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, 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 November 1, 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 March 31, 1999 and
December 31, 1998................................................3
Unaudited Consolidated Statements of Operations-for the three
months ended March 31, 1999 and 1998.............................5
Unaudited Consolidated Statements of Cash Flows-for the three
months ended March 31, 1999 and 1998.............................6
Notes to Consolidated Financial Statements.......................7
ITEM 2. Management's Discussion and Analysis or Plan of Operations...........8
PART II - OTHER INFORMATION..................................................10
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
OPAL TECHNOLOGIES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEET
<TABLE>
March 31, December 31,
1999 1998
------------- --------------
US$`000 US$`000
------------- --------------
<S> <C> <C>
ASSETS:
Current assets:
Cash and bank deposits $ 596 $ 384
Accounts receivable, net 219 289
Due from a related company - 5
Prepayments and other current assets 144 148
Inventories, net 1,220 1,164
-------------- --------------
Total current assets 2,179 1,990
Property, machinery and equipment, net 8,456 8,454
Construction-in-progress 7,776 7,819
Licensing costs, net 843 856
Goodwill, net 173 176
============== ==============
Total assets 19,427 19,195
============== ==============
LIABILITIES AND MINORITY INTERESTS AND
SHAREHOLDERS' EQUITY
Current liabilities:
Short-term borrowings 3,049 2,473
Accounts payable 635 762
Accrued liabilities 275 300
Due to a director - 3
Taxation payable 38 38
-------------- --------------
Total current liabilities 3,997 3,576
Non-current payable 2,491 2,491
Loans from PRC joint venture partner 680 680
Loans from a shareholder 1,999 1,856
-------------- --------------
Total liabilities 9,167 8,603
-------------- --------------
Minority interests 2,305 2,391
-------------- --------------
Shareholders' equity:
Common stock; par value US$0.001:
- - authorized - 49,000,000 shares as of
December 31, 1998 and March 31, 1999
- - outstanding and fully paid - 35,991,954
shares as of December 31, 1998 and March 31, 1999 36 36
Preferred stock, par value US$0.001:
- - authorized - 1,000,000 shares as of December 31,
1998 and 1999
- - outstanding and fully paid - 100,000 shares as of
December 31, 1998 and March 31, 1999 - -
Additional paid-in capital 12,306 12,306
Accumulated losses (4,335) (4,089)
Cumulative translation adjustments (52) (52)
-------------- --------------
Total shareholders' equity $ 7,955 $ 8,201
-------------- --------------
Total liabilities, minority interests and shareholders' equity $ 19,427 $ 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
March 31,
-------------------------------
1999 1998
-------------- -------------
US$`000 US$`000
-------------- -------------
<S> <C> <C>
Net sales $ 30 $ 440
Cost of goods sold (15) (220)
-------------- -------------
Gross profit 15 220
Selling, general and administrative expenses (294) (216)
Interest expense, net (52) (36)
Other expenses, net -
-------------- -------------
(Loss) before income taxes 331 (32)
Provision for income taxes - -
-------------- -------------
Profit (loss) before minority interests (331) (32)
Minority interest 85 14
-------------- -------------
Net income/(loss) (246) (18)
============== =============
Profit/ (loss) per common share - -
============== =============
</TABLE>
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,
------------------------------
1999 1998
-------------- ------------
US$`000 US$`000
-------------- ------------
<S> <C> <C>
Cash flow from operating activities
Net income/(losses) (246) (18)
Adjustments to reconcile net income /(loss) to
net cash provided by / (used in) operating activities -
Depreciation of property, machinery & equipment 7 21
Amortization of good will 14 12
Amortization of licensing costs 3 3
Minority interest (85) (14)
(Increase)/Decrease in operating assets -
Accounts receivable, net 70 (174)
Prepayments, and other current assets 4 (9)
Inventories, net (56) (199)
Increase /(Decrease) in operating liabilities -
Accounts payables (127) (245)
Accrued liabilities (25) (98)
Taxation payable -
----------- ------------
Net cash provided by/(used in) operating activities (441) (721)
----------- ------------
Cash flows from investing activities
Acquisition of property, machinery & equipment (66) (908)
(Advance to) Repayment from a shareholder 29
(Advance to) Repayment from a director (3) 3
(Advance to) Repayment from a related company 5 -
----------- ------------
Net cash provided by/(used in) investing activities (64) (876)
----------- ------------
Cash flows from financing activities
Short-term bank loan 603 364
Other loans (29) 24
Increase/(Decrease) in non-current payable - (177)
Loans from PRC joint venture partner - 1
Loans from a shareholder 143 -
----------- ------------
Net cash provided by/(used in) financing activities 717 212
----------- ------------
Effect of cumulative translation adjustments - 15
Net increase / (decrease) in cash and bank deposits 212 (1,370)
----------- ------------
Cash and bank deposits, as of beginning of period 384 1,453
----------- ------------
Cash and bank deposits, as of end of period 596 83
=========== ============
</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. 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>
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
Material Changes in Results of Operations
Three Months Ended March 31, 1999 Compared to the Three Months Ended March 31,
1998.
Net Sales. Net sales for the three months ended March 31, 1999 decreased by
US$410,000 or 93.2% to US$30,000 from US$440,000 for the three months ended
March 31, 1998. This decrease is due to the limited operation 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 Profits. Gross profits for the three months ended March 31, 1999 decreased
by US$205,000 or 93.2% to US$15,000 from US$220,000 for the same period last
year. This decrease is attributable to decreased sales volume. Gross profit as a
percent of sales was 50.0% for the three months ended March 31, 1999, identical
to the for the corresponding period of the prior year.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses for the three months ended March 31, 1999 increased by
US$78,000 or 36.1% to US$294,000 from US$216,000 for the corresponding period of
the prior year. The increase is principally attributable to an increase in sales
expenses because of higher promotion costs.
Interest Expense, Net. Interest expense, net for the three months ended March
31, 1999 increased by US$16,000 or 44.4% to US$52,000 from US$36,000 for the
corresponding period of the prior year. This increase in interest expense
reflects increased borrowings by the Company.
Net Loss. The net loss for the three months ended March 31, 1999 was US$246,000
compared with net loss of US$18,000 for the corresponding period of the prior
year. The increase in the net loss is attributable to decreased sales volume,
higher selling, general and administrative expenses and higher interest charges.
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, its PRC joint-venture
partner and a bank loan. As of March 31, 1999, the Company had cash of
US$596,000 but a working capital deficit of 1,818,000. This compares with cash
of US$83,000 and a working capital deficit of US$1,958,000 as of March 31, 1998.
Net cash used in operating activities decreased to US$441,000 for the three
months ended March 31, 1999 from US$721,000 for the three months ended March 31,
1998. This decrease resulted mainly from a decrease in accounts receivable, a
decrease in inventories and a smaller decrease in accrued liabilities, which
were partially offset by the increase in the net loss.
7
<PAGE>
Net cash used in investing activities decreased to US$64,000 for the three
months ended March 31, 1999 from US$876,000 for the three month ended March 31,
1998. This increase is entirely attributable to reduced expenditures for
machinery and equipment .
Net cash provided by financing activities increased to US$717,000 for the
three months ended March 31, 1999 from US$212,000 for the three months ended
March 31, 1998. This increase is principally attributable to an increase in
short term borrowings a loan from a shareholder and the fact that there were no
repayments of shareholder loans during the three months ended March 31, 1999.
To provide for its working capital needs for the next twelve months, the
Company will require substantial additional equity or lending sources without
which the Company will be unable to meet 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.
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.
Dated: 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
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-mos
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 596
<SECURITIES> 0
<RECEIVABLES> 219
<ALLOWANCES> 0
<INVENTORY> 1,220
<CURRENT-ASSETS> 2,179
<PP&E> 8,456
<DEPRECIATION> 0
<TOTAL-ASSETS> 19,427
<CURRENT-LIABILITIES> 3,997
<BONDS> 0
0
0
<COMMON> 36
<OTHER-SE> 7,919
<TOTAL-LIABILITY-AND-EQUITY> 19,427
<SALES> 30
<TOTAL-REVENUES> 30
<CGS> 15
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 279
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 52
<INCOME-PRETAX> (246)
<INCOME-TAX> 0
<INCOME-CONTINUING> (246)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (246)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
