SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                  FORM 10-KSB/A
                                Amendment No. 1

(Mark One)

[X]  ANNUAL REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES  EXCHANGE
     ACT OF 1934

                   For the Fiscal Year-ended December 31, 1997

[ ] TRANSITION  REPORT  PURSUANT  TO SECTION  13 OR 15(d) OF THE  SECURITIES
    EXCHANGE ACT OF 1934

        For the transition period from ______________ to _______________.

                         Commission File No. 33-18834-LA

                             OPAL TECHNOLOGIES, INC.
                         -------------------------------
                 (Name of small business issuer in its charter)

        Nevada                                                  87-0306463
------------------------                                  --------------------
(State or other jurisdiction                              (I.R.S. Employer 
of incorporation or organization)                         Identification Number)

         Suite 4704, Central Plaza, 18 Harbour Road, Wanchai, Hong Kong
     -------------------------------------------------------------------------
               (Address of Principal Executive Offices) (Zip Code)

Registrant's Telephone Number, Include Area Code: 011-852-2541-1999

Securities Registered Pursuant to Section 12(b) of the Act:

                                                     Name of Each Exchange
     Title of Each Class                              on Which Registered
     -------------------                            ------------------------
           None                                               None

Securities Registered Pursuant to Section 12(g) of the Act:

                                      None
                                   ----------
                                (Title of Class)

     Check  whether  the issuer (1) filed all  reports  required  to be filed by
Section 13 or 15(d) of the  Exchange  Act during the past twelve (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 ninety (90)
days. Yes   X    No
           ---     ---

     Check  if  disclosure  of  delinquent  filers  in  response  to Item 405 of
Regulation S-B is not contained in this form, and will not be contained,  to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated  by reference  in Part III of this Form 10-KSB or any  amendment to
this Form 10-KSB. [X]

     The issuer's revenues for its most recent fiscal year were $4,532,000.
 
     As of April 15, 1998,  35,911,964  shares of common stock of the Registrant
were  outstanding.  As of such date,  the  aggregate  market value of the common
stock  held by  non-affiliates,  based  on the  closing  bid  price  on the NASD
Bulletin Board, was approximately $12,214,000.

                       DOCUMENTS INCORPORATED BY REFERENCE

     No annual reports to security holders, proxy or information statements,  or
prospectuses  filed  pursuant  to Rule 424(b) or (c) have been  incorporated  by
reference in this report.

     Transitional Small Business Disclosure Format: Yes    No  X
                                                       ---    ---

<PAGE>



                                TABLE OF CONTENTS

                                                                          Page
                                                                         ------

PART I

       ITEM 1.     DESCRIPTION OF BUSINESS................................    3
       ITEM 2.     DESCRIPTION OF PROPERTIES..............................    6
       ITEM 3.     LEGAL PROCEEDINGS......................................    6
       ITEM 4.     SUBMISSION OF MATTERS TO A VOTE
                   OF SECURITY HOLDERS....................................    6

PART II

       ITEM 5.     MARKET FOR COMMON EQUITY AND
                   RELATED STOCKHOLDER MATTERS............................    7
       ITEM 6.     MANAGEMENT'S DISCUSSION AND ANALYSIS...................    7
       ITEM 7.     FINANCIAL STATEMENTS...................................   11
       ITEM 8.     CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
                   ON ACCOUNTING AND FINANCIAL DISCLOSURE.................   11

PART III

       ITEM 9.     DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS
                   AND CONTROL PERSONS; COMPLIANCE WITH
                   SECTION 16(a) OF THE EXCHANGE ACT......................   11
       ITEM 10.    EXECUTIVE COMPENSATION.................................   12
       ITEM 11.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
                   OWNERS AND MANAGEMENT..................................   13
       ITEM 12.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.........   13
       ITEM 13.    EXHIBITS AND REPORTS OF FORM 8-K.......................   13

                   SIGNATURES.............................................   14

                   FINANCIAL STATEMENTS...................................  F-1


<PAGE>

 


                                     PART I

ITEM 1. DESCRIPTION OF BUSINESS

     This Form 10-KSB contains forward-looking  statements within the meaning of
Section 27A of the  Securities  Act of 1933 and  Section  21E of the  Securities
Exchange Act of 1934. The Company's actual results could differ  materially from
those set forth in the  forward-looking  statements.  Certain factors that might
cause such a difference are discussed in the section  entitled  "Certain Factors
Affecting Future Operating Results" beginning on page 10 of this Form 10- KSB.

Background

     Opal  Technologies,  Inc. (the "Company") was  incorporated in the State of
Nevada May 14,  1987 under the name of  Sportsland  Sales,  Inc.  Following  the
acquisition  of Enpak Medical  Corporation  and its  subsidiary,  Enpak Surgical
Products, Inc. in 1994, the Company changed its name to Med-Tex Corporation. The
Enpak  companies  were engaged in assembling  and marketing  custom and standard
surgical kits used in diagnostic and surgical  procedures.  On October 31, 1996,
the Company  disposed of its entire  interest in the Enpak  companies for $1.00.
From October 31, 1996 to June 6, 1997 the Company was dormant.  On May 14, 1997,
in anticipation of an acquisition,  Med-Tex Corporation changed its name to Opal
Technologies,   Inc.  and   affected  an  one  for  ten  reverse   stock  split,
re-classified its authorized share capital of 50,000,000 shares of Common Stock,
par value $.001 each into 49,000,000 shares of Common Stock par value $.001 each
and 1,000,000 shares of Preferred Stock, par value $.001 each.

     On June 6, 1997,  the Company  entered  into an  agreement  with  Bestalong
Group, Inc. ("Bestalong";  a company incorporated in the British Virgin Islands)
to acquire  from  Bestalong  a 100%  interest in Triple  Star  Holdings  Limited
("TSH";  a  company  incorporated  in the  British  Virgin  Islands)  and a 100%
interest in Opal Agriculture  Development Limited ("OAD"; a company incorporated
in the British Virgin Islands) by (i) issuing to Bestalong  8,452,768  shares of
post reverse  common stock and 100,000 shares of Series A preferred  stock,  and
(ii)  assuming  Bestalong's  liabilities  in the  form of a  promissory  note of
US$2,100,000,  which was  subsequently  canceled by the  issuance  of  4,200,000
shares of post reverse common stock. Bestalong is beneficially controlled by Mr.
John K.C. Koon, the Chairman and Chief Executive Officer of the Company.

The TSH Group

     TSH and its  wholly-owned  subsidiary,  Triple Star Group Limited ("TSG"; a
company  incorporated  in the British  Virgin  Islands) are  investment  holding
companies.  On August 6, 1996,  TSG  acquired  a 55%  interest  in Beijing  Opal
Agriculture  Biochemistry  Co., Ltd.  ("Beijing  Opal"), an equity joint venture
established  in the  People's  Republic of China ("the  PRC").  Beijing  Opal is
engaged in the manufacturing and sale of organic agricultural fertilizers.

     Beijing Opal was originally established as a PRC equity joint venture for a
period of 20 years from  February  8, 1995 to  February  7, 2015  between  Ideit
Enterprise  Co., Ltd.  ("IECL";  a company  incorporated in Taiwan) having a 40%
interest  and Beijing  Opal  Biochemistry  Factory  ("BOBF";  a PRC  state-owned
enterprise)  having a 60%  interest.  Pursuant to a sale and purchase  agreement
dated August 6, 1996,  TSG acquired from IECL a 40% interest in Beijing Opal and
acquired from BOBF a 15% interest in Beijing Opal for an aggregate consideration
of approximately  $140,000.  A revised joint venture  agreement  between TSG and
BOBF was  executed on August 6, 1996,  which was  approved by the  relevant  PRC
authorities on March 24, 1997.  Under the revised joint venture  agreement,  the
joint  venture  period has been  extended  to 30 years from  February 8, 1995 to
February 7, 2025,  and the total  investment to be made by Beijing Opal has been
increased  from  US$350,000  to   US$10,000,000   (equivalent  to  approximately
Rmb82,900,000),  of which US$6,000,000  (equivalent to Rmb49,920,000) must be in
the form of registered capital to be invested within one year after Beijing Opal
obtains its revised business  license from the PRC  authorities.  As of December
31,  1997,   all  of  the  registered   capital   requirement  of  Beijing  Opal
(US$6,000,000)  was paid and verified by certified public accountants in the PRC
under PRC regulations.




                                       3
<PAGE>




The other key provisions of the revised joint venture agreement are:

*    the profit and loss sharing ratio is the same as the respective  percentage
     of equity interest.

*    upon early  termination  or  liquidation of Beijing Opal, the net assets of
     Beijing  Opal  will  be  distributed  in  accordance  with  the  respective
     percentage of equity interest.

*    the Board of Directors of Beijing Opal will consist of seven members,  four
     designated by TSG and three designated by BOBF.

OAD

     OAD was incorporated in the British Virgin Islands on December 15, 1995. On
January 2, 1996,  OAD issued 50,000 shares of common stock to Asian  Connections
Limited (a company incorporated in the British Virgin Islands),  which was owned
by independent investors,  for a total cash consideration of US$50,000. On March
22,  1997,  Bestalong  acquired  the entire  interest  in OAD for  approximately
US$19,405,000.

     OAD  is  engaged  in  the  trading  of  organic   agricultural   fertilizer
manufactured by Beijing Opal. On December 16, 1996, OAD was appointed by Beijing
Opal as its sole agent and was granted the  exclusive  right to  distribute  and
sell organic  agriculture  fertilizer  manufactured  by Beijing Opal in the PRC,
Hong Kong,  Taiwan and Macau for a period  from  January 1, 1997 to  February 7,
2015.

     The acquisition of Beijing Opal by TSG on August 6, 1996 has been accounted
for using the  purchase  method  of  accounting.  Accordingly,  the  assets  and
liabilities  assumed have been recorded at their estimated fair values,  and the
operations of Beijing Opal are included in the consolidated financial statements
of the Group from the date of acquisition.

Business Operations

     The Company is engaged in the  manufacturing,  selling and  distribution of
environment  friendly  organic  fertilizers and related  products,  such as soil
conditioner, and other organic products for agriculture.

     The  Company's  principle  products  include a series of both organic spray
fertilizers and organic  granular  fertilizers.  These  fertilizers are based on
proprietary  formulations  of humic acids,  amino acids,  organic  matters and a
balance of nitrogen, phosphorous, potassium, minor nutrients and trace elements.

     The  Company  distributes  the spray  fertilizers  through  its  network of
distributors in approximately 15 provinces  throughout China.  Through tests and
trials with different crops,  ranging from grains to fruits and vegetables,  the
Company  has  demonstrated  the  fertilizers'   efficacy  in  increasing  yield,
enhancing quality, reducing the use of chemical fertilizers, strengthening crops
to  withstand   environmental   hazards  and  improve  soil   conditions.   More
importantly, the fertilizers are environment friendly, and have been endorsed by
the National Green Food Centre of China as green food fertilizers. To date, Opal
is the only mineralized  organic fertilizer  manufacture having received such an
endorsement.

     The  Company  produced  granular  fertilizers  in a  pilot  plant,  and has
conducted tests and field trials on various crops. The granular  fertilizers are
designed  for  use as  base  fertilizers,  and  contain  nitrogen,  phosphorous,
potassium, micro and trace elements (such as iron, copper, magnesium, manganese,
sulfur, zinc and etc.) and organic matters. These fertilizers can replace single
element and  compound  fertilizers  commonly  used by farmers,  and do not cause
environmental problems for the soil.

     The Company is divided  into two  principle  divisions:  manufacturing  and
sales.




                                       4
<PAGE>



Manufacturing Division

     The Company  manufactures  its products in its  Sino-foreign  joint venture
factory located in Shunyi County,  Beijing,  China. The  joint-venture  company,
Beijing Opal  Agricultural and Biochemistry  Company Limited (referred to herein
as "Beijing Opal"),  purchased the land use rights to a block of land consisting
of approximately 35.1 acres.  Beijing Opal is in the process of completing Phase
I of the manufacturing facilities on this property.

     In August,  1997, the Company opened the first segment of Phase I, a 53,000
square foot spray fertilizer  facility.  The plant is capable of producing up to
3,500  metric tons of spray  fertilizers,  and can be expanded to produce  7,500
metric  tons of  spray  fertilizers.  This  facility  can  also be used  for the
production  of specially  formulated  catalyst,  an essential  ingredient in the
production of granular fertilizers and soil conditioners.

     In March,  1998, the Company completed the second segment of the production
facility.  This segment adds  110,500  square feet to the existing  facility and
will have the capacity to produce 75,000 metric tons of granular fertilizers per
year.  Installation  of machinery and  equipment has begun with the  expectation
that this facility will open in June, 1998.

     The Company is also constructing an administration  building,  green house,
staff  quarters  and other  facilities  at the site.  These  facilities  will be
completed during the third quarter of 1998.

Sales Division

     The sale and  marketing of Opal  products is conducted by Opal  Agriculture
Development  Limited  (herein  referred to as "OAD").  OAD has  contracted  with
Beijing Opal for the exclusive  distribution of Beijing Opal's products  through
2015. OAD's marketing territory includes the People's Republic of China, Taiwan,
Hong Kong and Macau.

     OAD has  concentrated  its sales and marketing  efforts in China,  and to a
lesser extent,  in Taiwan.  The sales in China are made through several tiers of
distributors,   a  provincial   distributor,   who  distributes  to  county/city
distributors;  a county/city distributor who distributes to town/village agents,
who then sell direct to the farmers.  Most of the  distributors are agricultural
product  companies  authorized by the  government to sell  fertilizer  and other
agricultural   chemicals,   or  government  agencies  which  operate  under  the
agriculture  committees of provinces,  counties or villages.  In provinces where
there  are  no  provincial  distributors,  OAD  sells  directly  to  county/city
distributors.

     OAD also sells to major end users, such as large-scale  farms. In addition,
OAD  works  closely  with  agricultural  research  institutions  in tests of its
products. Among these institutions China National Hybrid Rice Research Centre of
Hunan, which has signed an agreement to promote the Company's products.

     OAD believes China is, and will, be the principle  market for its products.
Although not currently  included in its exlucsive  marketing  agreement,  OAD is
developing  other markets,  such as Taiwan,  Malaysia and Argentina.  Taiwan and
Malaysia have the potential to become OAD's major  overseas  markets as the need
for quality  organic  fertilizer has been growing in both  countries.  Potential
customers  from Taiwan and Malaysia have been making  inquiries of the supply of
the  granular  fertilizers  for several  months.  OAD hopes to meet the needs of
these markets upon  completion of its first granular  fertilizer  plant in June,
1998.

     Sales of Opal products in China are seasonal. In northern China, where only
one crop is grown per year,  the  growing  season  begins in April.  In southern
China,  where two crops are grown per year,  the first growing  season begins in
March. Therefore, it is essential that Opal fertilizers reach the farmers before
these growing seasons begin.

     China is still hindered by an underdeveloped transportation infrastructure.
The  strain on its  transportation  network  is  particularly  acute  during the
Chinese New Year when millions of workers return to visit their families through
out the country.  OAD's peak season  generally  occurs before the year end or in
early January as the fertilizers  must be delivered  before the Chinese New Year
migration.  The  other  Opal  sales  peaks  generally  occur  in  May/June  when
additional  applications of fertilizers are made, and in  August/September  when
the second crops in the southern provinces is planted.





                                       5
<PAGE>


Competition

     The Company competes primarily with locally  manufactured spray fertilizers
and a few imported  spray  fertilizers.  Most of these  products are designed as
additives of trace elements and are for foliar use only. However, competition in
this sector of the market is keen.

     Opal spray fertilizers have a competitive market edge because they are also
applied directly to the soil, to create a healthier root system,  an environment
for microbiological  activities, and improvement of soil conditions. The Company
believes that the  endorsement of its products by the National Green Food Centre
of China, its new modern production facility, and several years of field testing
gives the Company a firm footing in the Chinese market.

     The Company  envisages that when its granular facility begins production in
the  third  quarter  of  1998,  it  will  produce  two   complementary   organic
fertilizers,  and it will be the only mineralized  organic  granular  fertilizer
manufacturer in China. This should position the Company to compete in the market
of traditional  chemical fertilizers of which 38 million metric tons are used in
China each year, 10 million metric tons of which are imported.

Raw Materials

     The major  raw  material  utilized  in the  production  of  Beijing  Opal's
fertilizers  is peat.  This is  available  in  abundance  in  China.  Other  raw
materials used in production are generally available in sufficient quantities to
meet the Company's requirements.

Environmental Matters

     The Company's  manufacturing  facilities comply with existing environmental
requirements  of the Chinese  government.  The Company  does not  envisage  that
compliance with provisions relating to protection of the environment will have a
material  effect upon the  capital  expenditures,  earnings  or its  competitive
position.

Employees

     As of December 31, 1997, the Company had 61 employees.

ITEM 2. DESCRIPTION OF PROPERTIES

     The Company leases  approximately  2,900 square feet of office in Hong Kong
for use as its  corporate  headquarters.  As  described  in Item 1, the  Company
through its  Sino-foreign  joint venture  acquired land use right for a block of
land of approximately 35.1 acres in Shunyi County,  Beijing, China. The land use
rights will expire in 2025 when the  joint-venture  of Beijing Opal  terminates.
The  Company is  completing  the  construction  of Phase I of its  manufacturing
facilities  on this block of land.  On  completion  of Phase I, the Company will
have  a  facility  of   approximately   260,900   square  feet   including   the
administrative building, green house and staff quarters.

     The Company  believes  that these  properties  are adequate for its present
needs.

ITEM 3. LEGAL PROCEEDINGS

     The Company is not  presently a party to, and  management  is not aware of,
any pending or threatened legal proceedings.


ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     No  matters  were  submitted  to a vote of  security  holders  through  the
solicitation  of  proxies,  or  otherwise,  during  the  fourth  quarter  of the
Company's fiscal year-ended December 31, 1997.




                                       6
<PAGE>


 
                                     PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Market Information

     The  Company's  common  stock is  currently  traded  on the OTC  Electronic
Bulletin  Board and is quoted under the symbol OPAL.  The trading  market in the
Company's  common stock is limited and sporadic.  The following table sets forth
the high and low bid price per share  for the  Company's  common  stock for each
quarterly period.

                                 1997                            1996
                      ---------------------           --------------------
                      High              Low           High             Low

First Quarter           .50              .50          2.00             .50
Second Quarter        2.87               .50          2.00             .50
Third Quarter         3.00              1.25          2.00             .50
Fourth Quarter        2.75               .87          2.00             .50

     The quotation  reflects the  inter-dealer  prices  without  retail  markup,
markdown or commissions and may not represent actual transactions.

     As of April 15, 1998, the bid price of the Common Stock was $0.75.

Record Holders

     As of April 15, 1998,  there were  approximately  541 record  owners of the
Common Stock of the Company.

Dividends

     The Company has never  declared  or paid any cash  dividends  on its Common
Stock and does not expect to declare or pay any such dividend in the foreseeable
future.

Sales of Unregistered Securities

     On June 6, 1997,  the Company  acquired  all of the issued and  outstanding
capital stock of Triple Star Holdings Limited and Opal  Agriculture  Development
Limited in exchange for 8,452,768  shares of the Company's  common stock,  $.001
par value,  100,000 shares of the Company's Series A Preferred Stock,  $.001 par
value and the issuance of 4,200,000 shares of the Company's common stock,  $.001
par value for the cancellation of the promissory note.

     On July 1, 1997,  the Company sold  11,400,000  shares of its common stock,
$.001 par value,  at $0.50 per share for a total of  $5,700,000  pursuant to the
exemption provision of Regulation S.

     On September 29, 1997, the Company issued  11,000,000  shares of its common
stock, $.001 par value for the cancellation of $5,500,000 in debt.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS

Material Changes in Results of Operations

     In June,  1997,  the Company  acquired the  operations of Opal  Agriculture
Development Limited ("OAD") and Triple Star Holding Limited ("Triple Star"). For
the year prior to the  acquisition  of OAD and Triple  Star,  the Company had no
operations  other than the sale of its inactive  Enpak Medical  assets.  OAD and
Triple Star are primarily  engaged in the  production  and sale of fertilizer in
the People's Republic of China and both had limited  operations during 1996. The
financial  statements  of the Company and the following  discussion  include the
operations of OAD and Triple Star for all periods presented.




                                       7
<PAGE>



Year-ended December 31, 1997 Compared to the Year-ended December 31, 1996

     Net Sales.  Net sales for the  year-ended  December 31, 1997  increased by,
USD1,651,000  (RMB13,777,000)  or 57.3%  to  USD4,532,000  (RMB37,664,000)  from
USD2,881,000  (RMB23,887,000)  for the  year-ended  December 31, 1996.  The 1997
amount includes $1,758,000 of sales to the Company's  Sino-foreign joint venture
partner at cost.  This  compares  with sales to the  Sino-foreign  joint venture
partner in 1996 of $2,418,000 at a mark up of 2.6%.  This increase is the result
of the Company beginning the commercial production and sale of fertilizer. Sales
to third  parties  increased by  $2,311,000  to  $2,774,000  for the  year-ended
December 31, 1997 from $463,000 for the corresponding  periods of the prior year
while sales to the  Company's  Sino-foreign  joint venture  partner  declined by
$660,000 to $1,758,000 for the year-ended  December 31, 1997 from $2,418,000 for
the corresponding period of the prior year.

     Gross Profits. Gross profits for the year-ended December 31, 1997 increased
by USD1,023,000  (RMB8,516,000) or 248.3% to USD1,435,000  (RMB11,928,000)  from
USD412,000 (RMB3,412,000) for the year ended December 31, 1996. This increase in
the  result of the  Company  beginning  the  commercial  production  and sale of
fertilizer  to third  parties.  Gross profit as a percent of sales  increased to
31.7% for the  year-ended  December  31,  1997 from 14.3% for the  corresponding
period of the prior year.  This  increase  in gross  profit as a percent of sale
resulted from a greater  percentage of sales to third parties at reasonable mark
ups and a reduction in sales to the Sino- foreign joint venture partner at cost.

     General and Administrative  Expenses.  General and administrative  expenses
for the year-ended  December 31, 1997 increased by USD751,000  (RMB6,268,000) or
104%  to  USD1,474,000  (RMB12,260,000)  from  USD723,000  (RMB5,992,000).  This
increase  resulted  from the  Company  staffing  its  operations  to  begin  the
commercial production and sale of fertilizer, and the booking of a provision for
doubtful accounts of USD266,000  (RMB2,213,000)  and a provision for slow-moving
and obsolete inventories of USD6,000 (RMB54,000).

     Interest  Income.  Interest  income for the  year-ended  December  31, 1997
totaled $9,000 compared to net interest  expenses of $750 for the  corresponding
period  of the  prior  year.  This  change  to  interest  income  resulted  from
additional funds being held on deposit during the current year.

     Other Expenses,  net. Other expenses,  net increased  nominally  during the
year-ended December 31, 1997 to $5,000 from $4,000 for the corresponding  period
of the prior year. Other expenses consist of foreign exchange losses incurred in
normal business operations.

     Loss  from  Discontinued  Operations.  The  Company  incurred  a loss  from
discontinued operations of USD234,000 (RMB1,944,000) for the year-ended December
31, 1996 as compared to no loss from discontinued  operations for the year-ended
December 31,  1997.  The loss from  discontinued  operations  resulted  from the
liquidation of the Company's prior business  activities  conducted through Enpak
Medical Corporation.

     Net Loss on Disposal of  Discontinued  Operations.  The Company  incurred a
loss on the disposal of discontinued operations of USD204,000 (RMB1,696,000) for
the year-ended December 31, 1996 as compared to no net loss from the disposal of
discontinued  operations for the  year-ended  December 31, 1997. The net loss on
the disposal of discontinued  operations resulted from the sale of the Company's
entire interest in Enpak Medical Corporation on October 31, 1996 for USD1.

     Income  Taxes.  Income taxes for the  year-ended  December 31, 1997 totaled
$38,000 compared to no income tax liability for the corresponding  period of the
prior year. Although the Company reported a consolidated loss for the year-ended
December 31, 1997, it still incurred an income tax liability  because certain of
its operations in the PRC were profitable.

     Net Loss.  The net loss for the  year-ended  December 31, 1997 decreased by
$800,000 to $73,000  from a $873,000  loss for the  corresponding  period of the
prior year. The decrease in the net loss is  attributable to higher gross profit
margins  and the lack of a write off from  discontinued  operations  which  were
partially offset by higher selling and general and  administrative  expenses and
the provision for income taxes.



                                       8
<PAGE>


Year-Ended December 31, 1996 Compared to the Year-Ended December 31, 1995

     For the year-ended  December 31, 1995, the Company incurred a net loss from
discontinued operations of USD356,000.  While the Company had nominal operations
from the winding down and liquidation of its Enpak Medical operations, there are
no meaningful comparative data comparing results for the year-ended December 31,
1996 with the results for the  year-ended  December  31, 1995 as the  year-ended
December  31, 1996  contains  the  beginning of  operations  for the  fertilizer
business while the year-ended December 31, 1995 contains the winding down of the
Enpak Medical  operations.  The loss from beginning the fertilizer  business for
the  year-ended  December 31, 1996 was USD315,000 and the loss from winding down
the Enpak Medical  operations  was  USD234,000  for a total loss of  USD549,000,
while this loss from the winding down of the Enpak  Medical  operations  for the
year-ended December 31, 1995 was USD356,000.

Changes in Financial Condition, Liquidity and Capital Resources

     For the past  twelve  months,  the Company  has funded its  operations  and
capital   requirements   with  loans  from  both  its  parent  company  and  PRC
joint-venture  partner,  the sale of common  stock and from  bank  loans.  As of
December 31, 1997, the Company had cash USD1,453,000 (RMB12,078,000) and working
capital of USD3,022,000 (RMB25,120,000).  This compares with cash of $67,000 and
working capital of $545,000 as of December 31, 1996.

     Net  cash   used  in   operating   activities   increased   to   USD975,000
(RMB8,101,000)  for the  year-ended  December  31,  1997  from  (USD711,000)  or
(RMB5,890,000) for the year-ended December 31, 1996. This increase resulted from
a  decrease  in  the  loss  from   operations  and  increase  in   depreciation,
amortization,  accounts payable and other payables and a decrease in inventories
which was partially offset by an increase in accounts receivable.

     Net  cash  used  in  investing   activities   increased   to   USD5,421,000
(RMB45,050,000)   for  the  year-ended   December  31,  1997  from  USD2,400,000
(RMB19,902,000)  for the year-ended  December 31, 1996.  This increase  resulted
from additional  expenditures  for the  acquisition of machinery,  equipment and
land an  advance  to a  director  and an  advance  to a  shareholder  which were
partially offset by the repayment of an advance from a related party.

     Net  cash  provided  by  financing  activities  increased  to  USD5,827,000
(RMB48,421,000)   for  the  year-ended   December  31,  1997  from  USD3,211,000
(RMB26,615,000)   for  the  year-ended  December  31,  1996.  This  increase  is
attributable  to  proceeds  from the  issuance of common  stock,  loans from the
parent  company,  loans from PRC joint venture partner and bank loans which were
partially offset by the repayment of a loan to the parent company.

     On July 1, 1997 the Company  issued  11,400,000  shares of common stock for
USD5,700,000   and  4,200,000  shares  of  common  stock  in  exchange  for  the
cancellation  of a promissory  note of  USD2,100,000.  On September 29, 1997, an
additional  USD5,500,000  of the loan from the parent company was capitalized in
exchange for 11,000,000  shares of common stock.  These funds have been used for
working capital and the acquisition of additional property, plant and equipment.
However,  to complete the remaining  portion of the  manufacturing  facility and
execute its business plan, the Company will need additional loans and/or capital
of $2,000,000 over the next twelve months.  It is the opinion of management that
such funds will be forthcoming.

     The  foregoing  is subject to various  factors  which could  affect  future
operating results. These include, but are not limited to the following:

Certain Factors Affecting Future Operating Results

a.   Limited operating history

     The  Group   reorganized  and  commenced  its  operations  in  trading  and
     manufacturing of organic agricultural fertilizers in August, 1996, and such
     operations were still in the development stage as of December 31, 1997. The
     Group  incurred  losses  from   continuing   operations  (net  of  minority
     interests)  for  the  years-ended  December  31,  1996  and  1997  and  had
     accumulated  losses as of  December  31, 1996 and 1997,  respectively.  The
     Group's  operations  are  subject to all the risks  inherent in an emerging
     business  enterprise.  These include,  but are not limited to,  competition
     from other  fertilizer  manufacturers,  the need to expand  production  and
     distribution, and slow settlement of billings to new customers. Realization
     of the  Group's  investment  in assets is  dependent  on the success of its
     future operations.




                                       9
<PAGE>


 
b.   Dependence strategic relationship

     The Group  conducts  its  operations  in the PRC  through  an equity  joint
     venture  with  BOBF  as  described  in Note 1.  Any  deterioration  of this
     strategic  relationship  could have an adverse effect on the operations and
     financial position of the Group.

c.   Concentration of credit risk

     A  substantial  portion of the Group's  sales is made to a small  number of
     customers on an open account basis and generally no collateral is required.
     Details of individual  customers accounting for more than 5% of the Group's
     sales are as follows:

<TABLE>



                                                                   1996                    1997
                                                                -----------             ----------
<S>                                                              <C>                     <C>

     Agriculture and Production Information Company               81.3%                  38.9%

     Heng Yang Agriculture and Technology Development                -                   11.6%

     Yunnan Xing Long Agriculture and Trade Development            1.4%                  11.4%

     Xin Jiang Agriculture and Science Institute                     -                    8.2%

     Gansu Nong Ken Technological Development Company              1.2%                   5.2%
                                                                -----------            ----------

</TABLE>


     Concentration of accounts receivable as of December 31, 1996 and 1997 is as
     follows:

                                              1996                    1997
                                           -----------            ------------
     Five largest accounts receivable         82.9%                  68.6%
                                           ===========            ============

     The Group performs ongoing credit  evaluation of each customer's  financial
     condition.  It maintains  reserves  for  potential  credit  losses and such
     losses in  aggregate  have not  exceeded  management's  projections.  As of
     December 31, 1997, the Group maintained a specific provision of USD 175,500
     (RMB1,458,000)  and a  general  provision  of 3% of the  remaining  balance
     against its trade receivables.  The Directors,  in their opinion,  consider
     that the risk of recoverability of the outstanding receivable is minimal.

d.   Concentration of suppliers

     The Group  purchases raw material  from a number of  suppliers.  Details of
     individual  suppliers  accounting for more than 5% of the Group's purchases
     are as follows:


                                                         1996          1997
                                                     -----------   -----------
     Purchases from:                                    85.4%         15.9%
     Agriculture and Production Information Company
     Shun Yi County Chemical Fertilizer factory            -          63.7%
     Bestalong                                             -           9.8%
                                                    =============  ===========

e.   Country risk

     Substantially all of the Group's operations are conducted by its subsidiary
     Beijing Opal, in the PRC and, accordingly,  the Group is subject to special
     considerations   and  significant  risks  not  typically   associated  with
     companies  operating in North  America and Western  Europe.  These  include
     risks  associated  with,  among others,  the political,  economic and legal
     environments  and foreign  currency  exchange.  The Group's  results may be
     affected  by,  among  other  things,  changes in the  political  and social
     conditions in the PRC and changes




                                       10
<PAGE>


     in   governmental   policies   with   respect  to  laws  and   regulations,
     anti-inflationary  measures, currency conversion and remittance abroad, and
     rates and methods of taxation.  The PRC government has implemented economic
     reform  policies  in recent  years,  and these  reforms  may be  refined or
     changed by the government at any time. It is also possible that a change in
     the PRC leadership could lead to changes in economic policy.

     In addition, a substantial portion of the Group's revenue is denominated in
     Renminbi  ("Rmb"),  which must be converted  into other  currencies  before
     remittance  outside the PRC.  Both the  conversion  of Renminbi  into other
     foreign  currencies and the remittance of foreign currencies abroad require
     approvals of the PRC government.

ITEM 7. FINANCIAL STATEMENTS

     The  consolidated  financial  statements of the Company,  together with the
independent  auditors' report thereon of Arthur Andersen & Co., appears on pages
F-2 through F-27 of this report. See Index to Financial  Statements on page F-1
of this report.

ITEM 8.  CHANGES  IN  AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
         FINANCIAL DISCLOSURE

     On January 23, 1998, the Board of Directors  selected Arthur Andersen & Co.
of Hong Kong, as its certifying accountants for the year-ended December 31, 1997
replacing H.J. Swart & Co. of Kissimmee, Florida. During the preceding two years
and the subsequent interim periods preceding their dismissal, the Company had no
disagreements with the prior accountants on any matter of accounting  principals
or practices, financial statement disclosure, or auditing scope or procedure.

                                    PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
        WITH SECTION 16(a) OF THE EXCHANGE ACT

Information Regarding Present Directors and Executive Officers

     The following table sets forth the names and ages of the present  executive
officers and directors of the Company and the positions held by each.

<TABLE>
 

Name                             Age                                  Title
-------------------            --------                          -----------------
<S>                             <C>          <C>    

John Koon                         50         Chairman of the Board, President Chief Executive Officer and Director
Antonio C.K. Young                49         Vice President, Chief Operating Officer and Director
Kenneth C.W. Poon                 39         Chief Financial Officer
Long Chen Chen                    47         Vice President, Sales and Marketing and Director
Michael W. Botts                  50         Vice President of Research and Development and Director
Raul F. Sanchez-Elia              43         Director
James H. Shane                    52         Director
James Wong                        50         Director

</TABLE>


     John Koon,  Chairman of the Board,  President Chief  Executive  Officer and
Director,  has been involved in developing the fertilizer project since 1990. He
is the founder and Chairman of Bestalong Group, Inc. the controlling shareholder
of the Company and he is the principal and director of several private companies
with   operations  in  China,   including   real  estate,   entertainment,   and
manufacturing.  Mr. Koon is a graduate of The  University  of Hong Kong,  with a
Bachelor of Social Science (Honours) degree in Accounting and Economics and is a
member of The International Institute of Management.

     Antonio C.K. Young,  Vice President,  Chief Operating Officer and Director,
has been involved in developing the fertilizer project since 1991. He is also an
Executive  Director of Bestalong Group, Inc. the controlling  shareholder of the
Company and is responsible  for the management of its investment and operations.
Mr. Young has an MBA from the Chinese University of Hong Kong.




                                       11
<PAGE>



     Kenneth C.W. Poon, Chief Financial Officer,  served as financial controller
in major multinational companies in information technology,  banking and trading
industries  before joining the Company.  Prior to joining the Company,  Mr. Poon
was  employed by Newco  Resources  Limited,  as  financial  controller.  He is a
graduate  of The Hong  Kong  Baptist  University  and a member  of The  American
Institute of Certified  Public  Accountants  and Certified  General  Accountants
Association of Canada.

     Long Chen Chen,  Vice  President,  Sales and Marketing  Director,  has been
involved in developing the  fertilizer  project since 1990. In addition to Sales
and Marketing,  he is also  responsible for product  applications,  sourcing and
quality control. Mr. Chen is a graduate of Taipei Technical University.

     Michael W. Botts,  Vice President of Research and Development and Director,
is a soil scientist who  originally  brought the Opal  fertilizer  technology to
China. He is a consultant on the procurement,  installation and testing OPAL OMF
and OPAL OMS production  facilities in Beijing and is  responsible  for research
and  development  for both  existing  and new  products.  Mr. Botts holds a B.S.
degree in Soil Science from the University of Oregon.

     Raul F.  Sanchez-Elia,  Director,  is the principal of Condor  Capital,  an
investment banking firm in New York, and director of Condor Mercosur  Investment
Limited,  an investment  company  based in  Argentina.  He is also a director of
Bestalong Group, Inc., the controlling  shareholder of the Company.  Mr. Sanchez
holds a Bachelor  of Arts from Brown  University  and a Master of  International
Management from A.G.S.I.M.

     James H. Shane, Director, is President and Chief Executive Officer of Shane
Associates  Limited,  a  diversified  operating  company  in the U.S.  which has
developed and managed real estate  properties since 1969, and consulted for U.S.
companies importing from Pacific Rim countries.

     James Wong, Director, is Chairman and Chief Executive Officer of Directions
International, Inc., a Dallas, Texas-based management consulting firm for Global
Industrial 500  corporations  and  entrepreneurs.  His clients include  American
Express,  Arco, Budget Rent A Car, CNA, Compaq, EDS, etc. Mr. Wong is a graduate
of Massachussetts Institute of Technology and MBA from Harvard University.

ITEM 10. EXECUTIVE COMPENSATION

     The  following  officers  received  compensation  from the  Company for the
current and/or prior calendar year. Mr. John Koon, the Chief  Executive  Officer
of the Company, did not receive compensation for either year.


                                          Total Compensation
                                         ---------------------
Kenneth Poon            1997                $      32,000
                        1996                            *
Antonio Young           1997                $      46,000
                        1996                

*    Joined the Company in August, 1997.

     Messrs. Botts and Chen each received management fees which are disclosed in
"Certain  Relationships  and  Related  Transactions".  No other  officer  of the
Company  received  compensation  for either the year-ended  December 31, 1997 or
1996.

     Each  non-executive  director was compensated  with 50,000 shares of common
stock for their services as directors.  No additional  compensation  was paid to
employee directors.

     The Board of  Directors  of the  Company  annually  reviews  all  executive
positions and compensation.




                                       12
<PAGE>





ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The following table sets forth as of April 15, 1998 the number of shares of
the  Company's  Common  Stock  known to be held by the  executive  officers  and
directors individually and as a group and by beneficial owners of more than five
percent of the Company's Common Stock.

<TABLE>



                                                                           Amount and Nature of
                                                          ------------------------------------------------------
      Name and Address of Beneficial Owner (1)               Beneficial Ownership            Percent of Class
----------------------------------------------------      ---------------------------      ---------------------
<S>                                                               <C>                           <C>    
 
John Koon                                                         18,671,768                      51.99%
Antonio C.K. Young                                                   100,000                          *
Kenneth C.W. Poon                                                     N/L                             *
Long Chen Chen                                                       100,000                          *
Michael W. Botts                                                     100,000                          *
Raul F. Sanchez-Elia                                                 100,000                          *
James H. Shane                                                        50,000                          *
James Wong                                                            50,000                          *
                                                          ---------------------------      ---------------------
Total all officers and directors                                  19,671,768                      54.78%
                                                          ---------------------------      ---------------------

</TABLE>

-----------------

*    Less than 1%.

(1)  The persons named in the table have sole voting and  investment  power with
     respect to all shares of Common Stock shown as beneficially  owned by them,
     and the information contained in the footnotes to the table.

(2)  Address is 4704, 47/F, Central Plaza, 18 Harbour Road, Wanchai, Hong Kong.


ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     During the year-ended  December 31, 1997, the Company advanced  $252,000 to
its controlling  shareholder,  Bestalong Group, Inc. ("Bestalong").  These funds
were unsecured and non-interest bearing. The advances were settled subsequent to
December 31, 1997.

     During the  year-ended  December  31, 1997,  the Company made  purchases of
$310,000  from  Bestalong.  These  purchases  were made at original cost with no
mark-up being charged.  In addition,  the Company paid $100,000 to Bestalong for
rent.

     The Company paid a management  fee to Mr.  Michael Botts, a director in the
amount of $43,000 for his services during the year-ended December 31, 1997.

     The Company paid a management  fee to Mr. Chen Long Chen, a director in the
amount of $108,000 for his service during the year-ended December 31, 1997.


                                     PART IV

ITEM 13. EXHIBITS AND REPORTS OF FORM 8-K

(a)  Exhibits


(b)  Reports on Form 8-K

       None





                                       13
<PAGE>

                                   SIGNATURES

     In accordance  with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                                                  OPAL TECHNOLOGIES, INC.



                                                   By: /s/  John Koon
                                                     ---------------------------
                                                         John Koon, President

Dated:  May 6, 1998


     In  accordance  with the Exchange Act, this report has been signed below by
the following  persons on behalf of the  registrant and in the capacities and on
the dates indicated.

<TABLE>


        Signature                                        Title                                     Date
     ---------------                                   ---------                                 --------
<S>                                          <C>                                               <C>

/s/  John Koon
-----------------------------               Chairman of the Board, President, Chief                                       
John Koon                                   Executive Officer and Director                   May 6, 1998

/s/  Antonio C.K. Young
----------------------------                Vice President, Chief Operating Officer                                       
Antonio C.K. Young                          and Director                                     May 6, 1998

/s/  Long Chen Chen
----------------------------                Vice President, Sales and Marketing and                                       
Long Chen Chen                              Director                                         May 6, 1998

/s/  Michael W. Botts
----------------------------                Vice President of Research and                                                
Michael W. Botts                            Development and Director                         May 6, 1998

/s/  Raul F. Sanchez-Elia
----------------------------                Director                                                                      
Raul F. Sanchez-Elia                                                                         May 6, 1998

/s/  James H. Shane
----------------------------                Director                                                                      
James H. Shane                                                                               May 6, 1998

/s/  James Wong
----------------------------                Director                                         May 6, 1998
James Wong

</TABLE>





                                       14
<PAGE>


                             OPAL TECHNOLOGIES, INC.

                   Index to Consolidated Financial Statements


                                                                         Page
                                                                       --------

Independent Auditors Report                                               F-2

Consolidated Balance Sheet as of December 31, 1996 
and 1997                                                                  F-3

Consolidated Statements of Operations for the Years Ended 
December 31, 1995, 1996 and 1997                                          F-4

Consolidated Statements of Cash Flows for the Years Ended 
December 31, 1995, 1996 and 1997                                          F-5

Consolidated Statements of Stockholders' Equity (Deficit) 
for the Years Ended December  31, 1995, 1996 and 1997                     F-7

Notes to Consolidated Financial Statements                                F-8




                                       F-1


<PAGE>




REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To the Shareholders and the Board of Directors of Opal Technologies Inc.:



We  have  audited  the   accompanying   consolidated   balance  sheets  of  Opal
Technologies Inc. (a company incorporated in the State of Nevada,  United States
of America;  the  "Company") and  Subsidiaries  (the "Group") as of December 31,
1996 and 1997, and the related consolidated statements of operations, cash flows
and changes in shareholders'  equity for the years ended December 31, 1995, 1996
and 1997. The accompanying financial statements give retroactive effect, for all
periods presented,  to the acquisition of Opal Agriculture  Development  Limited
and Triple Star Holdings Limited as a reverse acquisition as described in Note 2
to the accompanying  financial  statements.  These financial  statements are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial  statements based on our audits. We did not audit the
historical  financial  statements  of the  Company,  before  giving  retroactive
effective to the acquisition of Opal Agriculture  Development Limited and Triple
Star Holdings Limited as a reverse acquisition,  as of December 31, 1996 and for
the years ended December 31, 1995 and 1996,  which statements were immaterial to
the  consolidated  assets  and  liabilities  as of  December  31,  1996  and the
consolidated  loss from  continuing  operations for the years ended December 31,
1995  and  1996  as  reflected  in  the  accompanying   consolidated   financial
statements.  Those historical unconsolidated financial statements of the Company
were audited by other  auditors  whose  report has been  furnished to us and our
opinion,  insofar as it relates to the amounts included for the Company,  before
giving retroactive effective to the acquisition of Opal Agriculture  Development
Limited  and  Triple  Star  Holdings  Limited  as a reverse  acquisition,  as of
December 31, 1996 and for the years ended  December 31, 1995 and 1996,  is based
solely on the report of the other auditors.

We conducted our audits in accordance with generally accepted auditing standards
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audits to obtain  reasonable  assurance  about whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial statement  presentation.  We believe that our audits and the report of
other auditors provide a reasonable basis for our opinion.


In our opinion, the consolidated  financial statements referred to above present
fairly, in all material  respects,  the financial  position of Opal Technologies
Inc. and Subsidiaries as of December 31, 1996 and 1997, and the results of their
operations and their cash flows for the years ended December 31, 1995,  1996 and
1997 after giving  retroactive  effect to the  acquisition  of Opal  Agriculture
Development Limited and Triple Star Holdings Limited as a reverse acquisition as
described in Note 2 to the financial  statements,  in conformity  with generally
accepted accounting principles in the United States of America.

As described in Note 25.a to the accompanying  financial  statements,  the Group
was  reorganized  and commenced the current  operations in 1996 and, as shown in
the accompanying  statement of operations,  sustained a net loss from continuing
operations (net of minority interests) of approximately Rmb3,601,000 (equivalent
to  US$433,000)  and  Rmb605,000  (equivalent  to US$73,000) for the years ended
December 31, 1996 and 1997, respectively.  Realization of the Group's investment
in assets is dependent upon the success of its future operations.





ARTHUR ANDERSEN & CO.
Certified Public Accountants
Hong Kong





Hong Kong,
March 31, 1998.



                                      F-2


<PAGE>

                     OPAL TECHNOLOGIES INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                        AS OF DECEMBER 31, 1996 AND 1997

<TABLE>



                                                  Note         1 9 9 6                   1 9 9 7
                                                ---------  ----------------  ---------------------------------
                                                               Rmb'000          Rmb'000           US$'000
<S>                                               <C>       <C>                <C>                <C>

ASSETS

Current assets:
   Cash and bank deposits                                              560            12,078            1,453
   Accounts receivable, net                        5                 4,446            21,525            2,590
   Due from a shareholder                          23                    -             3,430              412
   Due from a director                             23                    5                19                2
   Due from a related company                      23                  749                 -                -
   Prepayments and other current assets                                155               212               26
   Inventories, net                                6                 6,918             5,330              642
                                                           ----------------  ---------------  ----------------

         Total current assets                                       12,833            42,594            5,125

   Property, machinery and equipment, net          7                11,582            17,638            2,123
   Construction-in-progress                        8                61,274            96,613           11,626
   Licensing costs, net                            9                 7,980             7,536              907
   Goodwill, net                                   10                1,624             1,540              186
                                                           ----------------  ---------------  ----------------

         Total assets                                               95,293           165,921           19,967
                                                           ================  ===============  ================

LIABILITIES, MINORITY INTERESTS AND
   SHAREHOLDERS' EQUITY                

Current liabilities:
   Short-term borrowings                           11                    -            10,300            1,239
   Accounts payable                                                  6,750             5,190              625
   Accrued liabilities                             12                1,566             1,669              201
   Taxation payable                                13                    -               315               38
                                                           ----------------  ---------------  ----------------

         Total current liabilities                                   8,316            17,474            2,103

Non-current payable                                14                    -            23,911            2,877

Loan from PRC joint venture partner                15                2,269             5,315              639

Loans from a shareholder                           16               58,394                 -                -
                                                           ----------------  ---------------  ----------------

         Total liabilities                                          68,979            46,700            5,619
                                                           ----------------  ---------------  ----------------

Minority interests                                                  22,008            22,005            2,649
                                                           ----------------  ---------------  ----------------

Shareholders' equity:
   Common stock, par value US$0.001:
     - authorized - 49,000,000 shares as of
         December 31, 1996 and 1997
     - outstanding and fully paid -
         13,591,964 shares as of December
         31, 1996 and 35,991,964 shares as
         of December 31, 1997                      17                  113               299               36
   Preferred stock, par value US$0.001:
     -  -Authorized - 1,000,000 shares as of
         December 31, 1996 and 1997
     - outstanding and fully paid - 100,000
         shares as of December 31, 1996 and        17                    1                 1                -
         1997
   Additional paid-in capital                                        8,205           101,488           12,213
   Accumulated losses                                               (3,601)           (4,206)            (506)
   Cumulative translation adjustments                                 (412)             (366)             (44)
                                                           ----------------  ---------------  ----------------

         Total shareholders' equity                                  4,306            97,216           11,699
                                                           ----------------  ---------------  ----------------

         Total liabilities, minority
           interests and shareholders' equity                       95,293           165,921           19,967
                                                           ================  ===============  ================

</TABLE>


The accompanying notes are an integral part of these financial statements.
                           
Translation of amounts from Renminbi  ("Rmb") into United States dollars ("US$")
is for the  convenience  of readers and has been made at the noon buying rate in
New York City for cable transfers in foreign currencies as certified for customs
purposes by the Federal Reserve Bank of New York on February 28, 1998 of US$1.00
= Rmb8.31.  No representation is made that the Renminbi amounts could have been,
or could be,  converted  into United States dollars at that rate or at any other
rate.


                                      F-3


<PAGE>


                     OPAL TECHNOLOGIES INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS
              FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997

<TABLE>




                                  Note         1 9 9 5          1 9 9 6                  1 9 9 7
                                ----------  ---------------  --------------- --------------------------------
                                               Rmb'000          Rmb'000         Rmb'000          US$'000
<S>                               <C>       <C>               <C>               <C>              <C>


Net sales                          20                   -           23,887          37,664            4,532
Cost of goods sold                 20                   -          (20,475)        (25,736)          (3,097)
                                            ---------------  --------------- ---------------  ---------------

       Gross profit                                     -            3,412          11,928            1,435

Selling, general and
   administrative expenses                              -           (5,992)        (12,260)          (1,474)
Interest expenses                                       -              (18)              -                -
Interest income                                         -               12              77                9
Other expenses, net                                     -              (33)            (38)              (5)
                                            ---------------  --------------- ---------------  ---------------

       Loss from continuing
         operations                                     -           (2,619)           (293)             (35)

Discontinued operations:
   - Loss from discontinued
       operations                   1              (2,960)          (1,944)              -                -
   -- -Net loss on disposal
       of discontinued              1                   -           (1,696)              -                -
       operations
                                            ---------------  --------------- ---------------  ---------------

       Loss from discontinued
         operations                                (2,960)          (3,640)              -                -
                                            ---------------  --------------- ---------------  ---------------

       Loss before income                          (2,960)          (6,259)           (293)             (35)
         taxes

Provision for income taxes         13                   -                -            (315)             (38)
                                            ---------------  --------------- ---------------  ---------------

       Loss before minority
         interests                                 (2,960)          (6,259)           (608)             (73)

Minority interests                                      -             (982)              3                -
                                            ---------------  --------------- ---------------  ---------------

       Net loss                                    (2,960)          (7,241)           (605)             (73)
                                            ===============  =============== ===============  ===============

Loss per common share:
   - Continuing operations                              -             (0.26)          (0.03)               -
   - Discontinued operations                         (0.22)           (0.27)              -                -
                                            ---------------  --------------- ---------------  ---------------

                                                     (0.22)           (0.53)          (0.03)               -
                                            ===============  =============== ===============  ===============

</TABLE>


The accompanying notes are an integral part of these financial statements.
                           
Translation of amounts from Renminbi  ("Rmb") into United States dollars ("US$")
is for the  convenience  of readers and has been made at the noon buying rate in
New York City for cable transfers in foreign currencies as certified for customs
purposes by the Federal Reserve Bank of New York on February 28, 1998 of US$1.00
= Rmb8.31.  No representation is made that the Renminbi amounts could have been,
or could be,  converted  into United States dollars at that rate or at any other
rate.



                                      F-4


<PAGE>


                     OPAL TECHNOLOGIES INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
              FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997

<TABLE>


                                               1 9 9 5          1 9 9 6                  1 9 9 7
                                            ---------------  --------------- --------------------------------
                                               Rmb'000          Rmb'000         Rmb'000          US$'000
<S>                                             <C>             <C>              <C>              <C>

Cash flows from operating activities:
Net loss                                           (2,960)          (7,241)           (605)             (73)
Adjustments to reconcile net loss to net
   cash provided by (used in) operating
   activities -
   Depreciation of property, machinery
     and equipment                                      -               53             960              115
   Amortization of goodwill                             -               34              84               10
   Amortization of licensing costs                      -                -             444               53
   Loss from discontinued operations                2,960            1,944               -                -
   Net loss on disposal of discontinued                 -            1,696               -                -
     operations
   Change in discontinued operations                   58             (149)              -                -
   Minority interests                                   -              982              (3)               -
(Increase) Decrease in operating assets -
   Accounts receivable, net                             -              374         (17,079)          (2,055)
   Prepayments and other current assets                 -              (79)            (57)              (7)
   Inventories, net                                     -           (2,629)          1,588              191
Increase (Decrease) in operating
   liabilities -
   Accounts payable                                     -           (1,246)         (1,560)            (187)
   Accrued liabilities                                  -              371             103               13
   Taxation payable                                     -                -             315               38
   Non-current payable                                  -                -          23,911            2,877
                                            ---------------  --------------- ---------------  ---------------

         Net cash provided by (used in)
           operating activities                        58           (5,890)          8,101              975
                                            ===============  =============== ===============  ===============

Cash flows from investing activities:
   Acquisition of property, machinery
     and equipment                                      -          (10,573)        (42,355)          (5,097)
   Net cash outflow from acquisition of
     a subsidiary (Note 24)                             -             (595)              -                -
   Acquisition of license right                         -           (7,980)              -                -
   Advance to a shareholder                             -                -          (3,430)            (412)
   Advance to a director                                -               (5)            (14)              (2)
   (Advance to) Repayment from a related                -             (749)            749               90
     company
                                            ---------------  --------------- ---------------  ---------------

         Net cash used in investing                     -          (19,902)        (45,050)          (5,421)
           activities
                                            ---------------  --------------- ---------------  ---------------

Cash flows from financing activities:
   Issuance of common stock, net of
     issuance expenditures                              -                -          47,567            5,724
   New loans from a shareholder                         -           26,303          25,020            3,011
   New loans from PRC joint venture                     -                -           3,046              367
     partner
   New short-term bank loan                             -                -          10,000            1,203
   Other loans                                          -                -             300               36
   Repayment of loans from a shareholder                -                -         (37,512)          (4,514)
   Others                                               -              312               -                -
                                            ---------------  --------------- ---------------  ---------------

         Net cash provided by financing                 -           26,615          48,421            5,827
           activities
                                            ---------------  --------------- ---------------  ---------------

Effect of cumulative translation                        -             (412)             46                5
   adjustments
                                            ---------------  --------------- ---------------  ---------------

Net increase in cash and bank deposits                 58              411          11,518            1,386

Cash and bank deposits, as of beginning                91              149             560               67
   of year
                                            ---------------  --------------- ---------------  ---------------

Cash and bank deposits, as of end of year             149              560          12,078            1,453
                                            ===============  =============== ===============  ===============


</TABLE>

The accompanying notes are an integral part of these financial statements.
                           
Translation of amounts from Renminbi  ("Rmb") into United States dollars ("US$")
is for the  convenience  of readers and has been made at the noon buying rate in
New York City for cable transfers in foreign currencies as certified for customs
purposes by the Federal Reserve Bank of New York on February 28, 1998 of US$1.00
= Rmb8.31.  No representation is made that the Renminbi amounts could have been,
or could be,  converted  into United States dollars at that rate or at any other
rate.



                                      F-5


<PAGE>


                     OPAL TECHNOLOGIES INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CHANGES IN
                              SHAREHOLDERS' EQUITY
              FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997


<TABLE>

                                 Common stock          Preferred stock      Additional             Cumulative
                             ---------------------- ----------------------
                             Number                 Number of               paid-in    Accumulated translation
                             of shares    Amount      shares     Amount      capital     losses    adjustments
                             ---------- ----------- ----------- ----------  ---------- ----------- -----------
                               '000      Rmb'000       '000      Rmb'000     Rmb'000    Rmb'000     Rmb'000
<S>                           <C>       <C>         <C>           <C>        <C>         <C>          <C>


Balance as of January 1,        13,592        113         100           1      28,925    (14,120)          -
   1995

Net loss                             -          -           -           -           -     (2,960)          -

Translation adjustments              -          -           -           -           -          -           -
                             ---------- ----------- ----------- ----------  ---------- ----------- ----------

Balance as of January 1,        13,592        113         100           1      28,925    (17,080)          -
   1996

Net loss                             -          -           -           -           -     (7,241)          -

Accumulated loss
   capitalized (Note 1)              -          -           -           -     (20,720)    20,720           -

Translation adjustments              -          -           -           -           -          -        (412)
                             ---------- ----------- ----------- ----------  ---------- ----------- -----------

Balance as of December          13,592        113         100           1       8,205     (3,601)       (412)
   31, 1996

Issuance of common stock
   for cash                     11,400         95           -           -      47,472          -           -

Issuance of common stock
   by capitalization of
   loan from a                  11,000         91           -           -      45,811          -           -
   shareholder (Note 16)

Net loss                             -          -           -           -           -       (605)          -

Translation adjustments              -          -           -           -           -          -          46
                             ---------- ----------- ----------- ----------  ---------- ----------- -----------

Balance as of December          35,992        299         100           1     101,488     (4,206)       (366)
   31, 1997
                             ========== =========== =========== ==========  ========== =========== ===========


</TABLE>


                                      F-7



   The accompanying notes are an integral part of these financial statements.


<PAGE>



                     OPAL TECHNOLOGIES INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



1.   ORGANIZATION AND PRINCIPAL ACTIVITIES

Opal  Technologies  Inc. (the "Company") was incorporated in the State of Nevada
in the United  States of America on September 9, 1987.  With effect from May 14,
1997, the Company changed its name from Med-Tex Corporation to Opal Technologies
Inc.

Disposal of subsidiaries

During the period from January 1, 1995 (the  earliest date cover by this report)
to  October  30,  1996,  the  Company  had  two  subsidiaries  -  Enpak  Medical
Corporation  ("EMC")  and Enpak  Surgical  Products,  Inc.  ("ESP"),  which were
engaged in assembling  and marketing  custom and standard  surgical kits used in
interventions,  and diagnostic and surgical procedures. On October 31, 1996, the
Company disposed of its entire interests in EMC and ESP for US$1. As a result of
the disposal,  the  operations  of EMC and ESP for the years ended  December 31,
1995 and 1996 have been reclassified as discontinued operations in the financial
statements.  The  Company  recorded  a net  loss  on  disposal  of  discontinued
operations of approximately Rmb1,696,000 (equivalent of US$204,000).

During the year ended December 31, 1996, the Company capitalized its accumulated
loss  of  approximately   Rmb20,720,000  (equivalent  of  US$2,499,000)  against
additional paid-in capital.

During the period from  October 31, 1996 to June 6, 1997,  the Company  remained
dormant.

Acquisition of subsidiaries

On June 6, 1997, the Company entered into an agreement with Bestalong Group Inc.
("Bestalong";  a company  incorporated in the British Virgin Islands) to acquire
from Bestalong 100% interest in Triple Star Holdings  Limited ("TSH";  a company
incorporated   in  the  British  Virgin  Islands)  and  100%  interest  in  Opal
Agriculture  Development  Limited ("OAD"; a company  incorporated in the British
Virgin  Islands) by (i) issuing to  Bestalong  8,452,768  shares of common stock
(after the  one-for-ten  reverse  stock split  described in Note 17) and 100,000
shares of Series A preferred stock, and (ii) assuming Bestalong's liabilities in
the form of a promissory note of US$2,100,000,  which was subsequently cancelled
by the  issuance of  4,200,000  shares of common  stock  (after the  one-for-ten
reverse stock split described in Note 17). Bestalong is beneficially  controlled
by Mr. John K. C. Koon, a director of the Company.



                                      F-8


<PAGE>





1.   ORGANIZATION AND PRINCIPAL ACTIVITIES (Cont'd)

TSH Group

TSH and its wholly-owned subsidiary, Triple Star Group Limited ("TSG"; a company
incorporated in the British Virgin Islands) are investment holding companies. On
August 6,  1996,  TSG  acquired  a 55%  interest  in  Beijing  Opal  Agriculture
Biochemistry Co., Ltd. ("Beijing Opal"), an equity joint venture  established in
the People's Republic of China ("the PRC").  Beijing Opal is principally engaged
in the manufacturing and sales of organic agricultural fertilizers.

Beijing Opal was originally  established  as a PRC equity joint venture  between
Ideit Enterprise Co., Ltd. ("IECL"; a company  incorporated in Taiwan) - 40% and
Beijing Opal Biochemistry Factory ("BOBF"; a PRC state-owned  enterprise) - 60%,
for a period of 20 years from February 8, 1995 to February 7, 2015.  Pursuant to
a sale and purchase agreement dated August 6, 1996, TSG acquired from IECL a 40%
interest in Beijing Opal and  acquired  from BOBF a 15% interest in Beijing Opal
for an aggregate  consideration of approximately  Rmb1,159,000.  A revised joint
venture agreement between TSG and BOBF was executed on August 6, 1996, which was
approved by the relevant PRC  authorities  on March 24, 1997.  Under the revised
joint venture agreement,  the joint venture period has been extended to 30 years
from February 8, 1995 to February 7, 2025,  and the total  investment of Beijing
Opal  has  been  increased  from  US$350,000  to  US$10,000,000  (equivalent  to
approximately Rmb82,900,000), of which US$6,000,000 (equivalent to approximately
Rmb49,920,000) has to be in the form of registered capital to be injected within
one year after  Beijing Opal obtains its revised  business  license from the PRC
authorities.  As of December 31, 1997, all of the registered  capital of Beijing
Opal of US$6,000,000 was paid-up and verified by a certified  public  accountant
in the PRC according to PRC regulations.

The other key provisions of the revised joint venture agreement are:

*    the profit and loss sharing ratio is the same as the respective  percentage
     of equity interest.

*    upon early  termination  or  liquidation of Beijing Opal, the net assets of
     Beijing  Opal  will  be  distributed  in  accordance  with  the  respective
     percentage of equity interest.

*    the Board of Directors of Beijing Opal consists of seven members, with four
     designated by TSG and three designated by BOBF.



                                      F-9


<PAGE>




1.   ORGANIZATION AND PRINCIPAL ACTIVITIES (Cont'd)

OAD

OAD was  incorporated  in the British  Virgin  Islands on December 15, 1995.  On
January 2, 1996,  OAD issued 50,000 shares of common stock to Asian  Connections
Limited (a company incorporated in the British Virgin Islands),  which was owned
by  independent  investors,  at par  value  for a total  cash  consideration  of
US$50,000.  On March 22, 1997, Bestalong acquired the entire interest in OAD for
a consideration of approximately US$19,405,000.

OAD is  principally  engaged in the trading of organic  agricultural  fertilizer
manufactured by Beijing Opal. On December 16, 1996, OAD was appointed by Beijing
Opal as its sole agent and was granted the  exclusive  right to  distribute  and
sell organic  fertilizer  manufactured  by Beijing  Opal in the PRC,  Hong Kong,
Taiwan and Macau for the period from January 1, 1997 to February 7, 2015.

2.   BASIS OF PRESENTATION

The acquisitions of TSH and OAD by the Company on June 6, 1997 have been treated
as a reverse  acquisition  since TSH and OAD are the  continuing  entities  as a
result of the recapitalization and restructuring.  On this basis, the historical
financial  statements  prior to June 6, 1997  represent  the combined  financial
statements of TSH and OAD. The historical  shareholders'  equity accounts of the
Company as of  December  31, 1995 and 1996 have been  retroactively  restated to
reflect the  issuance of  8,452,768  shares of common stock (after the effect of
the reverse  stock split - described in Note 17) and 100,000  shares of Series A
preferred  stock to Bestalong  and the  issuance of  4,200,000  shares of common
stock  (after the effect of the reverse  stock split - described in Note 17) for
the cancellation of a promissory note (see Note 1).

The  acquisition of Beijing Opal by TSG on August 6, 1996 has been accounted for
using the purchase method of accounting. Accordingly, the assets and liabilities
assumed have been recorded at their estimated fair values, and the operations of
Beijing Opal are included in the consolidated  financial statements of the Group
from the date of acquisition.



                                      F-10


<PAGE>




3.   SUBSIDIARIES

Details of the  Company's  subsidiaries  (which  together  with the  Company are
collectively  referred  to as "the  Group")  as of  December  31,  1997  were as
follows:

<TABLE>

                                                          Percentage of
                                       Place of          equity interest
             Name                     incorporation           held                Principal activities
-------------------------------  --------------------- --------------------  --------------------------------
<S>                              <C>                     <C>                 <C>


Triple Star Holdings Limited     The British Virgin           100%           Investment holding
    ("TSH")                          Islands

Triple Star Group Limited        The British Virgin           100%           Investment holding
    ("TSG")                          Islands

Opal Agriculture Development     The British Virgin           100%           Trading of organic
    Limited ("OAD")                  Islands                                     agricultural fertilizers

Beijing Opal Agriculture         The PRC                       55%           Manufacturing and sale of
    Biochemistry Co., Ltd.                                                       organic agricultural
    ("Beijing Opal")                                                             fertilizers

</TABLE>



4.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a.   Basis of consolidation

     The consolidated  financial  statements include the accounts of the Company
     and its subsidiaries.  All material  intra-group  balances and transactions
     have been eliminated on consolidation.

b.   Goodwill

     Goodwill, being the excess of cost over the fair value of the Group's share
     of the net assets of a subsidiary (Beijing Opal) acquired,  is amortized on
     a straight-line  basis over 20 years. The amortization  recorded during the
     years  ended  December  31,  1995,  1996 and 1997  was  approximately  Nil,
     Rmb34,000  and  Rmb84,000,  respectively.  Accumulated  amortization  as of
     December  31, 1996 and 1997 was  approximately  Rmb34,000  and  Rmb118,000,
     respectively.  Management  assesses  the  remaining  life  of the  goodwill
     annually,  taking  into  consideration  the current  operating  results and
     future prospects of the subsidiary.

c.   Inventories

     Inventories  are stated at the lower of cost, on a weighted  average basis,
     or market value. Costs of  work-in-process  and finished goods are composed
     of direct materials, direct labor and an attributable portion of production
     overheads.


                                      F-11



<PAGE>



4.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd)

d.   Property, machinery and equipment

     Property,  machinery and equipment are recorded at cost. Gains or losses on
     disposals are reflected in current  operations.  Depreciation for financial
     reporting  purposes is  provided  using the  straight-line  method over the
     estimated useful lives of the assets as follows:  machinery and equipment -
     5 to 10 years, motor vehicles - 5 years, furniture and office equipment - 5
     years. All ordinary repair and maintenance costs are expensed as incurred.

     The Company  recognizes an impairment  loss on a fixed asset when evidence,
     such as the sum of  expected  future cash flows  (undiscounted  and without
     interest  charges),  indicates  that  future  operations  will not  produce
     sufficient   revenue  to  cover  the  related   future   costs,   including
     depreciation,  and when the carrying amount of the asset cannot be realized
     through sale. Measurement of the impairment loss is based on the fair value
     of the assets.

e.   Construction-in-progress

     Construction-in-progress  represents  factories and office  buildings under
     construction  and machinery  pending  installation.  This includes costs of
     land, costs of  construction,  and interest charges arising from borrowings
     used to finance these assets during the period of  construction.  There was
     no interest  capitalized  for the years ended  December 31, 1995,  1996 and
     1997.  No  deprecation  is provided in respect of  construction-in-progress
     until the construction is completed.

f.   Licensing costs

     Licensing  costs are costs  incurred  to  acquire  the  exclusive  right to
     distribute   and  sell  a  brand  of   organic   agricultural   fertilizer.
     Amortization  for  financial  reporting  purposes  is  provided  using  the
     straight-line  method over the license period of 18 years. The amortization
     recorded  during  the years  ended  December  31,  1995,  1996 and 1997 was
     approximately   Nil,   Nil  and   Rmb444,000,   respectively.   Accumulated
     amortization  as of December  31, 1996 and 1997 was  approximately  Nil and
     Rmb444,000,  respectively.  Management  assesses the remaining  life of the
     licensing costs annually,  taking into  consideration the current operating
     results and future prospects of the subsidiary.

g.   Net sales

     Net sales represent the invoiced value of goods supplied to customers,  net
     of sales  returns and  allowances.  Sales are  recognized  upon delivery of
     goods and passage of title to customers.



                                      F-12


<PAGE>





4.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd)

h.   Income taxes

     The Group  accounts for income taxes under the  provisions  of Statement of
     Financial  Accounting  Standards No. 109,  which  requires  recognition  of
     deferred  tax  assets  and   liabilities   for  the  expected   future  tax
     consequences of events that have been included in the financial  statements
     or tax returns.  Deferred  income taxes are  provided  using the  liability
     method.  Under the liability  method,  deferred income taxes are recognized
     for all  significant  temporary  differences  between the tax and financial
     statement bases of assets and liabilities.

i.   Operating leases

     Operating leases represent those leases under which  substantially  all the
     risks and  rewards  of  ownership  of the  leased  assets  remain  with the
     lessors.  Rental payments under operating  leases are charged to expense on
     the straight-line basis over the period of the relevant leases.

j.   Foreign currency translation

     The Group considers  Reminbi ("Rmb") as its functional  currency as most of
     the Group's business activities are based in Reminbi.

     The translation of the financial statements of group companies into Reminbi
     is performed for balance sheet accounts using the closing  exchange rate in
     effect at the balance sheet date and for revenue and expense accounts using
     an average  exchange  rate during each  reporting  period.  Gains or losses
     resulting from translation are included in shareholders'  equity separately
     as  cumulative  translation  adjustments.  Aggregate  gains  (losses)  from
     foreign currency transactions included in the results of operations for the
     years ended December 31, 1995,  1996 and 1997 were  approximately  Nil, Nil
     and Rmb38,000, respectively.

k.   Loss per common share

     Loss per common share is computed in accordance with Statement of Financial
     Accounting  Standards  No.  128 by  dividing  net loss for each year by the
     weighted  average number of shares of common stock  outstanding  during the
     years,  as  if  the  8,452,768  shares  of  common  stock  issued  for  the
     acquisition of OAD and TSH (see Note 1) and the  one-for-ten  reverse stock
     split (see Note 17.a) had been  consummated  prior to the years  presented.
     The weighted  average  number of shares to compute loss per common share is
     approximately  13,592,000,  13,592,000  and  22,172,000 for the years ended
     December 31, 1995, 1996 and 1997, respectively.



                                      F-13


<PAGE>





4.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd)

Use of estimates

     The  preparation  of financial  statements  in  conformity  with  generally
     accepted  accounting  principles in the United  States of America  requires
     management to make estimates and assumptions  that affect certain  reported
     amounts and  disclosures.  Accordingly,  actual  results  could differ from
     those estimates.

m.   Fair value of financial statements

     The Group's financial instruments consist of cash, cash equivalents,  trade
     receivables  and trade  payables.  The book value of these  instruments are
     considered to be representative of their fair values.

5.   ACCOUNTS RECEIVABLE

Accounts receivable comprised:

<TABLE>

                                                    1 9 9 6                         1 9 9 7
                                              --------------------  -----------------------------------------
                                                    Rmb'000               Rmb'000              US$'000
<S>                                             <C>                      <C>                      <C>


Trade receivables                                         4,511                23,803                 2,864
Less: Allowance for bad and doubtful
          accounts                                          (65)               (2,278)                 (274)
                                              --------------------  --------------------  -------------------

Accounts receivable, net                                  4,446                21,525                 2,590
                                              ====================  ====================  ===================



6.       INVENTORIES

Inventories comprised:

                                                    1 9 9 6                         1 9 9 7
                                              --------------------  -----------------------------------------
                                                    Rmb'000               Rmb'000              US$'000

Raw materials                                             2,653                 4,003                   482
Work-in-process                                             982                   532                    64
Finished goods                                            3,283                   849                   102
                                              --------------------  --------------------  -------------------

                                                          6,918                 5,384                   648

Less: Allowance for slow-moving and
    obsolete inventories                                      -                   (54)                   (6)
                                              --------------------  --------------------  -------------------

Inventories, net                                          6,918                 5,330                   642
                                              ====================  ====================  ===================


</TABLE>




                                      F-14


<PAGE>



7.   PROPERTY, MACHINERY AND EQUIPMENT

Property, machinery and equipment comprised:

<TABLE>

                                                    1 9 9 6                         1 9 9 7
                                              --------------------  -----------------------------------------
                                                    Rmb'000               Rmb'000              US$'000
<S>                                            <C>                    <C>                      <C>


Property, machinery and equipment:
    Machinery and equipment                              11,426                17,521                 2,108
    Motor vehicles                                          231                 1,051                   126
    Furniture and office equipment                           20                   121                    15
                                              --------------------  --------------------  -------------------

Cost                                                     11,677                18,693                 2,249
Less: Accumulated depreciation                              (95)               (1,055)                 (126)
                                              --------------------  --------------------  -------------------

Property, machinery and equipment, net
                                                         11,582                17,638                 2,123
                                              ====================  ====================  ===================

</TABLE>


8.   CONSTRUCTION-IN-PROGRESS

     Construction-in-progress  represents  land cost and  factories  and  office
     buildings under construction in the PRC, which comprised:

<TABLE>


                                                    1 9 9 6                         1 9 9 7
                                              --------------------  -----------------------------------------
                                                    Rmb'000               Rmb'000              US$'000
<S>                                          <C>                      <C>                      <C>


Land cost                                                24,700                52,611                 6,331
Construction costs                                        6,874                14,302                 1,721
Machinery                                                29,700                29,700                 3,574
                                              --------------------  --------------------  -------------------

                                                         61,274                96,613                11,626
                                              ====================  ====================  ===================

</TABLE>


Private  ownership of land is not allowed in the PRC;  rather,  entities acquire
the right to use the land for a designated  term. As of December 31, 1997,  land
cost  represented  the cost of acquiring the land use right to a plot of land of
approximately  213 acres (1996 - 110 acres) in Beijing,  the PRC for a period of
50 years  commencing  from the issuance date of the land use right  certificate.
The Group is in the process of completing the legal  agreements  relating to the
acquisition of the land use right.

As of December 31, 1997, approximately 122 acres of land was under development.



                                      F-15


<PAGE>




9.   LICENSING COSTS

<TABLE>

                                                    1 9 9 6                         1 9 9 7
                                              --------------------  -----------------------------------------
                                                    Rmb'000               Rmb'000              US$'000
<S>                                          <C>                      <C>                      <C>


Licensing costs                                           7,980                 7,980                   960
Less: Accumulated amortization                                -                  (444)                  (53)
                                              --------------------  --------------------  -------------------

Licensing costs, net                                      7,980                 7,536                   907
                                              ====================  ====================  ===================

</TABLE>


Licensing  costs  represent  fees paid to a third party to obtain the  exclusive
right to distribute  and sell organic  agriculture  fertilizer  manufactured  by
Beijing Opal in the PRC, Hong Kong, Taiwan and Macau for 18 years up to February
7, 2015.



10.  GOODWILL

<TABLE>

                                                    1 9 9 6                         1 9 9 7
                                              --------------------  -----------------------------------------
                                                    Rmb'000               Rmb'000              US$'000
<S>                                          <C>                      <C>                 <C>


Goodwill                                                  1,658                 1,658                   200
Less: Accumulated amortization                              (34)                 (118)                  (14)
                                              --------------------  --------------------  -------------------

Goodwill, net                                             1,624                 1,540                   186
                                              ====================  ====================  ===================

</TABLE>



11.  SHORT-TERM BORROWINGS

Short-term borrowings comprised:
<TABLE>

                                                    1 9 9 6                         1 9 9 7
                                              --------------------  -----------------------------------------
                                                    Rmb'000               Rmb'000              US$'000
<S>                                          <C>                      <C>                  <C>


Short-term bank loan (a)                                      -                10,000                 1,203
Other loan (b)                                                -                   300                    36
                                              --------------------  --------------------  -------------------

                                                              -                10,300                 1,239
                                              ====================  ====================  ===================

</TABLE>


Notes -

a.   Short-term  bank loan is  denominated in Renminbi and bore interest at 9.5%
     per  annum as of  December  31,  1997.  It was drawn in  December  1997 for
     working  capital  purposes and is repayable  within one year and  renewable
     with the consent of the relevant bank. It is guaranteed by a third party in
     the PRC.

b.   .Other  loan  from a third  party in the PRC is  denominated  in  Renminbi,
     unsecured, non-interest bearing and without pre-determined repayment terms.
     It was used to finance the construction of the Group's factories and office
     buildings.



                                      F-16


<PAGE>



11.  SHORT-TERM BORROWINGS (Cont'd)

Supplemental  information  with respect to the short-term bank loan for the year
ended December 31, 1997 is as follows:

<TABLE>


                                    Maximum amount     Average amount        Weighted           Weighted
                                     outstanding        outstanding          average             average
                                   during the year    during the year     interest rate       interest rate
                                                                          at the end of      during the year
                                                                               year
                                   -----------------  -----------------  -----------------   ----------------
                                       Rmb'000            Rmb'000
<S>                                <C>                 <C>                 <C>                 <C>


Short-term bank loan                        10,000                833              9.5%                9.5%
                                   =================  =================  =================   ================

</TABLE>



12.  ACCRUED LIABILITIES

Accrued liabilities comprised:

<TABLE>

                                                    1 9 9 6                         1 9 9 7
                                              --------------------  -----------------------------------------
                                                    Rmb'000               Rmb'000              US$'000
<S>                                          <C>                      <C>                      <C>


Accruals for operating expenses
    -  salary and bonus                                     199                   108                    13
    -  professional fees                                  1,036                 1,086                   130
Provision for welfare fund (a)                               40                   114                    14
Provision for pension fund (a)                               36                   109                    13
Others                                                      255                   252                    31
                                              --------------------  --------------------  -------------------

                                                          1,566                 1,669                   201
                                              ====================  ====================  ===================

</TABLE>


Note -

a.   Welfare  fund is  provided  at 19% of  total  salary  and  pension  fund is
     provided at 17% of total salary.  The welfare fund is for welfare  expenses
     of  employees  (see  Note 18) and the  pension  fund is for the  employees'
     retirement benefit (see Note 19).



                                      F-17


<PAGE>
5



INCOME TAXES

The Company and its  subsidiaries are subject to income taxes on an entity basis
on  income  arising  in or  derived  from the tax  jurisdictions  in which  they
operate. The British Virgin Islands entities (TSH, TSG and OAD) are incorporated
under the  International  Business  Companies Act of the British  Virgin Islands
and, accordingly, are exempted from payment of the British Virgin Islands income
taxes.   OAD  carries  on  business  in  the  PRC  through   Beijing  Opal  and,
consequently,  is  subject  to PRC  enterprise  income tax at a rate of 33% (30%
state tax and 3% local tax).  Beijing  Opal also  carries on business in the PRC
and is subject to PRC enterprise  income tax at a rate of 33% (30% state tax and
3% local tax). However, Beijing Opal is exempted from the state and local income
taxes for two years  starting from the first year of profitable  operations  and
then is subject to a 50% reduction for the next ten years.  The first profitable
year for Beijing Opal was the year ended  December 31, 1996.  If the tax holiday
for Beijing Opal did not exist, the Group's income tax expenses (net of minority
interests)  would have been  increased  by  approximately  nil,  Rmb396,000  and
Rmb263,000 for the years ended December 31, 1995, 1996 and 1997, respectively.

The  reconciliation of the statutory income tax rate in the PRC to the effective
income tax rate based on loss before income taxes as stated in the  consolidated
statements  of operations  for the years ended  December 31, 1996 and 1997 is as
follows:

<TABLE>

                                                                         1 9 9 6                1 9 9 7
                                                                    ------------------     ------------------
<S>                                                                 <C>                      <C>


PRC statutory income tax rate                                                  (33%)                  (33%)

Non-taxable activities                                                          44%                   134%

Effect of tax exemption for the PRC joint venture                              (11%)                 (158%)

Deferred tax assets for which no benefit has been recognised
    due to establishment of valuation allowance (a)
                                                                                 -                    164%
                                                                    ------------------     ------------------

                                                                                 -                    107%
                                                                    ==================     ==================

</TABLE>

Note -

(a)  This  represents  the tax effect of the allowance for doubtful  accounts of
     approximately  Rmb1,458,000  offsetted  by a  valuation  allowance  due  to
     uncertainties  associated with the success of the Group's future operations
     (see Note 25.a).



                                      F-18


<PAGE>





NON-CURRENT PAYABLE

This  represents the  outstanding  payable to acquire the right to use a plot of
land of approximately 97 acres in Beijing, the PRC.



15.  LOAN FROM PRC JOINT VENTURE PARTNER

This represented a loan from the PRC joint venture partner - BOBF, for financing
the operations of the Group,  which is  denominated  in Renminbi,  unsecured and
non-interest  bearing.  BOBF has agreed  not to demand  the Group for  repayment
until the Group is financially capable to do so.



16.  LOANS FROM A SHAREHOLDER

As of December 31, 1996, loans from Bestalong, a major shareholder,  amounted to
approximately Rmb58,394,000 (equivalent to US$7,003,000), and were unsecured and
non-interest bearing.

During the year ended December 31, 1997, approximately Rmb45,902,000 (equivalent
to  US$5,500,000)  of the loans from Bestalong  were  capitalized by issuance of
11,000,000 shares of common stock, par value US$0.001, at US$0.50 per share.



17.  SHARE CAPITAL

a.   Common stock

     During the period from  January 1, 1995 (the  earliest  date covered by the
     report)  to June 5, 1997,  the  Company  had  authorized  share  capital of
     50,000,000 shares of common stock, par value US$0.001 each, and outstanding
     share capital of 9,391,964 shares of common stock, par value US$0.001 each.
     On June 6, 1997, the Company  reclassified  its authorized share capital of
     50,000,000 shares of common stock, par value US$0.001 each, into 49,000,000
     shares of common stock,  par value US$0.001  each, and 1,000,000  shares of
     preferred  stock,  par value US$0.001 each. Also, it effected a one-for-ten
     reverse stock split and,  resulting in 939,196 shares of common stock,  par
     value  US$0.001  each,  being  outstanding.  This  reverse  split  has been
     reflected  retroactively in the accompanying  financial  statements and all
     loss per common share computations.



                                      F-19


<PAGE>

17.  SHARE CAPITAL (Cont'd)

a.   Common stock (Cont'd)

     On June 6, 1997, in connection  with the  acquisitions  of TSH and OAD (see
     Note 1), the Company  issued  8,452,768  shares of common stock,  par value
     $0.001 each (after the one-for-ten  reverse stock split).  On July 1, 1997,
     the Company  issued  4,200,000  shares of common stock,  par value US$0.001
     each (after the one-for-ten  reverse stock split),  for a consideration  of
     US$0.5 per share,  in return for the  cancellation  of a promissory note of
     US$2,100,000 (equivalent to Rmb17,451,000) (see Note 1).

     On July 1, 1997, the Company issued  11,400,000 shares of common stock, par
     value US$0.001 each, for cash consideration of US$0.5 per share, and raised
     US$5,700,000 (equivalent to Rmb47,567,000).

     On  September  29, 1997,  the Company  issued  11,000,000  shares of common
     stock,  par value  US$0.001  each, at US$0.5 per share to capitalize a loan
     from a shareholder amounting to US$5,500,000  (equivalent to Rmb45,902,000,
     see Note 16).

b.   .Preferred stock

     On June 6, 1997, the Company authorized the creation of 1,000,000 shares of
     preferred  stock,  par value  US$0.001  each,  and  authorized its board of
     directors to assign these  preferred  stock to different  series and to fix
     the related designation, powers, preference and rights of the shares.

     On June 6, 1997, in connection  with the  acquisitions  of TSH and OAD (see
     Note 1), the Company issued 100,000 shares of Series A preferred stock, par
     value  US$0.001  each.  The Series A preferred  stock carries  preferential
     rights to  dividends,  is not  subject to  redemption  and has  liquidation
     preference  of US$0.001  per share.  Also,  the 100,000  shares of Series A
     preferred  stock carry voting  rights of 30% of the total voting  rights on
     all corporate matters.



18.  DISTRIBUTION OF INCOME

     At present, a major portion of the Group's income is contributed by Beijing
     Opal.  Income  of  Beijing  Opal as  determined  under  generally  accepted
     accounting  principles  in the PRC is  distributable  to its joint  venture
     partners after transfer to (i) contributory  dedicated  capital as required
     under PRC  government  regulations  and the  joint  venture's  articles  of
     association,  and (ii)  discretionary  dedicated  capital as  determined by
     Beijing Opal's board of directors.  Discretionary capital includes a salary
     fund and a staff welfare fund.  Contributory dedicated capital is a form of
     legal reserve fund. Contributory and discretionary dedicated capital is not
     distributable  in  the  form  of  dividends.  In the  financial  statements
     prepared under US GAAP,  amounts designated for payments of employee salary
     and welfare of  approximately  Rmb40,000  and Rmb74,000 for the years ended
     December  31,  1996 and 1997 have been  charged to income  and the  related
     provisions are reflected as accrued liabilities in the balance sheets as of
     December 31, 1996 and 1997.



                                      F-20


<PAGE>



18.  DISTRIBUTION OF INCOME (Cont'd)

     A  reconciliation  of the  consolidated  accumulated loss reported under US
     GAAP to that reported under PRC GAAP as of December 31, 1996 and 1997 is as
     follows:

<TABLE>


                                                    1 9 9 6                         1 9 9 7
                                              --------------------  -----------------------------------------
                                                    Rmb'000               Rmb'000              US$'000
<S>                                          <C>                      <C>                      <C>


Accumulated loss, under PRC GAAP
                                                         (3,567)               (2,610)                 (315)

Increase in allowance for doubtful
    accounts                                                  -                (1,458)                 (175)

Increase in allowance for obsolete
    inventories                                               -                   (54)                   (6)

Amortization of goodwill                                    (34)                  (84)                  (10)
                                              --------------------  --------------------  -------------------

Accumulated loss, under US GAAP
                                                         (3,601)               (4,206)                 (506)
                                              ====================  ====================  ===================

</TABLE>


19.  RETIREMENT PLAN

     The  Group's  employees  in the PRC are all  employed by Beijing  Opal.  As
     stipulated   by  PRC   regulations,   Beijing  Opal   maintains  a  defined
     contribution  retirement  plan  for  all  of  its  employees.  All  retired
     employees  are  entitled to an annual  pension  equal to their basic annual
     salary upon  retirement.  Beijing  Opal  contributes  to a state  sponsored
     retirement plan approximately 17% of the basic salary of its employees, and
     has  no  further   obligations   for  the  actual   pension   payments   or
     post-retirement  benefits  beyond  the  annual  contributions.   The  state
     sponsored retirement plan is responsible for the entire pension obligations
     payable to retired employees. Beijing Opal's contribution was approximately
     Rmb36,000  and  Rmb73,000  for the years ended  December 31, 1996 and 1997,
     respectively.

     The Group has no other retirement plan for its employees outside the PRC.



                                      F-21


<PAGE>


20.  NET SALES AND COST OF GOODS SOLD

Net sales and cost of goods sold comprised:

<TABLE>

                                       1 9 9 5            1 9 9 6                      1 9 9 7
                                   -----------------  -----------------  ------------------------------------
                                       Rmb'000            Rmb'000            Rmb'000             US$'000
<S>                                <C>                 <C>                 <C>                 <C>


Net sales to related companies
    (Note 23)                                    -             20,045             14,609               1,758
Cost of goods sold (Note 23)
                                                 -            (19,531)           (14,609)             (1,758)
                                   -----------------  -----------------  -----------------   ----------------

                                                 -                514                  -                   -

Net sales to third parties                       -              3,842             23,055               2,774
Cost of goods sold (Note 23)
                                                 -               (944)           (11,127)             (1,339)
                                   -----------------  -----------------  -----------------   ----------------

                                                 -              2,898             11,928               1,435
                                   -----------------  -----------------  -----------------   ----------------

         Gross profit                            -              3,412             11,928               1,435
                                   =================  =================  =================   ================

</TABLE>


21.  COMMITMENTS

     The  Group had  capital  commitments  amounting  to  approximately  Nil and
     Rmb5,065,000  as  of  December  31,  1996  and  1997,   respectively,   for
     construction   of   factories   and  office   buildings  in  the  PRC,  and
     approximately  Rmb36,300,000  and  Rmb3,300,000 as of December 31, 1996 and
     1997, respectively, for purchases of machinery and equipment.



22.  BANKING FACILITIES

     The Group had banking  facilities of approximately Nil and Rmb10,000,000 as
     of December 31, 1996 and 1997, respectively, for short-term bank loans. The
     facilities  was fully  utilized as of December 31, 1997.  These  facilities
     were secured by a guarantee given by a third party in the PRC.



                                      F-22


<PAGE>


23.  RELATED PARTY TRANSACTIONS

Name and relationship of related parties:

<TABLE>
                                                                                  Relationships with the
Name of related parties                                                                   Company
--------------------------------------------------------------------------     ------------------------------
<S>                                                                             <C>


Bestalong Group Inc. ("Bestalong")                                              Parent company

Oriental Alliance Limited                                                       Subsidiary of Bestalong
                                                                                   Group Inc.

Agriculture and Production Information Company ("APIC")                         Holding company of BOBF
    

Beijing Komix Vigour Property Liquid Fertilizer Co. Ltd. ("BKVPL")              Affiliated company of BOBF

Komix Asia Pacific Company Limited ("KAP")                                      Common directors

Fuzhou Opal Company Limited ("Fuzhou Opal")                                     Common director

</TABLE>

Summary of related party balances and transactions is as follows:

<TABLE>

                                             1 9 9 5           1 9 9 6                   1 9 9 7
                                         ----------------  ----------------  ---------------------------------
                                             Rmb'000           Rmb'000          Rmb'000           US$'000
<S>                                          <C>            <C>                 <C>                 <C>

Due from a shareholder
   - Bestalong (a)                                     -                 -             2,100              252

Due from a related company
   - Oriental Alliance Limited (b)                     -               749                 -                -

Due from a director
   - Mr. Chen Long Chen (b)                            -                 5                19                2

Accounts payable to related companies
   (c)
   - APIC                                              -             1,260             4,072              490
   - KAP                                               -               356                 -                -
   - BKVPL                                             -             4,435                 -                -

Sales to related companies (d)
   - APIC                                              -            19,423            14,609            1,758
   - Fuzhou Opal                                       -               622                 -                -

Purchases from related companies (e)
   -  APIC                                             -                 -             3,648              439
   -  KAP                                              -             2,164                 -                -
   -  Bestalong                                        -                 -             2,568              310

Rental expenses paid to
   - APIC                                              -                 -                29                3
   - Bestalong                                         -               290               831              100

Management fees paid to directors (f)
   - Mr. Michael William Botts                         -               348               357               43
   - Mr. Chen Long Chen                                -               522               897              108


</TABLE>




                                      F-23



<PAGE>



23.  RELATED PARTY TRANSACTIONS (Cont'd)

Notes -

a.   This   represented   advances  to  Bestalong   which  were   unsecured  and
     non-interest  bearing. The advances were settled subsequent to December 31,
     1997.

b.   The  balances  due from a related  company and a director  were  unsecured,
     non-interest bearing and without pre-determined repayment terms.

c.   These  represented  payables on  purchases  of raw  materials  from related
     companies in the ordinary course of business.

d.   Sales to APIC were at a mark-up  of 0.5% for the year  ended  December  31,
     1996 and at cost for the year ended December 31, 1997. Sales to Fuzhou Opal
     were made in the ordinary course of business.

e.   Purchases  from related  companies  were made at the original  cost with no
     mark-up being charged.

f.   These  represent  management fees paid to Mr. Michael William Botts and Mr.
     Chen Long Chen for the provision of executive services.

In addition,  the Group reimbursed  Bestalong for expenditures (both capital and
operating  in  nature)  incurred  by  Bestalong  on  behalf of the  Group.  Such
reimbursements  amounted to approximately  Nil,  Rmb58,394,000 and Rmb25,020,000
during the years ended December 31, 1995, 1996 and 1997.



24.  SUPPLEMENTAL DISCLOSURE OF CASHFLOW INFORMATION

a.   On August 6, 1996,  TSG  acquired a 55%  interest in Beijing  Opal for cash
     consideration of approximately Rmb1,159,000. Details of assets acquired and
     liabilities assumed were as follows:


                                                                      Rmb'000
                                                                  --------------

    Cash and bank deposits                                               564
    Accounts receivable                                                4,820
    Prepayments and other current assets                                  76
    Inventories                                                        4,289
    Property, machinery and equipment                                  2,292
    Accounts payables                                                 (7,996)
    Accrued expenses                                                  (1,195)
    Loans from Bestalong Group Inc.                                   (3,757)
                                                                  --------------

      Net liabilities assumed as of the date of acquisition             (907)
                                                                  ==============



                                      F-24



                                       1
<PAGE>


24.  SUPPLEMENTAL DISCLOSURE OF CASHFLOW INFORMATION (Cont'd)

a.  (Cont'd)                                                               
                                                                      Rmb'000
                                                                  --------------

     Share of net liabilities as of the date of acquisition (55%)        (499)
     Goodwill                                                           1,658
                                                                  --------------

     Consideration satisfied in cash                                    1,159
                                                                  ==============

      Net cash outflow:
        Cash paid                                                      1,159
        Cash and bank deposits acquired                                 (564)
                                                                  --------------

                                                                         595
                                                                  ==============

b.   Non cash items:

     During the year ended  December 31,  1997,  the Company  issued  11,000,000
     shares of common stock by  capitalization  of a loan from a shareholder  of
     approximately  Rmb45,902,000  (equivalent  of  US$5,500,000).  In addition,
     during the year ended  December  31,  1997,  the Company  issued  4,200,000
     shares  of  common  stock  by the  cancellation  of a  promissory  note  of
     approximately Rmb17,451,000 (equivalent of US$2,100,000) (See Note 17.a).



25.  OPERATING RISKS

a.   Limited operating history

     The  Group   reorganized  and  commenced  its  operations  in  trading  and
     manufacturing of organic agricultural  fertilizers in August 1996, and such
     operations were still in the development stage as of December 31, 1997. The
     Group  incurred  losses  from   continuing   operations  (net  of  minority
     interests) of approximately Rmb3,601,000 and Rmb605,000 for the years ended
     December  31,  1996 and  1997,  respectively,  and had  accumulated  losses
     amounting to approximately Rmb3,601,000 and Rmb4,206,000 as of December 31,
     1996 and 1997, respectively.  The Group's operations are subject to all the
     risks inherent in an emerging business  enterprise.  These include, but are
     not limited to, competition from other fertilizer  manufacturers,  the need
     to expand production and  distribution,  and slow settlement of billings to
     new customers. Realization of the Group's investment in assets is dependent
     on the success of its future operations.

b.   Dependence strategic relationship

     The Group  conducts  its  operations  in the PRC  through  an equity  joint
     venture  with  BOBF  as  described  in Note 1.  Any  deterioration  of this
     strategic  relationship  could have an adverse effect on the operations and
     financial position of the Group.



                                      F-25



                                      
<PAGE>



25.  OPERATING RISKS (Cond't)

c.   Concentration of credit risk

     A  substantial  portion of the Group's  sales is made to a small  number of
     customers on an open account basis and generally no collateral is required.
     Details of individual  customers accounting for more than 5% of the Group's
     sales are as follows:

<TABLE>

                                                                         1 9 9 6                1 9 9 7
                                                                    ------------------     ------------------
          <S>                                                         <C>                      <C>    

          Agriculture and Production Information Company,
              a related party
                                                                                81.3%                  38.9%
          Heng Yang Agriculture and Technology Development
              Company 
                                                                                 -                     11.6%
          Yunnan Xing Long Agriculture and Trade Development
              Centre
                                                                                 1.4%                  11.4%
          Xin Jiang Agriculture and Science Institute
                                                                                 -                      8.2%
          Gansu Nong Ken Technological Development Company
              
                                                                                 1.2%                   5.2%
                                                                    ==================     ==================
</TABLE>


     Concentration of accounts receivable as of December 31, 1996 and 1997 is as
     follows:
<TABLE>


                                                                         1 9 9 6                1 9 9 7
                                                                    ------------------     ------------------
     <S>                                                               <C>                    <C>


     Five largest accounts receivable                                      82.9%                  68.6%
                                                                    ==================     ==================

</TABLE>

     The Group performs ongoing credit  evaluation of each customer's  financial
     condition.  It maintains  reserves  for  potential  credit  losses and such
     losses in  aggregate  have not  exceeded  management's  projections.  As of
     December  31,  1997,  the Group  maintained  a  specific  provision  of Rmb
     1,458,000 and a general  provision of 3% of the remaining  balance  against
     its trade receivables.  The Directors, in their opinion,  consider that the
     risk of recoverability of the outstanding receivable is minimal.



                                      F-26


<PAGE>





25.  OPERATING RISKS (Cond't)

d.   Concentration of suppliers

     The Group  purchases raw material  from a number of  suppliers.  Details of
     individual  suppliers  accounting for more than 5% of the Group's purchases
     are as follows:

<TABLE>

                                                                         1 9 9 6                1 9 9 7
                                                                    ------------------     ------------------
          <S>                                                         <C>                      <C>    


          Purchases from:
          Agriculture and Production Information Company
                                                                         85.4%                  15.9%
          Shun Yi County Chemical Fertilizer factory
                                                                            -                   63.7%
          Bestalong                                                         -                    9.8%
                                                                    ==================     ==================

</TABLE>

e.   Country risk

     Substantially all of the Group's operations are conducted by its subsidiary
     Beijing Opal, in the PRC and, accordingly,  the Group is subject to special
     considerations   and  significant  risks  not  typically   associated  with
     companies  operating in North  America and Western  Europe.  These  include
     risks  associated  with,  among others,  the political,  economic and legal
     environments  and foreign  currency  exchange.  The Group's  results may be
     affected  by,  among  other  things,  changes in the  political  and social
     conditions in the PRC and changes in governmental  policies with respect to
     laws and regulations,  anti-inflationary  measures, currency conversion and
     remittance  abroad,  and rates and methods of taxation.  The PRC government
     has implemented economic reform policies in recent years, and these reforms
     may be  refined  or  changed  by the  government  at any  time.  It is also
     possible  that a change in the PRC  leadership  could  lead to  changes  in
     economic policy.

     In addition, a substantial portion of the Group's revenue is denominated in
     Renminbi  ("Rmb"),  which must be converted  into other  currencies  before
     remittance  outside the PRC.  Both the  conversion  of Renminbi  into other
     foreign  currencies and the remittance of foreign currencies abroad require
     approvals of the PRC government.




                                      F-27


<PAGE>



26.  OTHER SUPPLEMENTAL INFORMATION

     The  following  items  were  included  in the  consolidated  statements  of
     operations:

<TABLE>

                                    1 9 9 5             1 9 9 6                       1 9 9 7
                               ------------------   -----------------   -------------------------------------
                                    Rmb'000             Rmb'000             Rmb'000             US$'000
<S>                                <C>                 <C>                 <C>                 <C>


Depreciation of property,
    machinery and equipment
                                              -                   53                 960                115

Amortization expense
    -  Licensing costs                        -                    -                 444                 53
    -  Goodwill                               -                   34                  84                 10

Advertising expenses                          -                   50                 668                 80

Provision for bad and
    doubtful accounts                         -                   65               2,213                266

Provision for slow-moving
    and obsolete inventories
                                              -                    -                  54                   6

Rental expenses                               -                  290                 860                103

Salary and employee benefits
                                              -                   76                 154                 19

Repair and maintenance
    expense                                   -                    8                  72                  9

Net foreign exchange loss
                                              -                    -                  38                  5

Interest expenses                             -                   18                   -                  -

Interest income                               -                   12                  77                  9
                               ==================   =================   =================   =================

</TABLE>



                                      F-28