. Interest expense, net for the three months ended
September 30, 1999 increased by US$10,000 or 24.4% to US$51,000 from US$41,000
for the corresponding period of the prior year. This increase in interest
expense reflects increased borrowings by the Company to finance the equipment
for the dry fertilizer line at the Beijing facility.
Net Loss. The net loss for the three months ended September 30, 1999 was
US$301,000 compared with a net loss of US$227,000 for the corresponding period
of the prior year. The increase in net loss is attributable to lower gross
profit, increased selling, general and administrative expenses and higher
interest charges.
Nine Months Ended September 30, 1999 Compared to the Nine Months Ended September
30, 1998.
Net Sales. Net sales for the nine months ended September 30, 1999 decreased by
US$579,000 or 68.4% to US$268,000 from US$847,000 for the nine months ended
September 30, 1998. This decrease reflects more normal sales of the Company's
liquid fertilizers and reduced sales of granulars because of a lack of working
capital.
Gross Profits. Gross profits for the nine months ended September 30, 1999
decreased by US$333,000 or 77.4% to US$97,000 from US$430,000 for the
corresponding period of the prior year. This decrease is attributable to reduced
sales volume. Gross profit as a percent of sales was 36.2% for the nine months
ended September 30, 1999 compared to 50.8% for the corresponding period of the
prior year. This decrease in gross profit is attributable to a higher percentage
of total sales which have a lower profit margin. Selling, General and
Administrative Expenses. Selling, general and administrative expenses for the
nine months ended September 30, 1999 increased by US$444,000 or 61.9% to
US$1,161,000 from US$717,000 for the corresponding period of the prior year.
This increase resulted from the adding additional sales and administrative
personnel in anticipation of fall production on the dry fertilizer line.
Interest Expense, Net. Interest expense, net for the nine months ended September
30, 1999 increased by $57,000 from net interest income of $120,000 for the
corresponding period of the prior year. This increase in interest expense
reflects increased borrowings by the Company to finance the equipment for the
dry fertilizer line at the Beijing facility.
Net Loss. The net loss for the nine months ended September 30, 1999 was
US$1,013,000 compared with net loss of US$349,000 for the corresponding period
of the prior year. The loss for the nine months ended September 30, 1999 was due
to lower gross profits, increased selling general and administrative expense,
and higher interest charges.
Changes in Financial Condition, Liquidity and Capital Resources
For the past twelve months, the Company has funded its operating and
capital requirements with loans from the parent company and its PRC
joint-venture partner and bank loan. As of September 30, 1999, the Company had
cash of US$27,000 and a working capital deficit of US$2,058,000. This compares
with cash of US$384,000 and a working capital deficit of US$1,586,000 as of
September 30, 1998.
Net cash used in operating activities increased to US$1,543,000 for the
nine months ended September 30, 1999 from US$979,000 for the nine months ended
September 30, 1998. This inecrease resulted from an increase in the net
operating loss which was partially offset by a net increase in operating assets.
Net cash from investing activities increased to US$8,000,000 for the nine
months ended September 30, 1999 from US$1,214,000 for investing activities the
corresponding period of the prior year. This resulted from reduces purchases of
property machinery and equipment and no repayment of a shareholder loans.
Cash flows from financing activities increased to US$1,178,000 for the nine
months ended September 30, 1999 from US$843,000 for the corresponding period of
the prior year. The increase is attributable to a net increase in bank loans.
To provide the working capital to operate the new organic granular
fertilizer line, the Company will be required to place additional equity or
develop additional lending sources. Without the availability of such sources of
funds, the Company will be unable to begin commercial production. While the
Company is currently negotiating with several banks in the PRC for funding and
other parties in Hong Kong, there is no assurance that such funding will be
forthcoming, or if forthcoming will be in sufficient amount for the Company to
execute its business plan.
Year 2000 Issues
In the opinion of management, the Company does not believe that year 2000 issues
will have a material impact on the Company's business result of operations or
financial condition.
7
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27.1 Financial Data Schedule
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: December 24, 1999 By: /s/ John K. C. Koon
-------------------------------------
John K. C. Koon
President and Chief Executive Officer
Dated: December 24, 1999 By: /s/ Tammy Ho
-------------------------------------
Tammy Ho
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-mos
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 27
<SECURITIES> 0
<RECEIVABLES> 319
<ALLOWANCES> 0
<INVENTORY> 1,285
<CURRENT-ASSETS> 1,808
<PP&E> 8,467
<DEPRECIATION> 0
<TOTAL-ASSETS> 23,946
<CURRENT-LIABILITIES> 3,866
<BONDS> 0
0
0
<COMMON> 62
<OTHER-SE> 12,171
<TOTAL-LIABILITY-AND-EQUITY> 23,946
<SALES> 268
<TOTAL-REVENUES> 268
<CGS> 171
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,161
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 167
<INCOME-PRETAX> (1,013)
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,013)
<EPS-BASIC> (.02)
<EPS-DILUTED> (.02)
</TABLE>
