UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] Quarterly report under Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the quarterly period ended June 30, 2001.
[_] Transition report under Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the transition period from ______ to ______.
Commission file number: 0-26717
SCORE ONE, INC.
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(Exact name of small business issuer as specified in its charter)
Nevada 88-0409164
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(State or other jurisdiction of (IRS Employer
Incorporation or organization) Identification No.)
Unit 2, 34/F
Cable TV Tower 9 Hoi Shing
Tsuen Wan, Hongkong
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(Address of principal executive offices)
011-852-2406-8978
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(Issuer's Telephone Number, Including Area Code)
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(Former name, address and fiscal year, if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes [X] No [_]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant has filed all documents and reports required to be
filed by Sections 12, 13, or 15(d) of the Exchange Act subsequent to the
distribution of securities under a plan confirmed by a court.
Yes [_] No [_]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
As of June 30, 2001, there were 19,930,000 shares of common stock issued
and outstanding.
2
FORM 10-QSB
SCORE ONE, INC.
TABLE OF CONTENTS
PART I
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS.......................................... 4
CONSOLIDATED INCOME STATEMENTS....................................... 5
CONSOLIDATED STATEMENTS OF CASH FLOWS................................ 6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS........................... 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS......... 8
PART II
ITEM 1. LEGAL PROCEEDINGS.................................................. 12
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.......................... 12
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.................................... 12
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS................ 12
ITEM 5. OTHER INFORMATION.................................................. 12
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K................................... 13
SIGNATURES................................................................. 13
3
PART I
ITEM 1. FINANCIAL STATEMENTS
In the opinion of management, the accompanying unaudited financial statements
included in this Form 10-QSB reflect all adjustments (consisting only of normal
recurring accruals) necessary for a fair presentation of the results of
operations for the periods presented. The results of operations for the periods
presented are not necessarily indicative of the results to be expected for the
full year.
SCORE ONE, INC.
CONSOLIDATED BALANCE SHEETS
JUNE 30, 2001 AND DECEMBER 31, 2000
(Unaudited)
2001 2000
----------- ----------
ASSETS
------
Current Assets
Cash and cash equivalents $ 401,780 $ 239,909
Accounts Receivable 4,090,025 1,792,096
Other receivables, Deposits, and Prepayments 829,255 3,383,593
Inventories 1,388,970 598,233
Advances Due From Director 416,731 0
Deferred Income Taxes 0 20,984
----------- ----------
Total Current Assets 7,126,761 6,034,815
Plant and Equipment, Net 5,084,335 3,227,815
Goodwill 10,962,252 0
----------- ----------
Total Assets $23,173,348 $9,262,630
=========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities
Accounts Payable $ 3,639,116 $1,537,789
Bank Loans 1,951,693 0
Other Payables and Accrued Expenses 806,770 199,589
Income Taxes Payable 249,546 817,429
----------- ----------
Total Current Liabilities 6,647,125 2,554,807
Long Term Liabilities
Deferred Income Taxes 1,858,846 242,265
Other Noncurrent Liabilities 1,282,051 0
Amount payable to stockholder 0 102,281
----------- ----------
Total Long Term Liabilities 3,140,897 344,546
----------- ----------
Total Liabilities 9,788,022 2,899,353
Minority Interest 705,648 0
Stockholders' Equity
Preferred Stock, par value $0.001 per share; 5,000,000 shares
authorized, none issued
Common Stock, par value $0.001 per share; 41,250,000 shares
authorized, 19,930,000 shares issued and outstanding 19,930 19,930
Accumulated Other Comprehensive Income (Loss) (48,263) 0
Retained Earnings 12,708,011 6,343,347
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Total Stockholders' Equity 12,679,678 6,363,277
----------- ----------
Total Liabilities and Stockholders' Equity $23,173,348 $9,262,630
=========== ==========
The accompanying notes are an integral part of these financial statements.
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SCORE ONE, INC.
CONSOLIDATED INCOME STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2001 AND 2000
(Unaudited)
For The Three For The Three For The Six For The Six
Months Ended Months Ended Months Ended Months Ended
June 30, 2001 June 30, 2000 June 30, 2001 June 30, 2000
------------- ------------- ------------- -------------
Net Sales $ 7,205,495 $ 4,942,306 $12,846,682 $ 9,785,583
Costs of Sales (5,187,702) (3,653,184) (9,226,603) (7,000,850)
----------- ----------- ----------- -----------
Gross Profit 2,017,793 1,289,122 3,620,079 2,784,733
Selling Expenses (33,793) (11,728) (54,322) (16,702)
General and Administrative (376,816) (182,585) (697,747) (443,515)
Other Income (Expense), Net (179,864) 1,895 (167,957) 1,895
Interest (Financial Expense), Net (28,640) 0 (34,219) 0
----------- ----------- ----------- -----------
Income Before Income Taxes, Minority
Interest and Extraordinary Gain 1,398,680 1,096,704 2,665,834 2,326,411
Provision for Income Taxes (109,534) (106,347) (210,906) (204,724)
----------- ----------- ----------- -----------
Income Before Minority Interest and
Extraordinary Gain 1,289,146 990,357 2,454,928 2,121,687
Minority Interest (103,956) - (103,956) -
----------- ----------- ----------- -----------
Income Before Extraordinary Gain 1,185,190 990,357 2,350,972 2,121,687
Extraordinary Gain, net 4,013,692 0 4,013,692 -
----------- ----------- ----------- -----------
Net Income Available for Common
Stockholders $ 5,198,882 $ 990,357 $ 6,364,664 $ 2,121,687
=========== =========== =========== ===========
Net Income Per Common Share-
Basic and Diluted:
Income Before Extraordinary Gain $ 0.06 $0.05 $ 0.12 $0.11
=========== =========== =========== ===========
Extraordinary Gain $ 0.20 - $ 0.20 -
=========== =========== =========== ===========
Net Income $ 0.26 $0.05 $ 0.32 $0.11
=========== =========== =========== ===========
Weighted average common shares
outstanding-basic and diluted 19,930,000 19,930,000 19,930,000 19,930,000
=========== =========== =========== ===========
The accompanying notes are an integral part of these financial statements.
5
SCORE ONE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2001 AND 2001
(Unaudited)
Six Months Ended Six Months Ended
June 30, 2001 June 30, 2000
---------------- ----------------
Cash Flows From Operating Activities
Net Income $ 6,364,664 $ 2,121,687
Adjustments to Reconcile Net Income to Net Cash
Provided By Operating Activities
Depreciation and Amortization 758,039 481,870
Minority Interest 103,956 0
Gain on Disposal of Shares in Subsidiary (4,013,692) 0
Deferred Income Taxes 1,649,615 39,593
Changes in Assets and Liabilities
(Increase) Decrease in
Accounts Receivable (590,059) 253,561
Other Receivables, Deposits, and Prepayments 2,981,090 426,381
Inventories (43,208) (55,237)
Accounts Payable 552,252 (438,106)
Other Payables and Accrued Expenses (754,684) 134,752
Income Taxes Payable (778,965) 157,915
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Total Adjustments (135,656) 1,000,729
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Net Cash Provided By Operating Activities 6,229,008 3,122,416
Cash Flows From Investing Activities
Acquisition of Plant and Machinery (639,388) (1,063,814)
Related party Loans (516,765) (895,882)
Purchase of Subsidiary (10,037,214) 0
Disposal of Subsidiary 4,615,384 0
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Net Cash Used In Investing Activities (6,577,983) (1,959,696)
Cash Flows From Financing Activities
Bank Overdraft 510,846 0
Dividends Paid 0 (959,172)
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Net Cash Provided By (Used In) Financing Activities 510,846 (959,172)
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Increase in Cash and Cash Equivalents 161,871 203,548
Cash and Cash Equivalents, Beginning of Period 239,909 114,171
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Cash and Cash Equivalents, End of Period $ 401,780 $ 317,719
============ ===========
The accompanying notes are an integral part of these financial statements.
6
SCORE ONE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2001
BASIS OF PRESENTATION
---------------------
The accompanying unaudited interim financial statements have been prepared in
accordance with Form 10QSB instructions and, in the opinion of management,
include all normal adjustments considered necessary to present fairly the
financial position as of June 30, 2001 and the results of operations for the
three and six months ended June 30, 2001 and 2000. These results have been
determined on the basis of generally accepted accounting principles and
practices and applied consistently with those used in the preparation of the
Company's audited financial statements and notes for the seven months ended
December 31, 2000. On January 23, 2001, the Company elected to change its
fiscal year end from May 31 to December 31.
Certain information and footnote disclosures normally included in the financial
statements presented in accordance with generally accepted accounting principles
have been condensed or omitted. It is suggested that the accompanying unaudited
interim financial statements be read in conjunction with the financial
statements and notes thereto incorporated by reference in the Company's 2000
Annual Report on Form 10KSB.
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ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS.
The following discussion should be read in conjunction with, and is
qualified in its entirety by reference to the consolidated financial statements
and notes thereto, included as part of this quarterly report.
NATURE OF THE COMPANY'S PRESENT OPERATIONS
The success of the Company's proposed plan of operation will depend to a
great extent on the operations, financial condition, and management of its
subsidiary Advanced Technology International Holdings Limited ("ATIH"). The
Company cannot ensure that it will be a commercially or economically viable
business operation. It will face all of the risks inherent in a new business,
the majority of which are beyond the control of the management of both the
Company and ATIH.
RESULTS OF OPERATIONS
The following table shows the selected consolidated income statement data
of the Company and its subsidiaries for the three-month period and six-month
period ended June 30, 2001 and June 30, 2000. The data should be read in
conjunction with, and is qualified in its entirety by reference to, the
consolidated financial statements and the notes thereto included as part of this
quarterly report:
------------------------------------------------------------------------------------------------------------------------
Three-month period ended Six-month period ended
June 30 June 30
(US dollars in thousands) 2001 2000 2001 2000
------------------------------------- --------------------------------------
Revenue 7,205 4,942 12,847 9,786
Cost of Sales (5,188) (3,653) (9,227) (7,001)
------ ------ ------ ------
Gross Profit 2,017 1,289 3,620 2,785
Gross Profit Margin 28.0% 26.1% 28.2% 28.5%
Other Income/(Expenses) (180) 2 (168) 2
Interest Income/(Expenses) (29) -- (34) --
Selling Expenses (33) (12) (54) (17)
General and Administrative Expenses (376) (182) (698) (444)
------ ------ ------ ------
Income before Income Taxes 1,399 1,097 2,666 2,326
Income Taxes (110) (107) (211) (204)
------ ------ ------ ------
Income after Income Taxes 1,289 990 2,455 2,122
Minority Interest (104) -- (104) --
------ ------ ------ ------
Net Income Before Extraordinary Gain 1,185 990 2,351 2,122
Earning per shares (US$) 0.06 0.05 0.12 0.11
Extraordinary Gain on Disposal 4,014 -- 4,014 --
Earnings per share 0.26 0.05 0.32 0.11
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REVENUE AND GROSS PROFIT MARGIN
Total revenue for the three-month period ended June 30, 2001 increased by
US$2.3 million or 45.8% to US$7.2 million, compared to US$4.9 million for the
corresponding period in year 2000. During the three-month period ended June 30,
2001, the Company has continued to shift its focus on high margin flexible PCBs,
which are expected to be the main stream of the PCB industry for
telecommunication products. The Company also provides value-added services to
its clients, the circuit-on-board service, to improve its gross profit margin in
this highly competitive industry. Due to this adjustment, the total revenue for
the three-month period ended June 30, 2001 increased accordingly, as compared to
the same corresponding period in 2000 when the Company concentrated mainly on
the traditional phenol based single and double-sided PCBs.
Total revenue for the six-month period ended June 30, 2001 increased by
US$3.1 million or 31.3% to US$12.8 million, compared to US$9.8 million for the
corresponding period in 2000. The increase was primarily the results of
shifting its focus on high margin products and on providing value-added
services, rather than concentrating on comparatively low margin traditional PCB
products.
The increase in average gross profit margin from 26.1% for the three-month
period ended June 30, 2000 to 28.0% in year 2001 was the result of the entrance
into higher profit margin PCBs market and providing additional value-added
services to the clients during last two quarters. Lower production cost as a
result of bulk purchases of raw material at comparatively cheaper prices was
also contributed to the increase in gross profit margin.
OTHER INCOME/(EXPENSES)
Other expenses during the three-month period ended June 30, 2001 were
US$180,000, compared to other income of US$2,000 for the same corresponding
period in 2000. During the six-month period ended June 30, 2001, other expenses
were US$168,000, compared to other income of US$2,000 for the corresponding
period in year 2000. The majority of other expenses was the result of the
accounting treatment of amortization of goodwill resulting from the acquisition
of asset in Shanghai during the three-month period ended June 30, 2001.
INTEREST (FINANCIAL) EXPENSES
Interest expenses during the three-month period and six-month period ended
June 30, 2001 were US$29,000 and $34,000, compared to none for the same
corresponding periods in year 2000. Interest expenses incurred during the said
period were the result of interests and bank charges spent on maintaining the
revolving over-draft banking facilities for the provision of working capital
flexibility. The Company maintained no outside debt and did not have any
interest expense on long-term debt facilities.
9
SELLING EXPENSES
Selling expenses increased by approximately US$21,000 or 175.0% to
US$33,000 for the three-month period ended June 30, 2001 and increased by
approximately US$37,000 or 217.6% to US$54,000 for the six-month period ended
June 30, 2000. The increase in laboratory testing and transportation related
costs contributed to the majority of the increase in selling expenses for the
past two quarters.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses increase by approximately US$194,000
or 106.6% to US$376,000 for the three-month period ended June 30, 2001 from
US$182,000 for the same corresponding period in year 2000. The following events
occurred during the three-month period ended June 30, 2001 contributed to the
majority of the overall increase in general and administrative expenses:
1. Provision of Business Tax - The provision of business tax in the
amount of US$107,000 was recorded during the three-month period ended
June 30, 2001, compared to none for the same corresponding period in
year 2000. This provision was made for a wholly owned British Virgin
Islands' subsidiary of the Company.
2. Auditors' Fee - This fee increased by approximately US$20,000 for the
three-month period ended June 30, 2001 as compared to the
corresponding period in year 2000. This was the result of additional
fees spent on independent auditor's work for the review of quarterly
reports during the period. The Company has changed its accounting
policy to reflect such fees on a quarterly basis in year 2001 rather
than to show a year-end one-time entry/adjustment as in year 2000.
3. Staff Salaries and Allowances and Directors' Remuneration - During
the three-month period ended June 30, 2001, a total of US$117,000 was
recorded, an increase of US$50,000 over the same corresponding period
in year 2000. The Company has changed its accounting policy to
reflect directors' remuneration on a quarterly basis in year 2001
rather than to show a year-end one-time entry/adjustment as in year
2000.
General and administrative expenses increase by approximately US$254,000
or 57.2% to US$698,000 for the six-month period ended June 30, 2000 from
US$444,000 for the same corresponding period in year 2000. The following events
occurred during the six-month period ended June 30, 2001 contributed to the
majority of the overall increase in general and administrative expenses:
1. Provision of Business Tax - The provision of business tax in the
amount of US$107,000 was recorded during the six-month period ended
June 30, 2001, compared to none for the same corresponding period in
year 2000. This provision was made for a wholly owned British Virgin
Islands' subsidiary of the Company.
10
2. Staff Salaries and Allowances and Directors' Remuneration - During
the six-month period ended June 30, 2001, a total of US$226,000 was
recorded, an increase of US$54,000 over the same corresponding period
in year 2000. The Company has changed its accounting policy to
reflect directors' remuneration on a quarterly basis in year 2001
rather than to show a year-end one-time entry/adjustment as in year
2000.
3. Loss on Exchange - During the six-month period ended June 30, 2001, a
total of US$35,000 was recorded as loss on exchange, compared to none
for the same corresponding period in year 2000. This loss was the
result of using a high exchange rate (US$/HK$) of 7.8 rather than
7.75 to better reflect the current exchange rate market situation in
the region.
INCOME TAXES
The increase in income taxes was the result of the increase in income
before income taxes. Under the Hong Kong Tax Authority's Departmental
Interpretation and Practice Notes, a company based in Hong Kong, but with
substantially all of its manufacturing operations located in the PRC conducted
under a processing agreement with a PRC company, can enjoy profit appointment
under which 50% of its manufacturing profit is subject to Hong Kong profit
taxed. Therefore, the effective tax rate of the Company is approximately 8%
p.a. Such tax concession is granted based on an annual application by the
Company.
NET INCOME AND EARNINGS PER SHARE
For the three-month period ended June 30, 2001, income before
extraordinary gain increased by US$195,000 or 19.7% to US$1.2 million, compared
to US$990,000 for the corresponding period in year 2000. For the six-month
period ended June 30, 2001, income before extraordinary gain increased by
US$229,000 or 10.8% to US$2.4 million, compared to US$2.1 million for the same
period in year 2000. The increase was the result of increase in demand for
higher margin PCBs of the consumer electronics and telecommunication products,
lower production costs and addition of value-added services .
Earnings per share before extraordinary gain for the three-month period
ended June 30, 2001 increased approximately by US$0.01 or 25% to US$0.06, as
compared to US$0.05 for the corresponding period in year 2000. For the six-month
period ended June 30, 2001, earning per shares increased approximately by
US$0.01 or 7.1% to US$0.12 over US$0.11 for the same period in year 2000.
EXTRAORDINARY GAIN ON DISPOSAL
An extraordinary gain on disposal in the amount of US$4 million was the
result from the proceeds of a placement of shares of a newly formed indirect
subsidiary of the Company. These proceeds were then used to pay for the
acquisition of, through an intermediate British Virgin Islands' holding
corporation, the ultimate assets of Jiang Yin Kaicheng Copper Clad Laminated
11
Co., Ltd., a wholly foreign owned enterprise established in the PRC whose
principal activities are the manufacture and sale of copper clad laminated
sheets. The extraordinary gain is classified as a capital gain and not subject
to any tax liability under Hong Kong Inland Revenue Ordinance. As a result of
the extraordinary gain on disposal, net income available to Common Stockholders
increased, thereby increasing earnings per share for the three and six month
period ended June 30, 2001 to $0.26 and $0.32, respectively.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents were US$402,000 as of June 30, 2001. This
represents an increase of US$162,000 as compared with the cash balance as of
December 31, 2000. The increase was primarily due to cash provided by operating
activities, which was partially offset by capital spending for purchase of an
operating subsidiary and equipment and repayment of short-term overdraft banking
facilities.
Management believes that the level of financial resources is a
significant competitive factor in the PCB industry and accordingly may choose at
any time to raise additional capital through debt or equity financing to
strengthen its financial position, facilitate growth and provide the Company
with additional flexibility to take advantage of business opportunities.
PART II
ITEM 1 LEGAL PROCEEDINGS. NONE
ITEM 2 CHANGES IN SECURITIES AND USE OF PROCEEDS. NONE
ITEM 3 DEFAULTS UPON SENIOR SECURITIES. NONE
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. NONE
ITEM 5 OTHER INFORMATION
RESIGNATION AND APPOINTMENT OF DIRECTOR AND OFFICER
Effective as of July 1, 2001, Mr. Kuai Cheong POON, a director of the
Company, Mr. Paul Wing Kwong HO, a director of the Company, Mr. Chi Sum MAN,
also a director of the Company and Mr. Kwok Ming LI, VP-Engineering have
resigned. The board of directors and the Company immediately appointed Mr. Kin
Hung LAI and Ms. Shuk Wah KWOK as directors of the Company. The backgrounds of
Mr. Lai and Ms. Kwok are depicted as follows:
Kin Hung LAI, 40, a non-executive director of the Company. Before setting up
its own accounting firm, Francis K. Lai CPA office in 1993, Mr. Lai worked for
several US companies, including Echo Design Group in 1990, Golodetz Trading
Corp. in 1989, and David Lieb and Company in 1988. Mr. Lai has over 15 years of
experience in finance and accounting field.
Shek Wah KWOK, 29, a director of the Company. Before joining the Company, Ms.
Kwok has held various senior positions in company secretary and corporate
compliance area with the Win Dragon Consultants Limited and Triolink Corporate
Services Limited since 1996.
12
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits:
None.
b) Filed 8-K on 6/14/01 under Item 2 (Acquisition or Disposition of Assets)
regarding the acquisition of World Top Development LTD on May 31, 2001
Financial Statements Required by this Item have not been filed but will be
filed by Amendment to the 8-K as soon as practicable.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned thereunto duly
authorized.
SCORE ONE, INC.
Date: August 24, 2001 By: /s/ Wing Cheong Ho
-------------------------------
Name: Wing Cheong Ho
Title: President
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