SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-Q
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended September 30, 1997
( ) TRANSITION REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 33-3272-W
LOTUS PACIFIC, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State of Organization)
52-1947160
(I.R.S. Employer Identification Number)
200 Centennial Avenue, Suite 201, Piscataway, New Jersey 08854
(Address of principal executive offices)
(732) 885-1750
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
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
proceeding 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.
(1)Yes __X__ No ___
(2)Yes __X__ No ___
As of September 30, 1997, the Registrant had outstanding
46,809,054 shares of Common Stock, par value $.001 per
share and 4,300 shares of Series A Preferred Stock.
LOTUS PACIFIC, INC.
Table of Contents
PART I. Financial Information
Item 1.
Consolidated Balance Sheet
Consolidated Statement of Operations
Consolidated Statement of Cash Flows
Item 2.
Management's Discussion and Analysis of Financial
Condition and Results of Operations
PART II. Other Information
Item 1. Legal Proceedings
Item 2. Change in the Rights of the Registrant's Holders
Item 3. Defaults by Registrants on its Senior Securities
Item 4. Submission of Matters to a Vote of Securities Holder
Item 5. Other Information
Part I Financial Information
Item 1. Consolidated Financial Statements
The accompanying unaudited consolidated financial
statements have been prepared in accordance with
generally accepted accounting principles for interim
financial information and the instructions to Form 10-Q
and Rule 10-01 of Regulation S-X. Accordingly, they
do not include all of the information and footnotes
required by generally accepted accounting principles
for completing financial statements. In the opinion of
management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation
have been included.
LOTUS PACIFIC, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
September 30, 1997
(Unaudited)
ASSETS
September 30, 1997 September 30, 1996
Current Assets
Cash $1,120,455 $ 215,560
Accounts receivable 471 0
Prepaid expenses 25,049 0
Total Currents Assets 1,145,975 215,560
Property and Equipment, net 1,488,410 0
Leasehold Improvement, net 1,017 0
Investments 600,000 172,395
Intangible Assets, net of accumulated
amortization of $113,922 in 1997 5,696,078
Total Assets 8,931,480 387,955
LIABILITIES AND STOCKHOLDERS EQUITY
Current Liabilities
Account Payable $679,039 0
Payroll Taxes Payable 28,681 0
Income Taxes payable 23,391 0
Purchase Deposit 100,000 0
Total Current Liabilities 931,111 0
Minority Interest in Equity of
Consolidated Subsidiary 555,439 0
Stockholders' Equity
Preferred Stock, $.001 par value, 100,000
shares authorized, issued and outstanding
4,300 4 4
Common Stock, $.001 par value,
50,000,000 shares authorized,
issued and outstanding 46,809 26,937
Additional paid-in capital 8,138,087 67,717
Stock Warrants 80,000 0
Accumulated Deficit (819,970) (6,703)
Total Stockholders' Equity 7,444,930 387,955
Total Liabilities &
Stockholders' Equity $8,931,480 387,955
See notes to financial statements
LOTUS PACIFIC, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
For the Three Month Ended September 30, 1997
September 30, 1997 September 30, 1996
Revenue
Royalty Income $1,000,000 $ 0
Interest Income 467 834
Total Revenue 1,000,467 834
Operating Expenses 1,295159 0
Research and Development 57,453 0
Net Income (loss) before income taxes
and minority interest in income
of consolidated subsidiary (352,145) 834
Income Taxes 167 0
Minority Interest in Loss of Income
Consolidated Subsidiary 22,565 0
Net Income (329,747) 834
Earning Per Share $0.00 $0.00
Weighted Average Shares 42,785,054 26,937,054
see notes to financial statements
LOTUS PACIFIC, INC. AND SUBSIDIARY
STATEMENT OF CASH FLOWS
For the Three Month Ended September 30, 1997
September 30, 1997 September 30, 1996
CASH FLOW FROM OPERATING ACTIVITIES
Net Income $(329,747) $ 834
Adjustments to reconcile net income to
net cash provided by operating activities:
Increase in accumulated depreciatio 79,714 0
Increase in accounts payable 664,092 0
Increase in tax payable 2,909 0
Increase in purchase deposit 100,000 0
Increase in accounts receivable (471) 0
Increase in prepaid expenses (20,995) 0
Increase in minority interest 62,877
Net cash provided by operating activilties
558,379 834
CASH FLOW FROM INVESTING ACTIVITIES:
purchase of equipment (2,603) 0
Net cash used in investing activilities (2,603) 0
CASH FLOW FROM FINANCING ACTIVITIES:
Issuance of common stock 216,000 0
Issurance of stock warrant 80,000 0
Net cash provided in financing activities 296,000 0
Net increase in cash 851,776 834
Cash, beginning 268,679 214,726
Cash, ending 1,120,455 215,560
Noncash financing activilities
Issuance of 6,000,000 shares of common stock of Lotus
Pacific, Inc to Rightiming Electronics Corp. in
exchange for its 6,000,000 shares of common stock
of Regent Electronics Corp. Recorded at Regent's
book value on August 31, 1997: $1,532,042
see notes to financial statements
LOTUS PACIFIC, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997 AND 1996
1. Organization:
The Company was established to seek potential business
ventures, which in the opinion of management may warrant
involvement by the Company. The Company is a holding company
and its business to that operated by its subsidiaries. As
of September 30, 1997, the Company has two subsidiaries: a
high-tech New Jersey based Regent Electronics Corp., 92.3%
owned by the Company, and a wholly owned Richtime Far East
Ltd., which is operated in Hong Kong.
2. Summary of significant accounting policies:
Principle of Consolidation:
The accompanying financial statements include the
accounts of Lotus Pacific, Inc. and its 92.3% owned
subsidiary, Regent Electronics Corp. The 7.6% non-owned
portion of Regent Electronics Corp. appear as minority
interest in subsidiary on the balance sheet in accordance
with generally accepted accounting principles. All
intercompany transactions have been eliminated in consolidation.
Richtime Far East, Ltd., operated in Hong Kong, is not
consolidated with Lotus Pacific, Inc. in accordance with
generally accepted accounting principles.
Cash and Cash Equivalents:
For purposes of reporting cash flows, the Company considers
all cash accounts which are not subject to withdrawal restrictions
or penalties to be cash or cash equivalents.
Equipment and Depreciation:
Property and equipment are stated at cost. Depreciation
is calculated using the straight-line method over their
estimated useful lives from 3 to 10 years.
Intangible Asset:
Intangible asset consists of the acquisition of patents
by the Company in June 1997. The patents are carried at
cost and amortized over the useful life of 17 years.
LOTUS PACIFIC, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1997 AND 1996
2. Summary of significant accounting policies (continued):
Research and Development:
Research and development costs consist of expenditures
incurred by the Company during the course of planned
search and investigation aimed at the discovery of new
knowledge which will be used to develop and improve its
Internet access product. The Company expenses all such
research and development costs as they are incurred.
Income Taxes:
Income taxes are provided for the tax effects of transactions
reported in the financial statements and consist of taxes
currently due plus deferred taxes related primarily to
differences between the basis of balance sheet items for
financial and income tax reporting. There is no difference
between the basis for financial and income reporting.
Investment in Unconsolidted Subsidiary:
The Company recorded its investment in Richtime Far
East, Ltd. (a Hong Kong company) at cost.
3. Issuance of Stock:
On September 18, 1997, the Company issued 6,000,000
shares of common stock to Rightiming Electronics Corp.
in exchange for 6,000,000 shares of common stock of Regent
Electronics Corp. The purpose of this transaction was
to gain more control of its subsidiary Regent Electronics Corp.
On July 31, 1997, the Company issued 72,000 shares of
its common stock, through a private placement, to an
individual for total consideration of $216,000.
As of September 30, 1997 the Company has 46,809,054
shares of common stock outstanding.
4. Acquisitions and Dispositions:
On September 18, 1997, the Company issued 6 million shares
of its common stock to Rightiming Electronics Corp. in
exchanged for 6 million shares of Regent Electronics Corp.,
which was owned by Rightiming Electronics Corp. After this
transaction, the Company held 97.3% of equity interest
in Regent Electronics Corp.
LOTUS PACIFIC, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1997 AND 1996
Regent Electronics Corp.
Regent Electronics Corp. was incorporated in January 1997
to manufacture electronic Interest access software equipment
to be marketed and sold in the Far East. The accounts
of Regent Electronics Corp. are consolidated with the
parent's (Lotus Pacific, Inc.) accounts.
Richtime Far East Ltd.:
In April, 1997, the Company acquired 100% of the stock
of Richtime Far East Ltd. (a Hong Kong corporation)
for monetary consideration of $600,000. The management
of Lotus Pacific, Inc. carries the investment at cost.
Richtime Far East Ltd. is not consolidated with Lotus
Pacific, Inc. in accordance with generally
accepted accounting principles.
For the quarter ended September 30, 1997, the pertinent
financial information for Richtime Far East, Ltd. is as follows:
Unaudited
Sales $1,697,943
Gross Profit $ 171,660
Net Income $ 156,847
In the last quarter, Richtime Far East Ltd.
had net income of $177,742.
6. Financial Instrument:
Cash accounts are secured by the Federal Deposit
Insurance Corporation up to $100,000. At September 30, 1997
and September 30, 1996, the uninsured balance
was $956,962 and $-0- respectively.
LOTUS PACIFIC, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1997 AND 1996
7. Condensed Financial Statements for Regent
Electronics Corp. on September 30, 1997:
BALANCE SHEET
ASSETS
Current assets $ 1,040,061
Property and equipment 1,487,141
Other assets 5,696,078
$ 8,233,280
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities $ 802,574
Long-term Liabilities 200,000
Stockholders' Equity:
Common stock 26,000
Additional paid-in capital 7,762,000
Accumulated deficit (567,294)
Total Stockholders' Equity 7,220,706
$ 8,223,280
STATEMENT OF OPERATIONS
For the Quarter ended September 30, 1997
Revenue $ 1,000,256
Operating costs and expenses (1,236,147)
Research & Development 57,453
Net Loss $ (293,344)
LOTUS PACIFIC, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1997 AND 1996
STATEMENT OF CASH FLOW
Cash flows used in operating activities $529,343
Cash flows used in investing activities (2,453)
Cash flows from financing activities 200,000
Net increase in cash $ 726,890
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
1. Results of Operations
Regent, a subsidiary of the Company, started to market
Wonder TV A6000 offshore and particularly in China in
the last quarter. Wonder TV A6000 is an Amiga technology
based multimedia and multi-functional TV set top box
developed by Regent. It features an all-in-one box system
with combined functions of a multimedia personal computer,
a fax machine, a Karaoke machine, an Internet box,
an audio CD player, a video CD player and an electronic
game machine.
In August 1997, Regent signed an agreement with Shanghai
Dingqiu International Trade Co., Ltd. ("Shanghai Dingqiu"),
a public company in Shanghai, China, under which the two
companies agreed to work together in manufacturing and
marketing of Wonder TV A6000. According to the agreement,
Shanghai Dingqiu will order 300,000 sets of chips and parts
at the price $86 per set for assembling Wonder TV A6000 from
Regent before the end of December 1998. Shanghai Dingqiu is
responsible for assembling and marketing of the product
in China. Regent agreed to provide Shanghai Dingqiu with all
the necessary technical support while holding all patents and
copyrights relating to Wonder TV A6000. In addition, Shanghai
Dingqiu agreed to pay Regent $1,000,000 annually as
compensation for the use of the related patent, and the
first annual payment in the amount of $1,000,000 was
made in August 1997.
Richtime Far East Ltd., a whole subsidiary of the Company
incorporated and operated in Hong Kong, had a total sales
of $1.697 million and a net income of $157,000 for the
quarter ended September 30, 1997. Richtime is in the business
of import and export in garment. It receives customer orders
mainly from North America, and contracts the orders to garment
manufacturers in Nanjing and other eastern coast cities of China.
2. Liabilities and Capital Resources
On September 18, 1997, the Company entered into an Equity
Exchange Agreement with Rightiming Electronics Corp.,
wherein the Company issued 6,000,000 shares of common
stock of the Company with a par value of $0.001 per share
to Rightiming Electronics Corp. in exchange for 6,000,000
shares of common stock of Regent Electronics Corp. that
were owned by Rightiming Electronics Corp. The Equity
Exchange Agreement has substantially increased the company's
ownership of Regent Electronics Corp. from 70% to 92.3%.
The company also issued 72,000 shares of common stock with
par value of $0.001 per share to an individual of California
on July 31, 1997 for an aggregate consideration of $216,000.
As of September 30, 1997, the Company had outstanding
46,809,054 shares of Common Stock, par value $.001 per
share and 4,300 shares of Series A Preferred Stock.
Part II
Other Information
Item 1. Legal Proceedings
None.
Item 2. Changes in the Rights of the Registrant's Holders
None.
Item 3. Defaults by the Registrants on its Senior Securities
None.
Item 4. Submission of Matters to A Vote of Securities Holders
None.
Item 5. Other Information
The Company filed a Form 8-K report as of September 9, 1997,
wherein it reported the election of Simon Gu to be a member of
Board of Directors of the Company.
Signature
Pursuant to the requirements of Section 12 of the
Securities Exchange Act of 1934, the registrant had
duly caused this registration statement to be signed
on its behalf by the undersigned, thereto duly authorized.
Date: October 22, 1997
Lotus Pacific, Inc.
/S/ James Yao, Chairman & President
/S/ Gu Huang, Secretary & Treasurer
Pursuant to the requirements of the Securities Exchange
Act 1934, this report has been signed below by the
following persons on behalf of the registrants
and in capacities and on the dates indicated.
/S/ James Liu, Director & Vice President
/S/ Jeremy Wang, Director
/S/ David Leung, Director & Vice President