-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WBDK9MMnBWw4/i0GYySG5mSrL3SEnKoEK60tVi05Bei/ISdbPJkbHByZjA8q46Bb HhHCQ6NMji89d2iTl4du0A== 0000842295-00-000023.txt : 20000516 0000842295-00-000023.hdr.sgml : 20000516 ACCESSION NUMBER: 0000842295-00-000023 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20000512 ITEM INFORMATION: FILED AS OF DATE: 20000515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HITOX CORPORATION OF AMERICA CENTRAL INDEX KEY: 0000842295 STANDARD INDUSTRIAL CLASSIFICATION: INDUSTRIAL INORGANIC CHEMICALS [2810] IRS NUMBER: 742081929 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: SEC FILE NUMBER: 000-17321 FILM NUMBER: 630454 BUSINESS ADDRESS: STREET 1: 722 BURLESON CITY: CORPUS CHRISTI STATE: TX ZIP: 78402 BUSINESS PHONE: 3618825175 MAIL ADDRESS: STREET 1: 722 BURLESON CITY: CORPUS CHRISTI STATE: TX ZIP: 78402 8-K/A 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K/A CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): May 12, 2000(March 1, 2000) TOR Minerals International, Inc. (Exact name of registrant as specified in its charter) Delaware (State or other jurisdiction of corporation) 0-17321 (Commission File Number) 74-2081929 (I.R.S. Employer Identification No.) 722 Burleson Corpus Christi, Texas (Address of principal executive offices) 78402 (Zip Code) Registrant's telephone number, including area code: (361) 883-5591 HITOX CORPORATION OF AMERICA (Former name or former address, if changed since last report) 1 TOR MINERALS INTERNATIONAL, INC. INDEX Page Item 5 Other Events 4 Item 7 Financial Statements and Exhibits (a) Financial statements of the business acquired Audited financial statements of MTC In Ringgit Malaysia (RM) Audited financial statements for the six months ended December 31, 1999 5 Report of Deloitte Touche Tohmatsu 6 Balance Sheets at December 31, 1999 and June 30, 1999 7 Profit and loss accounts for the six months ended December 31, 1999 and for the year ended June 30, 1999 8 Cash flow statement for the six months ended December 31, 1999 and for the year ended June 30, 1999 9 Notes to the accounts 11 Statement by directors 23 Reconciliation of audited financial statements for the six months ended December 31, 1999 to US GAAP 24 Audited financial statements for the years ended June 30, 1999 and 1998 28 Directors' Report 29 Report of Deloitte Touche Tohmatsu 34 Balance Sheets at June 30, 1999 and 1998 35 Profit and loss accounts for the years ended June 30, 1999 and 1998 36 Cash flow statement for the years ended June 30, 1999 and 1998 37 Notes to the accounts 39 Statement by directors 52 Reconciliation of audited financial statements for the years ended June 30, 1999 and 1998 to US GAAP 53 Audited financial statements for the years ended June 30, 1998 and 1997 57 Directors' Report 58 Report of Deloitte Touche Tohmatsu 63 Balance Sheets at June 30, 1998 and 1997 64 Profit and loss accounts for the years ended June 30, 1998 and 1997 65 Cash flow statement for the years ended June 30, 1998 and 1997 66 Notes to the accounts 68 Statement by directors 81 Reconciliation of audited financial statements for the years ended June 30, 1998 and 1997 to US GAAP 82 (b) Pro forma financial information 86 TMI and MTC Pro Forma Condensed Combined Financial Statements (Unaudited) Pro Forma Condensed Combined Balance Sheet December 31, 1999 87 Pro Forma Condensed Combined Statements of Income for the twelve months ended December 31, 1999 and 1998 89 Notes to Pro Forma Condensed Combined Financial Statements 90 (c) Exhibit 23 - Consent of Deloitte Touche Tohmatsu 92 Signatures 93 Item 5. Other Events On March 16, 2000, TOR Minerals International, Inc. (the "Company") (formerly Hitox Corporation of America) filed a Current Report on Form 8-K reporting the acquisition (the"Acquisition") of Malaysian Titanium Corporation Sdn. Bhd. ("MTC"). The Company is filing this amendment to include financial statements under Item 7(a) and pro forma financial information under Item 7(b). 4 Item 7. Financial Statements and Exhibits (a) Financial statements of the business acquired in Ringgit Malaysia (RM) MALAYSIAN TITANIUM CORPORATION SDN. BHD. (Incorporated in Malaysia) FINALCIAL STATEMENTS FOR THE PERIOD 1ST JULY, 1999 TO 31ST DECEMBER, 1999 (In Ringgit Malaysia) 5 The Board of Directors Malaysian Titanium Corporation Sdn. Bhd. 4 1/2 Miles, Jalan Lahat 30200 IPOH Dear Sirs, We have examined the accompanying balance sheet of Malaysian Titanium Corporation Sdn. Bhd., the related profit and loss account and cash flow statement for the period 1st July, 1999 to 31st December, 1999, together with the notes thereto. Our examination was made in accordance with approved auditing standards in Malaysia and, accordingly, included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. As mentioned in Note 2 to the Accounts, the above mentioned accounts have been prepared using the same accounting principles and procedures as were used in the preparation of the Company's statutory accounts as of 30th June, 1999. In our opinion, these accounts have been properly drawn up so as to give a true and fair view of the state of affairs of the Company at 31st December, 1999 and of the results and the cash flows of the Company for the period 1st July, 1999 to 31st December, 1999. We understand that this report is for Malaysian Titanium Corporation Sdn. Bhd.'s internal use only and shall not be used or referred to in whole or part for any other purpose without our prior consent. Yours truly, DELOITTE TOUCHE TOHMATSU AF 0834 Public Accountants GREGORY WONG GUANG SENG 787/3/01(J/PH) Partner 18th January, 2000 6 MALAYSIAN TITANIUM CORPORATION SDN. BHD. (Incorporated in Malaysia) BALANCE SHEET AT 31ST DECEMBER, 1999 Note 31.12.1999 30.6.1999 ---- ----------- ---------- FIXED ASSETS 4 RM40,763,324 RM41,106,512 ASSOCIATED COMPANY 5 1 1 CURRENT ASSETS Stocks 6 7,314,035 3,065,795 Trade debtors 4,091,801 4,176,503 Other debtors, deposits and prepayments 248,301 1,366,963 Amount owing by a related company 7 -- 44,590 Cash on hand and at banks 121,339 47,211 11,775,476 8,701,062 CURRENT LIABILITIES Trade creditors 1,792,032 847,252 Other creditors and accrued expenses 8 1,618,543 1,242,113 Amount owing to holding companies 7 35,911 117,491 Amount owing to related companies 7 726,237 -- Bank borrowings 9 10,109,160 15,119,470 Provision for taxation 33,938 33,938 14,315,821 17,360,264 NET CURRENT LIABILITIES (2,540,345) (8,659,202) ------------ ------------ 38,222,980 32,447,311 LONG-TERM LIABILITIES 10 (5,131,854) (1,331,854) ------------ ------------ NET ASSETS EMPLOYED RM33,091,126 RM31,115,457 ============ ============ Represented by: SHARE CAPITAL 11 RM24,130,000 RM24,130,000 UNAPPROPRIATED PROFIT 12 8,961,126 6,985,457 ------------ ------------ TOTAL CAPITAL EMPLOYED RM33,091,126 RM31,115,457 ============ ============ The accompanying Notes form an integral part of the Accounts. 7 MALAYSIAN TITANIUM CORPORATION SDN. BHD. (Incorporated in Malaysia) PROFIT AND LOSS ACCOUNT FOR THE PERIOD 1ST JULY, 1999 TO 31ST DECEMBER, 1999 (With Comparative Figures For The Year Ended 30th June, 1999) Period Ended Year Ended 31.12.1999 30.6.1999 Note (6 months) (12 months) ---- ------------- ------------- TURNOVER 13 RM 8,988,436 RM 22,030,064 ============= ============= PROFIT BEFORE TAXATION 14 RM 1,975,669 RM 3,340,145 PROVISION FOR TAXATION 15 -- (33,938) ------------- ------------- NET PROFIT 1,975,669 3,306,207 Unappropriated profit at beginning of period/year 6,985,457 3,679,250 ------------- ------------- UNAPPROPRIATED PROFIT AT END OF PERIOD/YEAR RM 8,961,126 RM 6,985,457 ============= ============= The accompanying Notes form an integral part of the Accounts. 8 MALAYSIAN TITANIUM CORPORATION SDN. BHD. (Incorporated in Malaysia) CASHFLOW STATEMENT FOR THE PERIOD 1ST JULY, 1999 TO 31ST DECEMBER, 1999 (With Comparative Figures For The Year Ended 30th June, 1999) Period Ended Year Ended 31.12.1999 30.6.1999 (6 months) (12 months) -------------- -------------- CASH FLOWS FROM OPERATING ACTIVITIES Profit before taxation RM 1,975,669 RM 3,340,145 Adjustments for: Depreciation of fixed assets 623,585 832,693 Interest expense 547,130 1,637,557 Provision for doubtful debt -- 307,226 Provision for diminution in value of investment -- 282,334 Fixed asset written off -- 80,154 Stocks written off -- 7,237 Gain on disposal of fixed assets (12,000) (711,493) -------------- -------------- Operating Profit Before Working Capital Changes 3,134,384 5,775,853 Decrease/(Increase) in stocks (4,248,240) 2,086,870 Decrease in trade and other receivables 1,247,954 2,339,438 Increase/(Decrease) in trade and other payables 1,965,867 (1,560,106) -------------- -------------- Cash Generated From Operations 2,099,965 8,642,055 Interest paid (344,064) (1,549,537) -------------- -------------- Net Cash From Operating Activities 1,755,901 7,092,518 CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from disposal of other fixed assets 12,000 30,000 Deposits received from disposal of property -- 110,000 Purchase of fixed assets (280,397) (2,123,540) Net Cash Used In Investing Activities (268,397) (1,983,540) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from term loan RM 6,000,000 RM 1,331,854 Repayment of term loan (1,090,773) (988,020) Net Cash From Financing Activities 4,909,227 343,834 -------------- -------------- NET INCREASE IN CASH AND CASH EQUIVALENTS 6,396,731 5,452,812 9 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD/YEAR (14,984,552) (20,437,364) -------------- -------------- CASH AND CASH EQUIVALENTS AT END OF PERIOD/YEAR RM (8,587,821) RM (14,984,552) ============== ============== CASH AND CASH EQUIVALENTS Cash and cash equivalents included in the cash flow statement comprise the following balance sheet amounts: Cash on hand and at banks RM 122,339 RM 47,211 Bank overdrafts (4,194,624) (5,643,405) Export credit refinancing (4,514,536) (5,388,358) Other short-term borrowings -- (4,000,000) -------------- -------------- Cash and cash equivalents RM (8,587,821) RM (14,984,552) ============== ============== The accompanying Notes form an integral part of the Accounts. 10 MALAYSIAN TITANIUM CORPORATION SDN. BHD. (Incorporated in Malaysia) NOTES TO THE ACCOUNTS 1. PRINCIPAL ACTIVITY The Company is principally involved in the manufacturing of synthetic rutile and its related products. There has been no significant change in the nature of this activity during the financial period. 2. BASIS OF PREPARATION OF ACCOUNTS The accounts of the Company have been prepared in accordance with the provisions of the Companies Act, 1965 and the applicable approved accounting standards of the Malaysian Accounting Standards Board. 3. SIGNIFICANT ACCOUNTING POLICIES Basis of Accounting The accounts of the Company have been prepared under the historical cost convention. Depreciation of Fixed Assets Fixed assets are stated at cost less accumulated depreciation. Freehold land and capital work-in-progress are not depreciated while long-term leasehold land is amortised evenly over the period of the lease. Plant and machinery is depreciated based on units of production over the plant's normal capacity for an estimated life of 15 years. Depreciation of other fixed assets is computed using the straight- line method at the following annual rates based on the estimated useful lives of the various assets: Buildings 2% Motor vehicles 20% Office equipment, furniture and fittings 15 - 20% 11 Associated Company An associated company is a company in which the Company has a long- term equity investment of 20% to 50% and where the Company is in a position to exercise significant influence through management participation. The Company has an equity interest of 40% (40% in 1999) in an associated company, Fluid Minerals Espanola (FME) (a company incorporated in Spain), whose principal activity is manufacturing and sales of hitox pigment. Investment in associated company is stated at cost unless, in the opinion of the directors, there is a permanent diminution in the value of investment in which case provision is made for the diminution in value. Stocks Stocks are stated at the lower of cost and net realisable value. Cost is determined on the "weighted average" method. Cost of raw materials, consumables and trading goods comprise the original purchase price plus cost of bringing these stocks to location. Cost of finished goods and work-in-progress include the cost of raw materials and an appropriate allocation of labour cost and manufacturing overheads. Capitalisation of Borrowing Cost Borrowing costs incurred on the acquisition and construction of fixed assets which require a substantial period of time to get them ready for their intended use are capitalised and included as part of cost of the related assets. Deferred Taxation Provision is made using the liability method for taxation deferred by capital allowances and other timing differences except to the extent that it can be demonstrated with reasonable probability that the timing differences will continue in the foreseeable future. Timing differences giving rise to deferred tax benefits are not recognised. 12 Foreign Currency Conversion All foreign currency transactions are converted into Ringgit Malaysia at the exchange rates prevailing at the transaction dates or, where settlement has not yet taken place at the end of the financial year, at the approximate exchange rates prevailing on that date. All exchange gains or losses are taken up in the profit and loss account. Cash Equivalents Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. 13 4. FIXED ASSETS
---------------------Cost-------------------------------- Beginning End 31.12.1999 of period Additions Disposals of period -------------- ------------ ---------- ----------- ------------ Long-term leashold land RM 345,191 RM -- RM -- RM 345,191 Buildings 4,313,779 -- -- 4,313,779 Plant and machinery 42,970,294 90,444 -- 43,060,738 Motor vehicles 818,837 -- (34,383) 784,454 Office equipment furniture & fittings 856,883 10,976 -- 867,859 Capital work-in-progress -- 178,977 -- 178,977 ------------ ---------- ----------- ------------ Total RM49,304,984 RM 280,397 RM (34,383) RM49,550,998 ============ ========== =========== ============
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--------------Accumulated Depreciation-------------- Beginning Charge for End Net book 31.12.1999 of period the period Disposals of period value -------------- ------------ ---------- ----------- ----------- ----------- Long-term land RM 33,284 RM 2,064 RM - RM 35,348 RM 309,843 Buildings 665,639 43,134 - 708,773 3,605,006 Plant and machinery 6,010,033 528,425 - 6,538,458 36,522,280 Motor vehicles 721,967 24,942 (34,383) 712,526 71,928 Office equipment, furniture and fittings 767,549 25,020 - 792,569 75,290 Capital work-in-progress - - - - 178,977 ------------ ---------- ----------- ----------- ------------ Total RM 8,198,472 RM 623,585 RM (34,383) RM8,787,674 RM40,763,324 ============ ========== =========== =========== ============
-------------------------Cost------------------------------ Disposals/ Beginning Transfer/ End 30.6.1999 of year Additions Write off of year -------------- ------------ ----------- ------------- ------------ Freehold land RM 265,979 RM - RM (265,979) RM - Long-term leasehold land 345,191 - - 345,191 Buildings 4,553,634 8,720 (248,575) 4,313,779 Plant and machinery 40,854,801 2,115,493 - 42,970,294 Motor vehicles 890,837 - (72,000) 818,837 Office equipment furniture fittings 781,540 75,343 - 856,883 Capital work- Capital work-in-progress 76,016 2,040,497 (2,116,513) - ------------ ----------- ------------- ------------ Total RM47,767,998 RM4,240,053 RM(2,703,067) RM49,304,984 ============ =========== ============= ============
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------------------Accumulated Depreciation--------------- Beginning Charge for End Net book 30.6.1999 of year the year Disposals of year value -------------- ------------ ---------- ----------- ----------- ----------- Freehold land RM -- RM -- RM -- RM -- RM -- Long-term land 29,153 4,131 -- 33,284 311,907 Buildings 613,416 90,916 (38,693) 665,639 3,648,140 Plant and machinery 5,364,782 645,251 -- 6,010,033 36,960,261 Motor vehicles 717,078 54,089 (49,200) 721,967 96,870 Office equipment furniture and fittings 729,243 38,306 -- 767,549 89,334 Capital work- in-progress -- -- -- -- -- ------------ ---------- ----------- ------------ ------------ Total RM 7,453,672 RM 832,693 RM (87,893) RM 8,198,472 RM41,106,512 ============ ========== =========== ============ ============
Current charges to plant and machinery include interest costs capitalised of RM Nil (RM31,205 in 30th June, 1999). 16 5. ASSOCIATED COMPANY 31.12.1999 30.6.1999 ---------- ---------- Unquoted shares, at cost RM 837,902 RM 837,902 Less: Provision for diminution in value (837,901) (837,901) ---------- ---------- Net RM 1 RM 1 ========== ========== The directors of the Company have made a provision for diminution in the carrying value of the associated company based on the net asset value of the investee company and on the "prudence" concept. Had the equity method of accounting been presented, the Company's share of post-acquisition loss in associated company would have been RM Nil (RM802,818 in 30th June, 1999). 17 6. STOCKS 31.12.1999 30.6.1999 ------------ ------------ Finished goods RM 5,149,699 RM 1,216,085 Work-in-progress 593,989 169,318 Raw materials 234,392 274,894 Consumables 1,335,955 1,405,498 ------------ ------------ Total RM 7,314,035 RM 3,065,795 ============ ============ 7. HOLDING COMPANIES AND INTERCOMPANY TRANSACTIONS 31.12.1999 30.6.1999 ------------ ------------ Amount owing to immediate holding company RM 33,500 RM 33,500 Amount owing to intermediate holding company 2,411 83,991 ------------ ------------ Total RM 35,911 RM 117,491 ============ ============ The Company is a 52.84% (52.84% at 30th June, 1999) owned subsidiary of Megamin Ventures Sdn. Bhd.. The intermediate and ultimate holding companies are Bonanza Venture Holdings Sdn. Bhd. and Kay Lim Holdings Sdn. Bhd. respectively. All of these companies were incorporated in Malaysia. Significant intercompany transactions which were dealt with at arm's length during the period are as follows: 31.12.1999 30.6.1999 ------------ ------------ Related company: Trade purchases RM 2,149,227 RM 2,987,993 Trade sales -- 594,886 ============ ============ 8. RELATED PARTY TRANSACTIONS Included in other creditors and accrued expenses is an amount of RM600 (RM600 at 30th June, 1999) owing to a company in which one of the directors is also a director of the Company. Significant related party transaction which was dealt with at arm's length during the period comprise professional fee of RM1,200 (RM2,400 in 30th June, 1999). 18 9. BANK BORROWINGS 31.12.1999 30.6.1999 ------------ ----------- Secured: Bank overdrafts RM 4,194,624 RM 5,643,405 Export credit refinancing 4,514,536 5,388,358 Current portion of term loan (Note 10) 1,400,000 87,707 Other short-term borrowings -- 4,000,000 ------------ ------------ Total RM10,109,160 RM15,119,470 ============ ============ The Company's bank overdraft and other short-term credit facilities with two local banks up to a limit of RM23,900,000 (RM34,900,000 at 30th June, 1999) are secured by legal charges over the Company's long-term leasehold land and debentures with fixed and floating charges over all assets of the Company. The above facilities bear interest rates ranging from 3.50% to 9.30% (3.50% to 13.80% in 30th June, 1999) per annum. 10. LONG-TERM LIABILITIES 31.12.1999 30.6.1999 ------------ ------------ Term loans - Principal outstanding RM 6,531,854 RM 1,419,561 Less: Current portion included in bank borrowings under current liabilities (Note 9) (1,400,000) (87,707) ------------ ------------ Long-term portion RM 5,131,854 RM 1,331,854 ============ ============ The Company has two term loan facilities to the extent of RM6,000,000 and RM2,400,000 with a local bank mentioned in Note 9. The term loans are secured on similar assets and guarantees as disclosed therein and are repayable by 60 monthly instalments of RM100,000 and 48 monthly instalments of RM50,000 each commencing from October, 1999 and September, 2000 respectively. The term loans bear interest rates ranging from 8.80% to 9.65% (9.25% to 14.10% in 30th June, 1999) per annum. The long-term portion of the term loan is repayable as follows: 31.12.1999 30.6.1999 ------------ ------------ Within one to two years RM 1,800,000 RM 500,000 Within two to five years 3,331,854 831,854 ------------ ------------ RM 5,131,854 RM 1,331,854 ============ ============ 19 11. SHARE CAPITAL 31.12.1999 30.6.1999 ------------ ------------ Ordinary shares of RM1 each: Authorised RM60,000,000 RM60,000,000 ============ ============ Issued and fully paid RM24,130,000 RM24,130,000 ============ ============ 12. UNAPPROPRIATED PROFIT Subject to agreement with the Inland Revenue Board, as at 31st December, 1999, the Company has a Section 108 tax credit of approximately RM15,000 (RM15,000 at 30th June, 1999). The Company also has a special tax-exempt account amounting to approximately RM13,000 arising from the waiver of tax on chargeable income for Year of Assessment 2000. Accordingly, the Company may distribute an amount of approximately RM52,000 (RM52,000 at 30th June, 1999) out of its unappropriated profit at 31st December, 1999 without incurring additional tax liability. Any dividend declared and proposed out of the aforesaid tax-exempt account will be tax-exempted in the hands of the shareholders. 13. TURNOVER Turnover represents sales of goods at gross invoiced value less returns. The cost of inventories recognised as an expense, applicable to turnover, are as follows: 31.12.1999 30.6.1999 ------------ ------------ Raw materials and consumables RM 5,595,495 RM 6,527,433 Net change in inventories of finished goods and work-in-progress (4,358,285) 2,270,634 Labour costs 1,155,948 2,421,084 Depreciation and other production overheads 3,123,362 4,057,675 ------------ ------------ Total RM 5,516,520 RM15,276,826 ============ ============ 20 14. PROFIT BEFORE TAXATION Profit before taxation is arrived at: 31.12.1999 30.6.1999 ------------ ------------ After charging: Depreciation of fixed assets RM 623,585 RM 832,693 Interest on: Other short-term borrowings 135,703 786,431 Bank overdrafts 208,361 763,106 Term loans 203,066 88,020 Directors' remuneration: Fee -- 6,000 Other emoluments 191,520 409,318 Benefits-in-kind 7,830 16,021 Rental of premises and equipment 113,260 185,955 Audit fee: Current -- 14,000 Special 8,000 -- Professional fees paid to a company in which a director has an interest 1,200 2,400 Provision for doubtful debt -- 307,226 Provision for diminution in value of investment -- 282,334 Fixed asset written off -- 80,154 ============ ============ And crediting: Gain on disposal of fixed assets RM 12,000 RM 711,493 Rental received 6,000 30,200 ============ ============ 15. PROVISION FOR TAXATION 31.12.1999 30.6.1999 ----------- ----------- Real property gains tax RM -- RM 33,938 =========== =========== Although the operations of the Company in the current and preceding years resulted in profits, no provision for taxation has been made due to the utilisation of brought forward unabsorbed capital allowances to set-off in full the profits that would otherwise have been subjected to tax. The tax benefits arising from such utilisation is approximately RM374,000. 21 Subject to approval from the Inland Revenue Board, at balance sheet date, the Company has estimated unutilised tax losses and unabsorbed capital allowances carried forward amounting to approximately RM13,520,000 (RM13,520,000 at 30th June, 1999) and RM24,179,000 (RM25,513,000 at 30th June, 1999) respectively which can be carried forward and utilised to set-off against future taxable profits. As at 31st December, 1999, the amount of deferred taxation calculated at current tax rate which is not recognised in the accounts are as follows: Deferred Assets/(Liability) 31.12.1999 30.6.1999 ------------ ------------ Tax effects of timing differences in respect of: Excess of capital allowances over book depreciation RM(8,372,000) RM(8,182,000) Unabsorbed capital allowances and carry forward tax losses 10,556,000 10,929,000 ------------ ------------ Net RM 2,184,000 RM 2,747,000 ============ ============ 16. CAPITAL COMMITMENTS 31.12.1999 30.6.1999 ---------- ---------- Approved and contracted but not provided for RM -- RM 21,000 ========== ========== 17. CONTINGENT LIABILITY As at 31st December, 1999, a former employee has filed a claim against the Company for unlawful dismissal amounting to RM71,000. The Company is repudiating the claim on grounds that the dismissal was fair and just. The outcome of this case is presently not determinable. 22 MALAYSIAN TITANIUM CORPORATION SDN. BHD. (Incorporated in Malaysia) STATEMENT BY DIRECTORS The directors of MALAYSIAN TITANIUM CORPORATION SDN. BHD. state that, in their opinion, the accompanying balance sheet, profit and loss account and cash flow statement, together with the notes thereto, are drawn up in accordance with the provisions of the Companies Act, 1965 and the applicable approved accounting standards so as to give a true and fair view of the state of affairs of the Company at 31st December, 1999 and of the results of its business and the cash flows of the period 1st July, 1999 to 31st December, 1999. Signed in accordance with a resolution of the Directors, ____________________________________________ LEE HEE CHEW _____________________________________________ TEOH LAY HOCK Ipoh, 18th January, 2000 23
MALAYSIAN TITANIUM CORPORATION SDN BHD BALANCE SHEET AT 31ST DECEMBER, 1999 Accounts Adjustments to Comply Per Malaysian With US GAAP Accounts Standards Debit Credit Per US GAAP RM RM RM RM ------------ ------------ ------------ ------------ FIXED ASSETS 40,763,324 40,763,324 ASSOCIATED COMPANY 1 837,901 802,818 35,084 DEFERRED TAX ASSETS NON-CURRENT -- 2,746,846 1,108,227 1,638,619 CURRENT ASSETS Stocks 7,314,035 7,314,035 Trade debtors 4,091,801 4,091,801 Other debtors, deposits and prepayments 248,301 248,301 Amount owing by associated company -- -- Amount owing by related company -- -- Cash on hand and at banks 121,339 121,339 Deferred Tax Assets- Current 545,534 545,534 ------------ ------------ ------------ ------------ 11,775,476 545,534 0 12,321,010
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Accounts Adjustments to Comply Per Malaysian With US GAAP Accounts Standards Debit Credit Per US GAAP RM RM RM RM ------------ ------------ ------------ ------------ CURRENT LIABILITIES Trade creditors 1,792,032 1,792,032 Other creditors and accrued expenses 1,618,543 1,618,543 Amount owing to holding companies 35,911 35,911 Amount owing to related companies 726,237 726,237 Bank borrowings 10,109,160 10,109,160 Provision for taxation 33,938 33,938 ------------ ------------ ------------ ------------ 14,315,821 14,315,821 ------------ ------------ ------------ ------------ NET CURRENT LIABILITIES (2,540,345) 545,534 0 (1,994,811) ------------ ------------ ------------ ------------ 38,222,980 4,130,281 1,911,045 40,442,216 LONG-TERM LIABILITY (5,131,854) (5,131,854) ------------ ------------ ------------ ------------ NET ASSETS EMPLOYED 33,091,126 4,130,281 1,911,045 35,310,362 ============ ============ ============ ============ Represented by: SHARE CAPITAL 24,130,000 24,130,000 UNAPPROPRIATED PROFIT 8,961,126 1,365,511 3,584,747 11,180,362 ------------ ------------ ------------ ------------ TOTAL CAPITAL EMPLOYED 33,091,126 1,365,511 3,584,747 35,310,362 ============ ============ ============ ============
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MALAYSIAN TITANIUM CORPORATION SDN BHD PROFIT AND LOSS ACCOUNT FOR THE PERIOD 1ST JULY 1999 TO 31ST DECEMBER, 1999 Accounts Adjustments to Comply Per Malaysian With US GAAP Accounts Standards Debit Credit Per US GAAP RM RM RM RM ---------------- ---------------- ---------------- ---------------- TURNOVER 8,988,436 -- -- 8,988,436 ================ ================ ================ ================ PROFIT BEFORE TAXATION 1,975,669 1,975,669 PROVISION FOR TAXATION -- 562,693 -- (562,693) ---------------- ---------------- ---------------- ---------------- NET PROFIT 1,975,669 562,693 -- 1,412,976 Unappropriated profit at beginning of year 6,985,457 802,818 3,584,747 9,767,386 ---------------- ---------------- ---------------- ---------------- UNAPPROPRIATED PROFIT AT END OF YEAR 8,961,126 1,365,511 3,584,747 11,180,362 ================ ================ ================ ================
26 MALAYSIAN TITANIUM CORPORATION SDN. BHD. PERIOD 1ST JULY, 1999 TO 31ST DECEMBER, 1999 ADJUSTMENTS TO COMPLY WITH US GAAP 1 Provision for taxation - Profit and loss Account 562,693 Deferred Tax Assets - Balance Sheet 562,693 ========= ========= (Being current period's movement in deferred tax assets) 2 Deferred Tax Assets 2,746,846 Unappropriated profit at beginning of year 2,746,846 ========= ========= (Being adjustment to recognise brought forward deferred tax assets) 3 Deferred Tax Assets Current Portion 545,534 Deferred Tax Assets Non-Current Portion 545,534 ========= ========= (Being reclassification of current portion of deferred tax assets) 4 Unappropriated Profit Brought Forward 802,818 Associated Company 802,818 ========= ========= (Being adjustment to recognise MTC's share of post-acquisition loss in Associated Company for years prior to the period 1st July, 1999 to 31st December, 1999) 5 Associated Company 837,901 Unappropriated Profit Brought Forward 837,901 ========= ========= (Being reversal of provision for diminution in value of investment in Associated Company) 27 MALAYSIAN TITANIUM CORPORATION SDN. BHD. (Company No: 014387-W) (Incorporated in Malaysia) FINANCIAL STATEMENTS FOR THE YEAR ENDED 30TH JUNE, 1999 (In Ringgit Malaysia) 28 MALAYSIAN TITANIUM CORPORATION SDN. BHD. (Incorporated in Malaysia) DIRECTORS' REPORT The directors of MALAYSIAN TITANIUM CORPORATION SDN. BHD. have pleasure in submitting their report and the audited accounts of the Company for the financial year ended 30th June, 1999. PRINCIPAL ACTIVITY The Company is principally involved in the manufacturing of synthetic rutile and its related products. There has been no significant change in the nature of this activity during the financial year. RESULTS OF OPERATIONS The results of operations of the Company for the financial year are as follows: Net profit RM3,306,207 Unappropriated profit at beginning of year 3,679,250 ----------- Unappropriated profit at end of year RM6,985,457 =========== In the opinion of the directors, the results of operations of the Company during the financial year have not been substantially affected by any item, transaction or event of a material and unusual nature. DIVIDENDS No dividend has been paid or declared by the Company since the end of the previous financial year. The directors also do not recommend any dividend payment in respect of the current financial year. 29 RESERVES AND PROVISIONS There were no material transfers to or from reserves or provisions during the financial year other than those disclosed in the Accounts. ISSUE OF SHARES AND DEBENTURES The Company has not issued any new shares or debentures during the financial year. SHARE OPTIONS No options have been granted by the Company to any parties during the financial year to take up unissued shares of the Company. No shares have been issued during the financial year by virtue of the exercise of any option to take up unissued shares of the Company. As at the end of the financial year, there were no unissued shares of the Company under options. OTHER FINANCIAL INFORMATION Before the profit and loss account and balance sheet of the Company were made out, the directors took reasonable steps: (a) to ascertain that proper action had been taken in relation to the writing off of bad debts and the making of provision for doubtful debts, and have satisfied themselves that all known bad debts had been written off and that adequate provision had been made for doubtful debts; and (b) to ensure that any current assets which were unlikely to realise their book values in the ordinary course of business have been written down to their estimated realisable values. At the date of this report, the directors are not aware of any circumstances: (a) which would render the amount written off for bad debts or the amount of the provision for doubtful debts in the accounts of the Company inadequate to any substantial extent; or (b) which would render the values attributed to current assets in the accounts of the Company misleading; or 30 (c) which have arisen which render adherence to the existing method of valuation of assets or liabilities of the Company misleading or inappropriate; or (d) not otherwise dealt with in this report or accounts which would render any amount stated in the accounts of the Company misleading. At the date of this report, there does not exist: (a) any charge on the assets of the Company which has arisen since the end of the financial year which secures the liability of any other person; and (b) any contingent liability of the Company which has arisen since the end of the financial year. No contingent or other liability has become enforceable or is likely to become enforceable within the period of twelve months after the end of the financial year which, in the opinion of the directors, will or may substantially affect the ability of the Company to meet its obligations as and when they fall due. In the opinion of the directors, no item, transaction or event of a material and unusual nature has arisen in the interval between the end of the financial year and the date of this report which is likely to affect substantially the results of operations of the Company for the financial year in which this report is made. DIRECTORS The following directors served on the Board of the Company since the date of the last report: Thomas Michael Mackey Lim Chee Seng Lee Hee Chew Teoh Lay Hock Dato' Dr. Abdullah Hasbi bin Haji Hassan Ryan Hong Ho Yean 31 DIRECTORS' INTERESTS The shareholdings in the Company of those who were directors at the end of the financial year, as recorded in the Register of Directors' Shareholdings kept by the Company under Section 134 of the Companies Act, 1965, are as follows: No. of Shares of RM1 each ----------------------------------- Shares in the Company Deemed interest Thomas Michael Mackey 6,380,000 Lim Chee Seng 5,000,000 Ryan Hong 6,380,000 None of the other directors held shares or have any beneficial interest in the shares of the Company during the financial year. Under the Company's Articles of Association, the directors are not required to hold shares in the Company. There are no movement in the directors' shareholdings during the financial year. DIRECTORS' BENEFITS Since the end of the previous financial year, none of the directors of the Company have received or become entitled to receive any benefit (other than those disclosed as directors' remuneration in the Accounts) by reason of a contract made by the Company or a related corporation with the director or with a firm of which he is a member, or with a company in which he has a substantial financial interest. During and at the end of the financial year, no arrangement subsisted to which the Company was a party whereby directors of the Company might acquire benefits by means of the acquisition of shares in, or debentures of, the Company or any other body corporate. HOLDING COMPANIES The Company is a subsidiary of Megamin Ventures Sdn. Bhd.. The intermediate and ultimate holding companies are Bonanza Venture Holdings Sdn. Bhd. and Kay Lim Holdings Sdn. Bhd. respectively. All of these companies were incorporated in Malaysia. 32 AUDITORS The auditors, Messrs. Deloitte Touche Tohmatsu, have indicated their willingness to continue in office. On behalf of the Board, _____________________________________ LEE HEE CHEW _____________________________________ TEOH LAY HOCK Ipoh, 6th August, 1999 33 REPORT OF THE AUDITORS TO THE MEMBERS OF MALAYSIAN TITANIUM CORPORATION SDN. BHD. (Incorporated in Malaysia) We have audited the accompanying balance sheet as of 30th June, 1999, the related profit and loss account and cash flow statement, together with the notes thereto, for the year then ended. These accounts are the responsibility of the Company's directors. Our responsibility is to express an opinion on these accounts based on our audit. We conducted our audit in accordance with approved standards on auditing in Malaysia. These standards require that we plan and perform the audit to obtain reasonable assurance about whether the accounts are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the accounts. An audit also includes assessing the accounting principles used and significant estimates made by the directors, as well as evaluating the overall accounts presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion: (a) the accounts are properly drawn up in accordance with the provisions of the Companies Act, 1965 and the applicable approved accounting standards in Malaysia so as to give a true and fair view of: (i) the state of affairs of the Company as of 30th June, 1999 and of the results and the cash flows of the Company for the year ended on that date; and (ii) the matters required by Section 169 of the Act to be dealt with in the accounts; and (b) the accounting and other records and the registers required by the Act to be kept by the Company have been properly kept in accordance with the provisions of the Act. DELOITTE TOUCHE TOHMATSU AF 0834 Public Accountants GREGORY WONG GUANG SENG 787/3/01(J/PH) Partner 6th August, 1999 34 MALAYSIAN TITANIUM CORPORATION SDN. BHD. (Incorporated in Malaysia) BALANCE SHEET AT 30TH JUNE, 1999 Note 1999 1998 ---- ------------- ------------- FIXED ASSETS 4 RM 41,106,512 RM 40,314,326 ASSOCIATED COMPANY 5 1 282,335 CURRENT ASSETS Stocks 6 3,065,795 5,159,902 Trade debtors 7 4,176,503 6,553,461 Other debtors, deposits and prepayments 1,366,963 272,483 Amount owing by associated company 8 -- 418,776 Amount owing by a related company 9 44,590 -- Cash on hand and at banks 47,211 6,224 8,701,062 12,410,846 CURRENT LIABILITIES Trade creditors 847,252 922,806 Other creditors and accrued expenses 7 1,242,113 2,570,260 Amount owing to holding companies 9 117,491 233,641 Amount owing to related companies 9 -- 40,255 Bank borrowings 10 15,119,470 21,343,588 Provision for taxation 33,938 -- 17,360,264 25,110,550 NET CURRENT LIABILITIES (8,659,202) (12,699,704) ------------- ------------- 32,447,311 27,896,957 LONG-TERM LIABILITY 11 (1,331,854) (87,707) ------------- ------------- NET ASSETS EMPLOYED RM 31,115,457 RM 27,809,250 ============= ============= Represented by: SHARE CAPITAL 12 RM 24,130,000 RM 24,130,000 UNAPPROPRIATED PROFIT 13 6,985,457 3,679,250 ------------- ------------- TOTAL CAPITAL EMPLOYED RM 31,115,457 RM 27,809,250 ============= ============= The accompanying Notes form an integral part of the Accounts. 35 MALAYSIAN TITANIUM CORPORATION SDN. BHD. (Incorporated in Malaysia) PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 30TH JUNE, 1999 Note 1999 1998 ---- ------------- ------------- TURNOVER 14 RM 22,030,064 RM 34,355,296 ============= ============= PROFIT BEFORE TAXATION 15 RM 3,340,145 RM 3,550,012 PROVISION FOR TAXATION 16 (33,938) -- ------------- ------------- NET PROFIT 3,306,207 3,550,012 Unappropriated profit at beginning of year 3,679,250 129,238 ------------- ------------- UNAPPROPRIATED PROFIT AT END OF YEAR RM 6,985,457 RM 3,679,250 ============= ============= The accompanying Notes form an integral part of the Accounts. 36 MALAYSIAN TITANIUM CORPORATION SDN. BHD. (Incorporated in Malaysia) CASHFLOW STATEMENT FOR THE YEAR ENDED 30TH JUNE, 1999 1999 1998 -------------- -------------- CASH FLOWS FROM OPERATING ACTIVITIES Profit before taxation RM 3,340,145 RM 3,550,012 Adjustments for: Interest expense 1,637,557 2,238,812 Depreciation of fixed assets 832,693 1,311,232 Provision for doubtful debt 307,226 -- Provision for diminution in value of investment 282,334 555,567 Fixed asset written off 80,154 -- Stocks written off 7,237 -- Gain on disposal of fixed assets (711,493) -- -------------- -------------- Operating Profit Before Working Capital Changes 5,775,853 7,655,623 Decrease in stocks 2,086,870 2,990,222 Decrease/(Increase) in trade and other receivables 2,339,438 (2,419,629) Decrease in trade and other payables (1,560,106) (4,819,527) -------------- -------------- Cash Generated From Operations 8,642,055 3,406,689 Interest paid (1,549,537) (2,062,667) -------------- -------------- Net Cash From Operating Activities 7,092,518 1,344,022 CASH FLOWS FROM INVESTING ACTIVITIES Deposits received from disposal of property 110,000 -- Proceeds from disposal of other fixed assets 30,000 2,448 Purchase of fixed assets (2,123,540) (845,704) -------------- -------------- Net Cash Used In Investing Activities (1,983,540) (843,256) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from term loan 1,331,854 -- Repayment of term loan (988,020) (1,076,145) Proceeds from issuance of shares -- 2,130,000 -------------- -------------- Net Cash From Financing Activities 343,834 1,053,855 -------------- -------------- 37 MALAYSIAN TITANIUM CORPORATION SDN. BHD. (Incorporated in Malaysia) CASHFLOW STATEMENT FOR THE YEAR ENDED 30TH JUNE, 1999 1999 1998 -------------- -------------- NET INCREASE IN CASH AND CASH EQUIVALENTS RM 5,452,812 RM 1,554,621 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR (20,437,364) (21,991,985) -------------- -------------- CASH AND CASH EQUIVALENTS AT END OF YEAR RM (14,984,552) RM (20,437,364) ============== ============== CASH AND CASH EQUIVALENTS Cash and cash equivalents included in the cash flow statement comprise the following balance sheet amounts: Cash on hand and at banks RM 47,211 RM 6,224 Bank overdrafts (5,643,405) (8,730,412) Export credit refinancing (5,388,358) (7,713,176) Other short-term borrowings (4,000,000) (4,000,000) -------------- -------------- Cash and cash equivalents RM (14,984,552) RM (20,437,364) ============== ============== The accompanying Notes form an integral part of the Accounts. 38 MALAYSIAN TITANIUM CORPORATION SDN. BHD. (Incorporated in Malaysia) NOTES TO THE ACCOUNTS 1. PRINCIPAL ACTIVITY The Company is principally involved in the manufacturing of synthetic rutile and its related products. There has been no significant change in the nature of this activity during the financial year. 2. BASIS OF PREPARATION OF ACCOUNTS The accounts of the Company have been prepared in accordance with the provisions of the Companies Act, 1965 and the applicable approved accounting standards of the Malaysian Accounting Standards Board. 3. SIGNIFICANT ACCOUNTING POLICIES Basis of Accounting The accounts of the Company have been prepared under the historical cost convention. Depreciation of Fixed Assets Fixed assets are stated at cost less accumulated depreciation. Freehold land and capital work-in-progress are not depreciated while long-term leasehold land is amortised evenly over the period of the lease. Plant and machinery is depreciated based on units of production over the plant's normal capacity for an estimated life of 15 years. Depreciation of other fixed assets is computed using the straight- line method at the following annual rates based on the estimated useful lives of the various assets: Buildings 2% Motor vehicles 20% Office equipment, furniture and fittings 15 - 20% 39 Associated Company An associated company is a company in which the Company has a long- term equity investment of 20% to 50% and where the Company is in a position to exercise significant influence through management participation. The Company has an equity interest of 40% (40% in 1998) in an associated company, Fluid Minerals Espanola (FME) (a company incorporated in Spain), whose principal activity is manufacturing and sales of hitox pigment. Investment in associated company is stated at cost unless, in the opinion of the directors, there is a permanent diminution in the value of investment in which case provision is made for the diminution in value. Stocks Stocks are stated at the lower of cost and net realisable value. Cost is determined on the "weighted average" method. Cost of raw materials, consumables and trading goods comprise the original purchase price plus cost of bringing these stocks to location. Cost of finished goods and work-in-progress include the cost of raw materials and an appropriate allocation of labour cost and manufacturing overheads. Capitalisation of Borrowing Cost Borrowing costs incurred on the acquisition and construction of fixed assets which require a substantial period of time to get them ready for their intended use are capitalised and included as part of cost of the related assets. Deferred Taxation Provision is made using the liability method for taxation deferred by capital allowances and other timing differences except to the extent that it can be demonstrated with reasonable probability that the timing differences will continue in the foreseeable future. Timing differences giving rise to deferred tax benefits are not recognised. Foreign Currency Conversion All foreign currency transactions are converted into Ringgit Malaysia at the exchange rates prevailing at the transaction dates or, where settlement has not yet taken place at the end of the financial year, at the approximate exchange rates prevailing on that date. All exchange gains or losses are taken up in the profit and loss account. 40 Cash Equivalents Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. 41 4. FIXED ASSETS
----------------------------- Cost -------------------------- Disposals/ Beginning Transfer/ 1999 of year Additions Write off End of year ------ ------------- ----------- ------------- ------------- Freehold land RM 265,979 RM -- RM (265,979) RM -- Long-term leasehold land 345,191 -- -- 345,191 Buildings 4,553,634 8,720 (248,575) 4,313,779 Plant and machinery 40,854,801 2,115,493 -- 42,970,294 Motor vehicles 890,837 -- (72,000) 818,837 Office equipment furniture and fittings 781,540 75,343 -- 856,883 Capital work-in-progress 76,016 2,040,497 (2,116,513) -- ------------- ----------- ------------- ------------- Total RM 47,767,998 RM4,240,053 RM(2,703,067) RM 49,304,984 ============= =========== ============= ============= 42
--------------- Accumulated Depreciation ------------ Charge Beginning for Disposals/ End Net book 1999 of year the year Write off of year value ------ ----------- --------- ---------- ----------- ------------ Freehold land RM -- RM -- RM -- RM -- RM -- Long-term leasehold land 29,153 4,131 -- 33,284 311,907 Buildings 613,416 90,916 (38,693) 665,639 3,648,140 Plant and machinery 5,364,782 645,251 -- 6,010,033 36,960,261 Motor vehicles 717,078 54,089 (49,200) 721,967 96,870 Office equipment furniture and fittings 729,243 38,306 -- 767,549 89,334 Capital work-in-progress -- -- -- -- -- ----------- --------- ---------- ----------- ------------ Total RM7,453,672 RM832,693 RM (87,893) RM8,198,472 RM41,106,512 =========== ========= ========== =========== ============ 43
------------------------ Cost ------------------------------- Beginning Disposals/ End 1998 of year Additions Transfer of year ------ ------------- ----------- ------------- ------------- Freehold land RM 265,979 RM -- RM -- RM 265,979 Long-term leasehold land 345,191 -- -- 345,191 Buildings 4,553,634 -- -- 4,553,634 Plant and Plant and Machinery 39,640,217 1,214,584 -- 40,854,801 Motor vehicles 837,837 53,000 -- 890,837 Office equipment furniture and fittings 762,033 23,327 (3,820) 781,540 Capital work-in-progress 521,223 759,476 (1,204,683) 76,016 ------------ ----------- ------------- ------------ Total RM46,926,114 RM2,050,387 RM(1,208,503) RM47,767,998 ============ =========== ============= ============ 43
--------------- Accumulated Depreciation -------------- Charge Beginning for End Net book 1998 of year the year Disposals of year value ------ ------------ --------- ---------- ----------- ------------ Freehold land RM -- RM -- RM -- RM -- RM 265,979 Long-term leasehold land 25,022 4,131 -- 29,153 316,038 Buildings 522,343 91,073 -- 613,416 3,940,218 Plant and machinery 4,241,031 1,123,751 -- 5,364,782 35,490,019 Motor vehicles 656,306 60,772 -- 717,078 173,759 Office equipment furniture and fittings 699,110 31,505 (1,372) 729,243 52,297 Capital work-in-progress -- -- -- -- 76,016 ----------- ----------- --------- ----------- ------------ Total RM6,143,812 RM1,311,232 RM(1,372) RM7,453,672 RM40,314,326 =========== =========== ========= =========== ============ Current charges to plant and machinery include interest costs capitalised of RM31,205 (RM Nil in 1998). 44 5. ASSOCIATED COMPANY 1999 1998 ----------- ----------- Unquoted shares, at cost RM 837,902 RM 837,902 Less: Provision for diminution in value (837,901) (555,567) Net RM 1 RM 282,335 =========== =========== The directors of the Company have made a provision for diminution in the carrying value of the associated company based on the net asset value of the investee company and on the "prudence" concept. Had the equity method of accounting been presented, the Company's share of post-acquisition loss in associated company would have been RM802,818 (RM380,376 in 1998). 45 6. STOCKS 1999 1998 ------------- ------------- Finished goods RM 1,216,085 RM 3,096,631 Work-in-progress 169,318 386,378 Raw materials 274,894 79,242 Consumables 1,405,498 1,597,651 ------------- ------------- Total RM 3,065,795 RM 5,159,902 ============ ============ 7. RELATED PARTY TRANSACTIONS Included in the following current assets and liabilities are amounts owing by and to certain companies in which one of the directors is also a director of the Company: 1999 1998 ------------ ------------ Trade debtors RM -- RM 6,463,289 Other creditors and accrued expenses 600 848 ============ ============ The above balances arose mainly out of normal trade transactions and payments on behalf. Significant related party transactions which were dealt with at arm's length during the year comprise of professional fees paid amounting to RM2,400 (RM2,400 in 1998). 8. AMOUNT OWING BY ASSOCIATED COMPANY 1999 1998 ------------ ------------ Gross RM 307,226 RM 418,776 Less: Provision for doubtful debt (307,226) -- ------------ ------------ Net RM -- RM 418,776 ============ ============ Transactions with the associated company during the financial year include trade sales amounting to RM34,196 (RM304,250 in 1998). 46 9. HOLDING COMPANIES AND INTERCOMPANY TRANSACTIONS 1999 1998 ------------ ------------ Amount owing to immediate holding company RM 33,500 RM 33,500 Amount owing to intermediate holding company 83,991 200,141 ------------ ------------ Total RM 117,491 RM 233,641 ============ ============ The Company is a 52.84% (52.84% in 1998) owned subsidiary of Megamin Ventures Sdn. Bhd.. The intermediate and ultimate holding companies are Bonanza Venture Holdings Sdn. Bhd. and Kay Lim Holdings Sdn. Bhd. respectively. All of these companies were incorporated in Malaysia. Significant intercompany transactions which were dealt with at arm's length during the year are as follows: 1999 1998 ------------ ------------ Related company Trade purchases RM 2,987,993 RM 6,195,203 Trade sales 594,886 211,050 Sales of fixed assets -- 2,448 ============ ============ Intermediate holding company Management fees RM -- RM 6,250 ============ ============ Immediate holding company Interest on advances RM -- RM 4,609 ============ ============ 10. BANK BORROWINGS 1999 1998 ------------- ------------- Secured: Bank overdrafts RM 5,643,405 RM 8,730,412 Export credit refinancing 5,388,358 7,713,176 Current portion of term loan 87,707 900,000 (Note 11) Other short-term borrowings 4,000,000 4,000,000 ------------- ------------- Total RM 15,119,470 RM 21,343,588 ============= ============= 47 The Company's bank overdraft and other short-term credit facilities with two local banks up to a limit of RM34,900,000 (RM34,900,000 in 1998) are secured by legal charges over the Company's long-term leasehold land and debentures with fixed and floating charges over all assets of the Company. The above facilities bear interest rates ranging from 3.50% to 13.80% (7.70% to 14.30% in 1998) per annum. 11. LONG-TERM LIABILITY 1999 1998 ------------- ------------- Term loans - Principal outstanding RM 1,419,561 RM 987,707 Less: Current portion included in bank borrowings under current liabilities (Note 10) (87,707) (900,000) ------------- ------------- Long-term portion RM 1,331,854 RM 87,707 ============= ============= The Company has two term loan facilities to the extent of RM6,300,000 and RM2,400,000 with the two local banks mentioned in Note 10. The term loans are secured on similar assets and guarantees as disclosed therein and are repayable by 28 quarterly instalments of RM225,000 and 48 monthly instalments of RM50,000 each commencing from April, 1993 and September, 2000 respectively. The term loans bear interest rates ranging from 9.25% to 14.10% (11.30% to 14.30% in 1998) per annum. 12. SHARE CAPITAL 1999 1998 ------------- ------------- Ordinary shares of RM1 each: Authorised RM 60,000,000 RM 60,000,000 ============= ============= Issued and fully paid Balance at beginning of year RM 24,130,000 RM 22,000,000 Add: Rights issue= -- 2,130,000 ------------- ------------- Balance at end of year RM 24,130,000 RM 24,130,000 ============= ============= 48 13. UNAPPROPRIATED PROFIT Subject to agreement with the Inland Revenue Board, as at 30th June, 1999, the Company has a Section 108 tax credit of approximately RM15,000 (RM15,000 in 1998). The Company also has a special tax- exempt account arising from the waiver of chargeable income for the basis period ended 1999 of approximately RM13,000. Accordingly, the Company may distribute an amount of approximately RM52,000 (RM39,000 in 1998) out of its unappropriated profit at 30th June, 1999 without incurring additional tax liability. Any dividend declared and proposed out of the aforesaid tax-exempt account will be tax-exempted in the hands of the shareholders. 14. TURNOVER Turnover represents sales of goods at gross invoiced value less returns. The cost of inventories recognised as an expense, applicable to turnover, are as follows: 1999 1998 ------------- ------------- Raw materials and consumables RM 6,527,433 RM 12,778,935 Net change in inventories of finished goods and work-in-progress 2,270,634 3,204,159 Labour costs 2,421,084 2,792,591 Depreciation and other production overheads 4,057,675 6,636,070 ------------- ------------- Total RM 15,276,826 RM 25,411,755 ============= ============= 49 15. PROFIT BEFORE TAXATION Profit before taxation is arrived at: 1999 1998 After charging: Depreciation of fixed assets RM 832,693 RM 1,343,347 Interest on: Other short-term borrowings 786,431 1,119,708 Bank overdrafts 763,106 938,350 Term loans 88,020 176,145 Advances from holding company -- 4,609 Directors' remuneration: Fee 6,000 15,000 Other emoluments 409,318 344,052 Benefits-in-kind 16,021 9,652 Provision for doubtful debt 307,226 -- Provision for diminution in value of investment 282,334 555,567 Rental of premises and equipment 185,955 221,346 Fixed asset written off 80,154 -- Audit fee 14,000 14,000 Professional fees paid to a company in which a director has an interest 2,400 2,400 =========== =========== And crediting: Gain on disposal of fixed assets RM 711,493 RM -- Rental received 30,200 -- =========== =========== 16. PROVISION FOR TAXATION 1999 1998 ----------- ----------- Real property gains tax RM 33,938 RM -- =========== =========== Although the operations of the Company in the current and preceding years resulted in profits, no provision for taxation has been made due to the utilisation of brought forward unabsorbed capital allowances to set-off in full the profits that would otherwise have been subjected to tax. The tax benefits arising from such utilisation is approximately RM1,093,000 (RM1,547,000 in 1998). No provision for taxation has been made in the accounts in respect of rental income because in accordance with the 1999 budget, tax on rental income earned in the year of assessment 2000 will be waived. 50 Subject to approval from the Inland Revenue Board, at balance sheet date, the Company has estimated unutilised tax losses and unabsorbed capital allowances carried forward amounting to approximately RM13,520,000 (RM13,520,000 in 1998) and RM25,513,000 (RM21,528,000 in 1998) respectively which can be carried forward and utilised to set- off against future taxable profits. As at 30th June, 1999, the amount of deferred taxation calculated at current tax rate which is not recognised in the accounts are as follows: Deferred Assets/(Liability) 1999 1998 ------------- ------------- Tax effects of timing differences in respect of: Excess of capital allowances over book depreciation RM(8,182,000) RM(6,278,000) Unabsorbed capital allowances and carry forward tax losses 10,929,000 9,813,000 ------------- ------------- Net RM 2,747,000 RM 3,535,000 ============= ============= 17. CAPITAL COMMITMENTS 1999 1998 ---------- ---------- Approved and contracted but not provided for RM 21,000 RM -- ========== ========== 18. CONTINGENT LIABILITY As at 30th June, 1999, a former employee has filed a claim against the Company for unlawful dismissal amounting to RM71,000. The Company is repudiating the claim on grounds that the dismissal was fair and just. The outcome of this case is presently not determinable. 19. COMPARATIVE FIGURES Certain comparative figures in the accounts have been reclassified to conform with current year's presentation. 51 MALAYSIAN TITANIUM CORPORATION SDN. BHD. (Incorporated in Malaysia) STATEMENT BY DIRECTORS The directors of MALAYSIAN TITANIUM CORPORATION SDN. BHD. state that, in their opinion, the accompanying balance sheet, profit and loss account and cash flow statement, together with the notes thereto, are drawn up in accordance with the provisions of the Companies Act, 1965 and the applicable approved accounting standards so as to give a true and fair view of the state of affairs of the Company at 30th June, 1999 and of the results of its business and the cash flows for the year ended on that date. Signed in accordance with a resolution of the Directors, ____________________________________________ LEE HEE CHEW ____________________________________________ TEOH LAY HOCK Ipoh, 6th August, 1999 DECLARATION BY THE DIRECTOR PRIMARILY RESPONSIBLE FOR THE FINANCIAL MANAGEMENT OF THE COMPANY I, LEE HEE CHEW, the director primarily responsible for the financial management of MALAYSIAN TITANIUM CORPORATION SDN. BHD., do solemnly and sincerely declare that the accompanying balance sheet, profit and loss account and cash flow statement, together with the notes thereto, are, in my opinion, correct and I make this solemn declaration conscientiously believing the same to be true, and by virtue of the provisions of the Statutory Declarations Act, l960. Subscribed and solemnly declared by the above named LEE HEE CHEW at IPOH in the State of PERAK DARUL RIDZUAN this _____day of ______, 1999 ____________________________________________ Before me, ____________________________________________ COMMISSIONER FOR OATHS 52
MALAYSIAN TITANIUM CORPORATION SDN BHD BALANCE SHEET AT 30TH JUNE, 1999 Accounts Adjustments to Comply Per Malaysian With US GAAP Accounts Standards Debit Credit Per US GAAP RM RM RM RM ------------ ------------ ------------ ------------ FIXED ASSETS 41,106,512 41,106,512 ASSOCIATED COMPANY 1 837,901 802,818 35,084 DEFERRED TAX ASSETS 3,535,714 1,593,855 1,941,859 CURRENT ASSETS Stocks 3,065,795 3,065,795 Trade debtors 4,176,503 4,176,503 Other debtors, deposits and prepayments 1,366,963 1,366,963 Amount owing by associated company -- -- Amount owing by related company 44,590 44,590 Cash on hand and at banks 47,211 47,211 Deferred Tax Assets 804,987 804,987 ------------ ------------ ------------ ------------ 8,701,062 804,987 0 9,506,049 ============ ============ ============ ============
53
Accounts Adjustments to Comply Per Malaysian With US GAAP Accounts Standards Debit Credit Per US GAAP RM RM RM RM ------------ ------------ ------------ ------------ CURRENT LIABILITIES Trade creditors 847,252 847,252 Other creditors and accrued expenses 1,242,113 1,242,113 Amount owing to holding companies 117,491 117,491 Amount owing to related companies -- -- Bank borrowings 15,119,470 15,119,470 Provision for taxation 33,938 33,938 ------------ ------------ ------------ ------------ 17,360,264 0 0 17,360,264 ------------ ------------ ------------ ------------ NET CURRENT LIABILITIES (8,659,202) 804,987 0 (7,854,215) ------------ ------------ ------------ ------------ 32,447,311 5,178,602 2,396,673 35,229,240 LONG-TERM LIABILITY (1,331,854) (1,331,854) ------------ ------------ ------------ ------------ NET ASSETS EMPLOYED 31,115,457 5,178,602 2,396,673 33,897,386 ============ ============ ============ ============ Represented by: SHARE CAPITAL 24,130,000 24,130,000 UNAPPROPRIATED PROFIT 6,985,457 1,591,686 4,373,615 9,767,386 ------------ ------------ ------------ ------------ TOTAL CAPITAL EMPLOYED 31,115,457 1,591,686 4,373,615 33,897,386 ============ ============ ============ ============
54
MALAYSIAN TITANIUM CORPORATION SDN BHD PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 30TH JUNE, 1999 Accounts Adjustments to Comply Per Malaysian With US GAAP Accounts Standards Debit Credit Per US GAAP RM RM RM RM ---------------- ---------------- ---------------- ---------------- TURNOVER 22,030,064 -- -- 22,030,064 ================ ================ ================ ================ PROFIT BEFORE TAXATION 3,340,145 422,442 282,334 3,200,037 PROVISION FOR TAXATION (33,938) 788,868 (822,806) ---------------- ---------------- ---------------- ---------------- NET PROFIT 3,306,207 1,211,310 282,334 2,377,231 Unappropriated profit at beginning of year 3,679,250 380,376 4,091,281 7,390,155 ---------------- ---------------- ---------------- ---------------- UNAPPROPRIATED PROFIT AT END OF YEAR 6,985,457 1,591,686 4,373,615 9,767,386 ================ ================ ================ ================
55 MALAYSIAN TITANIUM CORPORATION SDN. BHD. YEAR ENDED 30TH JUNE, 1999 ADJUSTMENTS TO COMPLY WITH US GAAP 1 Provision for taxation - P&L 788,868 Deferred Tax Assets- B/S 788,868 ========= ========= (Being current year's movement in deferred tax assets) 2 Deferred Tax Assets 3,535,714 Unappropriated profit at beginning of year 3,535,714 ========= ========= (Being adjustment to recognise brought forward deferred assets) 3 Deferred Tax Assets Current Portion 804,987 Deferred Tax Assets Non-Current Portion 804,987 ========= ========= (Being reclassification of current portion of defered tax assets) 4 Unappropriated Profit Brought Forward 380,376 Associated Company 380,376 ========= ========= (Being adjustment to recognise MTC's share of post-acquisition loss in Associated Company for years prior to 1999) 5 Associated Company 837,901 Unappropriated Profit Brought Forward 555,567 Profit Before Taxation 282,334 ========= ========= (Being reversal of provision for diminution in value of investment in Associated Company) 6 Share of results in Associated Company-P&L 422,442 Associated Company-B/S 422,442 ========= ========= (Being adjustment to equity account for the results of the Associated Company in 1999) 56 MALAYSIAN TITANIUM CORPORATION SDN. BHD. (Company No: 014387-W) (Incorporated in Malaysia) FINANCIAL STATEMENTS FOR THE YEAR ENDED 30TH JUNE, 1998 (In Ringgit Malaysia) 57 MALAYSIAN TITANIUM CORPORATION SDN. BHD. (Incorporated in Malaysia) DIRECTORS' REPORT The directors of MALAYSIAN TITANIUM CORPORATION SDN. BHD. have pleasure in submitting their report and the audited accounts of the Company for the financial year ended 30th June, 1998. PRINCIPAL ACTIVITY The Company is principally involved in the manufacturing of synthetic rutile. There has been no significant change in the nature of this activity during the financial year. RESULTS OF OPERATIONS The results Of operations of the Company for the financial year are as follows: Net profit RM3,550,012 Unappropriated profit at beginning of year 129,238 ----------- Unappropriated profit at end of year RM3,679,250 =========== In the opinion of the directors, the results of operations of the Company during the financial year have not been substantially affected by any item, transaction or event of a material and unusual nature. DIVIDENDS No dividend has been paid or declared by the Company since the end of the previous financial year. The directors also do not recommend any dividend payment in respect of the current financial year. RESERVES AND PROVISIONS There were no material transfers to or from reserves or provisions during the financial year other than those disclosed in the Accounts. 58 ISSUE OF SHARES AND DEBENTURES At an Extraordinary General Meeting held on 23rd June, 1997, the shareholders approved a rights issue of 3,000,000 new ordinary shares of RMI each at par on the basis of three (3) new ordinary shares for every twenty-two (22) existing shares held. However, as at the date of the report, 2,130,000 new ordinary shares of RMI each has been subscribed. These new shares rank pari passu with the then existing shares of the Company. The Company has not issued any debentures during the financial year. SHARE OPTIONS No options have been granted by the Company to any parties during the financial year to take up unissued shares of the Company. No shares have been issued during the financial year by virtue of the exercise of any option to take up unissued shares of the Company. As at the end of the financial year, there were no unissued shares of the Company under options. OTHER FINANCIAL INFORMATION Before the profit and loss account and balance sheet of the Company were made out, the directors took reasonable steps: (a) to ascertain that proper action had been taken in relation to the writing off of bad debtsand the making of provision for doubtful debts, and have satisfied themselves that all known bad debts had been written off and that adequate provision had been made fordoubtful debts; and (b) to ensure that any current assets which were unlikely to realise their book values in the ordinary course of business have been written down to their estimated realisable values. At the date of this report, the directors are not aware of any circumstances: (a) which would render the amount written off for bad debts or the amount of the provision for doubtful debts in the accounts of the Company inadequate to any substantial extent; or (b) which would render the values attributed to current assets in the accounts of the Company misleading; or 59 (c) which have arisen which render adherence to the existing method of valuation of assets or liabilities of the Company misleading or inappropriate; or (d) not otherwise dealt with in this report or accounts which would render any amount stated in the accounts of the Company misleading. At the date of this report, there does not exist: (a) any charge on the assets of the Company which has arisen since the end of the financial year which secures the liability of any other person; and (b) any contingent liability of the Company which has arisen since the end of the financial year. No contingent or other liability has become enforceable or is likely to become enforceable within the period of twelve months after the end of the financial year which, in the opinion of the directors, will or may substantially affect the ability of the Company to meet its obligations as and when they fall due. In the opinion of the directors, no item, transaction or event of a material and unusual nature has arisen in the interval between the end of the financial year and the date of this report which is likely to affect substantially the results of operations of the Company for the financial year in which this report is made. DIRECTORS The following directors served on the Board of the Company since the date of the last report: Dato'Lim Keng Kay (Resigned on 8.10.1998) Thomas Michael Mackey Lim Chee Seng Lee Hee Chew Teoh Lay Hock (Appointed on 6.4.1998) Dato' Dr. Abdullah Hasbi bin Haji Hassan (Appointed on 6.4.1998) Ryan Hong (Appointed on 28.7.1998) Ho Yean (alternate to Dato' Lim Keng Kay; appointed on 6.4.1998) Hong Slew Sing @ Johnny Fong (Deceased on 19.12.1997) Yei Hong Chang (Resigned on 15.1.1998) Tan Sri Dato'Abdullah Bin Ayub (Resigned on 17.3.1998) Tan Hock Beng (alternate to Lim Chee Seng; resigned on 30.9.1997) Teoh Lay Hock (alternate to Dato' Lim Keng Kay; resigned on 6.4.1998) 60 DIRECTORS' INTERESTS The shareholdings in the Company and in related companies of those who were directors at the end of the financial year, as recorded in the Register of Directors' Shareholdings kept by the Company under Section 134, are as follows: No. of Shares of RM I each Balance at Balance at 1.7.1997 Bought Sold 30.6.1998 ----------- ---------- ----- ----------- Shares in the Company Deemed interest Dato'Lim Keng Kay 11,200,000 1,530,000 -- 12,750,000 Lim Chee Seng 4,400,000 600,000 -- 5,000,000 Shares in ultimate holding Company Kay Lim Holdings Sdn. Bhd. Registered in name of a director Dato' Lim Keng Kay 2,280,000 -- -- 2,280,000 Deemed interest Dato' Lim Keng Kay 720,000 -- -- 720,000 None of the other directors have any other interest in the shares of the Company or its related companies during the financial year. In addition, by virtue of Dato' Lim Keng Kay having an interest of more than 15% of the shares in the ultimate holding company, he is deemed to have an interest in the shares of the immediate holding company and its related companies to the extent of the ultimate holding company's shareholdings held therein. DIRECTORS' BENEFITS Since the end of the previous financial year, none of the directors of the Company have received or become entitled to receive any benefit (other than those disclosed as directors' remuneration in the Accounts) by reason of a contract made by the Company or a related corporation with the director or with a firm of which he is a member, or with a company in which he has a substantial fin~ncial interest except for any benefit which may be deemed to have allsen by virtue of the following: 61 (a) sale and purchase of goods in the ordinary course of business to a company in which Dato' Lim Keng Kay has an interest; and (b) provision of professional services to the Company by a company in which Dato' Lim Keng Kay has substantial interest. During and at the end of the financial year, no arrangement subsisted to which the Company was a party whereby directors of the Company might acquire benefits by means of the acquisition of shares in, or debentures of, the Company or any other body corporate. HOLDING COMPANIES The Company is a subsidiary of Megamin Ventures Sdn. Bhd. The intermediate and ultimate holding companies are Bonanza Venture Holdings Scln. Bhd. and Kay, Lim Holdings Sdn, Bhd. respectively. All of these companies were incorporated in Malaysia. AUDITORS The auditors. Messrs. Deloitte Touche Tohmatsu, have indicated their 'Aillineness to continue III office. On behalf of the Board LEE HEE CHEW - ------------ Lee Hee Chew TEOH LAY HOCK - ------------- Teoh Lay Hock Ipoh. 28 OCT 1998 62 Deloitte Touche Tohmatsu Public Accountants Company No: 014387-W REPORT OF THE AUDITORS TO THE MEMBERS OF MALAYSIAN TITANIUM CORPORATION SDN. BHD. (incorporated in Malaysia) We have audited the accompanying balance sheet, profit and loss account and cash flow statement. together with the notes thereto, in accordance with approved auditing standards, In our opinion'. (a) the abovementioned accounts are properly drawn up in accordance with the provisions of the Companies Act, 1965 and the applicable approved accounting standards so as to give a true and fair view of (i) the state of affairs of the Company at 30th June, 1998 and of the results and the cash flows of the Company for the year ended on that date: and (ii) the matters required by Section 169 of the Act to be dealt with in the accounts, a n d (b) the accounting and other records and the registers required by the Act to be kept by the Company have been properly kept in accordance with the provisions of the Act, DELOITTE TOUCHE TOHMATSU AF 0834 Public Accountants GREGORY WONG GUANG SENG 7871/3/9 VPH) Partner 28TH October, 1998 631 MALAYSIAN TITANIUM CORPORATION SDN. BHD. (Incorporated in Malaysia) BALANCESHEET AT 30TH JUNE, 1998 Notes 1998 1997 ----- ------------ ------------ FIXED ASSETS 4 RM40,314,326 RM40,782,302 ASSOCIATED COMPANY 5 282,335 837,902 CURRENT ASSETS Stocks 6 5,159,902 8,150,124 Trade debtors 7 6,553,461 3,842,680 Other debtors, deposits and prepayments 7 & 8 272,483 746,462 Amount owing by associated company 418,776 235,949 Cash on hand and at banks 6,224 11,362 ------------ ------------ 12,410,846 12,986,577 ------------ ------------ CURRENT LIABILITIES Trade creditors 922,806 1,735,317 Other creditors and accrued expenses 7 2,570,260 4,114,523 Amount owing to holding companies 9 233,641 1,252,833 Amount owing to related companies 9 40,255 1,483,816 Bank borrowings 10 21,343,588 22,903,347 ------------ ------------ 25,110,550 31,489,836 ------------ ------------ NET CURRENT LIABILITIES (12,699,704) (18,503,259) ------------ ------------ 27,896,957 23,116,945 LONG-TERM LIABILITY 11 (87,707) (987,707) ------------ ------------ NET ASSETS EMPLOYED RM27,809,250 RM22,129,238 ============ ============ Represented by. SHARE CAPITAL 12 RM24,130,000 RM22,000,000 UNAPPROPRIATED PROFIT 13 3,679,250 129,238 ------------ ------------ TOTAL CAPITAL EMPLOYED RM27,809,250 RM22,129,238 ============ ============ The accompanying Notes form an integral part of the Accounts. 64 MALAYSIAN TITANIUM CORPORATION SDN. BHD. (Incorporated in Malaysia) PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 30TH JUNE, 1998 Note Note 1998 1997 ------------ ------------ TURNOVER 14 RM34,355,296 RM29,152,235 ============ ============ PROFIT BEFORE TAXATION 15 RM 3,550,012 RM231,916 PROVISION FOR TAXATION 16 -- 58,784 ------------ ------------ NET PROFIT 3,550,012 290,700 Unappropriated profit/(Accumulated loss)at beginning of year 129,238 (161,462) ------------ ------------ UNAPPROPRIATED PROFIT AT END OF YEAR RM 3,679,250 RM129,238 ============ ============ The accompanying Notes form an integral part of the Accounts. 65 MALAYSIAN TITANIUM CORPORATION SDN. BHD. (Incorporated in Malaysia) CASHFLOW STATEMENT FOR THE YEAR ENDED 30TH JUNE, 1998 1998 1997 ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES Profit before taxation RM 3,550,012 RM 231,916 Adjustments for: Interest expense 2,238,812 2,168,927 Depreciation of fixed assets 1,311,232 1,549,571 Provision for diminution in value of investment 555,567 -- Gain on disposal of fixed assets -- (13,267) ------------ ------------ Operating Profit Before Working Capital Changes 7,655,623 3,937,147 Decrease in stocks 2,990,222 148,700 Decrease/(Increase) in trade and other receivables (2,419,629) 4,686,271 Increase/(Decrease) in trade and other payables (4,819,527) 3,948,036 ------------ ------------ Cash Generated From Operations 3,406,689 12,720,154 Tax refund -- 58,784 Interest paid (2,062,667) (1,910,804) ------------ ------------ Net Cash From Operating Activities 1,344,022 10,868,134 CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from disposal of fixed assets 2,448 50,000 Purchase of investment in associated company -- (837,902) Purchase of fixed assets (845,704) (6,204,815) ------------ ------------ Net Cash Used In Investing Activities (843,256) (6,992,717) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issuance of shares 2,130,000 253,493 Repayment of term loan (900,000) (900,000) Repayment of interest on term loan (176,145) (258,123) ------------ ------------ Net Cash From/(Used In) Financing Activities 1,053,855 (904,630) ------------ ------------ (Forward) 66 1998 1997 -------------- -------------- NET INCREASE IN CASH AND CASH EQUIVALENTS RM 1,554,621 RM 2,970,787 CASH A.ND CASH EQUIVALENTS AT BEGINNING OF YEAR (21,991,985) (24,962,772) -------------- -------------- CASH AND CASH EQUIVALENTS AT END OF YEAR RM(20,437,364) RM(21,991,985) CASH AND CASH EQUIVALENTS Cash and cash equivalents included in the cash flow statement comprise the following balance sheet amounts: Cash on hand and at banks RM 6,224 RM 11,362 Bank overdrafts (8,730,412) (11,698,332) Export credit refinancing (7,713,176) (4,905,015) Other short-term borrowings (4,000,000) (5,400,000) -------------- -------------- Cash and cash equivalents RM(20,437,364) RM(21,991,985) The accompanying Notes form an integral part of the Accounts. 67 MALAYSIAN TITANIUM CORPORATION SDN. BHD. (Incorporated in Malaysia) NOTES TO THE ACCOUNTS 1. PRINCIPAL ACTIVITY The Company is principally involved in the manufacturing of synthetic rutile. There has been no significant change in the nature of this activity during the financial year. 2. BASIS OF PREPARATION OF ACCOUNTS The accounts of the Company have been prepared in accordance with the provisions of the Companies Act, 1965 and applicable approved accounting standards. 3. SIGNIFICANT ACCOUNTING POLICIES Basis of Accounting The accounts of the Company have been prepared under the historical cost convention. Depreciation of Fixed Assets Fixed assets are stated at cost less accumulated depreciation. Freehold land and capital work-in-progress are not depreciated while long-term leasehold land is amortised evenly over the period of the lease. Plant and machinery is depreciated based on units of production over the plant's normal capacity for an estimated life of 15 years, Depreciation of other fixed assets is computed using the straight- line method at the following annual rates based on the estimated useful lives of the various assets: Buildings 2% Mlotor vehicles 20% Office equipment, furniture and fittings 15 - 20% 68 Associated Company An associated company is a company in which the Company has a long-term equity investment of 20% to 50% and where the Company is in a position to exercise significant influence through management participation. The Company has an equity interest of 40% (40% in 1997) in an associated company, Fluid Minerals Espanola (FME) (a company incorporated in Spain), whose principal activity is manufacturing and sales of hitox pigment. Investment in associated company is stated at cost unless, in the opinion of the directors, there is a permanent diminution in the value of investment in which case provision is made for the diminution in value. Stocks Stocks are stated at the lower of cost and net realisable value. Cost is determined on the "weighted average" method. Cost of raw materials, consurnables and trading goods comprise the original purchase price plus cost of bringing these stocks to location. Cost of finished goods and work-inprogress include the cost of raw materials and an appropriate allocation of labour cost and manufacturing overheads. Capitalisation of Borrowing Cost Borrowing costs incurred on the acquisition and construction of fixed assets which require a substantial period of time to get them ready for their intended use are capitalised and included as part of cost of the related assets. Deferred Taxation Provision is made using the liability method for taxation deferred by capital allowances and other timing differences except to the extent that it can be demonstrated with reasonable probability that the timing differences will continue in the foreseeable future. Timing differences giving rise to deferred tax benefits are not recognised. 69 Foreign Currency Conversion All foreign currency transactions are converted into Ringgit Malaysia at the exchange rates prevailing at the transaction dates or, where settlement has not yet taken place at the end of the financial year, at the approximate exchange rates prevailing on that date. All exchange gains or losses are taken up in the profit and loss account. Cash Equivalents Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. 70 4. FIXED ASSETS
----------------------------Costs--------------------------- Beginning Disposals/ End 1998 of year Additions Transfer of year ---- ------------ ----------- ------------- ------------ Freehold land RM 265,979 RM -- RM -- RM 265,979 Long-term leasehold land 345,191 -- -- 345,191 Buildings 4,553,634 -- -- 4,553,634 Plant and machinery 39,640,217 1,214,584 -- 40,854,801 Motor vehicles 837,837 53,000 -- 890,837 Office equipment furniture and fittings 762,033 23,327 (3,820) 781,540 Capital work- in-progress 521,223 759,476 (1,204,683) 76,016 ------------ ----------- ------------- ------------ Total RM46,926,114 RM2,050,387 RM(1,208,503) RM47,767,998 ============ =========== ============= ============ 71
--------------Accumulated depreciation------------------- Change 1998 Beginning for End Net Book ---- of year the year Disposals of year value ----------- ----------- ----------- ----------- ------------ Freehold land RM -- RM -- RM -- RM -- RM 265,979 Long-term leasehold land 25,022 4,131 -- 29,153 316,038 Buildings 522,343 91,073 -- 613,416 3,940,218 Plant and machinery 4,241,031 1,123,751 -- 5,364,782 35,490,019 Motor vehicles 656,306 60,772 -- 717,078 173,759 Office equipment furniture and fittings 699,110 31,505 (1,372) 729,243 52,297 Capital work-in-progress -- -- -- 76,016 ----------- ----------- --------- ----------- ------------ Total RM6,143,812 RM1,311,232 RM (1,372) RM7,453,672 RM40,314,326 =========== =========== ========= =========== ============
----------------------------Costs--------------------------- Beginning Disposals/ End 1997 of year Additions Transfer of year ---- ------------ ------------ ------------- ------------ Freehold land RM 265,979 RM -- RM -- RM 265,979 Long-term leasehold land 345,191 -- -- 345,191 Buildings 4,553,634 -- -- 4,553,634 Plant and machinery 31,541,302 8,098,915 -- 39,640,217 Motor vehicles 893,837 -- (58,000) 837,837 Office equipment furniture and fittings 751,864 10,169 -- 762,033 Capital work-in-progress 2,425,492 6,170,190 (8,074,459) 521,223 ------------ ------------ ------------- ------------ Total RM40,779,299 RM14,279,274 RM(8,132,459) RM46,926,114 ============ ============ ============= ============ 72
----------------Accumulated depreciation---------------- Change 1997 Beginning for End Net Book ---- of year the year Disposals of year value ----------- ----------- ------------- ----------- ------------ Freehold land RM -- RM -- RM -- RM -- RM 265,979 Long-term leasehold land 20,891 4,131 -- 25,022 320,169 Buildings 431,270 91,073 -- 522,343 4,031,291 Plant and machinery 2,915,531 1,325,500 -- 4,241,031 35,399,186 Motor vehicles 596,245 81,328 (21,267) 656,306 181,531 Office equipment furniture and fittings 651,571 47,539 -- 699,110 62,923 Capital work-in-progress -- -- -- 521,223 ----------- ----------- ---------- ----------- ------------ Total RM4,615,508 RM1,549,571 RM (21,267) RM6,143,812 RM40,782,302 =========== =========== ========== =========== ============ Current charges to plant and machinery include interest costs capitalised of RM Nil (RM130,148 in 1997). 73 5. ASSOCIATED COMPANY 1998 1997 ---------- ---------- Unquoted shares, at cost RM 837,902 RM 837,902 Less: Provision for diminution in value (555,567) -- ---------- ---------- Net RM 282,335 RM 837,902 ========== ========== The directors of the Company have made a provision for diminution in the carrying value of the associated company based on the net asset value of the investee company and on the "prudence" concept. The directors of the investee company have commenced several new businesses which are expected to contribute positively to the profitability of the company. Transactions with the associated company during the financial year include trade sales amounting to RM304,250 (RM255,780 in 1997). Had the equity method of accounting been presented, the Company's share of post-acquisition loss in associated company would have been RM380,376 (RM133,103 in 1997). 74 6. STOCKS 1998 1997 ----------- ----------- Finished goods RM3,005,601 RM6,108,615 Work-in-progress 386,378 437,028 Raw materials 79,242 84,635 Consumables 1,597,651 1,454,019 Trading goods 91,030 65,827 ----------- ----------- Total RM5,159,902 RM8,150,124 =========== =========== 7. RELATEDPARTY TRANSACTIONS Included in the following current assets and liabilities are amounts owing by and to certain companies in which one of the directors is also a director of the Company: 1998 1997 ----------- ----------- Trade debtors RM6,461,796 RM3,817,298 Other debtors, deposits and prepayments 1,493 1,495 Other creditors and accrued expenses 848 3,214 =========== =========== The above balances arose mainly out of normal trade transactions and payment on behalf, Significant related party transactions which were dealt with at arm's length during the year are as follows: 1998 1997 ------------ ------------ Trade sales RM12,392,652 RM10,127,442 Trade purchases 46,635 -- Professional fees paid 2,400 1,200 ============ ============ 8. OTHER DEBTORS, DEPOSITS AND PREPAYMENTS Included in other debtors, deposits and prepayments is depreciation of fixed assets amounting to RM Nil (RM32,114 in 1997) which has been deferred. 75 9. HOLDING COMPANIES AND INTERCOMPANY TRANSACTIONS 1998 1997 ------------ ----------- Amount owing to immediate holding company RM 33,500 RM1,044,847 Amount owing to intermediate holding company 200,141 207,986 ------------ ----------- Total RM 233,641 RM1,252,833 ============ =========== The Company is a 52.84% (51.00% in 1997) owned subsidiary of Megamin Ventures Sdn. Bhd. The interinediate and ultimate holding companies are Bonanza Venture Holdings Sdn. Bhd. and Kay Lim Holdings Sdn. Bhd. respectively. All of these companies were incorporated in Malaysia. Significant intercompany transactions during the year consist of the following: 1998 1997 ------------ ------------ Related company Trade purchases RM6,195,203 RM3,549,670 Trade sales 211,050 -- Sales of fixed assets 2,448 -- ============ ============ Intermediate holding company Management fees RM 6,250 RM 9,820 ============ ============ Immediate holding company Interest on advances RM 4,609 RM 14,847 Management fees -- 30,000 ============ ============ 76 10. BANK BORROWINGS 1998 1997 ------------ ------------ Secured: Bank overdrafts RM 8,730,412 RM11,698,332 Export credit refinancing 7,713,176 4,905,015 Current portion of term loan (Note 11) 900,000 900,000 Other short-term borrowings 4,000,000 5,400,000 ------------ ------------ Total RM21,343,588 RM22,903,347 ============ ============ The Company has bank overdrafts and other short-term credit facilities with two local banks up to a limit of RM34,900,000 (RM36,400,000 in 1997) which are secured by legal charges over the Company's long-term leasehold land and debentures with fixed and floating charges over all assets of the Company. The overdrafts and export credit refinancing facilities bear interest rates ranging from 7.70% to 14.30% (7.70% to 11.20% in 1997) per annum. 11. LONG-TERM LIABILITY 1998 1997 ------------ ------------ Term loan - Principal outstanding RM 987,707 RM 1,887,707 Less: Current portion included in bank borrowings under Current liabilities (Note 10) (900,000) (900,000) ------------ ------------ Long-term portion RM 87,707 RM 987,707 ============ ============ The term loan to the extent of RM6,300,000 obtained from one of the local banks mentioned in Note 10 is repayable by 28 quarterly instalments of RM225,000 each commencing April, 1993. The securities for the term loan is similar to that as disclosed in Note 10 and the loan bears interest rates ranging from 11.30% to 14.30% (11.05% to 11.50% in 1997) per annum. 77 12. SHARE CAPITAL 1998 1997 ------------ ------------ Ordinary shares of RM1 each: Authorised RM60,000,000 RM60,000,000 ============ ============ Issued and fully paid Balance at beginning of year RM22,000,000 RM21,746,507 Add: Rights issue/ additional allotments 2,130,000 253,493 ------------ ------------ Balance at end of year RM24,130,000 RM22,000,000 ============ ============ At an Extraordinary General Meeting held on 23rd June, 1997, the shareholders approved a rights issue of 3,000,000 new ordinary shares of RM1 each at par on the basis of three (3) new ordinary shares for every twenty-two (22) existing shares held. However, as at the date of the report, 2,130,000 new ordinary shares of RM1 each has been subscribed. These new shares rank pari passu with the then existing shares of the Company. 13. UNAPPROPRIATED PROFIT Subject to agreement with the Inland Revenue Board, as at 30th June, 1998, the Company has a Section 108 tax credit of approximately RM15,000 (RM15,000 in 1997). Accordingly, the Company may distribute an amount of approximately RM39,000 (RM39,000 in 1997) out of its unappropriated profit at 30th June, 1998 without incurring additional income tax. 14. TURNOVER Turnover represents sales of goods at gross invoiced value less returns. The cost of inventories recognised as an expense, applicable to turnover, are as follows: 1998 1997 ------------ ------------ Raw materials and consurnables RM 5,305,258 RM 6,544,950 Net change in inventories of finished goods and work-in-progress 3,153,664 (739,557) Labour costs 1,086,325 978,570 Depreciation and other production overheads 15,866,508 18,043,233 ------------ ------------ Net RM25,411,755 RM24,827,196 ============ ============ 78 15. PROFIT BEFORE TAXATION Profit before taxation is arrived at: 1998 1997 ------------ ----------- After charging: Depreciation of fixed assets RM 1,343,347 RM1,517,457 Interest on: Other short-term borrowings 1,119,708 965,578 Bank overdrafts 938,350 930,379 Term loans 176,145 258,123 Advances from holding company 4,609 14,847 Provision for diminution in value of investment 555,567 -- Directors' remuneration: Fee 15,000 20,000 Other emoluments 344,052 386,614 Benefits-in-kind 9,652 5,867 Rental of premises and equipment 221,346 306,802 Audit fee 14,000 14,000 Professional fees paid to a company in which a director has an interest 2,400 1,200 ============ =========== And crediting: Gain on disposal of fixed assets RM -- RM 13,267 ============ =========== 16. PROVISION FOR TAXATION 1998 1997 ------------ ----------- Overprovision in prior year RM -- RM 58,784 ============ =========== Although the operations of the Company during the year and in 1997 resulted in profits, no provision for taxation has been made due to the utilisation of capital allowances to setoff in full the profits that would otherwise have been subjected to tax. The tax benefits arising from such utilisation is approximately RM1,547,000 (RM568,000 in 1997). Subject to approval from the Inland Revenue Board, at balance sheet date, the Company has estimated unutillsed tax losses and unabsorbed capital allowances carried forward amounting to approximately RM13,520,000 and RM21,528,000 respectively which can be carried forward and utilised to set-off against future taxable profits. 79 17. CAPITAL COMMITMENTS 1998 1997 ------------ ----------- Amount authorised but not contracted for RM -- RM 540,000 ============ =========== 18 COMPARATIVE FIGURES Certain comparative figures in the accounts have been reclassified to conform with current year's presentation. 80 MALAYSLAN TITANIUM CORPORATION SDN. BHD. (Incorporated in Malaysia) STATEMENT BY DIRECTORS The directors of MALAYSIAN TITANIUM CORPORATION SDN. BHD. state that, in their opinion, the accompanying balance sheet, profit and loss account and cash flow statement, together with the notes thereto, are drawn up in accordance with the provisions of the Companies Act, 1965 and the applicable approved accounting standards so as to give a true and fair view of the state of affairs of the Company at 30th June, 1998 and of the results of its business and cash flows for the year ended on that date. Signed in accordance with a resolution of the Directors, LEE HEE CHEW - ------------- Lee Hee Chew TEOH LAY HOCK - -------------- Teoh Lay Hock Ipoh, 28 OCT 1998 DECLARATION BY THE DIRECTOR PRIMARILY RESPONSIBLE FOR THE FINANCIAL MANAGEMENT OF THE COMPANY I, LEE HEE CHEW, the director primarily responsible for the financial management of MALAYSLAN TITANIUM CORPORATION SDN. BHD., do solemnly and sincerely declare that the accompanying balance sheet, profit and loss account and cash flow statement, together ,,vith the notes thereto, are, in my opinion, correct and I make this solemn declaration conscientiouslv believing the same to be true, and by virtue of the provisions of the Statutory Declarations Act. 1960. Subscribed and solemnly declared by the abovenamed LEE HEE CHEW at IPOH in the State of PERAK DARUL RIDZUAN this day of 28 OCT 1998 Before me, EEC COMMISSIONIER FOR OATHS 81
MALAYSIAN TITANIUM CORPORATION SDN BHD BALANCE SHEET AT 30TH JUNE, 1998 Accounts Adjustments to Comply Per Malaysian With US GAAP Accounts Standards Debit Credit Per US GAAP RM RM RM RM ------------ ------------ ------------ ------------ FIXED ASSETS 40,314,326 40,314,326 ASSOCIATED COMPANY 282,335 555,567 380,376 457,526 DEFERRED TAX ASSETS 5,142,131 1,606,417 3,535,714 CURRENT ASSETS Stocks 5,159,902 5,159,902 Trade debtors 6,553,461 6,553,461 Other debtors, deposits and prepayments 272,483 272,483 Amount owing by by associated company 418,776 418,776 Cash on hand and at banks 6,224 6,224 ------------ ------------ ------------ ------------ 12,410,846 12,410,846 ------------ ------------ ------------ ------------
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Accounts Adjustments to Comply Per Malaysian With US GAAP Accounts Standards Debit Credit Per US GAAP RM RM RM RM ------------ ------------ ------------ ------------ CURRENT LIABILITIES Trade creditors 922,806 922,806 Other creditors and accrued expenses 2,570,260 2,570,260 Amount owing to holding companies 233,641 233,641 Amount owing to related companies 40,255 40,255 Bank borrowings 21,343,588 21,343,588 ------------ ------------ ------------ ------------ 25,110,550 25,110,550 ------------ ------------ ------------ ------------ NET CURRENT LIABILITIES (12,699,704) (12,699,704) LONG-TERM LIABILITY (87,707) (87,707) ------------ ------------ ------------ ------------ NET ASSETS EMPLOYED 27,809,250 5,697,698 1,986,793 31,520,155 ============ ============ ============ ============ Represented by: SHARE CAPITAL 24,130,000 24,130,000 UNAPPROPRIATED PROFIT 3,679,250 1,986,793 5,697,698 7,390,155 ------------ ------------ ------------ ------------ TOTAL CAPITAL EMPLOYED 27,809,250 1,986,793 5,697,698 31,520,155 ============ ============ ============ ============
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MALAYSIAN TITANIUM CORPORATION SDN BHD PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 30TH JUNE, 1998 Accounts Adjustments to Comply Per Malaysian With US GAAP Accounts Standards Debit Credit Per US GAAP RM RM RM RM ---------------- ---------------- ---------------- ---------------- TURNOVER 34,355,296 -- -- 34,355,296 ================ ================ ================ ================ PROFIT BEFORE TAXATION 3,550,012 247,273 555,567 3,858,306 PROVISION FOR TAXATION -- 1,606,417 (1,606,417) ---------------- ---------------- ---------------- ---------------- NET PROFIT 3,550,012 1,853,690 555,567 2,251,889 Unappropriated profit at beginning of year 129,238 133,103 5,142,131 5,138,266 ---------------- ---------------- ---------------- ---------------- UNAPPROPRIATED PROFIT AT END OF YEAR 3,679,250 1,986,793 5,697,698 7,390,155 ================ ================ ================ ================
84 MALAYSIAN TITANIUM CORPORATION SDN. BHD. YEAR ENDED 30TH JUNE, 1998 ADJUSTMENTS TO COMPLY WITH US GAAP DEBIT CREDIT RM RM 1 Unappropriated Profit Brought Forward 133,103 Associated Company-B/S 133,103 ======== ======== (Being adjustment to recognise MTC's share of post-acquisition loss in Associated Company for years prior to 1998) 2 Associated Company-B/S 555,567 Profit Before Taxation 555,567 ======== ======== (Being reversal of provision for diminution in value of investment in Associated Company) 3 Share of results in Associated Company 247,273 Associated Company-B/S 247,273 ======== ======== (Being adjustment to equity account for the results of the Associated Company) 4 Provision for taxation - P & L 1,606,417 Deferred Tax Assets- B/S 1,606,417 ========= ========= (Being current year's movement in deferred tax assets) 5 Deferred Tax Assets 5,142,131 Unappropriated profit at beginning of year 5,142,131 ========= ========= (Being adjustment to recognise brought forward deferred assets) 85 (b) Pro forma financial information Unaudited Pro Forma Combined Condensed Financial Statements The following unaudited pro forma combined condensed financial statements give effect to the Acquisition. For accounting purposes the Acquisition will be accounted for as a purchase of MTC by the Company; accordingly the net assets of MTC have been adjusted to their estimated fair values based upon a purchase price allocation. The unaudited pro forma combined condensed statements of operations for the year ended December 31, 1999 give effect to the Acquisition as if it had occurred at January 1, 1999. The unaudited pro forma combined condensed balance sheet at December 31, 1999 gives effect to the Merger as if it occurred on December 31, 1999. The unaudited pro forma combined condensed financial statements should be read in conjunction with the historical financial statements of MTC, included herein, and the annual and interim historical financial statements of the Company as filed with the US Securities and Exchange Commission. The unaudited pro forma combined condensed financial statements are not necessarily indicative of the actual results of operations or financial position that would have occurred had the Acquisition occurred on the dates indicated nor are they necessarily indicative of future operating results or financial position. The information presented below is unaudited and includes pro forma information as if MTC was acquired at the beginning of each interim period: 86
TOR Minerals International, Inc. ("TMI") (formerly Hitox Corporation of America) and Malaysian Titanium Corporation Sdn. Bhd. ("MTC") Pro Forma Condensed Combined Balance Sheet (Unaudited) December 31, 1999 Pro Forma Adjustments Pro Forma TMI MTC Increase(Decrease) Combined ------------- ------------- ------------------ ------------- ASSETS CURRENT ASSETS Cash and Cash Equivalents $ 2,329,877 $ 31,931 $ (430,000) (a) $ 1,931,808 Accounts Receivable-Trade 1,333,680 308,830 1,642,510 Accounts Receivable-MTC/Hitox -- 810,920 810,920 Accounts Receivable-Other 11,802 11,802 Inventory 6,489,840 1,924,746 (30,188) (b) 8,384,398 Other Current Assets 41,937 55,146 97,083 ------------- ------------- -------- ---------- Total Current Assets 10,207,136 3,131,573 (460,188) 12,878,521 Investment in MTC -- 5,885,000 (a) -- (5,885,000) (b) Property, Plant and Equipment, net 2,709,868 10,727,190 (2,793,003) (b) 10,644,055 Other Assets 43,200 43,200 ------------- ------------- ----------- ------------- Total Assets $ 12,960,204 $ 13,858,763 $(3,253,191) $ 23,565,776 ============= ============= ============ =============
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TOR Minerals International, Inc. ("TMI") (formerly Hitox Corporation of America) and Malaysian Titanium Corporation Sdn. Bhd. ("MTC") Pro Forma Condensed Combined Balance Sheet (Unaudited) December 31, 1999 Pro Forma Adjustments Pro Forma TMI MTC Increase(Decrease) Combined ------------- ------------- ------------------ ------------- LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts Payable - Trade $ 578,224 $ 671,426 $ 1,249,650 Accounts Payable - MTC/Hitox 810,920 810,920 Notes Payable-Bank Line/Crdt -- 1,103,848 1,103,848 Export Credit Refinancing -- 1,188,036 1,188,036 Accrued Expenses 511,486 468,354 979,840 Current Portion of Long Term Debt -- 368,420 499,000 (a) 867,420 ------------- ------------- ------------ ------------- Total Current Liabilities 1,900,630 3,800,084 499,000 6,199,714 Long Term Debt -- 1,350,488 3,956,000 (a) 5,306,488 ------------- ------------- ------------ ------------- Total Liabilities 1,900,630 5,150,572 4,455,000 11,506,202 ------------- ------------- ------------ ------------- SHAREHOLDERS' EQUITY Capital Stock $.25par 1,193,297 125,000 (a) 1,318,297 Additional Paid/Capital 14,315,410 -- 875,000 (a) 15,190,410 Equity-Retained Earnings (4,449,133) 8,708,191 (8,708,191) (b) (4,449,133) ------------- ------------- ------------ ------------- Total Shareholders' Equity 11,059,574 8,708,191 (7,708,191) 12,059,574 ------------- ------------- ------------ ------------- Total Liabilities and Stockholders' Equity $ 12,960,204 $ 13,858,763 $(3,253,191) $ 23,565,776 ============= ============= ============ =============
See notes to unaudited pro forma condensed combined financial statements 88
TOR Minerals International, Inc. ("TMI") (formerly Hitox Corporation of America) and Malaysian Titanium Corporation Sdn. Bhd. ("MTC") Pro Forma Condensed Combined Statements of Income (Unaudited) Twelve Months Ended December 31, 1999 Pro Forma Adjustments Pro Forma TMI MTC Increase(Decrease) Combined ------------ ------------ ---------------- ------------ Net Sales $ 11,582,720 $ 5,919,887 $(4,026,751) (c) $ 13,475,856 Costs and expenses: Cost of products sold 8,080,883 4,015,573 (2,537,748) (c) 9,558,708 Selling, administrative and general 2,606,791 341,672 2,948,463 ------------ ------------ ------------ ------------ Operating income 895,046 1,562,642 (1,489,003) 968,685 Other income (expenses): Interest income 88,745 (65,000) (c) 23,745 Interest expense (3,853) (340,760) 278,700 (c) (623,313) Other, net 28,054 34,324 (12,257) (c) 50,121 ------------ ------------ ------------ ------------ Income before income tax 1,007,992 1,256,206 (1,844,960) 504,632 Provision for income tax 17,000 8,931 25,931 ------------ ------------ ------------ ------------ NET INCOME $ 990,992 $ 1,247,275 $(1,844,960) (c) $ 393,307 ============ ============ ============ ============ Earnings per common share: Basic $ 0.21 $ 0.08 Diluted $ 0.21 $ 0.07 Weighted average common shares and equivalents outstanding: Basic 4,718,093 5,218,093 Diluted 4,765,002 5,265,002
See notes to unaudited pro forma condensed combined financial statements 89 TMI and MTC Notes to Pro Forma Condensed Combined Financial Statements (Unaudited) (a) The following pro forma adjustments reflect TMI's purchase of MTC. Pro forma adjustments include estimated direct costs of acquisition of $155,000 Cash $ 430,000 Note payable to seller 955,000 Note payable to bank 3,500,000 TMI common stock (500,000 shares @ $2.00 per share) 1,000,000 ----------- $ 5,885,000 =========== (b) The following pro forma adjustments are made to reflect estimated fair value adjustments at December 31, 1999, and to eliminate TMI's investment in MTC. MTC's stockholders' equity as reported $ 8,708,191 Fair value adjustments: Decrease carrying amount of inventories (30,188) Decrease carrying amount of property, plant & equipment (2,793,003) ------------ $ 5,885,000 ============ 90 (c) The following pro forma adjustments are incorporated in the pro forma condensed combined statements of income Increase (Decrease) Income -------------- 1. Decrease in sales resulting from elimination of intercompany sales $ (4,026,751) 2. Decrease in cost of sales resulting from elimination of intercompany sales 2,537,748 3. Decrease in interest income resulting from reduction of short term investments (65,000) 4. Increase in interest expense on assumed borrowing at 8% (278,700) 5. Decrease in other income net of Elimination of write-down of investment and related accounts receivable by MTC and Elimination of gain on sale of asset by MTC (12,257) -------------- $ (1,844,960) ============== 91 (c) Exhibit 23 - Consent of Deloitte Touche Tohmatsu Deloitte Touche Tohmatsu ________________________ __________________________________________ Public Accountant 87, Jalan Clarke Tel: 05-2531358 30300 Ipoh, Perak Fax: 05-2530090 Malaysia 11th May, 2000 The Directors Hitox Corporation of America 722, Burleson Street Texas 78402 United States of America Attention of Mr. Craig Schkade We consent to the incorporation by reference in the Registration Statement (Form S-8 No. 33-39755) pertaining to the 1990 Incentive Plan for Hitox Corporation of America of our audit report dated 18th January, 2000 for the period 1st July, 1999 to 31st December, 1999 and our reports dated 6th August, 1999 and 28th October, 1998 for the financial years ended 30th June, 1999 and 1998, which reports are included in Hitox Corporation of America's Current Report on Form 8-K/A dated 12th May, 2000. Yours truly, DELOITTE TOUCHE TOHMATSU - ------------------------ Deloitte Touche Tohmatsu AF0834 Public Accountants GREGORY WONG GUANG SENG - ------------------------ Gregory Wong Guang Seng 787/3/01(J/PH) Partner Deloitte Touche Tohmatsu International 92 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. TOR Minerals International, Inc. ____________ (Registrant) Date: May 12, 2000 CRAIG SCHKADE ------------------- Craig Schkade, Chief Financial Officer (Principal Financial and Accounting Officer) 93 -----END PRIVACY-ENHANCED MESSAGE-----