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, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to .
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Commission File No. 1-12293
NATURAL WAY TECHNOLOGIES, INC.
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(Exact name of small business issuer as specified in its charter)
Nevada 87-0394313
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(State or other jurisdiction of (IRS Employer Identification No)
incorporation or organization)
One World Trade Centre, Suite 7865, New York, New York 10048
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(Address of principal executive offices)
(212) 938-0574
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(Issuer's telephone number)
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(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes No X
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As of May 15, 1997, 10,200,000 shares of Common Stock of the issuer were
outstanding.
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NATURAL WAY TECHNOLOGIES, INC.
INDEX
Page
Number
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets - March 31, 1997 and
December 31, 1996............................................. 3
Consolidated Statements of Operations - For the three
month periods ended March 31, 1997 and 1996................... 4
Consolidated Statements of Cash Flows - For the three
month periods ended March 31, 1997 and 1996................... 5
Notes to Consolidated Financial Statements.................... 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations..................................... 6
PART II - OTHER INFORMATION.............................................. 7
SIGNATURES............................................................... 8
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
NATURAL WAY TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets (Unaudited)
(Amounts expressed in United States $`000)
<TABLE>
March 31, 1997 December 31, 1996
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<S> <C> <C>
ASSETS:
Current Assets:
Cash $ 52 $ 1,204
Accounts Receivable, net 9,583 8,838
Other Receivable, net 1,731 -
Prepayments and Deposits 831 313
Inventories 595 675
Amount Due From Related Company 9 9
Amount Due From Companies Related to
Joint Venture Partners 434 500
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Total Current Assets 13,235 11,539
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Deferred Value Added Taxes Recoverable 162 122
Investment Deposit 3,792 3,792
Property, Plant and Equipment, net 2,246 2,828
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Total Assets $ 19,435 $ 18,281
======== =======
LIABILITIES & SHAREHOLDERS' EQUITY
Current liabilities
Short Term Borrowings $ 437 $ 1,084
Accounts Payable and Accruals 1,871 933
Loans From Related Company 944 1,640
Taxes Payable 1,857 410
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Total Current Liabilities 5,109 4,067
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Payable To Joint Venture Partners 4,459 4,261
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Minority Interest 1,985 2,698
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Shareholders' Equity
Common stock, par value, $0.001;
authorized 50,000,000 shares,
outstanding 10,200,000 shares at March 31,
1997 and 8,200,000 shares at December 31,
1996 10 8
Preferred stock, Series A convertible and
redeemable, par value $.001; authorized
15,000 shares, outstanding 4,000 shares
at March 31, 1997 - -
Preferred stock, Series B super voting,
par value $.001, 100,000 shares issued
and outstanding as of December 31, 1996
and March 31, 1997 - -
Additional paid-in capital 5,025 5,242
Retained earnings 2,929 1,791
Dedicated capital 39 211
Cumulative translation adjustments (121) 3
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Total Shareholders' Equity 7,882 7,255
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Total Liabilities and Shareholders' Equity $ 19,435 $ 18,281
======== =======
</TABLE>
See accompanying notes to condensed consolidated financial statements
3
<PAGE>
NATURAL WAY TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Statements of Operations (Unaudited)
(Amounts expressed in United States $`000)
Three Months Ended March 31,
1997 1996
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Net Sales $ 2,714 $ 0
Cost of Goods Sold 728 0
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Gross Profit 1,986 0
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Selling, General and Administrative Expenses (1,424) 0
Other Incomes, net 9 0
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Income Before Taxes 571 0
Provisions for Income Taxes 0 0
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Income before minority interest 571 0
Minority Interest 151 0
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Net Income $ 420 $ 0
======== =======
Net Income Per Common Share $ .04 $ -
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Weighted Average Number of
Shares Outstanding 10,200,000 1,000,000
=========== ==========
4
<PAGE>
NATURAL WAY TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
(Amounts Expressed in United States $`000)
<TABLE>
Three Months Ended March 31,
1997 1996
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<S> <C> <C>
Cash flows from operating activities:
Net Income $ 420 $ 0
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation (22) 0
Minority Interest (713) 0
(Increase) Decrease in operating assets
Accounts receivable (745) 0
Inventories 80 0
Other receivable (1,731) 0
Prepayments and deposits (518) 0
Amount due from companies related to joint venture partners 66 0
Deferred value added tax recoverable (40) 0
Increase (Decrease) in operating liabilites
Short-term borrowings (647) 0
Accounts payable and accruals 938 0
Amount due to a related company (696) 0
Taxes payable 1,447 0
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Net cash provided by (used in) operating activities (2,161) 0
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Cash flows from investing activities:
Cumulative Translation Difference (124) 0
FUND 504 0
Proceeds from the disposal of property, plant and equipment 604 0
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Net cash provided by (used in) investing activities 984 0
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Net increase (decrease) in cash (1,152) 0
Cash as of beginning of period 1,204 0
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Cash as of end of period $ 52 $ 0
======= ======
</TABLE>
5
<PAGE>
NATURAL WAY TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
March 31, 1997
1. Interim Financial Presentation
The interim financial statements are prepared pursuant to the requirements
for reporting on Form 10-QSB. The December 31, 1996 balance sheet data was
derived from audited financial statements and may 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 included in the Company's Form 10-KSB dated December 31,
1996. In the opinion of management, the interim financial statements reflect all
adjustments of a normal recurring nature necessary for a fair presentation of
the results for the interim periods presented.
2. Currency Presentation and Foreign Currency Translation
The Company's financial information is presented in U.S. dollars. The
translation of the financial statements of foreign subsidiaries into United
States dollars is performed for balance sheet accounts using closing exchange
rates in effect at the balance sheet date and for revenue and expense accounts
using an average exchange rate during each reporting period. The gains or losses
resulting from translation are included in shareholders' equity separately as
cumulative translation adjustments.
3. Business and Organization
Effective July 1, 1996, the Company acquired all of the issued and
outstanding stock of China Medical Development, Co., Ltd. ("CMDC"), in exchange
for 7,000,000 shares of common stock. CMDC is the owner of 70% interest in
Dunhua Huakung Pharmaceutical Co., Ltd., a sino-foreign joint venture engaged in
the manufacture and distribution of Chinese herbal medicine in the People's
Republic of China ("PRC"). Before the acquisition of CMDC, the Company has no
operation.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Material Changes in Results of Operations
Net sales for the three months ended March 31, 1997 were $2,714,000
compared to $0 for the three months ended March 31, 1996. The increase in net
sales was attributable to the acquisition of China Medical Development Co. Ltd.
("CMDC") and its joint venture interest in Dun Hua Huakung Pharmaceutical Co.
Ltd. ("DHHP").
Cost of goods sold for the three months ended March 31, 1997, increased to
$728,000 from $0 for the three months ended March 31, 1996. The increase in cost
of goods sold was attributable to the acquisition of CMDC.
Selling, general and administrative expenses for the three months ended
March 31, 1997, increased to $1,424,000 from $0 for the three months ended March
31, 1996. The increase in selling general and administrative expenses was
attributable to the acquisition of CMDC.
Other income for the three months ended March 31, 1997, increased to $9,000
from $0 for the three months ended March 31, 1996. The increase in other income
was attributable to interest received from bank deposit.
Minority interest represents the allocable share of income or loss
attributable to the 30% share of DHHP not owned by the Company during the three
months of 1997.
6
<PAGE>
Net income for the three months ended March 31, 1997, increased to $420,000
from $0 for the three months ended March 31, 1996 because of the acquisition of
CMDC.
Material Changes in Financial Condition, Liquidity and Capital Resources
As of March 31, 1997, the Company had working capital of $8.1 million and
cash balances of $52,000 as compared to working capital of $3.2 million and cash
balances of $1.2 million at December 31, 1996. The improvement in working
capital was attributable to cash flows from profitable operations.
As of March 31, 1997, the Company's only long-term obligation consisted of
$4.5 million payable to a joint venture partner relating to the acquisition of
additional operating assets from the joint venture partner.
Management believes that with its available equity and financing sources
and its existing capital, the Company has sufficient capital resources to fund
its current operations for the foreseeable future.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
1. 27.1 Financial Data Schedule
b) Reports on Form 8-K
None
7
<PAGE>
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.
NATURAL WAY TECHNOLOGIES, INC.
Date: May 15, 1997 By: /s/ Yiu Yat Hung
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Yiu Yat Hung, President and Principal
Executive Officer
Date: May 15, 1997 By: /s/ Ken Kangmao Wang
-----------------------------------------
Ken Kangmao Wang, Treasurer and Principal
Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-mos
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 52
<SECURITIES> 0
<RECEIVABLES> 9,583
<ALLOWANCES> 0
<INVENTORY> 595
<CURRENT-ASSETS> 13,235
<PP&E> 2,246
<DEPRECIATION> 0
<TOTAL-ASSETS> 19,435
<CURRENT-LIABILITIES> 5,109
<BONDS> 0
0
10
<COMMON> 2,929
<OTHER-SE> 4,943
<TOTAL-LIABILITY-AND-EQUITY> 19,435
<SALES> 2,714
<TOTAL-REVENUES> 2,714
<CGS> 728
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,425
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 420
<INCOME-TAX> 0
<INCOME-CONTINUING> 420
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 420
<EPS-BASIC> 0
<EPS-DILUTED> .04
</TABLE>
