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, 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
---------------------------------------------------------------
(Address of principal executive offices)
852-2541-1999
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(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 June 30, 1999 and
December 31, 1998.................................................. 3
Consolidated Statements of Operations-for the three months
and six months ended June 30, 1999 and 1998........................ 4
Consolidated Statements of Cash Flows-for the three months
and six months ended June 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
UNAUDITED CONSOLIDATED BALANCE SHEET
<TABLE>
June 30, 1999 December 31, 1998
--------------- ------------------
US$'000 US$'000
--------------- ------------------
<S> <C> <C>
ASSETS
Current assets
Cash and bank deposits 361 384
Accounts receivable, net 293 289
Due from a related company - 5
Prepayments and other current assets 170 148
Inventories, net 1,266 1,164
------------- --------------
Total current assets 2,090 1,990
Property, machinery and equipment, net 8,435 8,454
Construction-in-progress 7,756 7,719
Licensing costs, net 830 856
Goodwill, net 171 176
------------- --------------
Total assets 19,282 19,195
============= ==============
LIABILITIES, MINORITY INTERESTS AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term borrowings 3,013 2,473
Accounts payable 653 762
Accrued liabilities 376 300
Due to a director 7 3
Taxation payable 38 38
------------- --------------
Total current liabilities 4,087 3,576
Non-current payable 2,491 2,491
Loans from PRC joint venture partner 680 680
Loans from a shareholder 2,296 1,856
------------- --------------
Total liabilities 9,554 8,603
------------- --------------
Minority interests 2,240 2,391
Shareholders' equity:
Common stock, par value US$0.001:
- - authorized - 49,000,000 shares as of December
31, 1998 and June 30, 1999
- - outstanding and fully paid - 35,991,964 shares
as of December 31, 1998 and June 30, 1999 36 36
Preferred stock, par value US$0.001:
- - authorized - 1,000,000 shares as of December
31, 1998 and June 30, 1999
- - outstanding and fully paid - 100,000 shares of
December 31, 1998 and June 30, 1999 - -
Additional paid in capital 12,306 12,306
Accumulated losses (4,802) (4,089)
Cumulative translation adjustments (52) (52)
------------- --------------
Total shareholders' equity 7,488 8,201
------------- --------------
Total liabilities, minority interest and shareholders' equity 19,282 19,195
============= ==============
</TABLE>
See Notes to Unaudited Consolidated Financial Statements
3
<PAGE>
OPAL TECHNOLOGIES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
For the three months ended For the six months ended
June 30 June 30
-------------------------- -------------------------
1999 1998 1999 1998
----------- ----------- ---------- ----------
US$'000 US$'000 US$'000 US$'000
----------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Net sales 184 376 214 816
Cost of goods sold (130) (187) (145) (407)
----------- ----------- ---------- -----------
Gross profit 54 189 69 409
Selling, general and administrative expenses (522) (251) (816) (467)
Interest expenses, net (64) (43) (116) (79)
Other expenses, net 0
----------- ----------- ---------- ------------
Profit/Loss before income taxes (532) (105) (863) (137)
Provision for income taxes - - 0 15
----------- ----------- ---------- ------------
Profit / (loss) before minority interests (532) (105) (863) (137)
Minority interest - 1 151 15
----------- ----------- ---------- ------------
Net income / (loss) (466) (104) (712) (122)
=========== =========== ========== ============
Loss per common share (.01) 0 (.02) 0
=========== =========== ========== ============
</TABLE>
See Notes to Unaudited Consolidated Financial Statements
4
<PAGE>
OPAL TECHNOLOGIES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
For the six months ended
June 30,
---------------------------
1999 1998
----------- ----------
US$`000 US$`000
----------- ----------
<S> <C> <C>
Cash flow from operating activities
Net income/(losses) (712) 122)
Adjustments to reconcile net income /(loss) to net cash
provided by / (used in) operating activities -
Depreciation of property, machinery & equipment 48 60
Amortization of good will 27 27
Amortization of licensing costs 5 5
Minority interest (151) (15)
(Increase)/Decrease in operating assets -
Accounts receivable, net (4) (491)
Prepayments, and other current assets (22) (40)
Inventories, net (102) (149)
Increase /(Decrease) in operating liabilities -
Accounts payables (109) (125)
Accrued liabilities 76 (129)
Taxation payable - -
---------- ----------
Net cash provided by/(used in) operating activities (944) (979)
---------- ----------
Cash flows from investing activities
Acquisition of property, machinery & equipment (66) (1,610)
(Advance to) Repayment from a shareholder 394
(Advance to) Repayment from a director 4 2
(Advance to) Repayment from a related company 5 -
---------- ----------
Net cash provided by/(used in) investing activities (57) (1,214)
---------- ----------
Cash flows from financing activities
Issuance of common shares 603 592
New loans from a shareholder (65) 145
New loans from PRC joint venture partner 0 (177)
Net short-term bank loan 0 1
Other loans 440 282
---------- ----------
Net cash provided by/(used in) financing activities 978 843
---------- ----------
Effect of cumulative translation adjustments 0 31
---------- ----------
Net increase / (decrease) in cash and bank deposits (23) (1,319)
Cash and bank deposits, as of beginning of period 384 1,453
---------- ----------
Cash and bank deposits, as of end of period 361 134
========== ==========
</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>
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, general economic conditions, and changes in the assumptions used in
making such forward looking statements.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
The following should be read in conjunction with the consolidated financial
statements and notes thereto.
Material Changes in Results of Operations
Three Months Ended June 30, 1999 Compared to the Three Months Ended June 30,
1998
Net Sales. Net sales for the three months ended June 30, 1998 decreased by
US$192,000 or 51% to US$184,000 from US$376,000 for the corresponding period of
the prior year. This decrease is due to the limited operations of the fertilizer
facility because of a lack of working capital and the production of samples
which were given to potential customers to promote future business.
Gross Profit. Gross profit for the three months ended June 30, 1999 decreased by
US$145,000 or 76.7% to US$54,000 from US$189,000 for the corresponding period of
the prior year. This decrease resulted from a decline in sales and an increase
in cost of goods sold as a percentage of sales. Cost of goods sold were 70.7% of
sales for the three months ended June 30, 1999, a significant increase from the
49.7% for the corresponding period of the prior year. This increase resulted
from the Company's producing, a large quantity of samples which were given to
prospective customers.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses for the three months ended June 30, 1999 increased by
US$271,000 or 108% to US$522,000 from US$251,000 for the corresponding period of
the prior year. This increase resulted from the Company hiring additional sales
and administrative staff in anticipation of full production of the Beijing
facility. Unfortunately, full production did not occur because the Chinese joint
venture partners were unable to obtain the working capital necessary to operate
the facility.
Interest Expense. Interest expense increased by US$21,000 or 48.8% to US$64,000
for the three months ended June 30, 1998 from US$43,000 for the corresponding
period of the prior year. This increase resulted from additional borrowings to
finance the machinery and equipment for the dry fertilizer line.
Net Loss. Because of the foregoing, the net loss for the three months ended June
30, 1999 was US$466,000 compared with net income of US$104,000 for the
corresponding period of the prior year.
Six Months Ended June 30, 1999 Compared to the Six Months Ended June 30, 1998.
Net Sales. Net sales for the six months ended June 30, 1999 decreased by
US$602,000 or 73.8% to US$214,000 from US$816,000 for the six months ended June
30, 1998. This decrease is due to the limited operations of the fertilizer
facility because of a lack of working capital and the production of samples
which were given to potential customers to promote future business.
7
<PAGE>
Gross Profits. Gross profits for the six months ended June 30, 1999 decreased by
US$340,000 or 83% to US$69,000 from US$409,000 for the same period last year.
This decrease resulted both from the decline in net sales and an increase in
cost of goods sold as a percentage of sales. Cost of goods sold totalled were
67.8% of sales for the six months ended June 30, 1999 compared with 49.9% for
the corresponding period of the prior year. This increase resulted from the
Company producing samples which were given to prospective customers.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses for the six months ended June 30, 1999 increased by
US$349,000 or 75% to US$816,000 from US$467,000 for the corresponding period of
the prior year. This increase is attributable to the Company hiring additional
sales and administrative staff in anticipation of full production of the Beijing
facility. Unfortunately, full production did not occur because the Chinese joint
venture partners were unable to obtain the working capital necessary to operate
the facility.
Interest Expense. Interest expense increased by US$37,000 or 46.8% to US$116,000
for the six months ended June 30, 1999 from US$79,000 for the corresponding
period of the prior year. This increase resulted from increased borrowings to
finance machinery and equipment for the dry fertilizer line.
Net Loss. Because of the foregoing, the net loss for the six months ended June
30, 1999 was US$712,000 compared with net profit of US$122,000 for the
corresponding period of the prior year.
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, its PRC joint-venture
partner, the sale of common stock, a bank loan and a related party short-term
loans. As of June 30, 1999, the Company had cash of US$361,000 and a deficit in
working capital of US$1,997,000. This compares with cash of US$134,000 and a
deficit in working capital of US$1,504,000 as of June 30, 1998.
Net cash used in operating activities decreased to US$944,000 for the six
months ended June 30, 1999 from US$979,000 for the six months ended June 30,
1998. The increase in the net loss from operations was largly offset by a
smaller increase in accounts receivable and inventories and by an increase in
accrued liabilities.
Net cash used in investing activities decreased to US$57,000 for the six
months ended June 30, 1999 from US$1,214,000 for the six months ended June 30,
1998. This decrease is attributable to reduced expenditures for machinery and
equipment for the dry fertilizer line.
Net cash provided by financing activities increased to US$978,000 for the
six months ended June 30, 1999 from US$843,000 for the six months ended June 30,
1998. This increase is principally attributable to an increase in loans from
shareholders which was partially offset by reduced loans from third parties.
To provide for its working capital requirements and to repay its short term
debt, the Company during the next twelve months will need to place additional
equity or develope additional lending sources without which the Company will be
unable to meet its business plans.
Year 2000 Issue
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.
8
<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
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: December 22, 1999 By: /s/ John K. C. Koon
---------------------------------
John K. C. Koon
President and Chief Executive Officer
Dated: December 22, 1999 By: /s/ Tammy Ho
---------------------------------------
Tammy Ho
Chief Financial Officer
9
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-mos
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 361
<SECURITIES> 0
<RECEIVABLES> 293
<ALLOWANCES> 0
<INVENTORY> 1,266
<CURRENT-ASSETS> 2,090
<PP&E> 8,435
<DEPRECIATION> 0
<TOTAL-ASSETS> 19,282
<CURRENT-LIABILITIES> 4,087
<BONDS> 0
0
0
<COMMON> 36
<OTHER-SE> 7,452
<TOTAL-LIABILITY-AND-EQUITY> 19,282
<SALES> 214
<TOTAL-REVENUES> 214
<CGS> 145
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 816
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 116
<INCOME-PRETAX> (712)
<INCOME-TAX> 0
<INCOME-CONTINUING> (712)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (712)
<EPS-BASIC> (.02)
<EPS-DILUTED> (.02)
</TABLE>
