-----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, SjYw5p3YJIFUFtHS3zpaNPewqhmBbzT5URAb0sftSzAZ/eSCZO/Y89ShFgLdhZHk 5qu5ijU3UbLoaAQ0bM4H7A== 0000898430-98-002975.txt : 19980817 0000898430-98-002975.hdr.sgml : 19980817 ACCESSION NUMBER: 0000898430-98-002975 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980814 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: SUNBASE ASIA INC CENTRAL INDEX KEY: 0000095626 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 941612110 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-03132 FILM NUMBER: 98686895 BUSINESS ADDRESS: STREET 1: PO BOS 1028 CITY: MONROVIA STATE: CA ZIP: 91017-1028 BUSINESS PHONE: 8183580181 MAIL ADDRESS: STREET 1: P O BOX 2600 CITY: BAKERSFIELD STATE: CA ZIP: 93303 FORMER COMPANY: FORMER CONFORMED NAME: PAN AMERICAN INDUSTRIES INC DATE OF NAME CHANGE: 19941216 FORMER COMPANY: FORMER CONFORMED NAME: PAN AMERICAN ENERGY CORPORATION DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: SUPREME OIL & GAS CORP DATE OF NAME CHANGE: 19901029 10-Q 1 FORM 10-Q FOR THE PERIOD ENDED JUNE 30, 1998 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT of 1934 For the quarterly period ended June 30, 1998. [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the transition period from ____________ to ____________ Commission File No. 0-3132 SUNBASE ASIA, INC. (Exact name of Registrant as specified in its charter) Nevada 94-1612110 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 19/F, First Pacific Bank Centre 51-57 Gloucester Road Wanchai, Hong Kong (Address of principal executive offices) Registrant's telephone number, including area code: (852) 2865-1511 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ___ --- As of June 30, 1998, the Company had 13,576,115 shares of common stock issued and outstanding. SUNBASE ASIA , INC. AND SUBSIDIARIES ------------------------------------ INDEX
PAGE ---- PART I: FINANCIAL INFORMATION Item 1 -- Financial statements Consolidated Condensed Balance Sheets (unaudited) - December 31, 1997 and June 30, 1998 3-4 Consolidated Condensed Statements of Income (unaudited) - Three months and six months ended June 30, 1997 and 1998 5 Consolidated Condensed Statements of Cash Flows (unaudited) -Six months ended June 30, 1997 and 1998 6 Notes to Consolidated Condensed Financial Statements (unaudited) - Three months and six months ended June 30, 1997 and 1998 7-11 Item 2 -- Management's Discussion and Analysis of Financial Condition and Results of Operations 12-19 PART II: OTHER INFORMATION Item 6 -- Exhibits and Reports on Form 8-K 20 SIGNATURES 21 EXHIBIT 11 Computation of Earnings Per Common Share 22-23
2 PART I. FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS -------------------- SUNBASE ASIA, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED) AS OF DECEMBER 31, 1997 AND JUNE 30, 1998 (Amounts in thousands, except number of shares and per share data)
12/31/97 6/30/98 --------------- ------------- Notes RMB US$ RMB US$ ----- --- --- --- --- ASSETS Current assets Cash and bank balances 39,343 4,740 16,974 2,045 Deposits with a financial institution 23,750 2,861 23,750 2,861 Accounts receivable, net 480,400 57,880 434,749 52,379 Notes receivable 6,190 746 4,180 504 Inventories, net 4 477,217 57,496 572,926 69,027 Other receivables 40,330 4,859 69,862 8,417 Due from related companies 300,023 36,147 326,423 39,328 --------- -------- ---------- ------- Total current assets 1,367,253 164,729 1,448,864 174,561 Fixed assets 631,812 76,122 598,946 72,162 Deferred asset 14,383 1,733 11,962 1,441 Long term investments 1,012 122 1,012 122 Goodwill 10,760 1,296 10,347 1,247 --------- -------- ---------- ------- Total assets 2,025,220 244,002 2,071,131 249,533 ========= ======== ========== ======= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Short term bank loans 435,403 52,458 457,583 55,130 Long term bank loans, current portion 140,772 16,960 140,772 16,960 Accounts payable 115,646 13,933 120,429 14,510 Accrued liabilities and other payables 131,536 15,848 144,663 17,429 Short term obligations under capital leases 20,441 2,463 20,682 2,492 Short term portion of secured promissory note 5 12,450 1,500 12,450 1,500 Income tax payable 50,392 6,071 39,240 4,728 Taxes other than income 38,972 4,696 62,137 7,486 Due to related companies 18,730 2,257 29,371 3,539 Convertible debentures 6 95,450 11,500 95,450 11,500 --------- -------- ---------- ------- Total current liabilities 1,059,792 127,686 1,122,777 135,274 Long term bank loans 4,005 483 4,005 483 Long term obligations under capital leases 68,483 8,251 58,238 7,017 Long term portion of secured promissory note 5 12,450 1,500 12,450 1,500 Minority interests 441,490 53,192 444,055 53,500 --------- -------- ---------- ------- 1,586,220 191,112 1,641,525 197,774
Continued/... The accompanying notes form an integral part of these consolidated condensed financial statements. 3 SUNBASE ASIA, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS AS OF DECEMBER 31, 1997 AND JUNE 30, 1998 (UNAUDITED) (CONTINUED) (Amounts in thousands, except number of shares and per share data)
12/31/97 6/30/98 -------------- -------------- NOTES RMB US$ RMB US$ ----- --- --- --- --- Shareholders' equity: Common Stock, par value US$ 0.001 each, 50,000,000 shares authorized; 13,576,115 (12,700,142 - 1997) shares issued, and fully paid up 107 13 116 14 Preferred Stock, par value US$ 0.001 each, 25,000,000 shares authorized; Convertible Preferred Stock - Series A; 36 shares issued and outstanding 44,533 5,365 44,533 5,365 Convertible Preferred Stock - Series B; 765 (6,800 - 1997) shares issued and outstanding 7 28,288 3,408 3,179 383 Contributed surplus 188,019 22,653 213,119 25,677 Reserves 27,971 3,370 27,971 3,370 Retained earnings 150,082 18,081 140,688 16,950 --------- ------- --------- -------- Total shareholders' equity 439,000 52,890 429,606 51,759 --------- ------- --------- -------- Total liabilities and shareholders' equity 2,025,220 244,002 2,071,131 249,533 ========= ======= ========= ========
The accompanying notes form an integral part of these consolidated condensed financial statements. 4 SUNBASE ASIA, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF INCOME (UNAUDITED) FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1997 AND 1998 (Amounts in thousands, except number of shares and per share data)
Six Months Ended June 30, Three Months Ended June 30, ------------------------------------- --------------------------------- 1997 1998 1998 1997 1998 1998 Notes RMB RMB US$ RMB RMB US$ ----- --- --- --- --- --- --- Net sales to - third parties 269,524 238,616 28,749 131,378 146,877 17,696 - related parties 216,319 21,996 2,650 113,248 13,539 1,631 ---------- ---------- ---------- ----------- ---------- ---------- 485,843 260,612 31,399 244,626 160,416 19,327 Cost of sales ( 295,825) ( 190,417) ( 22,942) ( 148,457) ( 116,959) ( 14,091) ---------- ---------- ---------- ----------- ---------- ---------- Gross profit 190,018 70,195 8,457 96,169 43,457 5,236 Selling, general and administrative expenses - third parties ( 35,282) ( 28,138) ( 3,390) ( 18,733) ( 12,123) ( 1,460) - related parties 24,946) ( 9,014) ( 1,086) ( 12,454) ( 8,196) ( 988) ---------- ---------- ---------- ----------- ---------- ---------- ( 60,228) ( 37,152) ( 4,476) ( 31,187) ( 20,319) ( 2,448) Interest expense, net - third parties ( 31,705) ( 36,176) ( 4,359) ( 16,274) ( 17,091) ( 2,059) - related parties ( 4,395) ( 3,587) ( 432) ( 2,149) ( 2,035) ( 246) ---------- ---------- ---------- ----------- ---------- ---------- ( 36,100) ( 39,763) ( 4,791) ( 18,423) ( 19,126) ( 2,305) ---------- ---------- ---------- ----------- ---------- ---------- Income before income taxes 93,690 ( 6,720) ( 810) 46,559 4,012 483 Provision for income taxes: - Current ( 15,723) ( 109) ( 13) ( 7,671) ( 109) ( 13) - Deferred - - - - - - ---------- ---------- ---------- ----------- ---------- ---------- Income before minority interests 77,967 ( 6,829) ( 823) 38,888 3,903 470 Minority interests ( 43,271) ( 2,565) ( 308) ( 21,110) ( 4,330) ( 521) ---------- ---------- ---------- ----------- ---------- ---------- Net income 34,696 ( 9,394) ( 1,131) 17,778 ( 427) ( 51) ========== ========== ========== =========== ========== ========== Earnings per common share 2 - Basic 2.73 (0.72) (0.09) 1.40 (0.03) (0.00) ========== ========== ========== =========== ========== ========== - Diluted 2.10 (0.72) (0.09) 1.07 (0.03) (0.00) ========== ========== ========== =========== ========== ========== Number of shares outstanding 2 - Basic 12,700,140 13,032,215 13,032,215 12,700,140 13,360,637 13,360,637 ========== ========== ========== =========== ========== ========== - Diluted 19,280,140 13,032,215 13,032,215 19,280,140 13,360,637 13,360,637 ========== ========== ========== =========== ========== ==========
The accompanying notes form an integral part of these consolidated condensed financial statements. 5 SUNBASE ASIA, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED) FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1998 (Amounts in thousands)
Six Months Ended June 30, ---------------------------------------- 1997 1998 1998 RMB RMB US$ ------------ ----------- ----------- Cash flows from operating activities: Net income 34,696 ( 9,394) ( 1,131) Adjustments to reconcile income to net cash used in operating activities: Minority interests 43,271 2,565 308 Depreciation 35,736 35,543 4,282 Loss on disposal of fixed assets 582 - - Amortization of goodwill 427 413 49 Exchange difference on secured promissory note and convertible debentures ( 145) - - Amortization of present value discount on deferred asset ( 391) 2,421 292 Amortization of deferred debenture issue expense 721 - - Changes in operating assets and liabilities- (Increase) decrease in assets: Accounts receivable ( 50,761) 45,651 5,501 Notes receivable 3,833 2,010 242 Inventories 23,663 ( 95,709) (11,531) Other receivables ( 22,704) ( 29,532) ( 3,558) Due from related companies (211,863) ( 26,400) ( 3,181) Increase (decrease) in liabilities: Accounts payable ( 19,731) 4,783 577 Accrued liabilities and other payables 60,744 13,127 1,581 Income tax payable 20,699 ( 11,152) ( 1,343) Taxes other than income 52,176 23,165 2,790 Due to related companies 9,439 637 77 -------- -------- ------- Net cash used in operating activities ( 19,608) ( 41,872) ( 5,045) -------- -------- ------- Cash flows from investing activities: Proceeds from disposal of fixed assets ( 134) - - Additions to fixed assets ( 13,345) ( 2,677) ( 322) -------- -------- ------- Net cash used in investing activities ( 13,479) ( 2,677) ( 322) -------- -------- ------- Cash flows from financing activities: Net increase in bank loans 16,896 22,180 2,672 -------- -------- ------- Net cash provided by financing activities 16,896 22,180 2,672 -------- -------- ------- Net increase (decrease) in cash and cash equivalents ( 16,191) ( 22,369) ( 2,695) Cash and cash equivalents, at beginning of period 87,428 63,093 7,601 -------- -------- ------- Cash and cash equivalents, at end of period 71,237 40,724 4,906 ======== ======== ======= Non-cash transaction: Financing of lease arrangements 4,395 10,004 1,205 ======== ======== =======
The accompanying notes form an integral part of these consolidated condensed financial statements. 6 SUNBASE ASIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED) FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1997 AND 1998 (Amounts in thousands, except number of shares and per share data) 1. GENERAL Sunbase Asia, Inc., a Nevada Corporation ("the Company"), is engaged in the design, manufacture and distribution of a broad range of bearing products in the People's Republic of China ("PRC") and certain western countries, including the United States. The Company acquired 100% of the issued share capital of China Bearing Holdings Limited ("China Bearing") on December 2, 1994 pursuant to a Share Exchange Agreement with Asean Capital Limited in exchange for 10,261,000 shares of common stock. The transaction has been treated as a recapitalization of China Bearing with China Bearing as the acquirer (reverse acquisition). The historical financial statements prior to December 2, 1994 are those of China Bearing. The Company owns, through various subsidiaries and joint venture interests, a 51.4% indirect ownership in Harbin Bearing Company Limited ("Harbin Bearing"), a joint stock limited company organized under the law of the PRC. Harbin Bearing is located in Harbin, the PRC, and has been in business since 1950. Harbin Bearing manufactures a wide variety of bearings in the PRC for use in commercial, industrial and aerospace applications and are sold primary in the PRC and certain western countries, including the United States. On January 16, 1996 (effective December 29, 1995), the Company acquired Smith Acquisition Company, Inc. dba Southwest Products Company ("Southwest Products"), a bearing manufacturing company located in Los Angeles County, California, that has been in business since 1945. Southwest Products manufactures precision spherical bearings that are sold primarily to the aerospace and commercial aviation industries. Its major customers are located in the United States. 2. BASIS OF PRESENTATION The accompanying consolidated condensed financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America. All material intercompany accounts and transactions were eliminated on consolidation. The accompanying consolidated condensed financial statements are unaudited but, in the opinion of the management of the Company, contain all adjustments, necessary to present fairly the financial position at June 30, 1998, the results of operations for the three months and six months ended June 30, 1997 and 1998, and the changes in cash flows for the six months ended June 30, 1997 and 1998. These adjustments are of a normal recurring nature. 7 SUNBASE ASIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED) FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1997 AND 1998 (Amounts in thousands, except number of shares and per share data) 2. BASIS OF PRESENTATION (continued) The consolidated balance sheet as of December 31, 1997, is derived from the Company's audited financial statements. Certain information and footnote disclosures normally included in financial statements that have been prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission, although management of the Company believes that the disclosures contained in these financial statements are adequate to make the information presented therein not misleading. For further information, refer to the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1997 as filed with the Securities and Exchange Commission. In 1997, the Financial Accounting Standards Board issued Statement No.128, "Earnings per Share" ("SFAS 128"). SFAS 128 replaced the calculation of primary and fully diluted earnings per share with basic and diluted earnings per share. Unlike primary earnings per share, basic earnings per share excludes any dilutive effects of options, warrants and convertible securities. Diluted earnings per share is very similar to the previously reported fully diluted earnings per share. All earnings per share amounts for the three months and six months ended June 30, 1997 and 1998 have been presented and, where appropriate, restated to conform to SFAS 128 requirements. The diluted loss per share for the three months and six months ended June 30, 1998 is the same as the basic loss per share as there was an anti-dilution effect which reduces the loss per share. The calculation which resulted in such an anti-dilution was based on the assumptions that the conversion rights under the Convertible Debentures had been fully exercised, at the adjusted exercise price as stated in note 6, and the redemption of preferred shares, both on January 1, 1998. On this basis, the net income calculated by adding back the interest expenses on the Convertible Debentures net of income tax is RMB 4,713 and RMB 9,426, respectively, for the three months and six months ended June 30, 1998. As a result of the aforesaid, an anti-dilution effect was resulted and therefore the diluted loss per share was the same as the basic loss per share. The results of operations for the three months and six months ended June 30, 1998 are not necessarily indicative of the results of operations to be expected for the full fiscal year ending December 31, 1998. 3. FOREIGN CURRENCY TRANSLATION AND EXCHANGE In preparing the consolidated financial statements, the financial statements of the Company are measured using Renminbi ("RMB") as the functional currency. All foreign currency transactions are translated into RMB using the applicable floating rates of exchange quoted by the People's Bank of China prevailing at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies have been translated into RMB using the unified exchange rate prevailing at the balance sheet dates. The resulting exchange gains or losses have been credited or charged to the statements of income for the periods in which they occur. 8 SUNBASE ASIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED) FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1997 AND 1998 (Amounts in thousands, except number of shares and per share data) 3. FOREIGN CURRENCY TRANSLATION AND EXCHANGE (continued) The Company's share capital is denominated in United States dollars (US$) and the reporting currency is the RMB. For financial reporting purposes, the US$ share capital amounts have been translated into RMB at the applicable rates prevailing on the transaction dates. For financial reporting purposes, translation of amounts from RMB into US$ for the convenience of the reader has been made at the exchange rate quoted by the People's Bank of China on June 30, 1998 of US$ 1.00 = RMB 8.30. No representation is made that the RMB amounts could have been, or could be, converted into US$ at the rate on June 30, 1998 or at any other certain rate on June 30, 1998 4. INVENTORIES Inventories consist of the following at December 31, 1997 and June 30, 1998:
December 31, 1997 June 30, 1998 -------------------- ------------------- RMB US$ RMB US$ -------- -------- -------- ------- Raw materials 92,039 11,089 107,264 12,923 Work-in-progress 141,214 17,014 170,298 20,518 Finished goods 282,634 34,052 334,034 40,245 -------- -------- -------- ------- 515,887 62,155 611,596 73,686 Less: Allowance for obsolescence ( 38,670) ( 4,659) ( 38,670) ( 4,659) -------- -------- -------- ------- Inventories, net 477,217 57,496 572,926 69,027 ======== ======== ======== =======
5. SECURED PROMISSORY NOTE A promissory note for US$ 5,012 (RMB 41,600) (the "Note") was issued to Asean Capital Limited ("Asean") in connection with the Share Exchange Agreement and is secured by a continuing security interest in all of the Company's title and interest in the outstanding capital stock of its wholly-owned subsidiary China Bearing. The Note is denominated in and is repayable in full in United States dollars, and bears interest at 8% per annum. In connection with the issuance of convertible debentures described at Note 6, Asean has undertaken that for so long as any of the debentures are outstanding, no amounts are to be repaid on the Note unless there is sufficient working capital and the repayment is made in accordance with the following schedule: 9 SUNBASE ASIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED) FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1997 AND 1998 (Amounts in thousands, except number of shares and per share data) 5. SECURED PROMISSORY NOTE (continued)
Payment Period Amount -------------- ------ August 1, 1996 to July 31, 1997 up to US$ 2,000 plus accrued interest August 1, 1997 to July 31, 1998 up to US$ 1,500 plus accrued interest August 1, 1998 to July 31, 1999 up to US$ 1,500 plus accrued interest
Pursuant to the above described repayment schedule, a principal payment of US$ 2,012 (RMB 16,700) was made on the Note on September 10, 1996. The directors do not envisage any other repayments being made in the foreseeable future. 6. CONVERTIBLE DEBENTURES Pursuant to a Subscription Agreement dated August 2, 1996, (the "Subscription Agreement"), among China Bearing, Asean Capital Limited, China International Bearing Holdings Limited, the Company and Southwest Products (collectively, the "Sunbase Group"); Glory Mansion Limited, Wardley China Investment Trust, MC Private Equity Partners Asia Limited and Chine Investissement 2000 (collectively the "Investors"), on August 23, 1996, China Bearing issued an aggregate of US$ 11,500,000 principal amount of Convertible Debentures (the "Convertible Debentures") to the Investors. Unless the Convertible Debentures have been converted, the Convertible Debentures are due and payable in August, 1999 (the "Maturity Date"). The Convertible Debentures bear interest at the rate of the higher of (i) 5% per annum (net of withholding tax, if applicable) and (ii) such percentage of the dividend yield calculated by reference to dividing the annual dividend declared per share of Common Stock of the Company by the Conversion Price (as hereinafter defined). Interest is payable quarterly. The Investors have the right to convert at any time, in whole or in part, the principal amount of the Convertible Debentures into shares of the Common Stock of the Company. The Conversion Price (the "Conversion Price") was initially $5.00 per share, subject to adjustment for (a) change in par value of the Common Stock, (b) issuance of shares by way of capitalization of profits or reserves, (c) capital distributions, (d) rights offering at a price which is less than the lower of the then market price or Conversion Price, (e) issuance of derivative securities where the total consideration per share initially received is less than the lower of the then market price or Conversion Price, (f) issuance of shares at a price per share which is less than the lower of the then market price or the Conversion Price, and (g) if the cumulative audited earnings per common share for any two consecutive fiscal years commencing with the fiscal year ended December 31, 1996 and ending with the fiscal year ending December 31, 1998 are less than the specified projection of cumulative earnings per common share for such periods. Due to the Company's failure to achieve the projected cumulative audited earnings per common share of US$1.79 for the two years ended December 31, 1997, the Conversion Price has been adjusted to US$1.84 per share pursuant to the terms of the Subscription Agreement. 10 SUNBASE ASIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED) FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1997 AND 1998 (Amounts in thousands, except number of shares and per share data) 6. CONVERTIBLE DEBENTURES (continued) The Convertible Debentures are required to be redeemed on the Maturity Date at its principal amount outstanding together with any accrued but unpaid interest together with an amount that would enable the Investors to yield an aggregate internal rate of return of 12% per annum on the cost of their investment. In addition, if any of the events of default specified in the Convertible Debentures occur, the Convertible Debentures are automatically due and payable at the principal amount outstanding together with accrued interest and an amount that would enable the Investors to yield an aggregate internal rate of return on their investment of 19.75% per annum. Events of default include the delisting of the shares from NASDAQ or its suspension thereof; default in performance after failure to cure after notice; failure to pay principal or interest; failure to pay indebtedness for borrowed money; bankruptcy, insolvency or unsatisfied judgment; failure to achieve earning per common share of at least $0.55 for fiscal years commencing January 1, 1996; and accounts receivable reaching a certain level in relationship to net sales. The obligations of China Bearing under the Subscription Agreement are guaranteed by the other members of the Sunbase Group. Due to the failure of the Company in achieving the defined earnings per common share of US $0.55 in 1997, an event of default had occurred. Although the Convertible Debentures bear an interest charge at the rate of 5% per annum, interest was being accrued at the rate of 19.75% per annum to provide for the condition of default. 7. CONVERTIBLE PREFERRED STOCK - SERIES B During April and May 1998, the Series B Convertible Preferred stock was converted to common stock of Sunbase Asia, Inc. The shares, originally issued to the former Southwest Products Company shareholders, were converted at the rate as agreed upon in the Sunbase Asia, Inc.\Southwest Products Company purchase agreement. Although all of the Series B Convertible Preferred stock was eligible for conversion, as of June 30, 1998, not all of the Series B Convertible Preferred stock was converted. 11 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS ----------------------------------------------------------------------- OF OPERATIONS ------------- OVERVIEW The Company owns, through various subsidiaries and joint venture interests, a 51.4% indirect ownership in Harbin Bearing. Harbin Bearing manufactures a wide variety of bearings in the PRC for use in commercial, industrial and aerospace applications that are sold primarily in the PRC and certain western countries, including the United States. On January 16, 1996 (effective December 29, 1995), the Company acquired Southwest Products, which manufactures precision spherical bearings that are sold primarily to the aerospace and commercial aviation industries. The acquisition of Southwest Products has been accounted for under the purchase method of accounting. The results of Southwest Products have been consolidated into the Company's consolidated results of operations commencing January 1, 1996. Unless specifically stated, all amounts are in thousands ('000). RESULTS OF OPERATION Three Months Ended June 30, 1997 and 1998: The following table sets forth certain unaudited operating data (in RMB and as a percentage of the Company's sales) for the three months ended June 30, 1997 and 1998.
Three Months Ended June 30, ---------------------------- 1997 1998 ---- ---- RMB % RMB % --- - --- - Sales 244,626 100.0 160,416 100.0 Cost of sales (148,457) (60.7) (116,959) (72.9) -------- ----- -------- ------ Gross profit 96,169 39.3 43,457 27.1 Selling expenses ( 6,115) ( 2.5) ( 4,099) ( 2.6) General and administrative expenses ( 25,072) (10.3) ( 16,220) ( 10.1) Interest expenses ( 18,423) ( 7.5) ( 19,126) ( 11.9) -------- ----- -------- ------ Income before income taxes 46,559 19.0 4,012 2.5 Provision for income taxes ( 7,671) ( 3.1) ( 109) ( 0.1) -------- ----- -------- ------ Income before minority interests 38,888 15.9 3,903 2.4 Minority interests ( 21,110) ( 8.6) ( 4,330) ( 2.7) -------- ----- -------- ------ Net income 17,778 7.3 ( 427) ( 0.3) ======== ===== ======== ======
12 Sales ----- Sales for the three months ended June 30, 1998 decreased by RMB 84,210 or 34.4% to RMB 160,416, as compared to RMB 244,626 for the three months ended June 30, 1997. The decrease in sales was due to adverse market conditions in the PRC primarily due to the financial crisis in Asia. Moreover, stringent control on capital expenditures of PRC enterprises by the government has caused the decrease in demand and thus the sales of the Company's products, which are components of machinery and equipment. Competition within the PRC bearing industry increased in 1998 for the limited sales orders in the bearing market. In addition there were no material price increases from the prior twelvemonth period. Sales for Harbin Bearing for the three months ended June 30, 1998 decreased by RMB 83,955 or 36% to RMB 149,387 as compared to RMB 233,342 for the three months ended June 30, 1997. This decrease was mainly caused by the decrease in domestic demand for bearing in the PRC. Cost of Sales/Gross Profit -------------------------- Cost of sales for the three months ended June 30, 1998 decreased to RMB 116,959 as compared to RMB 148,457 for the three months ended June 30, 1997. The cost of sales for Harbin Bearing for the three months ended June 30, 1998 and 1997 was calculated using the gross profit method by reference to average annual gross profit ratios. The cost of sales for Southwest Products for the three months ended June 30, 1998 and 1997 was calculated on an actual cost basis. Gross profit decreased by RMB 52,712 or 54.8% for the three months ended June 30, 1998 as compared to the three months ended June 30, 1997. The decrease in gross profit was mainly attributable to the decrease in sales caused by the adverse market conditions in the PRC, which led to a plunge in units of bearings produced in 1998. This resulted in production inefficiency and an under-utilization of machinery and equipment capacity causing an increase in overhead absorbed by each unit produced and thus the unit cost of goods sold. Also, there was no material change in selling prices during the two periods under review. Selling Expenses ---------------- Selling expenses for the three months ended June 30, 1998 decreased by RMB 2,016 or 33% to RMB 4,099 as compared to RMB 6,115 for the three months ended June 30, 1997. The decrease in selling expenses was in line with the decrease in sales. 13 General and Administrative Expenses ----------------------------------- General and Administrative Expenses for the three months ended June 30, 1998 decreased by RMB 8,852 or 35.3% to RMB 16,220 as compared to RMB 25,072 for the three months ended June 30, 1997. Significant factors affecting the change in General and Administration Expenses between 1997 and 1998 are as follows:- a. A provision for management fee of RMB 5,200 was made at Harbin Bearing for the three months ended June 30, 1997. No such provision was made for the three months ended June 30, 1998. b. A general provision for doubtful accounts of RMB 2,000 was made at Harbin Bearing for the three months ended June 30, 1997 but none for the three months ended June 30, 1998. Interest Expense ---------------- Interest Expense for the three months ended June 30, 1998 increased by RMB 703 or 3.8% to RMB 19,126 as compared to RMB 18,423 for the three months ended June 30, 1997. The increase in interest expense was primarily attributable to the increase in Convertible Debentures interest. The amount of Convertible Debentures interest charged for the three months ended June 30, 1998 was RMB 4,713 as compared to RMB2,864 for the three months ended June 30, 1997. The rise in Convertible Debentures interest was due to an increase in the interest accrual rate from 12% to 19.75% per annum as a result of the Company's default on a condition of the Subscription Agreement governing the Convertible Debentures. Net Income ---------- As a result of the aforementioned factors, net income decreased by RMB 18,205 to a loss of RMB 427 for the three months ended June 30, 1998 as compared to a profit of RMB 17,778 for the three months ended June 30, 1997. 14 Six Months Ended June 30, 1997 and 1998: The following table sets forth certain unaudited operating data (in RMB and as a percentage of the Company's sales) for the six months ended June 30, 1997 and 1998.
Six Months Ended June 30, --------------------------- 1997 1998 ---- ---- RMB % RMB % --- - --- - Sales 485,843 100.0 260,612 100.0 Cost of sales (295,825) (60.9) (190,417) (73.1) -------- ----- -------- ----- Gross profit 190,018 39.1 70,195 26.9 Selling expenses ( 11,946) ( 2.5) ( 8,143) ( 3.1) General and administrative expenses ( 48,282) ( 9.9) ( 29,009) (11.1) Interest expenses ( 36,100) ( 7.4) ( 39,763) (15.3) -------- ----- -------- ----- Income before income taxes 93,690 19.3 ( 6,720) ( 2.6) Provision for income taxes ( 15,723) ( 3.2) ( 109) 0 -------- ----- -------- ----- Income before minority interests 77,967 16.1 ( 6,829) ( 2.6) Minority interests ( 43,271) ( 8.9) ( 2,565) ( 1.0) -------- ----- -------- ----- Net income 34,696 7.2 ( 9,394) ( 3.6) ======== ===== ======== =====
Sales ----- Sales for the six months ended June 30, 1998 decreased by RMB 225,231 or 46.4% to RMB 260,612 as compared to RMB 485,843 for the six months ended June 30, 1997. The decrease in sales was due to adverse market conditions in the PRC primarily due to the financial crisis in Asia. Moreover, stringent control on capital expenditure of PRC enterprises by the government has caused the decrease in demand and thus the sales of the Company's products, which are components of machinery and equipment. Competition within the PRC bearing industry increased in 1998 for the limited sales orders in the bearing market. In addition there were no material price increases from the prior twelvemonth period. Sales for Harbin Bearing for the six months ended June 30, 1998 decreased by RMB 225,250 or 48.5% to RMB 239,171 as compared to RMB 464,421 for the six months ended June 30, 1997. This decrease was mainly caused by the decrease in domestic demand for bearing in the PRC. Cost of Sales/Gross Profit -------------------------- Cost of sales for the six months ended June 30, 1998 decreased to RMB 190,417 as compared to RMB 295,825 for the six months ended June 30, 1997. The cost of sales for Harbin Bearing for the six months ended June 30, 1998 and 1997 was calculated using the gross profit method by reference to average annual gross profit ratios. The cost of sales for Southwest Products for the six months ended June 30, 1998 and 1997 was calculated on an actual cost basis. 15 Gross profit decreased by RMB 119,823 or 63.1% for the six months ended June 30, 1998 as compared to the six months ended June 30, 1997. The decrease in gross profit was mainly attributable to the decrease in sales caused by the adverse market conditions in the PRC, which led to a plunge in units of bearings produced in 1998. This resulted in production inefficiency and an under-utilization of machinery and equipment capacity causing an increase in overhead absorbed by each unit produced and thus the unit cost of goods sold. Also, there was no material change in selling prices during the two periods under review. Selling Expenses ---------------- Selling expenses for the six months ended June 30, 1998 decreased by RMB 3,803 or 31.8% to RMB 8,143 as compared to RMB 11,946 for the six months ended June 30, 1997. As a result of the decrease in sales in 1998, there was a drop in royalty and government taxes. The government tax and royalty charged for the six months ended June 30, 1998 was RMB 1,482 and RMB 1,196 as compared to RMB 5,660 and RMB 2,322 for the six months ended 30 June 1997. General and Administrative Expenses ----------------------------------- General and Administrative Expenses for the six months ended June 30, 1998 decreased by RMB 19,273 or 39.9% to RMB 29,009 as compared to RMB 48,282 for the six months ended June 30, 1997. General and administrative expenses as a percentage of sales increased from 9.9% in 1997 to 11.1% in 1998. Significant factors affecting the change in general and administrative expenses between 1997 and 1998 are as follows: a. A provision for management fees of RMB 10,532 was made at Harbin Bearing for the six months ended June 30, 1997. No such provision was made for the six months ended June 30, 1998. b. A general provision for doubtful accounts of RMB 2,000 was made at Harbin Bearing for the six months ended June 30, 1997. No such provision was made for the six months ended June 30, 1998. c. A decrease in staff costs of RMB 1,385 associated with the U.S. engineering program at Harbin Bearing, which only incurred in the six months ended June 30, 1997. d. A management fee payable to Sunbase International of RMB 2,281 for the six months ended June 30, 1997 where no such fee was paid during the six months ended June 30, 1998. This management fee was for rent, utilities, and other administrative costs born by the parent. e. A decrease in property tax of RMB 1,062 for the six months ended June 30, 1998 as compared to the six months ended June 30, 1997. f. A decrease in administrative staff costs by RMB 1,647 as a result of increased compensation paid to workers in the six months ended June 30, 1997. No such compensation was made during the six months ended June 30, 1998. 16 Interest Expense ---------------- Interest Expense for the six months ended June 30, 1998 increased by RMB 3,663 or 10.1% to RMB 39,763 as compared to RMB 36,100 for the six months ended June 30, 1997. The increase in interest expense was primarily attributable to the increase in Convertible Debentures interest. The amount of Convertible Debentures interest charged for the six months ended June 30, 1998 was RMB 9,426 as compared to RMB 5,728 for the six months ended June 30, 1997. The rise in Convertible Debentures interest was due to an increase in the interest accrual rate from 12% to 19.75% per annum as a result of the Company's default on a condition of the Subscription Agreement governing the Convertible Debentures. Net Income ---------- As a result of the aforementioned factors, net income decreased by RMB 44,090 to a loss of RMB 9,394 for the six months ended June 30, 1998 as compared to a net income RMB 34,696 for the six months ended June 30, 1997. LIQUIDITY AND CAPITAL RESOURCES OPERATING ACTIVITIES For the six months ended June 30, 1998, the Company's operations utilized cash resources of RMB 41,872 as compared to RMB 19,608 for the six months ended June 30, 1997. The Company's net working capital increased by RMB 18,626 at June 30, 1998 to RMB 326,087 as compared to RMB 307,461 at December 31, 1997, and the Company's current ratio at June 30, 1998 was 1.29:1 as compared to 1.29:1 at December 31, 1997 and 1.52:1 at June 30, 1997. Accounts receivable decreased by RMB 45,651 or 9.5% to RMB 434,749 at June 30, 1998, as compared to RMB 480,400 at December 31, 1997. Due from related companies increased by RMB 26,400 during the six months ended June 30, 1998. The net decrease was mainly due to tight control in credit review procedures by limiting sales to customers where collectability was uncertain in the period. INVESTING ACTIVITIES Capital expenditures for the six months ended June 30, 1998 of RMB 2,677 consisted of costs relating to the renovation of existing facilities and equipment, and were financed by internally generated funds, as well as short- term and long-term bank loans. There are no other material capital expenditures expected in the near future. FINANCING ACTIVITIES The Company has historically relied on both long and short term bank loans from Chinese banks to support its operating and capital requirements. Short term bank loans have terms ranging from three months to six months, are utilized to finance both operating and capital requirements, and are renewed on a revolving basis. Long term bank loans are utilized to fund capital expansion projects. During the six months ended June 30, 1998, the net increase in bank loans (after deducting repayment) was RMB 22,180. The Company believes that it will be able to continue to maintain and expand its bank borrowings under existing terms and conditions. Pursuant to a Subscription Agreement dated August 2, 1996, (the "Subscription Agreement"), among China Bearing, Asean Capital Limited, China International Bearing Holdings Limited, the Company and Southwest Products (collectively, the "Sunbase Group"); Glory Mansion Limited, Wardley China 17 Investment Trust, MC Private Equity Partners Asia Limited and Chine Investissement 2000 (collectively the "Investors"), on August 23, 1996, China Bearing issued an aggregate of US$ 11,500,000 principal amount of Convertible Debentures (the "Convertible Debentures") to the Investors. Unless the Convertible Debentures have been converted, the Convertible Debentures are due and payable in August, 1999 (the "Maturity Date"). The Convertible Debentures bear interest at the rate of the higher of (i) 5% per annum (net of withholding tax, if applicable) and (ii) such percentage of the dividend yield calculated by reference to dividing the annual dividend declared per share of Common Stock of the Company by the Conversion Price (as hereinafter defined). Interest is payable quarterly. The Investors have the right to convert at any time, in whole or any part, the principal amount of the Convertible Debentures into shares of the Common Stock of the Company. The Conversion Price (the "Conversion Price") was initially $5.00 per share, subject to adjustment for (a) change in par value of the Common Stock, (b) issuance of shares by way of capitalization of profits or reserves, (c) capital distributions, (d) rights offering at a price which is less than the lower of the then market price or Conversion Price, (e) issuance of derivative securities where the total consideration per share initially received is less than the lower of the then market price or Conversion Price, (f) issuance of shares at a price per share which is less than the lower of the then market price or the Conversion Price, and (g) if the cumulative audited earnings per common share for any two consecutive fiscal years commencing with the fiscal year ended December 31, 1996 and ending with the fiscal year ending December 31, 1998 are less than the specified projection of cumulative earnings per common share for such period. Due to the Company's failure to achieve the projected cumulative audited earnings per common share of US$1.79 for the two years ended December 31, 1997, the Conversion Price has been adjusted to US$1.84 per share pursuant to the terms of the Subscription Agreement. The Convertible Debentures are required to be redeemed on the Maturity Date at its principal amount outstanding together with any accrued but unpaid interest together with an amount that would enable the Investors to yield an aggregate internal rate of return of 12% per annum on the cost of their investment. In addition, if any of the events of default specified in the Convertible Debentures occurs, the Convertible Debentures are automatically due and payable at the principal amount outstanding together with accrued interest and an amount that would enable the Investors to yield an aggregate internal rate of return on their investment of 19.75% per annum. Events of default include the delisting of the shares from NASDAQ or its suspension thereof; default in performance after failure to cure after notice; failure to pay principal or interest; failure to pay indebtedness for borrowed money; bankruptcy, insolvency or unsatisfied judgments; failure to achieve earning per common share of at least $.55 for fiscal years commencing January 1, 1996; and accounts receivable reaching a certain level in relationship to net sales. The obligations of China Bearing under the Subscription Agreement are guaranteed by the other members of the Sunbase Group. Due to the failure of the Company in achieving the defined earnings per common share of U.S. $0.55 in 1997, an event of default had occurred. Although the Convertible Debentures bear an interest charge at the rate of 5% per annum, interest was being accrued at the rate of 19.75% per annum to provide for the condition of the default. In view of the inadequate funding position of the Company and the guarantors to meet with an immediate redemption of the Convertible Debentures, the Company has conducted negotiations with the Investors in rescheduling the redemption payment. The Company believes that a workable solution could be made with the Investors in due course. No assurance can be given that such negotiations will result in a resolution that is favorable to the Company. A promissory note for US$ 5,012 (RMB 41,600) (the "Note") was issued to Asean Capital Limited ("Asean") in connection with the Share Exchange Agreement and is secured by a continuing security interest in all of the Company's title and interest in the outstanding capital stock of its wholly-owned 18 subsidiary China Bearing. The Note is denominated in and is repayable in full in United States dollars, and bears interest at 8% per annum. In connection with the issuance of Convertible Debentures described at above, Asean has undertaken that for so long as any of the Convertible Debentures are outstanding, no amounts are to be repaid on the Note unless there is sufficient working capital and the repayment is made in accordance with the following schedule:-
Payment Period Amount -------------- ------ August 1, 1996 to July 31, 1997 up to US$ 2,000 plus accrued interest August 1, 1997 to July 31, 1998 up to US$ 1,500 plus accrued interest August 1, 1998 to July 31, 1999 up to US$ 1,500 plus accrued interest
Pursuant to the above described repayment schedule, a principal payment of US$ 2,012 (RMB 16,700) was made on the Note on September 10, 1996. The directors do not envisage any other repayments being made in the foreseeable future. The Company anticipates that its cash flows from operations, combined with cash and cash equivalents, bank lines of credit and other external sources of debt and equity financing, are adequate to finance the Company's operating and debt service requirements for the foreseeable future. Nevertheless, due to the recent financial turmoil in Asia and the default on the Convertible Debentures, management will cautiously and closely monitor the funding position of the Company. INFLATION AND CURRENCY MATTERS In recent years, the Chinese economy has experienced periods of rapid economic growth as well as high rates of inflation, which in turn has resulted in the periodic adoption by the Chinese government of various corrective measures designed to regulate growth and contain inflation. During the six months ended June 30, 1998, the general inflation rate in the PRC was under control and was below 10% on an average basis. Since 1993, the Chinese government has implemented and maintained an economic program designed to control inflation, which has resulted in the tightening of working capital available to Chinese business enterprises. The success of the Company depends in substantial part on the continued growth and development of the Chinese economy. The Company continually monitors the effects of inflation. In view of the change in market conditions and increased competition, the Company may be unable to shift a portion of the inflated costs to the customers. The price of bearing steel, the major raw material used by the Company, remained fairly stable during 1997 and 1998. The major impact of inflation was on labor cost due to increases in employees wages. However, the Company has generally managed to offset the effects of inflation through improved operational efficiency. Foreign operations are subject to certain risks inherent in conducting business abroad, including price and currency exchange controls, and fluctuations in the relative value of currencies. Changes in the relative value of currencies occur periodically and may, in certain instances, materially affect the Company's results of operations. The Company conducts most of its business in the PRC and, accordingly, the sale of its products is settled primarily in RMB. As a result, devaluation of the RMB against the US$, and could have a material adverse effect upon the results of operations and financial position of the Company. Although prior to 1994 the RMB experienced significant devaluation against the US$, the RMB has remained fairly stable from 1994 to present. The unified exchange rate was US$ 1.00 to RMB 8.65 at December 31, 1993, RMB 8.45 at December 31, 1994, RMB 8.32 at December 31, 1995, RMB 8.3 at December 31, 1996, RMB 8.3 for December 31, 1997 and June 30, 1998. 19 PART II. OTHER INFORMATION Item 1 Legal Proceedings No Material Developments Item 2 Changes in Securities None Item 3 Defaults upon Senior Securities None Item 4 Submission of Matters to a Vote of Security Holders None Item 5 Other Information None Item 6 Exhibits and Reports on Form 8-K (a) Exhibits: 11 Computation of Earnings per common share 27 Financial Data Schedule (b) Reports on Form 8-K: Three months ended June 30, 1998: None 20 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 thereunto duly authorized. Sunbase Asia, Inc. ------------------ (Registrant) Date: August 12, 1998 By: /s/ William McKay ----------------- William McKay Chief Executive Officer and President (Duly Authorized Officer) Date: August 12, 1998 By: /s/ (Roger) Li Yuen Fai ----------------------- (Roger) Li Yuen Fai Vice President and Chief Financial Officer (Principal Financial Officer) 21 EX-11 2 COMPUTATION OF EARNINGS PER SHARE EXHIBIT 11 ---------- SUNBASE ASIA, INC. AND SUBSIDIARIES COMPUTATION OF EARNINGS PER COMMON SHARE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1997 AND 1998 (Amounts in thousands, except number of shares and per share data)
Six Months Ended June 30, Three Months Ended June 30, ------------------------------------- -------------------------------------- 1997 1998 1998 1997 1998 1998 RMB RMB US$ RMB RMB US$ ---------- ----------- ---------- ----------- ----------- ---------- BASIC Net income, as reported 34,696 (9,394) (1,131) 17,778 ( 427) ( 51) ========== ========== ========== =========== ========== ========== Weighted average number of shares of common stock outstanding: Shares of common stock outstanding on January 1 12,700,109 12,700,142 12,700,142 12,700,109 12,700,142 12,700,142 Conversion of Series B Preferred Shares 332,071 332,071 660,493 660,493 Share issued as a result of rounding from reverse stock split 31 2 2 31 2 2 ---------- ---------- ---------- ----------- ---------- ---------- Weighted average number of shares of common stock outstanding 12,700,140 13,032,215 13,032,215 12,700,140 13,360,637 13,360,637 ========== ========== ========== =========== ========== ========== Earnings / (Loss) per share 2.73 (0.72) (0.09) 1.40 (0.03) (0.00) ========== ========== ========== =========== ========== ==========
22 SUNBASE ASIA, INC. AND SUBSIDIARIES COMPUTATION OF EARNINGS PER COMMON SHARE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1997 AND 1998 (Amounts in thousands, except number of shares and per share data)
Six Months Ended June 30, Three Months Ended June 30, ------------------------------------- -------------------------------------- 1997 1998 1998 1997 1998 1998 RMB RMB US$ RMB RMB US$ ---------- ----------- ---------- ----------- ----------- ---------- DILUTED Net income, as reported 34,696 (9,394) (1,131) 17,778 (427) (51) Add after tax interest expense applicable to Convertible Debentures 5,724 - - 2,885 - - ---------- ---------- ---------- ----------- ---------- ------------ Net income, as adjusted 40,420 (9,394) (1,131) 20,663 (427) (51) ========== ========== ========== =========== ========== ============ Weighted average number of shares of common stock outstanding: Share of common stock outstanding on January 1 12,700,109 12,700,142 12,700,142 12,700,109 12,700,142 12,700,142 Conversion of Series B Preferred Shares 332,071 332,071 660,493 660,493 Share issued as a result of rounding from reverse stock split 31 2 2 31 2 2 ---------- ---------- ---------- ----------- ---------- ------------ Weighted average number of shares of common stock outstanding 12,700,140 13,032,215 13,032,215 12,700,140 13,360,637 13,360,637 Shares of common stock issuable assuming conversion of the Convertible Preferred Stock - Series A 3,600,000 - - 3,600,000 - - - Series B 680,000 - - 680,000 - - Shares of common stock issuable assuming conversion of the Convertible Debentures on August 23, 1996 2,300,000 - - 2,300,000 - - ---------- ---------- ---------- ----------- ---------- ------------ Total weighted average number of shares of common stock and common stock equivalents outstanding 19,280,140 13,032,215 13,032,215 19,280,140 13,360,637 13,360,637 ========== ========== ========== ========== ========== =========== Earnings /(Loss) per share 2.10 (0.72) (0.09) 1.07 (0.03) (0.00) ========== ========== ========== ========== ========== ===========
23 EX-27 3 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS CONTAINED IN THE COMPANY'S QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 6-MOS DEC-31-1998 JAN-01-1998 JUN-30-1998 4,906 0 100,628 0 69,027 174,561 72,162 0 249,533 135,274 0 0 5,748 14 45,997 249,533 31,399 31,399 22,942 22,942 0 0 4,791 (810) (13) (823) 0 0 0 (1,131) (0.09) (0.09)
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