UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q/A
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 1998
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 000-24999
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)
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 _____
Indicate the number of shares outstanding of each of the Registrant's classes
of common stock, as of the latest practicable date (October 26, 1998).
Class Number of Shares
Common Stock 47,499,306
Par Value $.001 Per Share
* Registrant became subject to the filling requirements of the Securities
Exchange Act of 1934 on June 30, 1998, when its assets exceed $10 million and
it has a class of equity securities held of record by 500 or more persons.
Registrant filed Form 10, a general form for registration of Securities
pursuant to Section 12 (b) or (g) of the Securities Exchange Act of 1934,
with the Securities and Exchange Commission on October 27, 1998.
LOTUS PACIFIC, INC.
INDEX
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of September 30,
1998 (Unauduited) and June 30, 1998 (audited)
Condensed Consolidated Statements of Operations (Unaudited) for
the Quarter ended September 30, 1998 and September 30, 1997
Condensed Consolidated Statements of Cash Flows (Unaudited) for
the Quarter ended September 30, 1998 and September 30, 1997
Notes to Condensed Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Item 3. Quantitative and Qualitative Disclosure About Market Risk
PART II OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities and Use of Proceeds
Item 3. Defaults upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signatures
LOTUS PACIFIC, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
ASSETS
September 30, 1998 June 30, 1998
Current Assets
Cash $2,618,594 $3,193,127
Accounts Receivable 6,800,806 4,979,759
Prepaid Expenses 2,874 833,087
Deposit 22,175
Total Currents Assets 9,444,449 8,933,181
Property and Equipment 1,630,353 1,631,403
Leasehold Improvement 1,041 75,612
1,631,394 1,707,015
Less: Accu. Depreciation 511,921 348,286
Investments 600,000
Intangible Assets, net of accumulated
amortization of $455,686 5,086,356 5,439,523
Total Assets 15,650,278 16,404,225
LIABILITIES AND STOCKHOLDERS EQUITY
Current Liabilities
Account Payable $663,668 1,755,654
Loans Payable 120,000
Salaries Payable 60,489 63,819
Payroll Taxes Payable 23,001 32,234
Income Taxes Payable 42,110
Total Current Liabilities 747,158 2,013,817
Minority Interest in Equity of
Consolidated Subsidiary 6,136,670 6,569,544
Stockholders' Equity
Preferred Stock, Class A, $.001 par value,
4,300 shares authorized; 4,300 shares
issued and outstanding 4 4
Common Stock, $.001 par value, 60 million
shares authorized, 47,499,304 shares
issued and outstanding 47,499 47,387
Stock Warrants 80,000 80,000
Additional paid-in capital 11,050,628 10,240,740
Accumulated Deficit (2,411,681) (2,547,267)
Total Stockholders' Equity 8,766,450 7,820,864
Total Liabilities &
Stockholders' Equity $15,650,278 $16,404,225
The accompanying notes are an integral part of the financial statements
LOTUS PACIFIC, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
For the Quarter Ended September 30, 1998
(Unaudited)
1998 1997
Net Sales -Products $2,420,000 $ -0-
Cost of Sales 1,198,000
Gross Profit 1,222,000 -0-
Operating Expenses
Selling, general and administrative 707,023 434,746
Research and development 565,743 917,866
1,272,766 1,352,622
Operating Income (loss) (50,766) (1,352,612)
Other Income (Expenses)
Interest Income 8,647 467
Royalty Income 1,000,000
Income from continuing operations
Before income taxes (42,119) (352,145)
Discontinued operations:
Income from operation of LPF, -0-
net of tax
Gain of disposal of LPF, net of tax 100,000
Net Income before income taxes
and minority interest in income
of consolidated subsidiary 57,881 (352,145)
Income Taxes -0- -0-
Minority Interest of Income
Consolidated Subsidiaries 7,351 (22,398)
Net Income 50,530 (329,747)
Earnings Per Share
Basic $0.00 $0.00
Diluted $0.00 $0.00
Weighted Average Shares 47,477,552 42,785,054
The accompanying notes are an integral part of the financial statements
LOTUS PACIFIC, INC. AND SUBSIDIARY
STATEMENT OF CASH FLOWS
For the Quarter Ended September 30, 1998
(Unaudited)
Sept. 30, 1998 Sept. 30, 1997
CASH FLOW FROM OPERATING ACTIVITIES
Net Income $50,530 $(329,747)
Adjustments to reconcile net income to
net cash used in operating activities:
Depreciation & amortization 248,572 79,714
Common stock issued for service 135,000
Changes in assets & liabilities:
Increase in accounts receivable (1,821,047) (471)
Decrease in Prepaid Expenses 757,421 (20,995)
Increase in deposit 50,617 100,000
Decrease in accounts payable (1,008,496) 667,001
Increase in minority interest 162,249 62,877
(1,475,684) 888,126
Net cash used in
operating activities (1,425,154) 558,379
CASH FLOW FROM INVESTING ACTIVITIES:
Purchase of equipment (2,603)
Sale of equipment 1,050
Sale of leasehold improvement 74,571
Gain on sale of investment 100,000
Net cash provided in
investing activities 175,621 (2,603)
CASH FLOW FROM FINANCING ACTIVITIES:
Issuance of common stock 675,000 216,000
Issuance of stock warrants 80,000
Net cash provided by
financing activities 675,000 296,000
Net increase (decrease) in cash (574,533) 851,776
Cash, beginning 3,193,127 268,679
Cash, ending $2,618,594 $1,120,455
Supplemental disclosure of non-cash financing activities:
Issuance of common stock for service $135,000
The accompanying notes are an integral part of the financial statements
LOTUS PACIFIC, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998 (UNAUDITED)
1. Description of business:
Lotus Pacific, Inc. (the "Company") is a holding company for Regent
Electronics Corp. ("Regent"). The Company, through its subsidiary Regent,
designs, engineers, develops, provides and markets the Internet-related
electronics products and services to electronics manufactures, commercial
cable TV networks, and general individual customers. Regent also generates
its income from granting its technology or licenses to electronic
manufactures and commercial cable TV networks. The Company owns 87.3% of
Regent's equity interest.
In order to concentrate on its Internet related electronics products and
services, the Company sold all of its ownership in LPF International Corp.
and Richtime Far East Ltd., including all assets and liabilities, to Clarinet
Overseas Ltd. on September 30, 1998 for an aggregation consideration of
$2,500,000 in cash.
LPF International Corp. was set up by the Company to expand its existing
textile and apparel business worldwide. Richtime Far East Ltd. ("Richtime"),
a Hong Kong-based subsidiary of the Company, was then merged into LPF.
2. Summary of significant accounting policies:
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have
been prepared by the Company pursuant to the rules and regulations of the
Securities and Exchange Commission regarding interim financial reporting.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements
and should be read in conjunction with the financial statements and notes
included in the Company's Annual Report on Form 10-K/A filed on January 8,
1999 for the year ended June 30, 1998. The accompanying condensed financial
statements reflect all adjustments (consisting of normal, recurring
adjustments) which are, in the opinion of management, necessary for a fair
presentation of the results for the interim periods presented. The results
of operations for the quarter ended September 30, 1998 are not necessarily
indicative of the results to be expected for the full year.
Principle of Consolidation:
The accompanying financial statements include the accounts of Lotus Pacific,
Inc. and its 87.3% owned subsidiary, Regent Electronics Corp. The 12.7%
non-owned portion of Regent Electronics Corp. appear as minority interest in
subsidiary on the balance sheet in
LOTUS PACIFIC, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1998 (UNAUDITED)
accordance with generally accepted accounting principles. All intercompany
transactions have been eliminated in consolidation.
LPF International Corp., a wholly owned subsidiary of the Company, was sold
to Clarinet Overseas Ltd. on September 30, 1998. The balance sheet accounts
of LPF were not included in the consolidated financial statement, but its
income statement accounts were consolidated as discontinued operations.
Accounts Receivable:
The allowance for doubtful accounts is based on management's evaluation of
outstanding accounts receivable at the end of this fiscal quarter. No
allowance for doubtful accounts has been provided, since management believes
all accounts are collectable.
Revenue recognition:
The revenue from product sales is recognized at the date of sale; revenue
from services rendered is recognized when services have been performed; and
revenue from royalty is recognized when the technology (software products) of
the Company is delivered. The Company generally allows the sales of products
to be returned within 15 business days.
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 that 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.
For the quarter ended September 30, 1998, no income taxes have been provided
since those income taxes liabilities could be offset by the Company's net
operating losses (NOLs) incurred in previous years.
LOTUS PACIFIC, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1998 (UNAUDITED)
Earnings (loss) Per Share:
Basic earnings per share are computed by dividing net income (loss) by the
weighted average number of shares of common stock and the equivalent number
of common shares of convertible preferred stock. Diluted earnings (loss) per
share reflect the dilutuive effect of stock options and warrants.
3. Issuance of Stock:
During the quarter ended September 30, 1998, the Company issued an aggregate
of 112,500 shares of its common stock. 90,000 shares of common stock were
issued for cash consideration of $675,000, and 22,500 shares of common stock
were issued for consulting services rendered.
4. Discontinued Operations:
On September 30, 1998, the Company sold all of its ownership in LPF
International Corp. and Richtime Far East Ltd., including all assets and
liabilities, to Clarinet Overseas Ltd. for an aggregate consideration of
$2,500,000. The Company has not generated income from the discontinued
operations, except $100,000 gain on sale of LPF.
Pro Forma Financial Information
The following condensed pro forma consolidated financial statement of Lotus
Pacific, Inc. and Subsidiary gives effect to the disposition of LPF
International Corp., a wholly owned subsidiary of the Company, as though it
had occurred at June 30, 1998.
PRO FORMA CONDENSED BALANCE SHEET
As of June 30, 1998
(In Thousands)
Pro Forma Pro Forma
ASSETS Actual Adjustments Statement
Current Assets
Cash 3,193 1,160 4,353
Accounts Receivable 4,979 (1,246) 3,703
Total current assets 8,172 8,056
Property & Equipment, net 1,359 (76) 1,283
Investment (note 1) 600 600
Intangible Assets 5,440 5,440
Total Assets 16,404 16,242
LIABILITIES & SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable 1,756 (173) 1,583
Other current liabilities (note 2) 258 258
Total current liabilities 2,014 1,841
Minority Interest 6,570 6,570
Capital Stock 127 127
Paid-in Capital 10,241 10,241
Retained Earnings (note 3) (2,547) (2,537)
Total stockholders' equity 7,821 7,831
Total Liabilities
& Stockholders' Equity $16,404 $16,242
Notes to Pro Forma Condensed Balance Sheet:
Note 1. 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 Company carries the investment at cost, and Richtime Far East
Ltd. is not consolidated with Lotus Pacific, Inc. in accordance with general
accepted accounting principles.
Note 2. No provision for income taxes has been reflected on the gains
applicable to the sale of LPF, since those gains could be offset by the
Company's net operating losses (NOLs) incurred in previous years.
Note 3. An adjustment has been made for $90,000 of LPF's retained earnings
and $100,000 gain on sale of LPF.
PRO FORMA CONDENSED STATEMENT OF OPERATIONS
For the Quarter Ended September 30, 1998
The following pro forma statement of operation for the quarter ended
September 30, 1998 has been prepared to reflect the sale of LPF. The
statement is based on the assumption that the sale of LPF was consummated
at July 1, 1998, the beginning of the fiscal year of Lotus Pacific, Inc. This
pro forma statement of operation should be read in conjunction with other
financial statements included elsewhere herein and the Company's annual
report 10-K/A, which has been filed with the SEC.
Pro Forma Pro Forma
(In Thousand dollars) Actual Adjustments Statement
Net Sales $5,314 ($2,894) $2,420
Cost of Sales 3,953 (2,755) 1,198
Gross Profit 1,361 1,223
Operating Expenses 1,134 (38) 1,096
Operating Income 227 127
Other Income (expenses) (69) (69)
Net Income before Minority Interest 158 58
Minority Interest 23 23
Net Income $135 $35
Earnings Per Share
Basic $.00 $.00
Diluted $.00 $.00
Pro forma earnings per share are based on the exercise of all outstanding
stock options and warrants, and it is fully diluted.
5. Capital Stock:
Common stock - $.001 par value, 60,000,000 shares authorized, 47,499,304
shares issued and outstanding as of September 30, 1998.
Preferred stock - $.001 par value, 100,000 shares authorized, no shares
issued and outstanding as of September 30, 1998.
Preferred stock, Series A - $.001 par value, 4,300 shares authorized,
4,300 shares issued and outstanding as of September 30, 1998.
Common stock warrants - 8,000,000 warrants issued and outstanding. Each
warrant entitled the holder to purchase one share of the Company's common
stock at $3.00 per share. Warrants expire May 5, 2002. As of September 30,
1998, no warrants have been exercised.
LOTUS PACIFIC, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1998 (UNAUDITED)
6. Significant customers:
For the quarter ended September 30, 1998, the Company's continuing operation
had two customers with billings in excess of 10% of total revenues. These two
customers accounted for almost 100% of the Company's total revenues. Of the
total revenue, Shanghai Hong Sheng Development Corp. accounted for $1.74
million (72%), and Lanzhou Sanmao Oindustrial Co. $680,000 (28%).
7. Commitments:
The Company leases its principal facilities of total approximately 9,400
square feet in Piscataway, New Jersey. Under the lease, the Company pays
$7,100 per month until expiration of lease in June 2000.
The Company also leases an additional space in Middlesex, NJ. The lease is
annually renewable and the monthly rent is $825.
8. Condensed Financial Statements for Regent Electronics Corp.:
BALANCE SHEET
ASSETS
Sept. 30, 1998 June 30, 1998
Current assets $6,268,322 $7,232,436
Property and equipment 1,1188,123 1,281,029
Other assets 5,086,356 5,461,930
$12,472,801 $13,975,395
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities $721,257 $2,134,683
Stockholders' equity:
Common stock 26,000 26,000
Preferred stock 1,500 1,500
Stock warrants 1,500 1,500
Additional paid-in capital 13,760,500 13,760,500
Accumulated deficit (1,743,998) (1,948,788)
11,751,544 11,840,712
$12,472,801 $13,975,395
LOTUS PACIFIC, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1998 (UNAUDITED)
STATEMENT OF OPERATIONS
For the Quarter ended September 30
1998 1997
Sales $2,420,000 -0-
Cost of sales (1,198,000)
Interest income 5,604 $666
Royalty income 1,000,000
Operating costs and expenses (1,051,699) (1,290,502)
Net Income (Loss ) $175,905 $(289,835)
STATEMENT OF CASH FLOWS
For the Quarter ended September 30
Cash flows used
in operating activities $(1,995,931) $(3,914,716)
Cash flows used
in investing activities (38,083)
Cash flows from
financing activities (435,000) 6,436,500
Net increase (decrease) in cash $(2,430,931) $2,483,701
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
The following Management's Discussion and Analysis of Financial Condition and
Results of Operations should be read in conjunction with the Company's
Consolidated Financial Statements as of September 30, 1998 included herein
this 10-Q Report.
GENERAL
The Company, through its subsidiary Regent Electronics Corp., designs,
engineers, develops, provides and markets Internet related electronics
products and services to electronics manufactures, commercial cable TV
networks, and general individual customers. Using its Internet research and
development capabilities, including the TeleWeb broadcasting system, set-top
boxes, WonderTV series products, the Company has also started its on-line
service business.
The Company has primarily positioned itself as a researcher and developer of
cable TV-based Internet access related consumer electronics products,
including hardware and software. The Company then licenses its technologies
to electronics manufacturers, commercial cable TV networks or contracts to
manufacturers for production.
The Company's products include the TeleWeb System and WonderTV series
products. The TeleWeb system is a WWW broadcasting system that sends
Internet contents and selected commercial information through the existing
cable TV network subscribers. Based on the technology of the TeleWeb system,
the Company has developed WonderTV series products: WonderTV A6000, A6060,
A8000, and A9000.
In 1998, the Company launched its on-line service business that (a) provide
retail services over the Internet to Chinese customers for purchasing a
variety of merchandises, and (b) offer information and electronic commerce
services. The information and services provided by the Company includes
breaking financial news, real-time stock quotes, corporate information as
well as consumer entertainment information. The information may be derived
either directly from the Internet or from the Company's own sources, which
are collected by the Company from individuals, companies, communities, or
other organizations who intend to broadcast their information via TeleWeb
system. The Company's electronic commerce services consist of advertising
sales and initiating business transactions over the Internet, such as home
shopping, online stock trading and online utility bill payments.
The Company believes that its targeted market of consumers represents an
attractive and rapidly growing segment of the Web commerce industry.
RESULTS OF OPERATIONS
NET REVENUES For the quarter ended September 30, 1998, sales from the
Company's continuing operations increased to $2.42 million from $1 million
for the quarter ended September 30,1997. The increase in revenue in fiscal
1998 was due to the sale of chipsets.
Two Company's products, TeleWeb broadcasting systems and WonderTVs, are
marketed to electronics manufactures and commercial cable TV networks. In
order to manufacture the Company's products, the manufactures must obtain
the dedicated chipsets and the accompanying software. Therefore, the Company
sells the chipsets to those companies that assemble and market WonderTV
set-top boxes.
During this quarter, the Company deposed of its textile and apparel
subsidiary, LPF International Corp. The Company has not generated revenue
from its discontinued operations for this quarter, except $100,000 gain of
disposal of LPF operation.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Selling, general and
administrative expenses consist primarily of general and administrative
expenses, such as travel, selling, communications, employee benefits,
management, administrative and office rents. For the quarter ended
September 30, 1998, selling, general and administrative expenses increased
63%, about $272,000, to $707,000 from the corresponding period in 1997. This
increase was mostly, about 85%, due to the higher salary expenses and higher
consulting fee expenses.
RESEARCH AND DEVELOPMENT For the quarter ended September 30, 1998, the
Company had R&D expenses of $565,800, compared with $918,000 for the quarter
ended September 30, 1997. The decrease in research and development expenses
was primarily because (1) less R&D related consulting fee expenses occurred
in this fiscal quarter; and (2) major R&D expenses has been spent in the
previous quarters.
NET INCOME Because of higher sales and lower R&D expenses, the Company's
net loss from continuing operations decreased from $330,000 for the quarter
ended September 30, 1997 to $42,100 for the quarter ended September 30, 1998.
The Company has not generated income from its discontinued operations during
this fiscal quarter, except $100,000 gain on disposal of its subsidiary.
Because of this gain, the Company's net income reached to $50,500 compared to
the net loss $330,000 for the corresponding quarter in 1997.
RECENT DEVELOPMENTS
In order to concentrate on its Internet related electronics products and
services, the Company entered into a Stock Purchase Agreement on September 30,
1998 with Clarinet Overseas Ltd. Under the Agreement, the Company sold all of
its ownership in LPF and Richtime, including all assets and liabilities, to
Clarinet Overseas Ltd. for an aggregation consideration of $2,500,000 in cash.
See "Item 6. Exhibits and Reports on Form 8-K".
LIQUIDITY AND CAPITAL RESOURCES
The Company ended this fiscal quarter with a cash position of approximately
$2.62 million.
During the quarter ended September 30, 1998, the Company used approximately
$1.43 million of cash for operations. The Company's accounts payable decreased
by more than $1 million during the quarter, and accounts receivable was
increased by $1.82 million during this quarter because of new sales and delay
in customer payments.
As of September 30, 1998, the Company's working capital was approximately
$8.70 million as compared to $6.9 million on June 30, 1998. The higher working
capital at September 30, 1998 as compared to June 30, 1998 was primarily the
result of higher accounts receivable and lower accounts payable. For the
quarter ended September 30, 1998, the Company generated $675,000 of cash from
financing activities in this quarter by issuing 90,000 shares of the Company's
common stock in private placements, and generated $176,000 cash from disposal
of its discontinuing operation. As of September 30, 1998 the Company had
47,499,306 shares of Common Stock with par value $.001 per share and 4,300
shares of Series A Preferred Stock issued and outstanding.
The Company has no material commitments for capital expenditures to date. The
Company believes that the anticipated funds from operations and the existing
cash and cash equivalents will be sufficient to meet its cash requirements
for at least the next twelve months. Although the Company's operating
activities may generate cash to cover its operating costs, the Company's
continuing operating and investing activities may require the Company to
obtain additional sources of financing. There can be no assurance that any
necessary additional financing will be available to the Company on
commercially reasonable terms, if at all.
The Company has trade credits available from many corporations with credit
line up to $50,000, net 30 days. The Company may raise its capital in the
future either from the secondary offerings or from private placements.
YEAR 2000
The Company recognizes the need to ensure that its operations will not be
adversely impacted by "Year 2000" issue, which has arisen because many
existing computer programs and chip-based embedded technology systems may
recognize a date using "00" as the year 1900 rather than year 2000. This
could result in a system failure or miscalculations which may cause
disruptions of operations, including, among other things, a temporary
inability to process transactions, send invoices, or engage in similar
normal business activities.
The Company has assembled a team of internal staff to oversee the matter
and is underway in completing its Year 2000 assessment. Internally, the
Company has upgraded its business system to address the Year 2000 issue.
Externally, the Company has surveyed and will continue to survey its
suppliers, financial institutions, and other organizations to ensure that
those parties have appropriate plans to be "Year 2000 Compliant." Costs
incurred to date and estimated costs to complete the Company's Year 2000
compliance efforts are not expected to be material.
The Company has substantially completed many procedures to test and replace
existing computer systems. Additionally, the Company continues to assess
and test newly engaged suppliers and their products for Year 2000 compliance
as part of the Company's normal business operations. The Company will
continue to monitor its Year 2000 Compliance program, address any material
issues, and develop contingency plan as it deems appropriate.
The failure to identify or correct a material Year 2000 problem could result
in an interruption in, or a failure of, certain business activities or
operations such as the Company's ability to service its customers. Such
failures could materially and adversely affect the Company's results of
operations, liquidity, and financial condition. The Company's Year 2000
assessment process is expected to significantly reduce the Company's level
of uncertainty about the Year 2000 problem and, in particular, about the
Year 2000 compliance and readiness of its material suppliers and customers.
ITEM 3. Quantitative and Qualitative Disclosure about Market Risk
The Company has not entered into any transactions using derivative financial
instruments or derivative commodity instruments and believes that its exposure
to market risk associated with other financial instruments are not material.
PART II OTHER INFORMATION
Item 1. Legal Proceedings
In July 1997, Gateway 2000 claimed that it "owns all Amiga patents, copyrights
and trademarks worldwide." No documentation in support of Gateway's claim
has been produced. After Gateway's claim, the Company has its attorney
contacted with Gateway and showed Gateway the pertinent document that proves
the company's ownership of the exclusive rights to all Amiga patents,
copyrights and trademarks for registration and use in the People's Republic
of China, Taiwan, Hong Kong, Macao, and the Asian bordering countries between
the People's Republic of China and the former Soviet Union. After the
Company's interactions with Gateway, to the best knowledge of the Company
to date, Gateway 2000 has not taken, nor has it threatened to take, any
further action with respect to its claim. Gateway did not mention this issue
in its 10K filings with the SEC.
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
The Company is scheduled to have its Annual Meeting of Shareholders on
Wednesday, December 2, 1998, at 2:00 p.m., the Eastern Time. The meeting will
be held at 200 Centennial Avenue, Suite 201, Piscataway, NJ 08854.
At the Annual Meeting, the shareholders of the Company will be asked to
consider and vote upon the following proposals: (i) the election of six (6)
directors of the Company, and (ii) the ratification of Schiffman, Hughes Brown
as independent auditors of the Company for the fiscal year ending June 30,
1999. During the meeting, shareholders will have the opportunity to ask
questions about the Company that may be of general interest to shareholders.
The Notice of Annual Meeting of Shareholders, Annual Report of the Company
on Form 10-K for the year ended June 30, 1998, and the Company's Proxy
Statement have been sent to shareholders of the Company.
Item 5. Other Information
Shareholders who desire to bring a proposal before the 1999 Annual Meeting
of the Shareholders must cause written notice of the proposal to be received
by the Secretary of the Company at the executive offices of the Company at
200 Centennial Avenue, Suite 201, Piscataway, New Jersey 08854 by no later
than July 31, 1999.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits: Exhibit 27: Financial Data Schedule
(b) Reports on Form 8-K
The Company filed a Form 8-K with the Commission on October 14, 1998 regarding
the sale of the Company's wholly owned subsidiary LPF International Corp. to
Clarinet Overseas Ltd.
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant had duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
LOTUS PACIFIC, INC.
Date: January 8, 1998 By: /S/ James Yao
James Yao, Chairman & President
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/
David Leung, Director & Vice President
/S/
James Liu, Director & Vice President
/S/
Gary Huang, Chief Financial Officer & Secretary
/S/
Jeremy Wang, Director
/S/
Simon Gu, Director