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, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to .
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
- -------------------------------- ---------------------------------
(State or other jurisdiction of (IRS Employer Identification No)
incorporation or organization)
Rm. 2211-2215, Science and Technology Building, No. 1001
Shangbuzhong Road, Fution District Shenzhen, PRC
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(Address of principal executive offices)
011-07-55-369-9588
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(Issuer's telephone number)
One World Trade Centre, Suite 7865, New York, New York 10048
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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
As of February 1, 2000, 3,500,000 shares of Common Stock of the issuer were
outstanding.
<PAGE>
NATURAL WAY TECHNOLOGIES, INC.
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INDEX
Page
Number
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets - June 30, 1997 and
December 31, 1996.............................................3
Statements of Operations - For the three
month and six month periods ended June 30, 1997 and 1996......5
Consolidated Statements of Cash Flows - For the six
month periods ended June 30, 1997 and 1996....................6
Notes to Consolidated Financial Statements....................7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.....................................8
PART II - OTHER INFORMATION.................................................8
SIGNATURES..................................................................9
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
NATURAL WAY TECHNOLOGIES, INC.
Balance Sheets
Expressed in United States Dollars
(000)
December 31,
June 30, 1997 1996 (1)
------------- -------------
ASSETS
Total assets - -
============ =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Total liabilities - -
============ =============
Stockholders' equity (deficit):
Preferred stock, Series A convertible and
redeemable, par value US$0.001; issued and
outstanding 6,000 as of December 31, 1996
and 3,700 shares as of June 30, 1997 - -
Preferred stock, Series B, supervoting par
value US$0.001; issued and outstanding - 100,000
as of December 31, 1996 and June 30, 1997
Common stock, par value US$0.001; issued
and outstanding - 10,500,000 shares as of
December 31, 1996 and June 30, 1997 10 10
Additional paid in capital 5,922 5,922
Accumulated deficit (5,932) (5,932)
------------ -------------
Total stockholders' equity - -
------------ -------------
Total liabilities and stockholders' equity - -
============ =============
The accompanying notes are an integral part of these financial statements
3
<PAGE>
(1) In accordance with the Company's termination of its ownership of China
Medical Development Corporation ("CMDC") and its joint venture, the
following balances were removed from the original December 31, 1996 balance
sheet through a noncash transaction:
<TABLE>
Rmb '000 US$'000
<S> <C> <C>
Cash 9,999 1,205
Receivables 73,533 8,859
Amounts due from related companies 4,159 501
Prepayments, deposits and other 2,607 314
Inventories 5,618 677
Investment deposits 19,900 2,398
Deferred value-added tax recoverable 1,011 122
Property, plant and equipment 23,526 2,834
Accounts payable (9,016) (1,086)
Accrued expenses and other payables (5,591) (674)
Income taxes payable (13,648) (1,644)
Payable to a joint venture partners (35,450) (4,271)
Minority interest (22,450) (2,705)
------------ -----------
Deemed dividend - terminated joint venture interests 54,198 6,530
============ ===========
</TABLE>
The balance sheet as of December 31, 1996 presented on the prior page reflects
this transaction and restates the original balance sheet.
The accompanying notes are an integral part of these financial statements
4
<PAGE>
NATURAL WAY TECHNOLOGIES, INC.
Statements of Operations
Expressed in United States Dollars
(000)
<TABLE>
Three Months Ended Six Months Ended
June 30, June 30,
1997* 1996 1997* 1996
------- ------ ------- ------
<S> <C> <C> <C> <C>
Revenues $ 0 $ 0 $ 0 $ 0
Expenses:
Administrative expenses 0 8
Bad debt expenses 0 8
Foreign currency gain (3) - (3) -
---------- --------- -------- --------
Net income $ 3 $ (0) $ 3 $ (8)
========== ========= ======== ========
(Loss) per share $ (.00) $ (.00) $ (.00) $ (.00)
========== ========= ======== ========
Weighted average share outstanding 10,500,000 1,000,000 10,500,000 1,000,000
============ =========== ============ ===========
</TABLE>
* Gives retroactive effect to the Termination Agreement
The accompanying notes are an integral part of these financial statements
5
<PAGE>
NATURAL WAY TECHNOLOGIES, INC.
Statements of Cash Flows
Expressed in United States Dollars
(000)
<TABLE>
Six Months Ended June 30,
1997* 1996
------- -------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 3 $ (1,326)
Decrease in accrued expenses (2) 8
-------- ---------
Net cash provided by operating activities 1 0
-------- ---------
Cash flows from investing activities:
Investments in a subsidiary (4,200,000)
Deposit paid (1,400,000)
Effect of translation adjustments (3) (0)
-------- ---------
Net cash (used in) investing activities (3) (5,600,000)
-------- ---------
Cash flows from financing activities:
Proceeds from the issuance of preferred stock - Series A 5,600,000
Diminution of cash due to disposal of subsidiary (1,204) 0
-------- ---------
Net cash provided by financing activities (1,204) 5,600,000
-------- ---------
Net increase (decrease) in cash (1,206) 0
Cash at beginning of period 1,206 0
-------- ---------
Cash at end of period $ 0 $ 0
======== =========
</TABLE>
* Restated to give retroactive effect to the Termination Agreement
The accompanying notes are an integral part of these financial statements
6
<PAGE>
NATURAL WAY TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
June 30, 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
adjusted to give retroactive effect to the Termination Agreement 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 and the adjustments thereto because of the retroactive
effect of the Termination Agreement. 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. Termination Agreement
On June 6, 1997, the Company executed a Termination Agreement retroactively
effective to January 1, 1997 whereby the Company divested its interest in CMDC
in exchange for the return of the 7,000,000 shares of common stock and the
100,000 shares of Series B supervoting preferred stock originally issued in the
Exchange. This transaction has been accounted for as a discounted operation and
the results of operations have been excluded from continuing operations in the
statements of operations for calendar years 1996 and 1997.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Material Changes in Results of Operations
Because the Termination Agreement was effective retroactive to January 1,
1997, the Company had no reported operations during the six months ended June
30, 1997 and 1996.
The Company had no revenues for either the three months or six months ended
June 30, 1997 or 1996. However, for both the three months and six months ended
June 30, 1997, the Company had operating a foreign currency gain of $3,000
compared to no operating expenses or income for the corresponding period of the
prior year.
During the six months ended June 30, 1996, the Company issued 5,600 shares
of Series A convertible and redeemable preferred stock, par value $0.001 each
for $5,600,000. Each share of the Series A convertible and redeemable preferred
stock is convertible into the lesser of (i) 1,000 shares or (ii) $1,000 divide
by the average closing market price of the Company's common stock for the five
days immediately preceding the date of conversion, of shares of common stock of
the Company. The outstanding convertible and redeemable preferred stock is
redeemable at the option of the Company at any time after December 31, 1997 by
giving ten days notice at a price equal to $1,000 per share plus any accrued
dividend. In the first quarter of 1997, 2,300 Series A convertible and
redeemable preferred stock was converted into common stock.
On June 6, 1997, the Company executed a Termination Agreement retroactively
effective to January 1, 1997 whereby the Company divested its interest in CMDC
in exchange for the return of the 700,000 shares of common stock and the 100,000
shares of Series B supervoting preferred stock originally issued in the
Exchange. This transaction has been accounted for as a discontinued operation
and the results of operations have been excluded from continuing operations in
the statements of operations for calendar years 1996 and 1997.
Although the Company has no assets or operations, the Company believes that
it will be able to find a suitable candidate with which to merge or acquire.
PART II - OTHER INFORMATION
Item 5. None
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
1. Termination Agreement
2. 27.1 Financial Data Schedule
b) Reports on Form 8-K
None
8
<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: February 3, 2000 By: /s/ Yiu Yat On
---------------------------
Yiu Yat On, President
Date: February 3, 2000 By: /s/ Ma Ding Jie
---------------------------
Ma Ding Jie, Chief Financial Officer
TERMINATION AGREEMENT
TERMINATION AGREEMENT, dated June 6, 1997 but effective January 1, 1997 by
and between NATURAL WAY TECHNOLOGIES, INC., a Nevada corporation (hereinafter
"NWYT"), CHINA MEDICAL DEVELOPMENT CO., LTD. (hereinafter "CMDC") and NEW SILVER
EAGLE HOLDINGS LIMITED (hereinafter the "Shareholders") and collectively the
"Parties".
RECITALS
WHEREAS, NWYT and the shareholders of CMDC entered into an Exchange
Agreement (the "Agreement") on June 30, 1996 pursuant to which NWYT agreed to
acquire, and the shareholders of CMDC agreed to sell, 100% of the outstanding
securities of CMDC in exchange (the "Exchange") for 7,000,000 shares of common
stock (the "Exchange Shares") and 100,000 shares of Series B Preferred Stock
(the "Series B Shares");
WHEREAS, the Exchange was undertaken based upon various representations of
NWYT, including representation that NWYT was a reporting company under the
Securities Exchange Act of 1934, which, among other things, were intended to
assure that NWYT would be an attractive vehicle through which to raise capital;
WHEREAS, NWYT has been unable to raise the capital necessary to fully fund
the obligations of CMDC under its joint venture known as Dunhua Huakang
Pharmaceutical Co., Ltd. and
WHEREAS, it has come to the attention of NWYT that a significant amount of
the joint venture's receivables may be uncollectible, thereby acquiring
additional capital which NWYT does not have;
WHEREAS, in order to resolve any disputes arising with respect to
performance under the Agreement and the representations made therein, the
parties thereto desire to terminate the Agreement.
NOW THEREFORE, in consideration of the premises herein contained and the
mutual covenants hereinafter set forth, the parties hereto covenant and agree as
follows;
1. Termination of Agreement. The parties hereto hereby terminate the
Agreement effective as of January 1, 1997.
<PAGE>
2. Obligations of NWYT. NWYT hereby agrees:
a. to transfer all of the issued and outstanding shares of CMDC
held by NWYT to such persons as the Shareholder shall
instruct;
b. to utilize the funds to be provided pursuant to paragraph
3.b. below to redeem outstanding Series A Shares; and
c. to return to CMDC all corporate records and documents of or
pertaining to CMDC.
3. Obligations of CMDC and the Shareholder. CMDC and the Shareholder
hereby jointly agree;
a. to cause all of the Exchange Shares and Series B Shares to
be returned to NWYT for cancellation. Should CMDC and/or the
Shareholder be unable to return all of the Exchange Shares
and Series B Shares to NWYT, CMDC and/or the Shareholder
shall acquire in the open market such number of shares of
common stock and/or Series B Shares as shall be necessary to
cause a total of 7,000,000 shares of common stock an 100,000
shares of Series B Preferred Stock to be surrendered to NWYT
for cancellation. Should CMDC and/or the Shareholder be
unable to return all of the Exchange Shares and Series B
Shares, notwithstanding their efforts to acquire shares in
the open market, CMDC and/or the Shareholder shall pay to
NWYT an amount in cash equal to the fair market value or any
shares not so delivered as agreed upon by NWYT, CMDC and the
Shareholder or, at the election of the Shareholder, shall
offset those shares against the shares issuable pursuant to
paragraph 4 below;
b. to cause the sum of $4,607,100 to be paid to NWYT as
repayment of all amounts advanced to CMDC from NWYT pursuant
to the sale of the Series A Shares. If agreed to by NWYT,
CMDC may pay the sum of $4,607,100 directly to the holders
of the Series A Shares in redemption of such shares which
payment shall be deemed to satisfy CMDC's obligations
hereunder as well as the obligations of NWYT pursuant to
paragraph 2.b;
c. to cause the holders of the Series A Shares to agree, and to
execute such documents as shall be necessary, to permit the
redemption of the Series A Shares for $4,607,100; and
d. to return to NWYT all corporate records and documents of or
pertaining to NWYT.
<PAGE>
e. to assume all accrued expenses of NWYT (net of any cash of
NWYT).
4. Closing. The parties hereto shall hold a formal closing of this
Termination Agreement as soon as possible at such time and place as
the parties shall mutually agree ("Closing"). At Closing, NWYT shall
deliver the items called for by paragraph 2. CMDC and/or the
Shareholder shall deliver the items called for by paragraph 3.
5. Release and Indemnification. Effective on Closing,
a. NWYT releases CMDC and each of the pre-Exchange shareholders of
CMDC from all obligations and liability under or arising from the
Agreement and agrees to indemnify and hold CMDC and each of the
pre-Exchange shareholders of CMDC harmless from and against any
liability, cost, expense or claim which may be asserted or
imposed from time to time as a result of the Agreement or the
termination of the Agreement pursuant hereto.
b. CMDC and the Shareholder release NWYT from all obligations and
liability under or arising from the Agreement except as such
liability arise in connection with third party claims asserted as
a result of the Agreement or the termination of the Agreement
pursuant hereto.
7. Miscellaneous.
a. By execution of this Agreement, each of the parties hereto hereby
represents that it has the requisite power and authority to enter
into this Termination Agreement.
b. Unless required by applicable law or regulatory authority, none
of the parties will issue any report, statement or press release
to the general public, to the trade, to the general trade or
trade press, or to any third party (other than its advisors and
representatives ion connection herewith) or file any document,
relating to this Termination Agreement, except as may be mutually
agreed by the parties.
c. Each party hereto will bear its own expenses, including legal,
accounting and professional fees, incurred in connection with the
transactions contemplated hereby.
d. This Termination Agreement may be executed in multiple
counterparts, each of which shall be deemed an original and all
of which taken together shall be but a single instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of
the date of year first above written.
NATURAL WAY TECHNOLOGIES, INC.
By:
---------------------------
President
CHINA MEDICAL DEVELOPMENT LTD.
By:
----------------------------
Title:
-------------------------
SHAREHOLDER:
NEW SILVER EAGLE HOLDINGS LTD.
By:
----------------------------
Title:
-------------------------
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-mos
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 10
<OTHER-SE> (10)
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> (3)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 3
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
