<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 2 to
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) January 23, 1997
BUREAU OF ELECTRONIC PUBLISHING, INC.
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other Jurisdiction of Incorporation)
1-13890 22-2894444
(Commission File No.) (I.R.S. Employer Identification No.)
745 Alexander Road Princeton, New Jersey 08540
(Address of principal executive offices) (zip code)
Registrant's telephone number including area code (609) 514-1600
<PAGE>
Item 7. Financial Statements and Exhibits.
This Amendment No. 2 is being filed to replace in their entirety
the financial statements contained in Amendment No. 1 to this current
report on Form 8-K.
(a) Financial Statements of Business Acquired
Financial Statements as of December 31, 1996 and 1995 of Jinan Chemical
Fibre Corporation - Plant One
Financial Statements as of December 31, 1996 and 1995 of Pacific
Chemical Group Limited
Financial Statements as of December 31, 1996 of Jinan Da Yang Chemical
Fibre Company Limited
(b) Pro Forma Financial Information
Pro Forma Financial Information (unaudited) of Bureau of Electronic
Publishing, Inc. as of and for the year ended December 31, 1996
(c) Exhibits -- Previously filed
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BUREAU OF ELECTRONIC PUBLISHING, INC.
By: /s/ J. S. Pan
J. S. Pan, Vice President and
Chief Financial Officer
Date: April 18, 1997
2
<PAGE>
JINAN CHEMICAL FIBRE CORPORATION - PLANT ONE
============================================
FINANCIAL STATEMENTS AS OF DECEMBER 31, 1996 and 1995
TOGETHER WITH AUDITORS' REPORT
F-1
<PAGE>
[LETTERHEAD OF ARTHUR ANDERSEN & CO]
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To: Jinan Chemical Fibre Corporation
We have audited the accompanying statements of net assets of Jinan Chemical
Fibre Corporation - Plant One ("Plant One") as of December 31, 1996 and 1995,
and the related statements of expenditures and cash flows for the years then
ended, expressed in Chinese Renminbi. These financial statements are the
responsibility of the management of Plant One. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Plant One as of December 31,
1996 and 1995, and the results of its operations and cash flows for the years
then ended in conformity with generally accepted accounting principles in the
United States of America.
Hong Kong,
April 1, 1997.
F-2
<PAGE>
JINAN CHEMICAL FIBRE CORPORATION - PLANT ONE
STATEMENTS OF EXPENDITURES
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
(Amounts in thousands)
1995 1996 1996
---- ---- ----
Rmb Rmb US$
Cost of goods transferred to other
production units of Jinan Chemical
Fibre Corporation and to third
parties 583,095 484,880 58,451
General and administrative expenses 17,790 16,472 1,986
------- ------- ------
Total costs and expenses 600,885 501,352 60,437
======= ======= ======
The accompanying notes are an integral part of these financial statements.
Translation of amounts from Renminbi (Rmb) into United States dollars (US$) for
the convenience of the reader has been made at the rate of US$1.00=Rmb8.2955
announced by the Bank of China on March 17, 1997. No representation is made
that the Renminbi amounts could have been, or could be, converted into United
States dollars at that rate on March 17, 1997 or at any other certain rate.
F-3
<PAGE>
JINAN CHEMICAL FIBRE CORPORATION - PLANT ONE
STATEMENTS OF NET ASSETS
AS OF DECEMBER 31, 1996 and 1995
(Amounts in thousands)
1995 1996 1996
---- ---- ----
Rmb Rmb US$
ASSETS
Current assets:
Accounts receivable 2,208 173 21
Inventories and spare parts, net 102,573 45,755 5,516
Prepayments and other current assets 12,489 16,666 2,009
------- ------- ------
Total current assets 117,270 62,594 7,546
Fixed assets, net 386,416 278,363 33,556
------- ------- ------
Total assets 503,686 340,957 41,102
------- ------- ------
LIABILITIES
Current liabilities:
Accounts payable 41,663 60,310 7,270
Accrued expenses and other liabilities 643 1,553 187
------- ------- ------
Total current liabilities 42,306 61,863 7,457
------- ------- ------
Net assets 461,380 279,094 33,645
======= ======= ======
The accompanying notes are an integral part of these financial statements.
Translation of amounts from Renminbi (Rmb) into United States dollars (US$) for
the convenience of the reader has been made at the rate of US$1.00=Rmb8.2955
announced by the Bank of China on March 17, 1997. No representation is made
that the Renminbi amounts could have been, or could be, converted into United
States dollars at that rate on March 17, 1997 or at any other certain rate.
F-4
<PAGE>
JINAN CHEMICAL FIBRE CORPORATION - PLANT ONE
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996 and 1995
(Amounts in thousands)
1995 1996 1996
---- ---- ----
Rmb Rmb US$
Cash flows from operating activities:
Total costs and expenses (600,885) (501,352) (60,437)
Adjustments to reconcile total costs and
expenses to net cash used in operating
activities:
Depreciation of property, plant and equipment 33,365 31,946 3,851
(Increase) decrease in assets:
Accounts receivable (2,208) 2,035 245
Inventories and spare parts (15,346) 56,818 6,849
Prepayments and other current assets 7,138 (4,177) (504)
Increase (decrease) in liabilities:
Accounts payable 38,583 18,647 2,248
Accrued expenses and other liabilities (86) 910 109
-------- -------- -------
Net cash used in operating activities (539,439) (395,173) (47,639)
-------- -------- -------
Cash flows from financing activities:
Net cash transferred from Jinan Chemical Fibre
Corporation - head office 539,439 395,173 47,639
-------- ------- -------
Net cash provided by financing activities 539,439 395,173 47,639
-------- ------- -------
Net changes in cash and cash equivalents - - -
-------- ------- -------
Cash and cash equivalents, beginning of year - - -
-------- ------- -------
Cash and cash equivalents, end of year - - -
======== ======= =======
The accompanying notes are an integral part of these financial statements.
Translation of amounts from Renminbi (Rmb) into United States dollars (US$) for
the convenience of the reader has been made at the rate of US$1.00=Rmb8.2955
announced by the Bank of China on March 17, 1997. No representation is made
that the Renminbi amounts could have been, or could be, converted into United
States dollars at that rate on March 17, 1997 or at any other certain rate.
F-5
<PAGE>
JINAN CHEMICAL FIBRE CORPORATION - PLANT ONE
NOTES TO THE FINANCIAL STATEMENTS
1. ORGANIZATION AND PRINCIPAL ACTIVITIES
Jinan Chemical Fibre Corporation ("JCFC") was incorporated in the People's
Republic of China (the "PRC") in 1990 as a stated-owned enterprise. JCFC is
principally engaged in the manufacturing of chemical fibre. Plant One is one of
the production units of JCFC and is principally engaged in the manufacturing of
Purified Terephthalic Acid ("PTA") for further processing by other production
units of JCFC. A small portion of PTA produced is sold to third parties.
Based on a joint venture agreement dated February 9, 1996 between JCFC and
Pacific Chemical Group Limited ("Pacific Chemical"), a company incorporated in
the British Virgin Islands, a Sino-foreign equity joint venture enterprise,
Jinan Da Yang Chemical Fibre Company Limited (the "Joint Venture"), was
established. Pursuant to the aforesaid agreement, Pacific Chemical will pay
US$14,995,000 in cash as its capital contribution for 51% of the equity interest
in the Joint Venture. JCFC will own 49% of the equity interest in the Joint
Venture and will contribute to the Joint Venture part of its production
facilities and other assets including certain machinery and equipment of Plant
One, valued at US$ 14,425,000, based on PRC regulations as its capital
investment. JCFC has also agreed to lease to the Joint Venture certain
production equipment, land and buildings of Plant One with an estimated
valuation of approximately Rmb 259 million for an annual payment of Rmb
35,083,000 for a period of three years. The rental charges will be adjusted and
mutually agreed by JCFC and Pacific Chemical after the initial three years'
rental period. The Joint Venture will also succeed to the business of
manufacturing and sale of PTA currently conducted by Plant One.
The Joint Venture was formally incorporated on March 27, 1996. As of December
31, 1996, JCFC had already contributed machinery and equipment valued at
US$14,425,000 to the Joint Venture. However, the injection of cash by Pacific
Chemical and the transfer of operations from Plant One to the Joint Venture had
not been completed.
Other key provisions of the joint venture agreement and related supplemental
agreements between JCFC and Pacific Chemical included the following:
o the joint venture period is 50 years commencing from the formation of the
Joint Venture on March 27, 1996;
o the profit and loss sharing ratio is the same as the percentage of equity
interests held by the respective investors;
o the Board of Directors consists of 7 members; 3 designated by JCFC and 4
designated by Pacific Chemical;
F-6
<PAGE>
1. ORGANIZATION AND PRINCIPAL ACTIVITIES (Cont'd)
o the production of the Joint Venture will first serve the demand of JCFC's
annual production requirements;
o the Joint Venture will guarantee approximately 70,000 tons of PTA per annum
to supply to JCFC at sales prices set by the PRC Price Bureau;
o JCFC will continue to provide management and administrative services to the
Joint Venture for a management fee; and
o JCFC will transfer to the Joint Venture the right to use electricity and
water, and the Joint Venture will pay JCFC a one-off license and know-how fee
for the use of certain fixed assets of Plant One. The total cost to the
Joint Venture will be approximately Rmb 62.6 million; and
o JCFC will purchase certain raw materials for the Joint Venture. Such raw
materials will be sold to the Joint Venture based on the prevailing market
prices of such raw materials at the date of utilization for production by the
Joint Venture.
Plant One conducts its operations in the PRC and accordingly is subject to
special considerations and significant risks not typically associated with
investments in equity securities of United States and Western European
companies. These include risks associated with, among others, political,
economic and legal environments and foreign currency exchange. These risks are
described further in the following paragraphs:
a. Political Environment
Plant One's results may be adversely affected by changes in the political
and social conditions in the PRC and by, among other things, changes in
governmental policies with respect to laws and regulations, inflationary
measures, currency conversion and remittance abroad, and rates and methods
of taxation. While the PRC government is expected to continue its economic
reform policies, many of the reforms are new or experimental and may be
refined or changed. It is also possible that a change in the PRC leadership
could lead to changes in economic policy.
b. Economic Environment
The economy of the PRC differs significantly from the United States economy
in many respects, including its structure, levels of development and capital
reinvestment, growth rate, government involvement, resource allocation,
self- sufficiency, rate of inflation and balance of payments position. The
adoption of economic reform policies since 1978 has resulted in a gradual
reduction in the role of state economic plans in the allocation of
resources, pricing and management of such assets, an increased emphasis on
the utilization of market forces, and rapid growth in the PRC economy.
However, such growth has been uneven among various regions of the country
and among various sectors of the economy.
F-7
<PAGE>
1. ORGANIZATION AND PRINCIPAL ACTIVITIES (Cont'd)
b. Economic Environment (Cont'd)
In recent years, the PRC economy has experienced periods of rapid economic
expansion and high rates of inflation, which have led to the adoption by the
central government from time to time of various corrective measures designed
to regulate growth and contain inflation. High inflation may cause the
government to take other actions which could inhibit economic activity in
the PRC and may thereby delay planned expansion. Such actions could
adversely affect Plant One's results of operations and expansion plans.
c. Legal Environment
The PRC's legal system is based on written statutes under which prior court
decisions may be cited as authority but do not have binding precedential
effect. The PRC's legal system is relatively new, and the government is
still in the process of developing a comprehensive system of laws, a process
that has been ongoing since 1979. Considerable progress has been made in
the promulgation of laws and regulations dealing with economic matters such
as corporate organization and governance, foreign investment, commerce,
taxation and trade. Such legislation has significantly enhanced the
protection afforded to foreign investors. However, experience with respect
to the implementation, interpretation and enforcement of such laws is
limited.
d. Foreign Currency Exchange
The Joint Venture expects that substantially all of its revenue will be
denominated in Renminbi. A portion of the future profits of the Joint
Venture, if any, will need to be converted to other currencies to meet its
foreign currency obligations such as payment of dividends declared. Both
the conversion of Renminbi into foreign currencies and the remittance of
foreign currencies abroad require PRC government approvals.
No assurance can be given that the Joint Venture will be able to convert
sufficient amounts of foreign currencies in the PRC foreign exchange market
in the future for payment of dividends.
2. BASIS OF PRESENTATION
Being one of the several production units of JCFC, Plant One did not maintain
separate accounting records in the past. The account balances of Plant One were
commingled with the accounts of other production units of JCFC. The statements
of expenditures and the statements of net assets of Plant One were prepared by
management by identifying those expenditures, and those assets and liabilities
directly related and/or attributable to Plant One.
For the years ended December 31, 1996 and 1995, majority of Plant One's products
was transferred to other production units of JCFC for further manufacturing and
processing.
F-8
<PAGE>
2. BASIS OF PRESENTATION (Cont'd)
Pursuant to the joint venture agreement between JCFC and Pacific Chemical (see
Note 1), the Joint Venture will supply PTA to JCFC at sales prices set by the
PRC Price Bureau. The ranges of sales prices of PTA according to notices/
correspondence from the State/Jinan City Price Bureau for the years ended
December 31, 1996 and 1995 as set by the PRC Price Bureau are summarized as
follows:
1995 1996 1996
---- ---- ----
Rmb Rmb US$
(Unaudited) (Unaudited) (Unaudited)
Price of PTA (per ton) 6,838 - 11,197 5,085 - 11,197 680-721
The historical average market prices published in certain PRC industry journals
are summarized as follows:
1995 1996 1996
---- ---- ----
Rmb Rmb US$
(Unaudited) (Unaudited) (Unaudited)
Market price of PTA (per ton) 12,227 7,668 924
If the sales prices set by the PRC Price Bureau had been adopted by Plant One
for its transfer of PTA to JCFC, the total sales revenue, net of value-added tax
("VAT"), and income (loss) before income taxes of Plant One would have been as
follows:
1995 1996 1996
---- ---- ----
Rmb'000 Rmb'000 US$'000
(Unaudited) (Unaudited) (Unaudited)
Revenue* 750,797 603,806 72,787
Total costs and expenses (600,885) (501,352) (60,437)
-------- -------- -------
Income before income taxes* 149,912 102,454 12,350
======== ======== =======
* There was a range of sales prices quoted by Jinan City Price Bureau during
the year ended December 31, 1996. The sales prices used for computation of
revenue and income before income taxes above are determined by the
management of JCFC by reference to the range of sales prices set by the
Price Bureau. The management of JCFC believed that the sales prices adopted
are reasonable.
If the historical market prices had been adopted by Plant One for its transfer
of PTA to JCFC, the total sales revenue, net of VAT, and income (loss) before
income taxes of Plant One would have been as follows:
1995 1996 1996
---- ---- ----
Rmb'000 Rmb'000 US$'000
(Unaudited) (Unaudited) (Unaudited)
Revenue 947,821 498,037 60,037
Total costs and expenses (600,885) (501,352) (60,437)
-------- -------- -------
Income (loss) before income taxes 346,936 (3,315) (400)
======== ======== =======
F-9
<PAGE>
2. BASIS OF PRESENTATION (Cont'd)
The sales revenue computed above based on the prices set by the PRC Price Bureau
and the historical market prices are both for reference purposes only and are
not actual transaction prices. No representation is made that Plant One's
products could have been, or could be sold to JCFC or third party customers at
these prices or at any other prices.
JCFC has four different major production units and, accordingly, 25% of the
total general and administrative expenses of JCFC were allocated to Plant One
and recorded in the accompanying financial statements.
The accompanying financial statements were prepared in accordance with generally
accepted accounting principles in the United States of America ("US GAAP").
This basis of accounting differs from that used in the statutory accounts of
JCFC, which were prepared in accordance with the accounting principles and other
relevant financial regulations applicable to state-owned enterprises as
established by the Ministry of Finance of the PRC.
Major adjustments made to conform to US GAAP included the following:
o Restatement of fixed assets purchased in foreign currencies using the market
exchange rates for translation;
o Adjustment for depreciation of fixed assets to reflect the useful economic
lives of fixed assets.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Taxation
(i) Income taxes
Pursuant to the relevant income tax laws applicable to state-owned
enterprises in the PRC, JCFC is subject to PRC income taxes at the
applicable tax rate (currently 33%) on the taxable income as reported
in its statutory accounts.
As one of the production units of JCFC, the majority of the Plant One's
products are transferred to other production units for further
processing. Since Plant One itself does not maintain a separate set of
accounting records, all of its income tax liabilities, if any, are
borne by JCFC. Accordingly, no income taxes have been provided in
Plant One's financial statements.
F-10
<PAGE>
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd)
a. Taxation (Cont'd)
(ii) Valued-added Tax
Plant One's sales are subject to VAT which is the principal indirect
tax on the sales of tangible goods and the provision of certain
specified services. The general VAT rate applicable to Plant One's
products is 17%.
b. Inventories
Inventories are stated at the lower of cost, on a first-in first-out basis,
or net realizable value. Costs of work-in-progress and finished goods
include direct materials, direct labor and an attributable portion of
production overheads. Net realizable value is calculated based on estimated
normal selling price less all further costs of production and the related
costs of marketing, selling and distribution. Provision is made for
obsolete, slow moving or defective items, where appropriate.
c. Fixed Assets and Depreciation
Property, plant and equipment are stated at cost less accumulated
depreciation. Depreciation of property, plant and equipment is computed
using the straight-line method over the assets' estimated useful lives,
after taking into account the estimated residual value of 5% of the costs of
the fixed assets. The estimated useful lives are as follows:
Buildings 25 years
Machinery and equipment 14 years
d. Foreign Currency Translation
Renminbi is not freely convertible into foreign currencies. All foreign
exchange transactions involving Renminbi must take place either through the
Bank of China or other institutions authorized to buy and sell foreign
currencies, or at a Foreign Exchange Adjustment Center.
Foreign currency transactions are translated into Renminbi at the exchange
rates at the dates of the transactions. Monetary assets and liabilities
denominated in foreign currencies are translated into Renminbi using the
exchange rates prevailing at the balance sheet dates. The resulting
exchange differences are recorded in the statements of expenditures.
F-11
<PAGE>
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd)
e. Use of Estimates
The preparation of financial statements in conformity with US GAAP requires
management to make estimates and assumptions that affect certain reported
amounts and disclosures. Accordingly, actual results could differ from
those estimates.
4. INVENTORIES AND SPARE PARTS
Inventories and spare parts comprised:
1995 1996 1996
---- ---- ----
Rmb'000 Rmb'000 US$'000
Raw materials 87,268 34,839 4,200
Finished goods 2,796 12,279 1,480
Spare parts 19,244 - -
Less: Net realizable value and
obsolescence provision (6,735) (1,363) (164)
------- ------ -----
Inventories and spare parts, net 102,573 45,755 5,516
======= ====== =====
5. Fixed Assets
Property, plant and equipment comprised:
1995 1996 1996
---- ---- ----
Rmb'000 Rmb'000 US$'000
Buildings 109,550 109,550 13,206
Machinery and equipment 427,010 310,115 37,384
-------- -------- -------
536,560 419,665 50,590
Less: Accumulated depreciation (150,144) (141,302) (17,034)
-------- -------- -------
Net book value 386,416 278,363 33,556
======== ======== =======
F-12
<PAGE>
The Joint Venture will be granted the right to use the parcel of land and
buildings presently occupied by Plant One for an annual rental of Rmb506,000 and
Rmb2,345,000 respectively. The rental period is not specified in the agreement.
6. MOVEMENTS IN NET ASSETS
Movements in net assets were as follows:
1995 1996 1996
---- ---- ----
Rmb'000 Rmb'000 US$'000
Beginning balance 522,826 461,380 55,618
Total costs and expenses for the year (600,885) (501,352) (60,437)
Net book value of fixed assets
transferred to the Joint Venture - (76,107) (9,175)
Net cash transferred from JCFC 539,439 395,173 47,639
-------- -------- -------
Ending balance 461,380 279,094 33,645
======== ======== =======
7. RETIREMENT PLAN
As stipulated by the regulations of the PRC government, JCFC has established a
defined contribution retirement plan for all of its staff. Under this plan, all
staff are entitled to a fixed life-long pension equal to their basic salaries at
their retirement dates. JCFC is required to make specific contributions to the
state-sponsored retirement plan at a rate of 25% of the basic salaries of the
staff. It has no future obligations for the pension payment or any other
post-retirement benefits beyond the annual contributions made. The PRC
government is responsible for the entire pension liabilities to these retired
employees. During the years ended December 31, 1996 and 1995, Plant One made
pension contributions of Rmb1,548,292 and Rmb1,681,368 respectively.
F-13
<PAGE>
PACIFIC CHEMICAL GROUP LIMITED
==============================
FINANCIAL STATEMENTS AS OF DECEMBER 31, 1995 AND 1996
TOGETHER WITH AUDITORS' REPORT
F-14
<PAGE>
[LETTERHEAD OF ARTHUR ANDERSEN & CO]
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To: Pacific Chemical Group Limited
We have audited the accompanying balance sheets of Pacific Chemical Group
Limited (a company incorporated in the British Virgin Islands) as of December
31, 1995 and 1996, and the related statements of expenditures, cash flows and
changes in shareholder's equity for the period from November 28, 1995 (date of
incorporation) to December 31, 1995 and for the year ended December 31, 1996,
expressed in United States dollars. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Pacific Chemical Group Limited
as of December 31, 1995 and 1996, and the results of its operations and cash
flows for the period from November 28, 1995 (date of incorporation) to December
31, 1995 and for the year ended December 31, 1996 in conformity with generally
accepted accounting principles in the United States of America.
Hong Kong,
April 1, 1997.
F-15
<PAGE>
PACIFIC CHEMICAL GROUP LIMITED
STATEMENTS OF EXPENDITURES
FOR THE PERIOD FROM NOVEMBER 28, 1995 (DATE OF INCORPORATION)
TO DECEMBER 31, 1995 AND FOR THE YEAR ENDED DECEMBER 31, 1996
(Expressed in United States dollars)
1995 1996
---- ----
General and administrative expenses $(2,158) $(121,852)
Provision for income tax - -
------- ---------
Net loss for the period/year $(2,158) $(121,852)
======= =========
F-16
<PAGE>
PACIFIC CHEMICAL GROUP LIMITED
BALANCE SHEETS AS OF DECEMBER 31, 1995 AND 1996
(Expressed in United States dollars)
1995 1996
---- ----
ASSET
Cash on hand $12,842 $ 20,888
======= ========
LIABILITIES
Accrued liabilities $ - $121,852
------- --------
SHAREHOLDERS' EQUITY
Share capital 2 8,048
Share premium 14,998 14,998
Accumulated deficit (2,158) (124,010)
------- --------
Shareholders' equity 12,842 (100,964)
------- --------
Total liabilities and shareholders' equity $12,842 $ 20,888
======= ========
F-17
<PAGE>
PACIFIC CHEMICAL GROUP LIMITED
STATEMENTS OF CASH FLOWS
FOR THE PERIOD FROM NOVEMBER 28, 1995 (DATE OF INCORPORATION)
TO DECEMBER 31, 1995 AND FOR THE YEAR ENDED DECEMBER 31, 1996
(Expressed in United States dollars)
1995 1996
---- ----
Cash flows from operating activities:
Net loss $(2,158) $(121,852)
Increase in accrued liabilities - 121,852
------- ---------
Net cash used in operating activities (2,158) -
Cash flows from financing activity:
Proceeds from issue of shares 15,000 8,046
------- ---------
Increase in cash and cash equivalents 12,842 8,046
Cash and cash equivalents, beginning of
period/year - 12,842
------- ---------
Cash and cash equivalents, end of period/year $12,842 $ 20,888
======= =========
F-18
<PAGE>
PACIFIC CHEMICAL GROUP LIMITED
STATEMENTS OF CHANGES IN SHAREHOLDER'S EQUITY
FOR THE PERIOD FROM NOVEMBER 28, 1995 (DATE OF INCORPORATION)
TO DECEMBER 31, 1995 AND FOR THE YEAR ENDED DECEMBER 31, 1996
(Expressed in United States dollars)
Share Share Accumulated
capital premium deficit Total
------- ------- ----------- -----
Contribution from a
shareholder $ 2 $14,998 $ - $ 15,000
Net loss - - (2,158) (2,158)
------ ------- --------- ---------
Balance as of December 31, 1995 2 14,998 (2,158) 12,842
Contribution from shareholders 8,046 - - 8,046
Net loss - - (121,852) (121,852)
------ ------- --------- ---------
Balance as of December 31, 1996 $8,048 $14,998 $(124,010) $(100,964)
====== ======= ========= =========
F-19
<PAGE>
PACIFIC CHEMICAL GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
(Amounts expressed in United States dollars)
1. ORGANIZATION AND OPERATIONS
The Company was incorporated in the British Virgin Islands on November 28, 1995.
Based on a joint venture agreement dated February 9, 1996 between Jinan Chemical
Fibre Corporation ("JCFC"), a company incorporated in the People's Republic of
China (the "PRC"), and the Company, a Sino-foreign equity joint venture
enterprise, Jinan Da Yang Chemical Fibre Company Limited (the "Joint Venture"),
was established. Pursuant to the aforesaid agreement, the Company will pay
$14,995,000 in cash as its capital contribution for 51% of the equity interest
in the Joint Venture. JCFC will own 49% of the equity interest in the Joint
Venture and will contribute to the Joint Venture part of its production
facilities and other assets including certain machinery and equipment, valued at
$14,425,000, based on PRC regulations as its capital investment. The Joint
Venture will also succeed to the business of manufacturing and sale of Purified
Terephthalic Acid currently conducted by a plant of JCFC.
The Joint Venture was formally incorporated on March 27, 1996. As of December
31, 1996, JCFC had already contributed machinery and equipment valued at
$14,425,000 to the Joint Venture. However, the injection of cash by the Company
and the transfer of operations from JCFC to the Joint Venture had not been
completed.
2. BASIS OF PRESENTATION
The accompanying financial statements were prepared in accordance with generally
accepted accounting principles in the United States of America.
F-20
<PAGE>
3. SHARE CAPITAL
Share capital comprised:
1995 1996
---- ----
Authorized
50,000 ordinary shares of $1 each $50,000 $50,000
======= =======
Issued and fully paid
2 ordinary shares of $1 each $ 2 $ 8,048
======= =======
During 1995, 2 ordinary shares of $1 each were issued at $7,500 each resulting
in a share premium of $14,998. During 1996, 8,046 additional ordinary shares of
$1 each were issued at par.
4. SUBSEQUENT EVENT
Subsequent to year end, the Company entered into a merger agreement with Bureau
of Electronic Publishing, Inc. ("BEPI"), a company incorporated in the United
States, JCFC and BEPI Acquisition Corporation ("BEPI Acquisition"), a company
incorporated in the British Virgin Islands and a wholly owned subsidiary of
BEPI. Pursuant to the merger agreement, the shareholders of the Company will
transfer their entire interests in the Company to BEPI Acquisition and will, in
return, receive an aggregate of 833,671.66 shares of Class A Preferred Stock of
BEPI.
F-21
<PAGE>
JINAN DA YANG CHEMICAL FIBRE COMPANY LIMITED
============================================
FINANCIAL STATEMENTS AS OF DECEMBER 31, 1996
TOGETHER WITH AUDITORS' REPORT
F-22
<PAGE>
[LETTERHEAD OF ARTHUR ANDERSEN & CO]
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To: Jinan Da Yang Chemical Fibre Company Limited
We have audited the accompanying balance sheet of Jinan Da Yang Chemical Fibre
Company Limited (a company incorporated in the People's Republic of China) as of
December 31, 1996, and the related statements of expenditures, cash flows and
changes in investors' equity for the period from March 27, 1996 (date of
incorporation) to December 31, 1996, expressed in Chinese Renminbi. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Jinan Da Yang Chemical Fibre
Company Limited as of December 31, 1996 and the results of its operations and
cash flows for the period from March 27, 1996 (date of incorporation) to
December 31, 1996, in conformity with generally accepted accounting principles
in the United States of America.
Hong Kong,
April 1, 1997.
F-23
<PAGE>
JINAN DA YANG CHEMICAL FIBRE COMPANY LIMITED
STATEMENT OF EXPENDITURES
FOR THE PERIOD FROM MARCH 27, 1996 (DATE OF INCORPORATION)
TO DECEMBER 31, 1996
Rmb US$
Operating expenses (640,525) (77,214)
Provision for income taxes - -
-------- -------
Net loss, carried forward (640,525) (77,214)
======== =======
The accompanying notes are an integral part of these financial statements.
Translation of amounts from Renminbi (Rmb) into United States dollars (US$) for
the convenience of the reader has been made at the rate of US$1.00=Rmb8.2955
announced by the Bank of China on March 17, 1997. No representation is made
that the Renminbi amounts could have been, or could be, converted into United
States dollars at that rate on March 17, 1997 or at any other certain rate.
F-24
<PAGE>
JINAN DA YANG CHEMICAL FIBRE COMPANY LIMITED
BALANCE SHEET AS OF DECEMBER 31, 1996
Rmb US$
ASSETS
Fixed assets, net 116,255,214 14,014,250
=========== ==========
INVESTORS' EQUITY
Share capital 116,895,739 14,091,464
Accumulated deficit (640,525) (77,214)
----------- ----------
Total investors' equity 116,255,214 14,014,250
=========== ==========
The accompanying notes are an integral part of these financial statements.
Translation of amounts from Renminbi (Rmb) into United States dollars (US$) for
the convenience of the reader has been made at the rate of US$1.00=Rmb8.2955
announced by the Bank of China on March 17, 1997. No representation is made
that the Renminbi amounts could have been, or could be, converted into United
States dollars at that rate on March 17, 1997 or at any other certain rate.
F-25
<PAGE>
JINAN DA YANG CHEMICAL FIBRE COMPANY LIMITED
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM MARCH 27, 1996 (DATE OF INCORPORATION)
TO DECEMBER 31, 1996
Rmb US$
Cash flows from operating activities:
Net loss (640,525) (77,214)
Adjustment to reconcile net loss to net changes in
cash and cash equivalents
Depreciation of machinery and equipment 640,525 77,214
-------- -------
Net changes in cash and cash equivalents - -
======== =======
The accompanying notes are an integral part of these financial statements.
Translation of amounts from Renminbi (Rmb) into United States dollars (US$) for
the convenience of the reader has been made at the rate of US$1.00=Rmb8.2955
announced by the Bank of China on March 17, 1997. No representation is made
that the Renminbi amounts could have been, or could be, converted into United
States dollars at that rate on March 17, 1997 or at any other certain rate.
F-26
<PAGE>
JINAN DA YANG CHEMICAL FIBRE COMPANY LIMITED
STATEMENT OF CHANGES IN INVESTORS' EQUITY
FOR THE PERIOD FROM MARCH 27, 1996 (DATE OF INCORPORATION)
TO DECEMBER 31, 1996
Accumulated
Capital deficit Total
------- ----------- -----
Rmb Rmb Rmb
Contribution from a joint venture
partner 116,895,739 - 116,895,739
Net loss - (640,525) (640,525)
----------- -------- -----------
Balance as of December 31, 1996 116,895,739 (640,525) 116,255,214
=========== ======== ===========
F-27
<PAGE>
JINAN DA YANG CHEMICAL FIBRE COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
1. ORGANIZATION AND PRINCIPAL ACTIVITY
Jinan Da Yang Chemical Fibre Company Limited (the "Company") was incorporated in
the People's Republic of China (the "PRC") on March 27, 1996 as a Sino-foreign
equity joint venture enterprise.
Based on a joint venture agreement dated February 9, 1996 between Pacific
Chemical Group Limited ("Pacific Chemical"), a company incorporated in the
British Virgin Islands and Jinan Chemical Fibre Corporation ("JCFC"), a company
incorporated in the PRC, the Company was established. Pursuant to the aforesaid
agreement, Pacific Chemical will pay US$14,995,000 in cash as its capital
contribution for 51% of the equity interest in the Company. JCFC will own 49%
of the equity interest in the Company and will contribute to the Company part of
its production facilities and other assets including certain machinery and
equipment, valued at US$14,425,000, based on PRC regulations as its capital
investment. JCFC has also agreed to lease to the Company certain production
equipment, land and buildings of Plant One with an estimated valuation of
approximately Rmb 259 million for an annual payment of Rmb 35,083,000 for a
period of three years. The rental charges will be adjusted and mutually agreed
by JCFC and Pacific Chemical after the initial three years' rental period. The
Company will also succeed to the business of manufacturing and sale of Purified
Terephthalic Acid ("PTA") currently conducted by a production plant of JCFC.
During the period, JCFC contributed machinery and equipment of valued at
US$14,425,000 to the Joint Venture. However, as of December 31, 1996, the
injection of assets by Pacific Chemical and the transfer of operations of a
production plant of JCFC to the Company had not been completed. The machinery
and equipment injected by JCFC to the Company is being used by JCFC for its own
operations without charge pending completion of the capital contribution by
Pacific Chemical.
Other key provisions of the joint venture agreement and related supplemental
agreements between JCFC and Pacific Chemical included the following:
o the joint venture period of the Company is 50 years commencing from the
formation of the Company on March 27, 1996;
o the profit and loss sharing ratio of the Company is the same as the
percentage of equity interests held by the respective investors;
o the Company's Board of Directors consists of 7 members; 3 designated by JCFC
and 4 designated by Pacific Chemical;
F-28
<PAGE>
1. ORGANIZATION AND PRINCIPAL ACTIVITY (Cont'd)
o the production of the Company will first serve the demand of JCFC's annual
production requirements;
o the Company will guarantee approximately 70,000 tons of PTA per annum to
supply to JCFC at sales prices set by the PRC Price Bureau;
o JCFC will provide management and administrative services to the Company for a
management fee; and
o JCFC will transfer to the Company the right to use electricity and water,
and the Company will pay JCFC a one-off license and know-how fee for the
use of certain fixed assets of JCFC. The total cost to the Company will be
approximately Rmb 62.6 million; and
o JCFC will purchase certain raw materials for the Company. Such raw materials
will be sold to the Company based on the prevailing market prices of such raw
materials at the date of utilization for production by the Company.
The Company conducts its operations in the PRC and accordingly is subject to
special considerations and significant risks not typically associated with
investments in equity securities of United States and Western European
companies. These include risks associated with, among others, political,
economic and legal environments and foreign currency exchange. These risks are
described further in the following paragraphs:
a. Political Environment
The Company's results may be adversely affected by changes in the
political and social conditions in the PRC and by, among other things,
changes in governmental policies with respect to laws and regulations,
inflationary measures, currency conversion and remittance abroad, and rates
and methods of taxation. While the PRC government is expected to continue
its economic reform policies, many of the reforms are new or experimental
and may be refined or changed. It is also possible that a change in the PRC
leadership could lead to changes in economic policy.
b. Economic Environment
The economy of the PRC differs significantly from the United States economy
in many respects, including its structure, levels of development and capital
reinvestment, growth rate, government involvement, resource allocation,
self- sufficiency, rate of inflation and balance of payments position. The
adoption of economic reform policies since 1978 has resulted in a gradual
reduction in the role of state economic plans in the allocation of
resources, pricing and management of such assets, an increased emphasis on
the utilization of market forces, and rapid growth in the PRC economy.
However, such growth has been uneven among various regions of the country
and among various sectors of the economy.
F-29
<PAGE>
1. ORGANIZATION AND PRINCIPAL ACTIVITY (Cont'd)
b. Economic Environment (Cont'd)
In recent years, the PRC economy has experienced periods of rapid economic
expansion and high rates of inflation, which have led to the adoption by the
central government from time to time of various corrective measures designed
to regulate growth and contain inflation. High inflation may cause the
government to take other actions which could inhibit economic activity in
the PRC and may thereby delay planned expansion. Such actions could
adversely affect the Company's results of operations and expansion plans.
c. Legal Environment
The PRC's legal system is based on written statutes under which prior court
decisions may be cited as authority but do not have binding precedential
effect. The PRC's legal system is relatively new, and the government is
still in the process of developing a comprehensive system of laws, a process
that has been ongoing since 1979. Considerable progress has been made in
the promulgation of laws and regulations dealing with economic matters such
as corporate organization and governance, foreign investment, commerce,
taxation and trade. Such legislation has significantly enhanced the
protection afforded to foreign investors. However, experience with respect
to the implementation, interpretation and enforcement of such laws is
limited.
d. Foreign Currency Exchange
The Company expects that substantially all of its revenue will be
denominated in Renminbi. A portion of the future profits of the Company, if
any, will need to be converted to other currencies to meet its foreign
currency obligations such as payment of dividends declared. Both the
conversion of Renminbi into foreign currencies and the remittance of foreign
currencies abroad require PRC government approvals.
No assurance can be given that the Company will be able to convert
sufficient amounts of foreign currencies in the PRC foreign exchange market
in the future for payment of dividends.
2. BASIS OF PRESENTATION
The accompanying financial statements were prepared in accordance with
generally accepted accounting principles in the United States of America
("US GAAP"). This basis of accounting differs from that used in the
statutory accounts of the Company, which are prepared in accordance with the
accounting principles and other relevant financial regulations applicable to
Sino-foreign equity joint venture enterprises as established by the Ministry
of Finance of the PRC.
F-30
<PAGE>
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Taxation
Pursuant to the relevant income tax laws applicable to Sino-foreign equity
joint venture enterprises in the PRC, the Company is subject to PRC income
taxes at the applicable tax rate (currently 33%) on the taxable income as
reported in its statutory accounts. In accordance with the provisions of
the same income tax laws, the Company will be fully exempted from income
taxes for two years starting from the first profit-making year followed by a
50% reduction for the next three years.
b. Fixed Assets and Depreciation
Machinery and equipment are stated at cost less accumulated depreciation.
Depreciation of machinery and equipment is computed using the straight-line
method over the assets' estimated useful lives of 14 years after taking into
account the estimated residual value of 5% of the costs of the fixed assets.
c. Use of Estimates
The preparation of financial statements in conformity with US GAAP requires
management to make estimates and assumptions that affect certain reported
amounts and disclosures. Accordingly, actual results could differ from
those estimates.
4. FIXED ASSETS
Machinery and equipment comprised:
Rmb US$
Machinery and equipment 116,895,739 14,091,464
Less: Accumulated depreciation (640,525) (77,214)
----------- ----------
Net book value 116,255,214 14,014,250
=========== ==========
The Company will be granted the right to use the parcel of land and buildings
presently occupied by a production plant of JCFC for an annual rental of Rmb
506,000 and Rmb 2,345,000 respectively. The rental period is not specified in
the agreement.
F-31
<PAGE>
JINAN CHEMICAL FIBRE CORPORATION - PLANT ONE
============================================
UNAUDITED PRO FORMA FINANCIAL INFORMATION OF
BUREAU OF ELECTRONIC PUBLISHING, INC.
F-32
<PAGE>
INTRODUCTION TO UNAUDITED PRO FORMA FINANCIAL INFORMATION
BUREAU OF ELECTRONIC PUBLISHING, INC.
The unaudited pro forma consolidated statement of income from continuing
operations of Bureau of Electronic Publishing, Inc., a company incorporated in
the United States of America, for the year ended December 31, 1996 and the
unaudited pro forma consolidated balance sheet as of December 31, 1996 have
been prepared to give effect to (i) the formation of Jinan Da Yang Chemical
Fibre Company Limited ("Jinan Da Yang"), a joint venture between Jinan Chemical
Fibre Corporation ("JCFC") and Pacific Chemical Group Limited ("Pacific
Chemical"), pursuant to a joint venture agreement dated February 9, 1996 and
related supplemental agreements; (ii) the transfer of operations from Jinan
Chemical Fibre Corporation - Plant One ("Plant One") to Jinan Da Yang and (iii)
the exchange of shares between Bureau of Electronic Publishing, Inc. and
Pacific Chemical pursuant to an agreement dated January 23, 1997, in which the
shareholders of Pacific Chemical agreed to transfer their entire interests in
Pacific Chemical to a wholly owned subsidiary of Bureau of Electronic
Publishing, Inc. in exchange for 833,671.66 shares of Class A Preferred Stock
of Bureau of Electronic Publishing, Inc. The unaudited pro forma statement of
income and balance sheet are based upon the historical financial statements of
Bureau of Electronic Publishing, Inc, Pacific Chemical, Jinan Da Yang and Plant
One after giving effect to the pro forma adjustments described in the notes
thereto as if the formation of Jinan Da Yang, the transfer of operations from
Plant One to Jinan Da Yang and the share exchange between Bureau of Electronic
Publishing, Inc. and Pacific Chemical had occurred on January 1, 1996 and
December 31, 1996, respectively.
The unaudited pro forma statements do not purport to represent what the results
of operations and the financial position of Bureau of Electronic Publishing,
Inc. would actually have been if the events described above had in fact
occurred on January 1, 1996 or December 31, 1996, or to project the results of
operations of Bureau of Electronic Publishing, Inc. for any future period.
The unaudited pro forma statements should be read in conjunction with the
historical financial statements of Bureau of Electronic Publishing, Inc.,
Pacific Chemical, Jinan Da Yang and Plant One, including the notes thereto.
F-33
<PAGE>
HISTORICAL STATEMENTS OF EXPENDITURES OF
PACIFIC CHEMICAL GROUP LIMITED, JINAN DA YANG
CHEMICAL FIBRE COMPANY LIMITED AND
JINAN CHEMICAL FIBRE CORPORATION - PLANT ONE, AND
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FROM CONTINUING OPERATIONS
OF BUREAU OF ELECTRONIC PUBLISHING, INC.
FOR THE YEAR ENDED DECEMBER 31, 1996
(Amounts in thousands)
<TABLE>
<CAPTION>
Historical Statement of
Expenditure
------------------------------------
Jinan Da Pro forma
Yang Jinan Consolidated
Pacific Chemical Chemical Statement of Income
Chemical Fibre Fibre of Bureau of
Group Company Corporation- Pro forma Electronic
Limited Limited Plant One Note Adjustment Publishing, Inc.
---------- ----------- ---------- ----- ----------- ----------------------
US$ Rmb Rmb Rmb Rmb US$
<S> <C> <C> <C> <C> <C> <C> <C>
Sales - - - (1) 603,806 603,806 72,787
---------- ----------- ---------- ---------- -----------
Cost of goods sold - - (484,880) (2) 16,918 (363,305) (43,795)
(3) (1,776)
(4) (35,083)
(5) 141,516
General and
administrative
expenses (124) (641) (16,472) (18,142) (2,187)
---------- ----------- ---------- ---------- ----------
Total costs and
expenses (124) (641) (501,352) (381,447) (45,982)
---------- ----------- ---------- ---------- ----------
(Loss) income from
operations before
income taxes (124) (641) (501,352) 222,359 26,805
Provision for income
taxes - - - (6) - - -
---------- ----------- ---------- ---------- ----------
(Loss) income before
minority interests (124) (641) (501,352) 222,359 26,805
Minority interests - - - (7) 109,460 (109,460) (13,195)
---------- ----------- ---------- ---------- ----------
Net (loss)
income (124) (641) (501,352) 112,899 13,610
========== =========== ========== ========== ==========
</TABLE>
Translation of amounts from Renminbi (Rmb) into United States dollars (US$) for
the convenience of the reader has been made at the rate of US$1.00=Rmb8.2955
announced by the Bank of China on March 17, 1997. No representation is made
that the Renminbi amounts could have been, or could be, converted into United
States dollars at that rate on March 17, 1997 or at any other certain rate.
F-34
<PAGE>
HISTORICAL BALANCE SHEETS/STATEMENT OF NET ASSETS
OF BUREAU OF ELECTRONIC PUBLISHING, INC,
PACIFIC CHEMICAL GROUP LIMITED, JINAN DA YANG
CHEMICAL FIBRE COMPANY LIMITED AND
JINAN CHEMICAL FIBRE CORPORATION - PLANT ONE, AND
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET OF
BUREAU OF ELECTRONIC PUBLISHING, INC.
AS OF DECEMBER 31, 1996
(Amounts in thousands)
<TABLE>
<CAPTION>
Historical Balance Sheet/Statement of Net
Assets
-----------------------------------------------
Jinan Da Jinan
Bureau Yang Chemical Pro forma
of Pacific Chemical Fibre Consolidated Balance
Electronic Chemical Fibre Corporation- Pro Sheet of Bureau of
Publishing, Group Company Plant forma Electronic
Inc. Limited Limited One Note Adjustment Publishing, Inc.
---------- ----------- ---------- ---------- ------ ---------- ----------------------
US$ US$ Rmb Rmb Rmb Rmb US$
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets
Cash at bank and on 728 21 - - (8) 124,391 130,604 15,744
hand
Accounts receivable 70 - - 173 754 91
Inventories and
spare parts, net 34 - - 45,755 46,037 5,550
Prepayments and
other current
assets 22 - - 16,666 16,849 2,031
---------- ----------- ---------- ----------- ---------- -----------
Total current assets 853 21 - 62,594 194,244 23,416
Fixed assets, net 21 - 116,255 278,363 (9) (278,363) 155,628 18,760
(10) 38,558
Investment in joint
venture 226 1,875 226
Other assets 6 50 6
---------- ----------- ---------- ----------- ---------- -----------
Total assets 1107 21 116,255 340,957 351,797 42,408
---------- ----------- ---------- ----------- ---------- -----------
LIABILITIES
Current liabilities
Accounts payables 117 122 - 60,310 62,293 7,509
Accrued expenses &
other liabilities 241 - - 1,553 3,552 428
Amount due to JCFC - - - - (9) 1,372 39,930 4,814
(10) 38,558
---------- ----------- ---------- ----------- ---------- -----------
Total current
liabilities 358 122 - 61,863 105,775 12,751
---------- ----------- ---------- ----------- ---------- -----------
Minority interest - - - - (9) 116,896 116,896 14,091
---------- ----------- ---------- ----------- ---------- -----------
INVESTORS' EQUITY
(DEFICIT)
Share capital 5 8 116,896 - (7) (116,896) 124,499 15,008
(8) 124,391
Share 8,103 15 - - 67,343 8,118
preimium/Additional
paid-in capital
Warrants 335 - - 2,779 335
-
Accumulated deficit (7,694) (124) (641) - (65,495) (7,895)
---------- ----------- ---------- ----------- ---------- -----------
Investors' equity
(deficit) 749 (101) 116,255 - 129,126 15,566
---------- ----------- ---------- ----------- ---------- -----------
Total liabilities and
investors'
(deficit) equity 1,107 21 116,255 61,863 351,797 42,408
========== =========== ========== =========== ========== ===========
</TABLE>
Translation of amounts from Renminbi (Rmb) into United States dollars (US$) for
the convenience of the reader has been made at the rate of US$1.00=Rmb8.2955
announced by the Bank of China on March 17, 1997. No representation is made
that the Renminbi amounts could have been, or could be, converted into United
States dollars at that rate on March 17, 1997 or at any other certain rate.
F-35
<PAGE>
BUREAU OF ELECTRONIC PUBLISHING, INC.
NOTES TO UNAUDITED PRO FORMA
CONSOLIDATED FINANCIAL STATEMENTS
A description of pro forma adjustments is as follows:
(1) To record sales revenue in relation to the transfer of products to
other production units of JCFC based on the sales prices set by the
Price Bureau.
(2) To adjust for the decrease in depreciation expense based on the cost
of fixed assets contributed by JCFC to Jinan Da Yang.
(3) To adjust for additional utility charges imposed by JCFC for the
supply of utilities to Jinan Da Yang.
(4) To record operating lease rentals in respect of land, buildings and
equipment which will be leased to Jinan Da Yang.
(5) To adjust for the changes in production costs as a result of the
purchase of a major raw material, P-Xylene directly from JCFC based on
the prevailing market prices at the dates of production. The market
prices of P-Xylene used for computation of this pro forma adjustment
are based on prices quoted on a confirmation reply from a major
supplier of JCFC.
(6) Under the Income Tax Law of the People's Republic of China (the "PRC")
concerning Enterprises with Foreign Investments and Foreign
Enterprises and related regulations, a Sino-foreign joint venture may,
on application with the relevant tax bureau, be eligible for a tax
holiday. If Jinan Da Yang qualifies for a tax holiday, it will be
exempted from PRC income tax for two years starting from the first
profitable year of operations and 50% reduction in the three years
thereafter. No provision for income taxes has been made in the
unaudited pro forma consolidated statement of income on the basis that
Jinan Da Yang would have been eligible for a tax holiday in 1996.
Jinan Da Yang may also be liable to other taxes such as business tax
and other local taxes.
F-36
<PAGE>
(7) To record minority interests of JCFC.
(8) Neither Bureau of Electronic Publishing, Inc. nor Pacific Chemical
currently has the financial resources to make the US$14,995,000
capital contribution to Jinan Da Yang and must seek external
financing. The pro forma financial statements assume this financing
will be in the form of additional capital contributions from the
existing shareholders of Bureau of Electronic Publishing, Inc. or
Pacific Chemical. There is no assurance that Bureau of Electronic
Publishing, Inc. or Pacific Chemical will be successful in raising the
funds required to make its capital contribution. Accordingly, there is
no assurance that Jinan Da Yang will become operational.
(9) To record the amount due to JCFC assuming the transfer of all assets
and liabilities directly related and/or attributable to Plant One
other than fixed assets.
(10) To record the one-off license and know-how fee for the use of certain
fixed assets of Plant One to be transferred from Plant One to Jinan
Da Yang.
F-37
