UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] | QUARTERLY REPORT PURSUANT TO SECTION 13 OR15(d)OFTHE SECURITIES EXCHANGE ACT OF 1934 | |||
For the quarterly period ended December 31, 2007 | ||||
OR | ||||
[ ] | TRANSITION REPORT PURSUANT TO SECTION 13 OR15(d)OFTHE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _____________ to _____________.
Commission File Number: 33-10639-NY
MAN SANG HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Nevada | 87-0539570 |
(State or other jurisdiction | (I.R.S. Employer Identification No.) |
of incorporation or organization) |
21/F, Railway Plaza, 39 Chatham Road South, Tsimshatsui, Kowloon, Hong Kong
(Address of principal executive officers)
(852) 2317 5300
(Registrant's telephone number)
Indicate by check mark whether the Registrant (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 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 X No __
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act.
Large accelerated filer | Accelerated filer | Non-accelerated filer X |
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No X
As of February 14, 2008, 6,382,582 shares of the Registrant's common stock were outstanding.
MAN SANG HOLDINGS, INC.
TABLE OF CONTENTS
Page | |||
PART I - FINANCIAL INFORMATION | |||
ITEM 1. | Financial Statements (Unaudited) | ||
Condensed Consolidated Balance Sheets as at | |||
December 31, 2007 and March 31, 2007 | F-1 | ||
Condensed Consolidated Statements of Operations and | |||
Comprehensive Income for the Three and Nine Months Ended | |||
December 31, 2006 and 2007 | F-3 | ||
Condensed Consolidated Statements of Cash Flows for | |||
the Nine Months Ended December 31, 2006 and 2007 | F-4 | ||
Notes to Condensed Consolidated Financial Statements | F-6 | ||
ITEM 2. | Management's Discussion and Analysis of | ||
Financial Condition and Results of Operations | 1 | ||
ITEM 3. | Quantitative and Qualitative Disclosures About | ||
Market Risk | 7 | ||
ITEM 4. | Controls and Procedures | 8 | |
PART II - OTHER INFORMATION | |||
ITEM 6. | Exhibits | 9 | |
SIGNATURES | 10 |
PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MAN SANG HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Amounts expressed in thousands, except per share amounts)
As at December 31, 2007 | As at March 31, 2007 | ||||||
US$ | HK$ | HK$ | |||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | 73,421 | 572,682 | 296,969 | ||||
Marketable securities | 801 | 6,246 | 8,350 | ||||
Accounts receivable, net of allowance for doubtful | |||||||
accounts of HK$29,816 and HK$22,436 as of | |||||||
December 31, 2007 and March 31, 2007, respectively | 9,361 | 73,015 | 56,921 | ||||
Inventories: | |||||||
Raw materials | 1,790 | 13,965 | 17,914 | ||||
Work in progress | 1,288 | 10,048 | - | ||||
Finished goods | 2,388 | 18,624 | 28,281 | ||||
5,466 | 42,637 | 46,195 | |||||
Prepaid expenses | 1,014 | 7,912 | 3,516 | ||||
Deposits and other receivables, net of allowance for | |||||||
doubtful accounts of HK$2,919 and HK$3,766 as of | |||||||
December 31, 2007 and March 31, 2007, respectively | 2,493 | 19,444 | 12,906 | ||||
Properties under development for sale | 9,799 | 76,429 | - | ||||
Deposit on acquisition of land for development | 6,244 | 48,705 | - | ||||
Receivable for sales proceeds of a property | 2,828 | 22,058 | - | ||||
Other current assets | 283 | 2,207 | 141 | ||||
Income taxes receivable | 111 | 867 | 1,620 | ||||
Total current assets | 111,821 | 872,202 | 426,618 | ||||
Deferred tax assets | 7 | 53 | 254 | ||||
Property, plant and equipment | 79,982 | 623,862 | 159,647 | ||||
Accumulated depreciation | (7,976) | (62,211) | (54,976) | ||||
72,006 | 561,651 | 104,671 | |||||
Real estate investment | 7,261 | 56,633 | 75,290 | ||||
Accumulated depreciation | (1,485) | (11,579) | (14,311) | ||||
5,776 | 45,054 | 60,979 | |||||
Investment in and advance to affiliates | 14 | 107 | 86,587 | ||||
Goodwill | 8,222 | 64,133 | - | ||||
Total assets | 197,846 | 1,543,200 | 679,109 |
F-1
MAN SANG HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS - continued
(Unaudited)
(Amounts expressed in thousands, except per share amount)
As at December 31, 2007 | As at March 31, 2007 | |||||
US$ | HK$ | HK$ | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||
Current liabilities: | ||||||
Secured debts – current portion | 4,115 | 32,100 | - | |||
Accounts payable | 2,920 | 22,776 | 19,776 | |||
Accrued payroll and employee benefits | 1,278 | 9,972 | 8,428 | |||
Receipt in advance | 35,406 | 276,163 | - | |||
Loan from minority interests | 10,154 | 79,200 | - | |||
Other accrued liabilities | 3,902 | 30,430 | 12,000 | |||
Income taxes payable | 451 | 3,517 | 2,396 | |||
Total current liabilities | 58,226 | 454,158 | 42,600 | |||
Deferred tax liabilities | 525 | 4,094 | 2,290 | |||
Secured debts | 17,833 | 139,100 | - | |||
Minority interests | 71,239 | 555,668 | 313,860 | |||
Stockholders' equity: | ||||||
Series A preferred stock, par value US$0.001 | - | 1 | 1 | |||
- authorized, issued and outstanding: 100,000 shares; | ||||||
(entitled in liquidation to US$2,500 (HK$19,500)) | ||||||
Series B convertible preferred stock, par value US$0.001 | - | - | - | |||
- authorized: 100,000 shares; no shares outstanding | ||||||
Common stock, par value US$0.001 | 6 | 49 | 49 | |||
- authorized: 31,250,000 shares; | ||||||
issued and outstanding: 6,382,582 shares | ||||||
as at December 31, 2007 and March 31, 2007, respectively | ||||||
Additional paid-in capital | 15,024 | 117,184 | 69,350 | |||
Retained earnings | 33,655 | 262,508 | 245,686 | |||
Accumulated other comprehensive income | 1,338 | 10,438 | 5,273 | |||
Total stockholders' equity | 50,023 | 390,180 | 320,359 | |||
Total liabilities and stockholders' equity | 197,846 | 1,543,200 | 679,109 |
See accompanying notes to condensed consolidated financial statements.
F-2
MAN SANG HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(Unaudited)
(Amounts expressed in thousands except per share amounts)
Three Months Ended | Nine Months Ended | |||||||||||
December 31, | December 31, | |||||||||||
2007 | 2006 | 2007 | 2006 | |||||||||
US$ | HK$ | HK$ | US$ | HK$ | HK$ | |||||||
Net sales | 13,925 | 108,616 | 106,780 | 40,856 | 318,675 | 300,112 | ||||||
Cost of goods sold | (9,566) | (74,614) | (83,061) | (27,109) | (211,450) | (216,736) | ||||||
Gross profit | 4,359 | 34,002 | 23,719 | 13,747 | 107,225 | 83,376 | ||||||
Rental income, gross | 194 | 1,511 | 1,055 | 532 | 4,153 | 2,912 | ||||||
Expenses from real estate investment | (185) | (1,442) | (1,034) | (559) | (4,358) | (4,189) | ||||||
9 | 69 | 21 | (27) | (205) | (1,277) | |||||||
Selling, general and administrative expenses | (4,957) | (38,665) | (20,315) | (11,256) | (87,801) | (59,053) | ||||||
Operating income | (589) | (4,594) | 3,425 | 2,464 | 19,219 | 23,046 | ||||||
Non-operating items | ||||||||||||
- Interest income | 707 | 5,511 | 2,328 | 1,833 | 14,294 | 6,423 | ||||||
- Other income | 88 | 689 | 585 | 136 | 1,060 | 1,449 | ||||||
- Gain on sale of a real estate investment | 1,344 | 10,485 | - | 1,344 | 10,485 | - | ||||||
- Realized gain on sale of marketable securities | - | - | 4,769 | 289 | 2,257 | 4,769 | ||||||
Income before income taxes and minority interest | 1,550 | 12,091 | 11,107 | 6,066 | 47,315 | 35,687 | ||||||
Income taxes | 1 | 11 | (1,290) | (650) | (5,067) | (3,705) | ||||||
Income before minority interests | 1,551 | 12,102 | 9,817 | 5,416 | 42,248 | 31,982 | ||||||
Minority interests | (1,009) | (7,873) | (5,603) | (3,259) | (25,426) | (17,936) | ||||||
Net income | 542 | 4,229 | 4,214 | 2,157 | 16,822 | 14,046 | ||||||
Other comprehensive income, net of taxes and | ||||||||||||
minority interests | ||||||||||||
- Foreign currency translation adjustments | 287 | 2,238 | 1,720 | 660 | 5,148 | 2,036 | ||||||
- Unrealized holding gain on marketable | ||||||||||||
securities | 9 | 72 | (304) | 50 | 390 | (219) | ||||||
- Reclassification adjustment for realized gain | ||||||||||||
upon sale of marketable securities | ||||||||||||
included in net income for the period | - | - | (1,034) | (48) | (374) | (1,034) | ||||||
Other comprehensive income, net of taxes | ||||||||||||
and minority interests | 296 | 2,310 | 382 | 662 | 5,164 | 783 | ||||||
Comprehensive income | 838 | 6,539 | 4,596 | 2,819 | 21,986 | 14,829 | ||||||
Basic earnings per common share | 0.08 | 0.65 | 0.65 | 0.33 | 2.59 | 2.17 | ||||||
Diluted earnings per common share | 0.08 | 0.62 | 0.65 | 0.32 | 2.47 | 2.14 | ||||||
Weighted average number of shares of common | ||||||||||||
stock | ||||||||||||
- for basic earnings per share | 6,382,582 | 6,382,582 | 6,382,582 | 6,382,582 | 6,382,582 | 6,382,582 | ||||||
- for diluted earnings per share | 6,382,582 | 6,382,582 | 6,382,582 | 6,382,582 | 6,382,582 | 6,382,582 |
See accompanying notes to condensed consolidated financial statements
F-3
MAN SANG HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED DECEMBER 31
(Unaudited)
(Amounts expressed in thousands)
Nine Months Ended December 31, | ||||||
2007 | 2006 | |||||
US$ | HK$ | HK$ | ||||
Cash flow from operating activities: | ||||||
Net income | 2,157 | 16,822 | 14,046 | |||
Adjustments to reconcile net income to net cash | ||||||
provided by operating activities: | ||||||
Bad debts provision | 946 | 7,380 | - | |||
Inventory write-down | 1,588 | 12,386 | 9,450 | |||
Stock-based compensation expense | 165 | 1,290 | 5,224 | |||
Depreciation and amortization | 1,024 | 7,987 | 6,147 | |||
Gain on sales of marketable securities | (289) | (2,257) | (4,769) | |||
Gain on sale of real estate investment | (1,344) | (10,485) | - | |||
Gain on sale of property, plant and equipment | (17) | (135) | (161) | |||
Minority interests | 3,260 | 25,426 | 17,936 | |||
Changes in operating assets and liabilities: | ||||||
Accounts receivable | (3,009) | (23,474) | (24,920) | |||
Inventories | (1,052) | (8,208) | 16,230 | |||
Prepaid expenses | (560) | (4,365) | (1,733) | |||
Deposits and other receivables | (362) | (2,822) | (1,031) | |||
Other current assets | 13 | 105 | 122 | |||
Income taxes receivable | 97 | 753 | 519 | |||
Deferred tax assets | 26 | 201 | 447 | |||
Accounts payable | 380 | 2,961 | 3,849 | |||
Accrued payroll and employee benefits | 140 | 1,092 | (533) | |||
Receipt in advance | 23,962 | 186,900 | - | |||
Other accrued liabilities | 584 | 4,552 | (2,681) | |||
Deferred tax liabilities | 549 | 4,283 | (53) | |||
Income taxes payable | 144 | 1,121 | 2,479 | |||
Net cash provided by operating activities | 28,402 | 221,513 | 40,568 | |||
Cash flow from investing activities: | ||||||
Purchase of property, plant and equipment | (39,248) | (306,132) | (4,814) | |||
Purchase of marketable securities | (2) | (13) | - | |||
Investment in and advance to affiliates | (14) | (107) | (84,746) | |||
Deposit on acquisition of land held for development | (1,059) | (8,261) | - | |||
Acquisition of 6% controlling interest in CP&J, net | ||||||
of cash acquired | 9,666 | 75,396 | - | |||
Net proceeds from disposal of property, plant and | ||||||
equipment | 17 | 135 | 772 | |||
Net proceeds from sale of real estate investment | 377 | 2,942 | - | |||
Net proceeds from sales of marketable securities | 545 | 4,250 | 9,405 | |||
Net cash used in investing activities | (29,718) | (231,790) | (79,383) |
F-4
MAN SANG HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED DECEMBER 31
(Unaudited)
(Amounts expressed in thousands)
Nine Months Ended December 31, | ||||||
2007 | 2006 | |||||
US$ | HK$ | HK$ | ||||
Cash flow from financing activities: | ||||||
Net proceeds from issuance of common stock of a | ||||||
listed subsidiary | 37,227 | 290,370 | - | |||
Return of capital to stockholders | (4,630) | (36,112) | - | |||
Repayment of secured debts | (2,744) | (21,400) | - | |||
Increase in secured debts | 5,267 | 41,084 | - | |||
Net cash provided by financing activities | 35,120 | 273,942 | - | |||
Net increase (decrease) in cash and cash equivalents | 33,804 | 263,665 | (38,815) | |||
Cash and cash equivalents at beginning of period | 38,073 | 296,969 | 304,753 | |||
Exchange adjustments | 1,544 | 12,048 | 3,427 | |||
Cash and cash equivalents at end of period | 73,421 | 572,682 | 269,365 | |||
Supplementary disclosures of cash flow information | ||||||
Cash paid (refunded) during the period for: | ||||||
Interest paid | 1,194 | 9,313 | - | |||
Net income taxes refunded | (79) | (619) | (172) |
See accompanying notes to condensed consolidated financial statements.
F-5
Man Sang Holdings, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
December 31, 2007
(Unaudited)
1. Interim Financial Presentation
The interim financial statements are prepared pursuant to the requirements for reporting on Form 10-Q. The March 31, 2007 balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America. The interim financial statements and notes thereto should be read in conjunction with the financial statements and notes included in the annual report of Man Sang Holdings, Inc. (the "Company") on Form 10-K for the fiscal year ended March 31, 2007. 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. Operating results and cash flows for interim periods are not necessarily indicative of results of the entire year.
2. Currency Presentations and Foreign Currency Translation
Assets and liabilities of foreign subsidiaries are translated from their functional currencies to the reporting currencies, at period-end exchange rates, while revenues and expenses are translated at average exchange rates during the period. Adjustments arising from such translation are reported as a separate component of stockholders' equity. Gains or losses from foreign currency transactions are included in the Statement of Operations. Aggregate net foreign currency gains or losses were immaterial for all periods presented in this report.
The consolidated financial statements of the Company are maintained, and its consolidated financial statements are expressed, in Hong Kong dollars. The translations of Hong Kong dollar amounts into United States dollars are for convenience only and have been made at the rate of HK$7.8 to US$1, the approximate free rate of exchange as at December 31, 2007. Such translations should not be construed as representations that Hong Kong dollar amounts could be converted into United States dollars at that rate or any other rate.
3. Recent Accounting Pronouncements
In September 2006, the FASB issued FAS No. 157, Fair value Measurements (“FAS 157”). FAS 157 defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles, and expands disclosures about fair value measurements. FAS 157 is effective for fiscal years beginning after November 15, 2007. The adoption of this Statement is not expected to have a material effect on the Company’s consolidated financial statements.
In February 2007, the Financial Accounting Standards Board (“FASB”) issued FAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities (“FAS 159”), which gives entities the option to measure eligible financial assets, and financial liabilities at fair value under other instrument basis, that are otherwise not permitted to be accounted for at fair value under other accounting standards. The election to use the fair value option is available when an entity first recognizes a financial asset or financial liability. Subsequent changes in fair value must be recorded in earnings. This statement is effective as of the beginning of a company’s first fiscal year after November 15, 2007. The Company is currently evaluating the impact of adopting this Statement.
F-6
In December 2007, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 141 (revised 2007), Business Combinations, which replaces SFAS No 141. The statement retains the purchase method of accounting for acquisitions, but requires a number of changes, including changes in the way assets and liabilities are recognized in the purchase accounting. It also changes the recognition of assets acquired and liabilities assumed arising from contingencies, requires the capitalization of in-process research and development at fair value, and requires the expensing of acquisition-related costs as incurred. SFAS No. 141R is effective for us beginning April 1, 2009 and will apply prospectively to business combinations completed on or after that date. While the Company has not yet evaluated this statement for the impact, if any, that SFAS 141(R) will have on its consolidated financial statements, the Company will be required to expense costs related to any acquisitions after March 31, 2009.
In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB 51, which changes the accounting and reporting for minority interests. Minority interests will be recharacterized as noncontrolling interests and will be reported as a component of equity separate from the parent’s equity, and purchases or sales of equity interests that do not result in a change in control will be accounted for as equity transactions. In addition, net income attributable to the noncontrolling interest will be included in consolidated net income on the face of the income statement and, upon a loss of control, the interest sold, as well as any interest retained, will be recorded at fair value with any gain or loss recognized in earnings. SFAS No. 160 is effective for us beginning April 1, 2009 and will apply prospectively, except for the presentation and disclosure requirements, which will apply retrospectively. The Company is currently assessing the potential impact that adoption of SFAS No. 160 would have on our financial statements.
On April 1, 2007, we adopted the provisions of FASB Interpretation No. 48 (“FIN 48”), Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109, “Accounting for Income Taxes.” FIN 48 requires the use of a two-step approach for recognizing and measuring tax benefits taken or expected to be taken in a tax return and disclosures regarding uncertainties in income tax positions. The first step is recognition, whereby a determination is made whether it is more-likely-than-not that a tax position will be sustained upon examination based on the technical merits of the position. The second step is to measure a tax position that meets the recognition threshold to determine the amount of benefit to recognize. The Company does not believe there are significant unrecognized tax benefits, and the adoption of FIN 48 does not result in material impact on the Company's position.
4. Earnings Per Share ("EPS")
EPS is calculated in accordance with SFAS No. 128 by application of the two-class method. The two-class method is an earnings allocation formula that determines earnings per share for each class of common stock and participating securities according to dividends declared (or accumulated) and participation rights in undistributed earnings. Per share data is calculated using the weighted average number of shares of common stock outstanding during the period.
F-7
Three Months Ended | Nine Months Ended | ||
December 31, 2006 | December 31, 2006 | ||
(HK$ in thousands) | |||
Net income | 4,214 | 14,046 | |
Allocation of Series A preferred stock | (65) | (217) | |
Net income available to common stockholders, | |||
adjusted | 4,149 | 13,829 | |
Stock options granted by a listed subsidiary | (22) | (173) | |
Net income available to common stockholders | |||
including conversion | 4,127 | 13,656 | |
No. of shares | No. of shares | ||
Weighted average-shares outstanding | 6,382,582 | 6,382,582 | |
HK$ | HK$ | ||
Net earnings per share | |||
Basic | 0.65 | 2.17 | |
Diluted | 0.65 | 2.14 |
F-8
Three Months Ended | Nine Months Ended | ||
December 31, 2007 | December 31, 2007 | ||
(HK$ in thousands) | |||
Net income | 4,229 | 16,822 | |
Allocation of Series A preferred stock | (65) | (259) | |
Net income available to common stockholders, | |||
adjusted | 4,164 | 16,563 | |
Stock options granted by a listed subsidiary | (175) | (782) | |
Net income available to common stockholders | |||
including conversion | 3,989 | 15,781 | |
No. of shares | No. of shares | ||
Weighted average-shares outstanding | 6,382,582 | 6,382,582 | |
HK$ | HK$ | ||
Net earnings per share | |||
Basic | 0.65 | 2.59 | |
Diluted | 0.62 | 2.47 |
5. Disclosure of Geographic Information
All of the Company's sales of pearls are coordinated through its Hong Kong subsidiaries. The following is an analysis by destination:
Three Months Ended | Nine Months Ended | ||||||
December 31 | December 31 | ||||||
2007 | 2006 | 2007 | 2006 | ||||
(HK$ in thousands) | |||||||
Net Sales: | |||||||
Hong Kong | 9,109 | 5,665 | 27,888 | 19,995 | |||
Export: | |||||||
North America | 26,891 | 38,735 | 87,743 | 86,397 | |||
Europe | 42,207 | 45,375 | 119,822 | 118,280 | |||
Other Asian countries | 21,624 | 13,682 | 63,066 | 60,351 | |||
Others | 8,785 | 3,323 | 20,156 | 15,089 | |||
108,616 | 106,780 | 318,675 | 300,112 |
F-9
The Company operates primarily in one geographic area: Hong Kong and other regions of the People's Republic of China (“PRC”). The locations of the Company's identifiable assets are as follows:
As at December 31, | As at March 31, | ||
2007 | 2007 | ||
(HK$ in thousands) | |||
Hong Kong | 823,110 | 484,882 | |
People’s Republic of China | 720,090 | 194,227 | |
1,543,200 | 679,109 |
6. Disclosure of Major Customers
During the three months ended December 31, 2007, two customers accounted for 19.1% and 10.4% of total sales, respectively. During the nine months ended December 31, 2007, one customer accounted for 15.7% of total sales. During the three months ended December 31, 2006, two customers accounted for 20.4% and 11.5% of total sales, respectively. During the nine months ended December 31, 2006, one customer accounted for 17.3% of total sales. Generally, a substantial percentage of the Company's sales has been made to a small number of customers and is typically on an open account basis.
F-10
7. Segment Information
Reportable segment profit or loss and segment assets are disclosed as follows:
Reportable Segment Profit or Loss, and Segment Assets | |||||||
Three Months Ended, | Nine Months Ended, | ||||||
December 31 | December 31 | ||||||
2007 | 2006 | 2007 | 2006 | ||||
(HK$ in thousands) | |||||||
Revenues from external | |||||||
customers: | |||||||
Pearls | 108,616 | 106,780 | 318,675 | 300,112 | |||
Real estate investment | 1,511 | 1,055 | 4,153 | 2,912 | |||
110,127 | 107,835 | 322,828 | 303,024 | ||||
Operating income (loss): | |||||||
Pearls | 1,658 | 3,404 | 37,040 | 24,323 | |||
Real estate investment | 69 | 21 | (205) | (1,277) | |||
Property development | (6,321) | - | (17,616) | - | |||
(4,594) | 3,425 | 19,219 | 23,046 | ||||
Depreciation and amortization: | |||||||
Pearls | 1,767 | 1,622 | 5,183 | 4,291 | |||
Real estate investment | 391 | 392 | 1,184 | 1,167 | |||
Property development | 396 | - | 931 | - | |||
Corporate assets | 230 | 230 | 689 | 689 | |||
2,784 | 2,244 | 7,987 | 6,147 | ||||
Capital expenditure for segment | |||||||
assets: | |||||||
Pearls | 939 | 3,454 | 5,300 | 4,814 | |||
Real estate investment | - | - | - | - | |||
Property development | 145,083 | - | 300,832 | - | |||
146,022 | 3,454 | 306,132 | 4,814 |
As at | As at | ||
December 31, | March 31, | ||
2007 | 2007 | ||
(HK$ in thousands) | |||
Segment assets: | |||
Pearls | 712,451 | 572,466 | |
Real estate investment | 45,054 | 60,979 | |
Property development | 741,603 | - | |
Corporate assets | 44,092 | 45,664 | |
1,543,200 | 679,109 |
F-11
8. Common Stock and Stock Compensation Plans
A summary of the number of outstanding and exercisable options under the share option scheme adopted on August 2, 2002 by Man Sang International Limited, or MSIL, a subsidiary of the Company (the “Plan”), as at December 31, 2007, and changes during the period then ended is presented as follows:
Exercise price with the | ||||
Number of | weighted average exercise | |||
MSIL Options | price in parenthesis | |||
Outstanding as at April 1, 2007 | - | |||
Granted | 60,000,000 | HK$0.253, HK$0.233 and HK$0.500 | ||
(HK$0.267) | ||||
Exercised | (21,000,000) | HK$0.253 and HK$0.233 (HK$0.241) | ||
Outstanding as at December 31, 2007 | 39,000,000 | HK$0.253, HK$0.233 and HK$0.500 | ||
(HK$0.281) | ||||
Exercisable as at December 31, 2007 | 34,000,000 | HK$0.253 and HK$0.233 (HK$0.249) |
The Company accounts for stock-based compensation in accordance with SFAS No. 123(R), Share-Based Payment (revised 2004). Under the fair value recognition of this statement, stock-based compensation cost is measured at the grant date based on the value of the award granted, and recognized over the vesting period. The fair value of each option granted was calculated using the Black-Scholes option pricing model.
During the period ended December 31, 2007, 8,000,000 and 13,000,000 stock options were exercised at prices of HK$0.253 and HK$0.233, respectively. As of December 31, 2007, 34,000,000 exercisable options and 5,000,000 non-vested stock options were outstanding under the Plan. The weighted average fair value of the options granted during the period was HK$0.10. As of December 31, 2007, the weighted average remaining contractual term of the option was 4.21 years. Stock-based compensation for the nine months ended December 31, 2007 and December 31, 2006 were HK$1.3 million and HK$5.2 million, respectively.
9. Acquisition and Investment in affiliates
On April 12, 2007, MSIL acquired an additional 6% interest in a project located in Zhuji, China (the “CP&J Project”) and an assignment of a loan under which we are obligated to pay an amount equivalent to approximately HK$10,560,000 for a total consideration of HK$60,000,000. As a result of this acquisition, the Company, through Smartest Man Holdings Limited, an indirect wholly-owned subsidiary of MSIL, indirectly owns 55% of the issued share capital of China Pearls and Jewellery City Holdings Limited, or CP&J, and a 55% interest in the CP&J Project. The results of operations of CP&J have been included in the consolidated financial statements since that date, under the purchase method of accounting according to Statement of Financial Accounting Standard No.141, Business Combinations.
F-12
Reconciliation of cash received for the acquisition of 6% controlling interest in CP&J | |
(HK$ in thousands) | |
Purchase price | (49,440) |
Loan assignment | (10,560) |
Cash received at time of acquisition | 135,396 |
75,396 |
The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition:
As at | |
April 12, 2007 | |
(HK$ in thousands) | |
Acquisition costs – direct | 49,440 |
Direct costs | 1,000 |
50,440 | |
Current assets | 190,402 |
Property, plant and equipment | 207,044 |
Total assets acquired | 397,446 |
Current liabilities | (269,236) |
Deferred tax liabilities | (1,903) |
Long term debt | (140,000) |
Total liabilities assumed | (411,139) |
Net liability assumed | (13,693) |
Excess of cost over fair value of net assets acquired, Goodwill | 64,133 |
The minority interest has been reduced to zero and the minority shareholder has not guaranteed the losses and will not provide for additional losses. As such, the Company will absorb 100% of the losses until future earnings materialize, at which time the majority interest shall be credited to the extent of such losses previously absorbed.
No revenue was contributed by CP&J acquired during the nine months ended December 31, 2007. A loss of approximately HK$7.2 million was included in the consolidated statement of operations of the Company for the period.
Unaudited pro forma results of operation for the nine months ended December 31, 2007 and 2006, are as follows. The amounts are shown as if the acquisition had occurred at the beginning of the period presented:-
Nine Months Ended | ||||
December 31, | ||||
2007 | 2006 | |||
(HK$ in thousands) | ||||
Pro forma revenues, including rental income | 322,828 | 303,024 | ||
Pro forma net income | 16,228 | 7,057 | ||
Earnings per share – | Basic pro forma | 2.54 | 1.11 | |
Diluted pro forma | 2.38 | 1.04 |
F-13
The pro forma results have been prepared for comparative purposes only and are not necessarily indicative of the actual results of operations had the acquisition taken place as at the beginning of the periods presented, or the results that may occur in the future. Furthermore, the pro forma results do not give effect to all cost savings or incremental cost that may occur as a result of the integration and consolidation of the acquisition.
In addition, during the three months ended December 31, 2007, CP&J, a subsidiary of the Company, invested HK$107,000 to establish a property management service company. We are currently negotiating the service arrangements for this affiliate, and the affiliate has not yet begun operations.
10. Goodwill
The changes in carrying amount of goodwill for the period ended December 31, 2007 are as follows:
(HK$ in thousands) | |
Balance as at April 1, 2007 | - |
Goodwill acquired during the period | 64,133 |
Balance as at December 31, 2007 | 64,133 |
11.Secured debt
As at December 31, 2007, secured debt consisted of the following:
(HK$ in thousands) | |
Secured debt, varying interest rates per annum from 6.8% to 7.7%, | |
due December 2008 to September 2010 | 171,200 |
Less : current portion | (32,100) |
Long term debt | 139,100 |
Secured debt generally requires monthly interest payments and repayment of principal when due. Secured debt is secured by guarantees or land under development in the PRC. As at December 31, 2007, the total gross book value of land securing the debt was HK$142.2 million. As at December 31, 2007, the secured debt bore interest at variable rates, and the weighted average interest rate was 7.02% per annum.
F-14
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This section and other parts of this Form 10-Q contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which are, by their nature, subject to risks and uncertainties. This Act provides a "safe harbor" for forward-looking statements to encourage companies to provide prospective information about themselves so long as they identify these statements as forward-looking and provide meaningful cautionary statements identifying important factors that could cause actual results to differ from the projected results. All statements, other than statements of historical fact, including statements regarding industry prospects and future results of operations or financial position, made in this Form 10-Q are forward looking. Words such as “may,” "believes," “will,” "expect," "project," “estimate,” "intend," “anticipate,” “plan,” “continue” and similar expressions may identify forward-looking statements. These forward-looking statements include, without limitation, statements relating to: our future performance, our expansion efforts, demand for our products; the state of economic conditions and our markets; currency and exchange rate fluctuations; and our ability to meet our liquidity requirements. These forward-looking statements are based on assumptions and analyses made by us in light of our experience and perception of historical trends, current conditions and expected future developments, as well as other factors we believe to be appropriate in particular circumstances. However, whether actual results and developments will meet our expectations and predictions depend on a number of known and unknown risks and uncertainties and other factors, any or all of which could cause actual results, performance or achievements to differ materially from our expectations, whether expressed or implied by such forward-looking statements (which may relate to, among other things, the Company's sales, costs and expenses, income, inventory performance, and receivables). Primarily engaged in the processing and trading of pearls and pearl jewelry products, and in real estate investment, our ability to achieve our objectives and expectations are derived at least in part from assumptions regarding economic conditions, consumer tastes, and developments in our competitive environment. The following assumptions, among others, could materially affect the likelihood that we will achieve our objectives and expectations communicated through these forward-looking statements: (i) that low or negative growth in the economies or the financial markets of our customers, particularly in the United States and in Europe, will not occur and reduce discretionary spending on goods that might be perceived as "luxuries"; (ii) that the Hong Kong dollar will remain pegged to the U.S. dollar at US$1 to HK$7.8; (iii) that customer's choice of pearls vis-à-vis other precious stones and metals will not change adversely; (iv) that we will continue to obtain a stable supply of pearls in the quantities, of the quality and on terms we require; (v) that there will not be a substantial adverse change in the exchange relationship between the renminbi ("RMB") and the Hong Kong or U.S. dollar; (vi) that there will not be a substantial increase in the tax burdens of our subsidiaries operating in the People’s Republic of China; (vii) that there will not be a substantial change in climate and environmental conditions at the source regions of pearls that could have a material adverse effect on the supply and pricing of pearls; and (viii) that there will not be a substantial adverse change in the real estate market conditions in the People’s Republic of China and in Hong Kong. The following discussion of our results of operation, and liquidity and capital resources should be read in conjunction with the financial statements and the notes thereto included elsewhere in this Form 10-Q and with our annual report on Form 10-K for the year ended March 31, 2007, which contains a further description of risks and uncertainties related to forward-looking statements, as well as other aspects of our business. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as at the date of this report. We will not publicly release any revisions to these forward-looking statements after the date hereof. Readers are urged, however, to review the factors set forth in reports that we file from time to time with the Securities and Exchange Commission.
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Overview
We are one of the world’s largest purchasers and processors of saltwater cultured and freshwater cultured pearls. We are principally engaged in the purchasing, assembling, merchandising and wholesale distribution of pearls, pearl jewelry and other jewelry products. For the nine months ended December 31, 2007, net sales of the Company was HK$318.7 million, representing an increase of 6.2%, or HK$18.6 million, compared to HK$300.1 million for the same period in fiscal 2007. The increase in net sales was mainly due to the increase in net sales of South Sea pearls by 13.9% and increase in net sales of assembled pearl and jewelry products by 11.3%, when compared with the same period in 2006. Net sales in Europe and the United States were HK$119.8 million and HK$87.7 million, representing growth of 1.3% and 1.6%, respectively, when compared with the same period in fiscal 2007.
Gross profit margin improved by 5.8%, from 27.8% for the nine months ended December 31, 2006 to 33.6% for the nine months ended December 31, 2007. We have continued to make efforts to implement effective cost controls and enhance our production efficiency.
The Company is also organizing a grand opening event for the CP&J project, expected to launch in April 2008 as part of two major pearl trade events, the “China (International) Pearl Festival” and “Xishi Cultured Festival”, and aiming toboth promote the culture and business of the pearl trade worldwide and to demonstrate the large scale and wide scope of the CP&J project.
Future Trends
Emerging weaknesses relating to recent developments in the subprime lending market in the United States and the impact of such developments on the United States economy may threaten market conditions in the United States and globally. Despite negative developments in the subprime lending market, we expect to meet expected growth estimates for the year. We are diversified geographically and are well-positioned to react to fluctuating market conditions. We therefore expect to maintain steady growth in our Pearls and Jewelry segment.
Reviewing the performance of the Phase One of the CP&J Project, many of the potential purchasers have signed up contracts for their preferred units. The market feedback has met our expectations. In this regard, the Company is taking a positive view on the contributions of the CP&J Project.
In response to concerns about China’s high growth rate in certain economic sectors, the PRC government has recently introduced a number of macroeconomic measures to tighten monetary control and slow economic growth to a more manageable level. These measures are designed to slow the rapid economic growth of the PRC’s economy in certain sectors to a more sustainable level by, among other things, curbing such sectors, including the property market. Despite the introduction of these measures, we expect our property development segment to remain one of our core businesses and to continue to contribute to our sustainable growth. Further, we do not believe the introduction of these measures will adversely impact the CP&J Project as this project involves the integration of numerous business sectors outside of real estate developments, including trading, exhibition, manufacturing and processing, business services and supporting facilities. Construction of the CP&J Project is progressing as scheduled and the management and staff expect to complete construction of the first phase of the CP&J Project by March 2008.
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Results of Operations
The Nine-Month Period Ended December 31, 2007 compared to the Nine-Month Period Ended December 31, 2006.
Sales and Gross Profit
Net sales for the nine months ended December 31, 2007 increased by HK$18.6 million, or 6.2%, to HK$318.7 million, from net sales of HK$300.1 million for the nine months ended December 31, 2006. The increase in net sales was mainly due to the increase in net sales of South Sea pearls by 13.9% and increase in net sales of assembled pearl and jewelry products by 11.3%, compared with the same period in 2006.
Gross profit for the nine months ended December 31, 2007 increased by HK$23.8 million, or 28.6%, to HK$107.2 million from HK$83.4 million for the nine months ended December 31, 2006. As a percentage of net sales, gross profit margin increased by 5.8% to 33.6% for the nine months ended December 31, 2007, compared to 27.8% for the nine months ended December 31, 2006. The increase in gross profit margin was mainly attributable to a reduction in cost of sales.
Rental Income
Gross rental income for the nine months ended December 31, 2007 increased by HK$1.3 million, or 42.6%, to HK$4.2 million from HK$2.9 million for the nine months ended December 31, 2006. The increase in gross rental income was mainly attributable to the increase in the occupancy rate of Man Sang Industrial City located in the PRC and the increase in the rental rates of properties in Hong Kong.
Selling, General and Administrative Expense ("SG&A expense")
SG&A expense for the nine months ended December 31, 2007 was HK$87.8 million, consisting of HK$70.2 million attributable to pearl operations and HK$17.6 million attributable to property development operations. SG&A expense for the nine months ended December 31, 2007 increased by approximately HK$28.7 million, or 48.7%, from HK$59.1 million for the nine months ended December 31, 2006. SG&A expense for the nine months ended December 31, 2006 was wholly attributable to pearl operations. The increase in SG&A expense attributable to pearl operations was mainly due to an increase in allowance for doubtful debt of HK$7.4 million and an increase in staff cost and selling expense during the nine months ended December 31, 2007. This increase was partially offset by a HK$3.9 million reduction in stock compensation expense recognized.
As a percentage of net sales, SG&A expense attributable to pearl operations increased by 2.3%, to 22.0% for the nine months ended December 31, 2007, from 19.7% for the nine months ended December 31, 2006.
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Interest Income
Interest income increased by HK$7.9 million, or 122.5%, to HK$14.3 million for the nine months ended December 31, 2007 from HK$6.4 million for the nine months ended December 31, 2006. The increase was principally due to higher cash balances at banks during the nine months ended December 31, 2007.
Income Tax Expense
Income tax expense for the nine months ended December 31, 2007 was HK$5.1 million, compared to the HK$3.7 million during the nine months ended December 31, 2006. The increase was due to the increase in deferred tax expenses for the nine months ended December 31, 2007.
Net Income
Net income for the nine months ended December 31, 2007 was HK$16.8 million, compared to net income of HK$14.0 million for the nine months ended December 31, 2006. The increase was mainly attributable to the increase in gross profit and higher interest income and gain on sale of a real estate investment, but partially offset by an increase in allowance for doubtful debt.
The Three-Month Period Ended December 31, 2007 compared to the Three-Month Period Ended December 31, 2006.
Sales and Gross Profit
Net sales for the three months ended December 31, 2007 increased by HK$1.8 million, or 1.7%, to HK$108.6 million from HK$106.8 million for the three months ended December 31, 2006. The increase in net sales was mainly due to the increase in net sales of South Sea pearls by 54.6%.
Gross profit for the three months ended December 31, 2007 increased by HK$10.3 million, or 43.4%, to HK$34.0 million from HK$23.7 million for the three months ended December 31, 2006. As a percentage of net sales, gross profit margin increased by 9.1% to 31.3% for the three months ended December 31, 2007 from 22.2% for the three months ended December 31, 2006. The increase in gross profit margin was mainly attributable to a reduction in cost of sales.
Rental Income
Gross rental income for the three months ended December 31, 2007 was approximately HK$1.5 million representing an increase of approximately HK$0.4 million, or 43.2%, compared to HK$1.1 million for the three months ended December 31, 2006. The increase in gross rental income was mainly attributable to the increase in the occupancy rate of Man Sang Industrial City located in the PRC and the increase in the rental of properties in Hong Kong.
4
SG&A expense
For the three months ended December 31, 2007, SG&A expense was HK$38.7 million, consisting of HK$32.4 million attributable to pearl operations and HK$6.3 million attributable to property development operations. SG&A expense increased by approximately HK$18.4 million, or 90.3%, from HK$20.3 million for the three months ended December 31, 2006, which was mainly attributable to pearl operations. The increase was mainly due to an increase in allowance for doubtful debt.
As a percentage of net sales, SG&A expense attributable to pearl operations increased by 10.8% to 29.8% for the three months ended December 31, 2007 from 19.0% for the three months ended December 31, 2006.
Interest Income
Interest income increased by HK$3.2 million, or 136.7%, to HK$5.5 million for the three months ended December 31, 2007 from HK$2.3 million for the three months ended December 31, 2006. The increase was principally due to higher cash balances at banks compared to the three months ended December 31, 2006.
Income Tax Expense
Income tax credit for the three months ended December 31, 2007 was HK$11,000, compared to income tax expense of HK$1.3 million for the three months ended December 31, 2006. The change from income tax expense to income tax credit was due to an decrease in taxable income during the three months ended December 31, 2007. This decrease was partially offset by an increase in deferred tax expense.
Net Income
Net income for the three months ended December 31, 2007 and 2006 were HK$4.2 million. Gross profit increased, and there was higher interest income and a gain on sale of a real estate investment in the three months ended December 31, 2007 compared to the three months ended December 31, 2006, but these increases were offset by an increase in allowance for doubtful debt and an increase in staff costs and selling expensesin the three months ended December 31, 2007.
Liquidity and Capital Resources
Our primary liquidity needs are funded by the collection of accounts receivable and sales of inventory. As of December 31, 2007, we had working capital of HK$418.0 million, which included cash balances of HK$572.7 million. Our current ratio was 1.9 to 1 as at December 31, 2007. Net cash provided by operating activities was approximately HK$221.5 million for the nine months ended December 31, 2007. Net cash used in investing activities for the nine months ended December 31, 2007 was HK$231.8 million and net cash provided by financing activities for the nine months ended December 31, 2007 was HK$273.9 million.
5
In July 2007, MSIL entered into a placing agreement to place 200 million existing shares of MSIL with institutional or professional investors at a price of HK$1.48 per placing share to raise approximately HK$296.0 million. In August 2007, we received HK$285.3 million in cash after deducting fees and expenses incurred in connection with the placing.
Inventories were HK$42.6 million as at December 31, 2007. The inventory turnover period was 1.9 months as at December 31, 2007, compared to 1.8 months as at December 31, 2006.
Accounts receivable were HK$73.0 million as at December 31, 2007. Debtors' turnover period was 62.7 days as at December 31, 2007, compared to 65.9 days as at December 31, 2006.
Secured debt (including current portion) was HK$171.2 million as at December 31, 2007. The gearing ratio was 0.44. Secured debt consists of financing for the CP&J Project for property development. See “Part I – Item 1 – Notes to Condensed Consolidated Financial statements – Note 11” for detailed debt information, including the weighted average interest rate and scheduled maturities.
We had available credit facilities of HK$386.2 million with various banks at December 31, 2007. Such banking facilities include letter of credit arrangements, import loans, overdraft and other facilities commonly used in the jewelry business. All such banking facilities bear interest at floating rates generally offered by banks in Hong Kong and are subject to periodic review.
As at December 31, 2007, we had utilized HK$171.2 million of these bank loans.
We believe that our existing cash, cash equivalents, banking facilities and funds to be generated from internal operations will be sufficient to meet our anticipated future liquidity requirements.
Inflation
We believe that our results of operations have not been materially affected by inflation or deflation during the quarter. There can be no assurance, however, that our financial condition and results of operations will not be adversely affected by inflation or deflation in the future.
Seasonality
Our business is subject to seasonal fluctuations. The bulk of our sales occur during the months of March, June and September when major international jewelry trade shows are held in Hong Kong. Accordingly, the results of any interim period are not necessarily indicative of the results that might be expected during a full year.
6
Contractual Obligations
The following table sets forth information regarding our outstanding contractual and commercial commitments as at December 31, 2007:
Payments due by period | ||||||||||||||
Contractual obligations | ||||||||||||||
Total | Less than 1 year | 1-3 years | 3-5 years | More than 5 years | ||||||||||
HK$”000 | HK$”000 | HK$”000 | HK$”000 | HK$”000 | ||||||||||
Long-Term Debts | 171,200 | 32,100 | 139,100 | - | - | |||||||||
Capital Commitments | 162,362 | 144,461 | 17,901 | - | - | |||||||||
Operating Lease Obligations | 1,900 | 1,796 | 104 | - | - | |||||||||
Purchase Obligations | - | - | - | - | - | |||||||||
Other Long-Term Liabilities | - | - | - | - | - | |||||||||
Total | 335,462 | 178,357 | 157,105 | - | - |
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As at December 31, 2007, we had no derivative contracts, such as forward contracts and options to hedge against foreign exchange fluctuations.
We denominate our sales in either U.S. dollars or Hong Kong dollars. During the nine months ended December 31, 2007, we made approximately 39.3% of our purchases in U.S. dollars and 39.6% of our purchases in Hong Kong dollars and RMB combined. Since the Hong Kong Dollar remained "pegged" to the U.S. dollar at a consistent rate, we feel that the exposure of our sales proceeds to foreign exchange fluctuations is minimal. Furthermore, the potential revaluation of the RMB will not be considered significant to our operations as we believe that the risk of a substantial fluctuation of the RMB exchange rate remains low. As at December 31, 2007, we have no short-term RMB bank borrowings.
Because most of our purchases are made in currencies that we believe we have a low risk of appreciation or devaluation and our sales are made in U.S. dollars, we have determined that our currency risk in the foreseeable future should not be material, and that no derivative contracts, such as forward contracts and options to hedge against foreign exchange fluctuations, were necessary during this quarter.
We are exposed to interest rate risk resulting from fluctuations in interest rates. As at December 31, 2007, we had borrowed approximately HK$171.2 million under floating rate credit facilities. All such banking facilities bear interest at floating rates generally offered by banks in Hong Kong and the PRC and are subject to periodic review. Fluctuations in interest rates can lead to significant fluctuations in the fair value of our debt obligations. We closely monitor interest rate risk and consider using appropriate financial instruments to hedge any exposure. However, we do not currently use any derivative instruments to manage our interest rate risk. Given the relative price stability associated with the raw materials used in our products, we believe our commodity price risk should not be material.
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ITEM 4. CONTROLS AND PROCEDURES
In accordance with Rule 13a-15(b) of the Securities and Exchange Act of 1934, an evaluation was performed under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13(a)–15(e) under the Securities Exchange Act of 1934) as at December 31, 2007.
Based on such evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective to ensure that information required to be disclosed in reports that we file or submit under the Exchange Act is: (1) recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms and (2) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
Our disclosure controls and procedures do not provide absolute assurance that all deficiencies in design or operation of these control systems, or all instances of errors or fraud, will be prevented or detected. We designed these control systems to provide reasonable assurance of achieving the goals of these systems in light of our business operations. These control systems remain subject to risks of human error and the risk that controls can be circumvented for wrongful purposes by one or more individuals in management or non-management positions.
In connection with the evaluation described above, no new significant changes were identified in our internal controls over financial reporting during the quarter ended December 31, 2007, that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
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PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There have been no new legal proceedings initiated or material changes in legal proceedings previously disclosed in Item 3, "Legal Proceedings" of Man Sang Holdings, Inc.’s Annual Report on Form 10–K for the year ended March 31, 2007.
ITEM 1A. RISK FACTORS
There have been no material changes in the risk factors previously disclosed in Item 1A, "Risk Factors" of Man Sang Holdings, Inc.’s Annual Report on Form 10–K for the year ended March 31, 2007.
ITEM 6. EXHIBITS
(A) Exhibits |
3.1 | Amended and Restated Bylaws of Man Sang Holdings, Inc., amended and effective as of December 14, 2007. | ||
3.2 | Restated Articles of Incorporation including the Certificate of Designation of Series A Preferred Stock. (1) | ||
3.3 | Certificate of Designation of the Series B Preferred Stock. (2) | ||
3.4 | Amended and Restated Bylaws. (3) | ||
3.5 | Certificate of Amendment to Certificate of Designation of the Series A Preferred Stock. (4) | ||
31.1 | Rule 13a-14(a) Certification of Chief Executive Officer. | ||
31.2 | Rule 13a-14(a) Certification of Chief Financial Officer. | ||
32.1 | Section 1350 Certification of Chief Executive Officer. | ||
32.2 | Section 1350 Certification of Chief Financial Officer. | ||
(1) | Incorporated by reference to the Company’s current report on Form 8-K dated January 8, 1996. | |
(2) | Incorporated by reference to the Company's registration statement on Form 8-A dated June 17, 1996. | |
(3) | Incorporated by reference to the Company's quarterly report on Form 10-Q dated August 11, 2005. | |
(4) | Incorporated by reference to the Company's current report on Form 8-K dated November 23, 2005. |
(B) Reports on Form 8-K
(1) | A report on Form 8-K was filed on December 14, 2007 to announce approval by the Board of Directors of the Company of amendments to Article V, Sections 5.01 and 5.02 in the Company’s bylaws to comply with a new American Stock Exchange listing requirement that all listed companies become “Direct Registration System Eligible” by January 1, 2008. | ||
(2) | A report on Form 8-K was filed on December January 8, 2008 to announce the resignation of Hung Kwok Wing, Sonny as Executive Director from the Board of Directors of the Company. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
MAN SANG HOLDINGS, INC. | ||||
Date: February 14, 2008 | ||||
By: | /s/ CHENG Chung Hing, Ricky | |||
CHENG Chung Hing, Ricky | ||||
Chairman of the Board, President, | ||||
Chief Executive Officer |
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