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, 2000
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
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
Unit 2810, 28/F, Shun Tak Centre, West Tower,
200 Connaught Road, Central, Hong Kong
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(Address of principal executive offices)
852-2517-2674
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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 August 15, 2000, 67,241,964 shares of Common Stock of the issuer were
outstanding.
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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, 2000 and
December 31, 1999............................................... 3
Consolidated Statements of Operations for the three months
and six months ended June 30, 2000 and 1999..................... 5
Consolidated Statements of Cash Flows for the six months ended
June 30, 2000 and 1999.......................................... 6
Notes to Consolidated Financial Statements...................... 7
ITEM 2. Management's Discussion and Analysis or Plan of Operations....... 8
PART II - OTHER INFORMATION............................................... 10
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
OPAL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
June 30, December 31,
2000 1999
----------- -------------
US$`000 US$`000
----------- -------------
ASSETS:
Current assets:
Cash and bank deposits 8,232 19
Accounts receivable, net 168 285
Due from a director 1 1
Prepayments and other current assets 121 169
Inventories, net 933 954
------------ ----------
Total current assets 9,455 1,428
Property, machinery and equipment, net 7,950 8,045
Construction-in-progress 9,747 9,170
Licensing costs, net 776 803
Goodwill, net 161 166
Investment 4,882 4,882
============ ==========
Total assets 32,971 24,494
============ ==========
LIABILITIES AND MINORITY INTERESTS AND
SHAREHOLDERS' EQUITY
Current liabilities:
Short-term borrowings 4,417 870
Accounts payable 3,617 4,475
Accrued liabilities 389 584
Due to a director 7 7
Due to a related company - 84
Taxation payable 38 38
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Total current liabilities 8,468 6,058
Convertible bond 10,000 -
Long-term borrowings - 2,053
Loan from PRC joint venture partner 686 686
Loan from a shareholder 1,766 2,908
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Total liabilities 20,920 11,705
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Minority interests 1,774 1,955
Shareholders'equity:
Common stock; par value US$0.001:
- authorized - 100,000,000 shares
as of December 31, 1999 and 200,000,000
shares as of June 30, 2000
- outstanding and fully paid - 60,991,964
shares as of December 31, 1999 and 67,241,964
shares as of June 30, 2000 67 61
Preferred stock, par value US$0.001:
- authorized - 25,000,000 shares as of December
31, 1999 and June 30, 2000
- outstanding and fully paid - 100,000 shares as
of December 31, 1999 and June 30, 2000 0 0
Additional paid-in capital 17,775 17,281
Accumulated losses (7,525) (6,475)
Cumulative translation adjustments (40) (33)
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Total shareholders' equity 10,277 10,834
------------ ----------
Total liabilities, minority interests and
shareholders' equity 32,971 24,494
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See Notes to Consolidated Financial Statements
3
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OPAL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
For the three For the six
months ended months ended
June 30, June 30,
----------------------- --------------------
2000 1999 2000 1999
--------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales 25 184 57 214
Cost of goods sold (14) (130) (37) (145)
----------- ------------ ----------- ------------
Gross Profit 11 54 20 69
Selling, general and administrative expenses (498) (522) (1,070) (816)
Interest expense, net (116) (64) (181) (116)
Other expenses, net 0 0 0 0
----------- ------------ ----------- ------------
Profit / (Loss) before income taxes (603) (532) (1,231) (863)
Provision for income taxes 0 0
0 0
----------- ------------ ----------- ------------
Profit (loss) before minority interests (603) (532) (1,231) (863)
Minority interest 98 0 181 151
----------- ------------ ----------- ------------
Net income / (loss) (505) (466) (1,050) (712)
----------- ------------ ----------- ------------
Profit / (loss) per common share .01 .01 .02 .02
----------- ------------ ----------- ------------
Average Weighted Shares Outstanding 67,241,964 42,241,964 67,241,964 42,241,964
=========== ============ ============ ============
</TABLE>
4
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OPAL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the six months ended
June 30,
------------------------------
2000 1999
--------------- -----------
US$`000 US$`000
--------------- -----------
Cash flow from operating activities
Net loss (1,050) (712)
Adjustments to reconcile net income /(loss) to
net cash in operating activities -
Depreciation of property, machinery & equipment 125 48
Amortization of licensing costs 27 27
Amortization of good will 5 5
Net loss on disposals of fixed assets 4 0
Minority interest (181) (151)
(Increase)/Decrease in operating assets -
Accounts receivable 117 (4)
Prepayments, and other current assets 48 (22)
Inventories, net 21 (102)
Increase /(Decrease) in operating liabilities -
Accounts payables (858) (109)
Accrued liabilities (195) 76
Taxation payable 0 0
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Net cash (used in) operating activities (1,937) (944)
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Cash flows from investing activities
Acquisition of property, machinery & equipment (615) (66)
Proceeds from disposal of fixed assets 4 0
(Advance to) Repayment from a shareholder 0 0
(Advance to) Repayment from a director 0 4
(Advance to) Repayment from a related company (84) 5
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Net cash (used in) investing activities (695) (57)
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Cash flows from financing activities
Issuance of common stock 500 603
Issuance of convertible bond 10,000 0
Short-term borrowings 1,494 0
Other loans 0 440
Loans from PRC joint venture partner 0 0
Repayment of loans from a shareholder (1,142) (65)
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Net cash provided by financing activities 10,852 978
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Effect of cumulative translation adjustments (7) 0
Net increase in cash and bank deposits 8,213 (23)
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Cash and bank deposits, as of beginning of period 19 384
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Cash and bank deposits, as of end of period 8,232 361
=========== ==============
See Notes to Consolidated Financial Statements
5
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OPAL TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO 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, 1999 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' report on Form 10-KSB for the year ended December 31, 1999. 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
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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 June 30, 2000 Compared to the Three Months Ended June 30,
1999.
Net Sales. Net sales for the three months ended June 30,2000 decreased by
US$159,000 or 86.4% to US$25,000 from US$184,000 for the three months ended June
30, 2000. This decrease is attributable to a decrease in the sale of liquid
fertilizer because of a lack of working capital. No granular fertilizers were
produced during either the three months ended June 30, 2000 or June 30, 1999.
Gross Profits. Gross profits for the three months ended June 30,2000 decreased
by US$43,000 or 79.6% to US$11,000 from US$54,000 for the same period last year.
This decrease is attributable to the reduction in sales. Gross profit as a
percent of sales rebounded to 44% for the three months ended June 30, 2000,
compared to the abnormally low 29% for the corresponding period of the prior
year. During the corresponding period of the prior year, gross profit as a
percent of sales was depressed because of discounted promotional sales made
during the Yunan Expo 99.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses for the three months ended June 30, 2000 decreased by
US$24,000 or 4.6% to US$498,000 from US$522,000 for the corresponding period of
the prior year. The decrease is attributable to better control on general and
administrative expenses.
Interest Expense, Net. Interest expense, net for the three months ended June 30,
2000 increased by US$52,000 or 81.3% to US$116,000 from US$64,000 for the
corresponding period of the prior year. This increase in interest expense
reflects increased borrowings by the Company to cover its net operating losses
and interest accrued on the convertible notes.
Net Loss. The net loss after accounting for the minority interest for the three
months ended June 30, 2000 was US$505,000 compared with net loss of US$466,000
for the corresponding period of the prior year. The increase in the net loss is
attributable to reduced sales and higher interest charges which were offset by
higher gross profit, margins and reduced selling, general and administrative
expenses.
Six Months Ended June 30, 2000 Compared to the Six Months Ended June 30, 1999.
Net Sales. Net sales for the six months ended June 30, 2000 decreased by
US$157,000 or 73.4% to US$57,000 from US$214,000 for the six months ended June
30, 2000. This decrease is attributable to a decrease in the sales of liquid
fertilizer because of a lack of working capital and the lack of any granular
fertilizer production.
Gross Profits. Gross profits for the six months ended June 30, 2000 decreased by
US$108,000 or 74.5% to US$37,000 from US$145,000 for the same period last year.
This decrease is attributable to a lack of granular fertilizer sales on which
there is a higher gross profit margin. Gross profit as a percent of sales were
35% for the six months ended June 30, 2000, compared to 32% for the
corresponding period of the prior year.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses for the six months ended June 30, 2000 increased by
US$254,000 or 31.1% to US$1,070,000 from US$816,000 for the corresponding period
of the prior year. The increase is attributable to some unusual expenditures
incurred by the Company during March 2000. These expenditures are related to our
sales office in Shanghai which were not provided for in the previous accounts.
Interest Expense, Net. Interest expense, net for the six months ended June 30,
2000 increased by US$65,000 or 56.0% to US$181,000 from US$116,000 for the
corresponding period of the prior year. This increase in interest expense
reflects increased borrowings by the Company to cover its net operating losses
and interest accrued on the convertible notes.
7
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Net Loss. The net loss after accounting for the minority interest for the six
months ended June 30, 2000 was US$1,050,000 compared with net loss of US$712,000
for the corresponding period of the prior year. The increase in the net loss is
attributable to reduced sales, reduced gross profit margins, higher selling,
general and administrative expenses and increased interest charges.
Following the issuance of the convertible notes, the Company hired an
independent auditing firm to evaluate the Company, its assets and review its
business operation. As a result of this review, the Company is holding
discussions with its auditors concerning a possible write-down or write-off of
certain of the Company's assets. Therefore, the Company may incur a significant
charge in the quarter ended September 30, 2000 from the write-down or write-off
of assets.
As announced earlier in June 2000, the Company has undergone a change in
management. The new management has put greater emphasis on cost control.
The Company is currently assessing the raw materials needed as well as
additional equipment required to begin commercial operations of the granular
facility. The Company hopes to begin commercial operation at the Beijing
facility during the quarter ended December 31, 2000. Until commercial production
begins, the Company will continue to incur net operating losses.
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 third party loans.
As of June 30,2000, the Company had cash of US$8,232,000 and working capital of
$987,000. This compares with cash of US$19,000 and a working capital deficit of
$6,499,000 as of December 31, 1999.
Net cash used in operating activities increased to US$1,937,000 for the
three months ended June 30,2000 from US$944,000 for the three months ended June
30, 1999. This increase resulted from an increase in the net operating loss and
a decrease in operating liabilities which were partially offset by an increase
in depreciation and a decrease in operating assets.
Net cash provided by investing activities increased to US$695,000 for the
three months ended June 30, 2000 from US$57,000 used in investing activities for
the three month ended June 30, 1999. This increase in cash flows used in
investing activities is attributable to increased expenditures for machinery and
equipment which was partially offset by an advance from a related company.
Net cash provided by financing activities increased to US$10,852,000 for
the three months ended June 30, 2000 from US$978,000 for the three months ended
June 30, 1999. This increase is principally attributable to the US$10,000,000
received from the issuance of a convertible bond and the US$1,494,000 from other
short-term borrowings which were partially offset by the repayment of certain
shareholder loans.
With the proceeds from the convertible bond and the other short-term
borrowings, the Company believes that is has sufficient resources to fund its
operations and execute its current business plan.
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
8
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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: August 18, 2000 By: /s/ Eric Cheng
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Eric Cheng
President
Dated: August 18, 2000 By: /s/ Edmund Au
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Edmund Au
Chief Financial Officer
