SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____________ to _____________.
Commission File No. 33-55254-04
NATURAL WAY TECHNOLOGIES, INC.
(Exact name of small business issuer as specified in its charter)
NEVADA 87-0394313
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
ROOM 3105, 31/F, UNIVERSAL TRADE CENTRE
3-5 A ARBUTHNOT ROAD, CENTRAL, HONG KONG
(Address of principal executive offices)
(852) 2521-6296
(Issuer's telephone number)
ENERGY SYSTEMS, INC.
1111 CAROLINE, STE. 2905, HOUSTON, TEXAS 77010
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes X No
--- ---
As of June 30, 1996, 1,200,000 shares of Common Stock of the issuer
were outstanding.
NATURAL WAY TECHNOLOGIES, INC.
INDEX
Page
Number
------
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Balance Sheets - June 30, 1996 (unaudited) and
December 31, 1995 (audited).............................................. 3
Unaudited Condensed Statements of Operations - For the three months
ended June 30, 1996 and 1995 and for the period from
inception (May 4, 1988) to June 30, 1996.................................. 4
Unaudited Condensed Statements of Cash Flows - For the three months ended
June 30, 1996 and 1995 and for the period from inception (May 4, 1988)
to June 30, 1996.......................................................... 5
Notes to Unaudited Condensed Financial Statements.......................... 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................................. 7
PART II - OTHER INFORMATION.............................................................. 7
SIGNATURES............................................................................... 8
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
NATURAL WAY TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
ASSETS
(UNAUDITED) (AUDITED)
6-30-96 12-31-95
----------- ---------
CURRENT ASSETS
CASH $5,000,000 $ 0
----------
TOTAL CURRENT ASSETS 5,000,000 0
---------- --------
OTHER ASSETS 0 0
---------- --------
ORGANIZATION COSTS 0 0
---------- --------
TOTAL OTHER ASSETS 0 0
---------- --------
TOTAL ASSETS $5,000,000 $ 0
---------- --------
---------- --------
LIABILITIES & STOCKHOLDERS EQUITY
CURRENT LIABILITIES
ACCOUNTS PAYABLE $ 8,000 $ 8,000
---------- --------
TOTAL CURRENT LIABILITIES $ 8,000 $ 8,000
STOCKHOLDERS EQUITY
AUTHORIZED SHARES 50,000,000
$0.001 PAR VALUE; 1,200,000
OUTSTANDING AT 6-30-96 AND
1,000,000 OUTSTANDING AT 12-31-95 1,000 1,000
SERIES A CONVERTIBLE PREFERRED
STOCK, $.001 PAR VALUE 5,000 0
PAID IN CAPITAL 4,996,000 1,000
DEFICIT ACCUMULATED DURING
DEVELOPMENT STAGE (10,000) (10,000)
---------- --------
TOTAL STOCKHOLDERS EQUITY $4,992,000 $ (8,000)
---------- --------
TOTAL LIABILITIES & STOCKHOLDERS EQUITY $5,000,000 $ 0
---------- --------
---------- --------
SEE NOTES TO THE FINANCIAL STATEMENTS
1
NATURAL WAY TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS
(UNAUDITED)
FROM
INCEPTION
ON MAY 4,
FOR THE THREE FOR THE SIX MONTHS 1988
MONTHS ENDED ENDED THROUGH
JUNE 30, JUNE 30, JUNE 30,
-------- -------- --------
1996 1995 1996 1995 1996
---------- ---------- ---------- ---------- ----------
REVENUES $ 0 $ 0 $ 0 $ 0 $ 0
---------- ---------- ---------- ---------- ----------
EXPENSES
ADMINISTRATIVE EXPENSES 0 0 0 0 9,950
AMORTIZATION OF
ORGANIZATIONAL COSTS 0 0 0 0 50
TOTAL EXPENSES 0 0 0 8,000 10,000
---------- ---------- ---------- ---------- ----------
NET (LOSS) (0) (0) (0) (8,000) (10,000)
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
(LOSS) PER SHARE (.00) (.00) (.00) (.01) (.01)
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
AVERAGE SHARES
OUTSTANDING 1,200,000 1,200,000 1,100,000 1,000,000 1,100,000
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
2
NATURAL WAY TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS
(UNAUDITED)
FOR THE SIX MONTHS ENDED MAY 4, 1988
JUNE 30, (DATE
------- OF INCEPTION) TO
1996 1995 June 30, 1996
---- ---- ----------------
CASH FLOWS FROM FINANCING
ACTIVITIES
Net Loss $ 0 $ (8,000) $ (10,000)
Adjustments to reconcile net loss to
cash used in operating activities:
Amortization 0 0 50
---------- -------- ----------
Net Cash Used By Operating
Activities $ 0 $ (8,000) $ (9,950)
CASH FLOWS FROM INVESTING
ACTIVITIES
Organization costs 0 0 (50)
---------- -------- ----------
Net Cash used by investing
activities 0 0 (50)
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from issuance of common
stock 0 0 2,000
Proceeds from the issuance
of Series A, Convertible
Preferred Shares 5,000,000 5,000,000
Shareholder Loans 0 8,000 8,000
---------- -------- ----------
Net Cash provided from financing
activities $5,000,000 $ 8,000 $5,000,000
Net Increase (Decrease) in Cash $5,000,000 $ 0 $5,000,000
Cash at Beginning of Period 0 0 0
---------- -------- ----------
Cash at End of Period $5,000,000 $ 0 $5,000,000
---------- -------- ----------
---------- -------- ----------
See Notes to the Financial Statements
3
NATURAL WAY TECHNOLOGIES, INC.
(A Development Stage Company)
Notes to the Unaudited Condensed Financial Statements
June 30, 1996
1. GENERAL
The interim financial statements are prepared pursuant to the
requirements for reporting on Form 10-QSB. The December 31, 1995 balance
sheet data was derived from audited financial statements but does not include
all disclosures required by generally accepted accounting principles. The
interim financial statements and notes thereto should be read in conjunction
with the financial statements and notes included in the Company's Form 10-KSB
for the year ended December 31, 1995. In the opinion of management, the
interim financial statements reflect all adjustments of a normal recurring
nature necessary for a fair statement of the results for the interim periods
presented.
4
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
MATERIAL CHANGES IN RESULT OF OPERATIONS
During the three months ended June 30, 1996 and 1995, the Company had
no operations other than the search for a business to acquire or with which to
combine.
The Company reported no revenues or expenses for the three month
periods ended June 30, 1996 or 1995. The Company reported no revenues for the
six months ended June 30, 1996 or 1995. For the six months ended June 30,
1996, the Company incurred no expenses as compared to $8,000 of expenses for
the comparable period of 1995. This reduction in expenses resulted from a
decrease in legal and accounting fees.
MATERIAL CHANGES IN FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1996, the Company had a cash balance of 5,000,000. This
cash was raised from the sale of Series A, Convertible Preferred Stock
pursuant to the exemption from registration provided by Regulation S.
As of the close of business on June 30, 1996 the Registrant acquired
all of the issued and outstanding capital stock of China Medical Development
Co. Ltd., a British Virgin Islands corporation ("China Medical") in exchange
for 7,000,000 shares of the Registrant's Common Stock, $0.001 par value,
100,000 shares of Series B Preferred Stock and $4,200,000 in cash. The Common
Stock issued represent approximately 85.37% of the Registrant's issued and
outstanding Common Stock following the acquisition. The Series B Preferred
Stock has voting rights which will always be equal to 30% of the total vote on
any corporate matter.
China Medical was established to participate in a sino-foreign joint
venture with the Dunhua Huakang Pharmaceutical Plant, ("DHPP") a state owned
enterprise engaged in the manufacturing of formulated Chinese medicines for
sale within the Peoples Republic of China ("PRC"). Under the joint venture
agreement dated March 6, 1996, China Medical contributed $4,200,000 in cash
for a seventy-percent interest in the joint venture, while DHPP contributed
its production plant, (buildings, plant and machinery) valued at $1,800,000
for a thirty-percent interest in the joint venture.
The joint venture will succeed to the business of manufacturing
formulated Chinese medicine which was previously produced by DHPP. As part of
the joint venture agreement, DHPP has delivered a guarantee to China Medical
that the annual net income after tax (as determined under generally accepted
accounting principles) of the joint venture for each of its first four years
of operations will not be less than 25% of the net assets employed by the
joint venture. In the event that the net income of the joint venture is below
the guaranteed amount, DHPP has agreed to reallocate all or a portion of its
net income from the joint venture to China Medical, or make payments to China
Medical to cover any shortfall to China Medical's share of the net income. In
addition, DHPP has agreed to transfer to the joint venture additional
operating assets and liabilities with an estimated value of approximately for
a note which bears interest at an annual rate of 5.5%. The joint venture has
the right to transfer the note back to DHPP if the outstanding accounts
receivable as of December 31, 1995 are not realised in cash by June 30, 1997.
PART II - OTHER INFORMATION
NONE
5
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
NATURAL WAY TECHNOLOGIES, INC.
Date: July 19, 1996 By: /s/ Yiu Yat Hung
--------------------------------------
Yiu Yat Hung, Chairman
Date: July 19, 1996 By: /s/ Yiu Ye Le
--------------------------------------
Yiu Ye Le, Chief Financial Officer
6