-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AZ/psfmuhOrVh42ehcYruM6itUEAhRu6daUYugeL/BJUwTS/pcbM6HQvJuEHSQCE pNC1wuUxLytUQJUdc9MMfg== 0001042910-00-000902.txt : 20000517 0001042910-00-000902.hdr.sgml : 20000517 ACCESSION NUMBER: 0001042910-00-000902 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHINA RESOURCES DEVELOPMENT INC CENTRAL INDEX KEY: 0000793628 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-MISCELLANEOUS NONDURABLE GOODS [5190] IRS NUMBER: 870263643 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-26046 FILM NUMBER: 636576 BUSINESS ADDRESS: STREET 1: 23/F OFFICE TOWER, CONVENTION PLAZA STREET 2: 1 HARBOUR ROAD CITY: WANCHAI STATE: K3 ZIP: 84119 BUSINESS PHONE: 011-852-2810-7205 MAIL ADDRESS: STREET 1: C/O BAKER & HOSTETLER STREET 2: P O BOX 112 CITY: ORLANDO STATE: FL ZIP: 32802 FORMER COMPANY: FORMER CONFORMED NAME: MAGENTA CORP DATE OF NAME CHANGE: 19940217 10-Q 1 QUARTERLY REPORT SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarter period ended March 31, 2000 -------------- [ ] Transition report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from ___________ to _____________ CHINA RESOURCES DEVELOPMENT, INC. (Exact Name of registrant as Specified in Charter) Nevada 33-5628-NY 87-0263643 (State or other Jurisdiction (Commission File Number) (IRS Employer of incorporation) Identification No.) Room 2005, 20/F, Universal Trade Centre, 3-5A Arbuthnot Road, Central, Hong Kong Telephone: 011-852-28107205 (Address and telephone number of principal executive offices) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such requirements for the past 90 days. Yes X No --- --- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: 592,900 shares of common stock, $0.001 par value, as of May 15, 2000. Page 1 of 21 pages Exhibit Index on Page 18 CONVENTIONS Unless otherwise specified, all references in this report to "U.S. Dollars," "Dollars," "US$," or "$" are to United States dollars; all references to "Hong Kong Dollars" or "HK$" are to Hong Kong dollars; and all references to "Renminbi" or "RMB" or "Yuan" are to Renminbi Yuan, which is the lawful currency of the People's Republic of China ("China" or "PRC"). The Company and Billion Luck maintain their accounts in U.S. Dollars and Hong Kong Dollars, respectively. HARC and the Operating Subsidiaries maintain their accounts in Renminbi. The financial statements of the Company and its subsidiaries are prepared in Renminbi. Translations of amounts from Renminbi to U.S. Dollars and from Hong Kong Dollars to U.S. Dollars are for the convenience of the reader. Unless otherwise indicated, any translations from Renminbi to U.S. Dollars or from U.S. Dollars to Renminbi have been made at the single rate of exchange as quoted by the People's Bank of China (the "PBOC Rate") on March 31, 2000, which was approximately U.S.$1.00 = Rmb8.28. Translations from Hong Kong Dollars to U.S. Dollars have been made at the single rate of exchange as quoted by the Hongkong and Shanghai Banking Corporation Limited on March 31, 2000, which was approximately US$1.00 = HK$7.79. The Renminbi is not freely convertible into foreign currencies and the quotation of exchange rates does not imply convertibility of Renminbi into U.S. Dollars or other currencies. All foreign exchange transactions take place either through the Bank of China or other banks authorized to buy and sell foreign currencies at the exchange rates quoted by the People's Bank of China. No representation is made that the Renminbi or U.S. Dollar amounts referred to herein could have been or could be converted into U.S. Dollars or Renminbi, as the case may be, at the PBOC Rate or at all. References to "Billion Luck" are to Billion Luck Company Ltd., a British Virgin Islands company, which is a wholly-owned subsidiary of the Company. References to "Company" are to China Resources Development, Inc., and include, unless the context requires otherwise, the operations of its subsidiaries (all as hereinafter defined). References to "Farming Bureau" are to the Hainan Agricultural Reclamation General Company, a division of the Ministry of Agriculture, the PRC government agency responsible for matters relating to agriculture. References to "First Supply" are to First Goods And Materials Supply And Sales Corporation, a company organized in the PRC and a wholly-owned subsidiary of HARC. References to "Hainan" are to Hainan Province of the PRC. References to "Hainan State Farms" are to the rubber farms in Hainan controlled by the Farming Bureau. References to "Hainan Weilin" are to Hainan Weilin Timber Limited Liability Company, a limited liability company organized in the PRC, whose capital is owned 58% by HARC and 42% by Haikou Mechanical Factory, a PRC entity which is owned and controlled by the Farming Bureau. References to "HARC" are to Hainan Zhongwei Agricultural Resources Company Limited, a company organized in the PRC, whose capital is owned 56% by Billion Luck, 39% by the Farming Bureau and 5% by the Company. References to the "PRC" or "China" include all territory claimed by or under the control of the Central Government, except Hong Kong, Macau, and Taiwan. References to "Sales Centre" are to Rubber Sales Centre, a company organized in the PRC and a wholly-owned subsidiary of HARC. References to "Second Supply" are to Second Goods And Materials Supply And Sales Corporation, a company organized in the PRC and a wholly-owned subsidiary of HARC. References to "Zhuhai Zhongwei" are to Zhuhai Zhongwei Development Company Limited, a company organized in the PRC and a wholly-owned subsidiary of HARC. 2 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS CHINA RESOURCES DEVELOPMENT, INC., AND SUBSIDIARIES CONDENSED CONSOLIDATED INCOME STATEMENTS (UNAUDITED) FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999 (Amounts in thousands, except share and per share data)
Three Months Ended March 31, ---------------------------- Note 2000 1999 2000 ---- ---- ---- RMB RMB US$ NET SALES 1,397 -- 169 COST OF SALES (1,296) -- (157) -------- -------- -------- GROSS PROFIT 101 -- 12 DEPRECIATION (200) -- (24) SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (4,449) (2,539) (537) FINANCIAL INCOME, NET 40 79 5 OTHER INCOME, NET 13,019 -- 1,572 -------- -------- -------- INCOME/(LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 8,511 (2,460) 1,028 INCOME TAXES (1,957) -- (236) -------- -------- -------- INCOME/(LOSS) FROM CONTINUING OPERATIONS BEFORE MINORITY INTERESTS 6,554 (2,460) 792 MINORITY INTERESTS (4,417) -- (534) -------- -------- -------- INCOME/(LOSS) FROM CONTINUING OPERATIONS 2,137 (2,460) 258 DISCONTINUED OPERATIONS 2 -- (1,889) -- -------- -------- -------- NET INCOME/(LOSS) 2,137 (4,349) 258 ======== ======== ======== BASIC AND DILUTED EARNINGS/(LOSS) PER SHARE* Continuing operations 3.60 (4.15) 0.43 Discontinued operations -- (3.18) -- -------- -------- -------- 3.60 (7.33) 0.43 ======== ======== ======== WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING* 592,900 592,900 592,900 ======== ======== ========
* The computation of basic and diluted loss per share for the three months ended March 31, 1999 are based on weighted average number of shares outstanding as if the one-for-ten reverse stock split, effective on June 11, 1999, had been completed at the beginning of the period. See notes to condensed consolidated financial statements. 3 CHINA RESOURCES DEVELOPMENT, INC., AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 2000 AND DECEMBER 31, 1999 (Amounts in thousands, except share and per share data)
March 31, December 31, March 31 2000 1999 2000 RMB RMB US$ Notes (Unaudited) (Note) (Unaudited) ASSETS CURRENT ASSETS: Cash and cash equivalents 28,281 31,088 3,416 Marketable securities 93,562 57,035 11,300 Trade receivables 55 -- 7 Inventories 3 2,847 1,702 344 Other receivables, deposits and prepayments 12,422 11,781 1,500 Short term loan receivable 45,000 45,000 5,434 Amount due from Farming Bureau 32,626 47,013 3,940 Amounts due from related companies -- 1,500 -- Tax refundable -- 1,382 -- Net assets of discontinued operations -- 70,527 -- ------------ ------------ ------------ TOTAL CURRENT ASSETS 4 214,793 267,028 25,941 PROPERTY AND EQUIPMENT 11,109 9,855 1,342 INVESTMENTS 116,714 116,714 14,096 ------------ ------------ ------------ TOTAL ASSETS 342,616 393,597 41,379 ============ ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable 764 296 92 Other payables and accrued liabilities 43,682 15,860 5,276 Income taxes payable 643 -- 78 Amounts due to related companies 296 86,781 35 ------------ ------------ ------------ TOTAL CURRENT LIABILITIES 45,385 102,937 5,481 MINORITY INTERESTS 114,643 110,226 13,846 ------------ ------------ ------------ TOTAL LIABILITIES AND MINORITY INTERESTS 160,028 213,163 19,327 ------------ ------------ ------------ SHAREHOLDERS' EQUITY Common stock, US$0.001 par value: Authorized -- 200,000,000 shares in 2000 and 1999 Issued and outstanding - 592,900 shares in and 1999 5 5 1 Preferred stock, authorized - 10,000,000 shares in 2000 and 1999 Series B preferred stock, US$0.001 par value Authorized -- 320,000 shares in 2000 and 1999 Issued and outstanding -- 320,000 in 2000 and 1999 3 3 -- Additional paid-in capital 156,632 156,632 18,917 Reserves 26,830 26,830 3,240 Accumulated deficits (881) (3,018) (106) Accumulated other comprehensive loss (1) (18) -- ------------ ------------ ------------ TOTAL SHAREHOLDERS' EQUITY 182,588 180,434 22,052 ------------ ------------ ------------ TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 342,616 393,597 41,379 ============ ============ ============
Note: The balance sheet at December 31, 1999 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. See notes to condensed consolidated financial statements. 4 CHINA RESOURCES DEVELOPMENT, INC., AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED) FOR THE THREE MONTHS ENDED MARCH 31, 2000 (Amounts in thousands)
Accumulated Series B Additional other Common preferred paid-in Accumulated comprehensive stock stock capital Reserves deficits loss Total RMB RMB RMB RMB RMB RMB RMB Balance at January 1, 2000 5 3 156,632 26,830 (3,018) (18) 180,434 Net income - - - - 2,137 - 2,137 Currency translation adjustment - - - - - 17 17 ------- Comprehensive income 2,154 ------- ------ ------ ------- ------ ------- ------ ------- Balance at March 31, 2000 5 3 156,632 26,830 (881) (1) 182,588 ====== ====== ======= ====== ======= ====== =======
See notes to condensed consolidated financial statements. 5 CHINA RESOURCES DEVELOPMENT, INC., AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED) FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999 (Amounts in thousands)
Three months ended March 31, ---------------------------- 2000 1999 2000 ---- ---- ---- RMB RMB US$ Net cash provided by/(used in) operating activities (9,705) 4,443 (1,172) INVESTING ACTIVITIES Purchases of property and equipment (1,454) (42) (175) Proceeds from disposal of an investment 928 - 112 Proceeds from disposal of property and equipment 1,547 - 187 Short term loan - (45,000) - ---------- ---------- ---------- Net cash provided by/(used in) investing activities 1,021 (45,042) 124 ---------- ---------- ---------- FINANCING ACTIVITIES Reduction in minority interests (1,173) - (142) ---------- ---------- ---------- Net cash used in continuing operations (9,857) (40,599) (1,190) Net cash provided by discontinued operations (Note 2) - 893 - ---------- ---------- ---------- NET DECREASE IN CASH AND CASH EQUIVALENTS (9,857) (39,706) (1,190) Cash and cash equivalent, at beginning of period 38,138 129,238 4,606 ---------- ---------- ---------- Cash and cash equivalent, at end of period 28,281 89,532 3,416 ========== ========== ==========
See notes to condensed consolidated financial statements. 6 CHINA RESOURCES DEVELOPMENT, INC., AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Amounts in thousands) 1. BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months period ended March 31, 2000, are not necessarily indicative of the results that may be expected for the year ending December 31, 2000. 2. DISCONTINUED OPERATIONS AND BUSINESS RESTRUCTURING In the fourth quarter of 1999, the Company initiated a plan to restructure its business in Hainan, the PRC. On March 3, 2000, the Board of Directors of the Company approved a business restructuring involving HARC and certain subsidiaries of HARC (the "Restructuring"). The Restructuring resulted the discontinuation of substantially all of the existing operations of the Company as of December 31, 1999, including its two principal lines of business, the distribution of natural rubber and the procurement of materials, supplies and other agricultural products (collectively the "Rubber and Procurement Operations"). The financial data related to the Company's indirect investments in the Rubber and Procurement Operations prior to December 31, 1999 is classified as discontinued operations for all periods presented. The financial data of the Rubber and Procurement Operations reflect the historical results of operations and cashflows of the businesses that were considered part of the business segments of the Rubber and Procurement Operations during each respective period.. On March 3, 2000, HARC and certain of its subsidiaries entered into an Assets and Staff Transfer Agreement with the Farming Bureau, pursuant to which HARC and certain of its subsidiaries would transfer all the assets, liabilities and staff related to the discontinued operations to the Farming Bureau, effective from January 1, 2000. The consideration for the net assets transferred was determined based on the lower of their net book value or their fair value, as determined by an independent professional valuer, as of December 31, 1999. Based on the valuation, there were no material differences between the fair value and the net book value (as determined under US GAAP) of those assets and liabilities as of December 31, 1999, which was RMB70,527,000. Net sales of the Rubber and Procurement Operations included in discontinued operations totaled RMB21,355,000 for the three months ended March 31, 1999. Loss from discontinued operations of Rubber and Procurement Operations of RMB3,199,000 for the three months ended March 31, 1999 is reported without set-off of any income tax expenses. The net assets of the Rubber and Procurement Operations were as follows: December 31, 1999 RMB Current assets 110,703 Property and equipment - net 1,547 Cost method investments 928 Current liabilities (42,651) -------- Net assets of discontinued operations 70,527 ========= 7 CHINA RESOURCES DEVELOPMENT, INC., AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--(Continued) (Amounts in thousands) The Company and its subsidiaries accrued certain expenses totaling RMB3 million in relation to the Restructuring in the fourth quarter of 1999. There were no other significant expenses in relation to the Restructuring in the three months ended March 31, 2000. Notwithstanding the discontinuation of the Rubber and Procurement Operations, the Company has contemplated setting up several new lines of business as part of the Restructuring. As of March 31, 2000, the Company has set up two lines of business, namely, supermarket operations and processing and sale of timber. 3. INVENTORIES
March 31, December 31, 2000 1999 RMB RMB Raw materials 416 - Work in progress 160 - Finished goods 2,271 1,702 ---------- ---------- 2,847 1,702 ====== ======
4. PROPERTY AND EQUIPMENT, NET
March 31, December 31, 2000 1999 RMB RMB At cost: Buildings and leasehold improvements 5,906 5,906 Machinery, equipment and motor vehicles 7,846 6,392 ---------- ---------- 13,752 12,298 Accumulated depreciation: (2,643) (2,443) ---------- ---------- Net book value 11,109 9,855 ====== ======
8 CHINA RESOURCES DEVELOPMENT, INC., AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--(Continued) (Amounts in thousands) 5. SEGMENT FINANCIAL INFORMATION
Three months ended March 31, 2000 RMB Net sales to external customers: Supermarket operations, net sales to unaffiliated customers 1,151 Processed timber, net sales to unaffiliated customers 246 ---------- Total consolidated net sales 1,397 ====== Segment loss: Supermarket operations (40) Processed timber (164) ---------- Total segment profit/(loss) (204) Reconciling items: Corporate expenses (4,288) Gain on trading marketable securities 12,983 Interest income 20 ---------- Total consolidated profit/(loss) before income taxes 8,511 ====== March 31, 2000 RMB Segment assets: Supermarket operations 6,284 Processed timber 5,698 ---------- Total segment assets 11,982 Reconciling items: Corporate assets 213,920 Investments 116,714 ---------- Total consolidated assets 342,616 ==========
9 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATION RESULTS OF OPERATIONS The following table shows the selected unaudited condensed consolidated income statement data of the Company and its subsidiaries for the three months ended March 31, 2000 and 1999. The data should be read in conjunction with the unaudited Condensed Consolidated Financial Statements of the Company and related notes thereto, along with the Company's current report on Form 8-K filed with the Securities and Exchange Commission, dated March 3, 2000. The discussions below are presented in the Company's primary operating currency, which is the Renminbi Yuan ("RMB"). For information purposes only, the amounts may be translated into U.S. dollars at an exchange rate of $1.00 = RMB8.28, which represents the approximate single rate of exchange as quoted by the People's Bank of China on March 31, 2000. No representation is made that RMB amounts could have been, or could be, converted into U.S. dollars at that rate or any other rate. (Amounts in thousands) Three months ended March 31, ---------------------------- 2000 1999 RMB RMB Net sales: Supermarket operations 1,151 -- Processed timber 246 -- ------ ------ 1,397 -- ------ ------ Gross profit 101 -- Gross profit margin (%) 7.23 -- Income/(loss) from continuing before income taxes 8,511 (2,460) Income taxes (1,957) -- ------ ------ Income/(loss) from continuing before minority interest 6,554 (2,460) Minority interests (4,417) -- ------ ------ Income/(loss) from continuing 2,137 (2,460) Discontinued operations -- (1,889) ------ ------ Net income/(loss) 2,137 (4,349) ====== ====== NET SALES AND GROSS PROFIT The Company previously engaged in marketing and distribution of natural rubber and rubber products produced by the Hainan State Farms and non-state farms in the PRC, and procurement of production materials and supplies, including chemicals, farm equipment and machinery, automobiles and other commodities, for use primarily by the Hainan State Farms and other unaffiliated customers. Pursuant to a Shareholders' Agreement on Business Restructuring dated March 3, 2000, among the Company, Billion Luck and the Farming Bureau, the natural rubber distribution business and the procurement of materials and supplies business ceased effective as of January 1, 2000. Pursuant to an Assets and Staff Transfer Agreement dated March 3, 2000, among the Farming Bureau, HARC, First Supply, Second Supply and Sales Centre, the assets, liabilities and staff related to the ceased businesses were transferred to the Farming Bureau effective as of January 1, 2000. The restructuring resulted in the discontinuation of substantially all of the existing operations of the Company as of December 31, 1999. The Company has contemplated setting up several new lines of business as part of the restructuring. As of March 31, 2000, the Company has set up two lines of business, the supermarket operation and the processing and sale of timber, which are still in the start-up phase with insignificant revenue contribution for the first quarter of 2000. The supermarket operation has gross profit and gross profit margin of RMB196,000 (US$24,000) and 17.0%, respectively, for the first quarter of 2000. The sale of processed timber business has a gross loss of RMB95,000 (US$11,000) or 38.6% on sales for the first quarter of 2000, as the processing factory is still in the start-up phase and is not operated at its full capacity. 10 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Selling, general and administrative expenses for the first quarter of 2000 were RMB4.4 million (US$531,000), compared to RMB2.5 million (US$302,000) for the corresponding period in 1999. The increase was mainly attributable to selling and administrative expenses of HARC, which amounted to Rmb1.7 million (US$205,000) for the first quarter of 1999 and were grouped in the procurement of materials and supplies business, which is shown as discontinued operations. For the first quarter of 2000, selling and administrative expenses of HARC were grouped as corporate administrative expenses. FINANCIAL INCOME, NET Net financial income decreased by 77.9% from RMB79,000 (US$10,000) for the first quarter of 1999 to RMB40,000 (US$5,000) for the corresponding period in 2000. The decrease was mainly attributable to the decrease in average bank deposits in 2000, as funds were shifted to the trading of marketable securities. OTHER INCOME, NET Other income for the first quarter of 2000 represented a net gain on trading of marketable securities. The Company has commenced trading of marketable securities since the second quarter of 1999. DISCONTINUED OPERATIONS Discontinued operations for the first quarter of 1999 represented a loss from operations of the discontinued rubber distribution and procurement of materials and supplies businesses. LIQUIDITY AND CAPITAL RESOURCES The Company's and its subsidiaries' primary liquidity needs are to fund inventories and trade receivables and to expand business operations. The Company has financed its working capital requirements primarily through internally generated cash. The Company has a working capital surplus of approximately RMB169 million (US$20.4 million) as of March 31, 2000, compared to that of approximately RMB164 million (US$19.8 million) as of December 31, 1999. Net cash used in operating activities for the three months ended March 31, 2000 was approximately RMB9.7 million (US$1.2 million), as compared to net cash provided by operating activities of approximately RMB4.4 million (US$0.5 million) for the corresponding period in 1999. Net cash flows from the Company's operating activities are attributable to the Company's income and changes in operating assets and liabilities. Pursuant to an Assets and Staff Transfer Agreement dated March 3, 2000, the Farming Bureau purchased assets and assumed liabilities and staff related to the ceased businesses effective as of January 1, 2000. The purchase price was the lower of the book value or fair value of the net assets transferred (which were not materially different), determined as of January 1, 2000, which amounted to RMB70,527,000 (US$8,518,000). There has been no other significant change in financial condition and liquidity since the fiscal year ended December 31, 1999. The Company believes that internally generated funds will be sufficient to satisfy its anticipated working capital needs for at least the next twelve months. 11 MARKET RISK AND RISK MANAGEMENT POLICIES All of the Company's sales and purchases are made domestically and are denominated in Renminbi. Accordingly, the Company and its subsidiaries do not have material market risk with respect to currency fluctuation. As the reporting currency of the Company's consolidated financial statements is also Renminbi, there is no significant translation difference arising on consolidation. The Company's interest income is most sensitive to changes in the general level of Renminbi interest rates. In this regard, changes in Renminbi interest rates affect the interest earned on the Company's cash equivalents. As at March 31, 2000, the Company's cash equivalents are mainly Renminbi, Hong Kong Dollar and United States Dollar deposits with financial institutions, bearing market interest rates without fixed term. As at March 31, 2000, the Company had short-term investments in marketable securities mainly in the PRC stock market with a total market value of RMB93.6 million (US$11.3 million). These investments expose the Company to market risks that may cause the future value of these investments to be lower than the original cost of such investments at the time of purchase. YEAR 2000 ISSUE The Year 2000 issue is the result of information technology systems and embedded systems using a two-digit format, as opposed to four digits, to indicate the year. The Company and its subsidiaries use a limited amount of computer software primarily in connection with their accounting and financial reporting systems. Such programs have been upgraded so that they are year 2000 compatible. In addition to software issues, certain of the computer hardware of the Company and its subsidiaries have been replaced with more current technology. As of March 31, 2000, the Company has not experienced any disruptions or failures to its normal operations as a result of the transition into calendar year 2000. 12 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS: NONE ITEM 2. CHANGES IN SECURITIES: NONE ITEM 3. DEFAULTS UPON SENIOR SECURITIES: NONE ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS: NONE ITEM 5. OTHER INFORMATION NONE ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) The following Exhibits are filed as part of this Form 10-Q or incorporated by reference as indicated below: Exhibit No. Exhibit Description ----------- ------------------- 3.1 Articles of Incorporation of the Registrant, filed on January 15, 1986 (Filed with Annual Report on Form 10-K/A for the fiscal year ended December 31, 1994, and incorporated herein by reference.) 3.2 By-laws of the Registrant (Filed with Annual Report on Form 10-K/A for the fiscal year ended December 31, 1994, and incorporated herein by reference.) 3.3 Certificate of Amendment of Articles of Incorporation of the Registrant, filed on November 18, 1994 (Filed with Annual Report on Form 10-K/A for the fiscal year ended December 31, 1994, and incorporated herein by reference.) 3.4 Certificate of Amendment of Articles of Incorporation of the Registrant, filed on November 18, 1994 (Filed with Annual Report on Form 10-K/A for the fiscal year ended December 31, 1994, and incorporated herein by reference.) 3.5 Certificate of Amendment of Articles of Incorporation of the Registrant, effective March 31, 1995, and filed on June 19, 1995 (Filed with Quarterly Report on Form 10-Q/A for the fiscal quarter ended March 31, 1995, and with Current Report on Form 8-K dated June 19, 1995, and incorporated herein by reference.) 3.6 Certificate of Amendment of Articles of Incorporation of the Registrant, effective December 30, 1996 (Filed with Annual Report on Form 10-K/A for the fiscal year ended December 31, 1996, and incorporated herein by reference.) 3.7 Amended and Restated By-laws of the Registrant, as amended on December 30, 1996 (Filed with Annual Report on Form 10-K/A for the fiscal year ended December 31, 1996, and incorporated herein by reference.) 13 4.1 Certificate of Designation of Series B Convertible Preferred Stock, filed on December 13, 1995 (Filed with Current Report on Form 8-K dated March 8, 1996, and incorporated herein by reference.) 4.2 Certificate of Amendment of Certificate of Designation of Series B Convertible Preferred Stock, effective December 31, 1997 (Filed with Annual Report on Form 10-K/A for the fiscal year ended December 31, 1996, and incorporated herein by reference.) 10.1 Rental Agreement, by and between General Bureau of Hainan State Farms (the Farming Bureau) and Hainan Agricultural Resources Company Limited (Original Chinese version with English Translation filed as Exhibit 10.14 to Annual Report on Form 10-K/A for the fiscal year ended December 31, 1994, and incorporated herein by reference.) 10.2 China Resources Development, Inc., 1995 Stock Option Plan, adopted as of March 31, 1995 (Filed as Exhibit 10.18 to Quarterly Report on Form 10-Q/A for the fiscal quarter ended March 31, 1995, and the Current Report on Form 8-K dated June 19, 1995, and incorporated herein by reference.) 10.3 Contract on Investment in the Xilian Timber Mill between HARC and the State-Run Xilian Farm of Hainan Province dated July 7, 1994, and Supplementary Agreement dated December 24, 1994 (Original Chinese version with English translation filed as Exhibit 10.26 to Annual Report on Form 10-K for the fiscal year ended December 31, 1995, and incorporated herein by reference.) 10.4 Loan Agreement between HARC and the Farming Bureau, dated March 25, 1996, and the supplementary agreement dated December 31, 1996 (Certified English translation of original Chinese version filed as Exhibit 10.28 to Annual Report on Form 10-K/A for the fiscal year ended December 31, 1996,and incorporated herein by reference.) 10.5 Loan Agreement between HARC and the Registrant, dated March 25, 1996 (Certified English translation of original Chinese version filed as Exhibit 10.29 to Annual Report on Form 10-K/A for the fiscal year ended December 31, 1996, and incorporated herein by reference.) 10.6 Rental Agreement between HARC and the Hainan Farming Bureau Testing Center, dated August 9, 1996 (Certified English translation of original Chinese version filed as Exhibit 10.30 to Annual Report on Form 10-K/A for the fiscal year ended December 31, 1996, and incorporated herein by reference.) 10.7 China Resources Development, Inc., Amended and Restated 1995 Stock Option Plan, as amended on December 30, 1996 (Filed as Exhibit 10.34 to Annual Report on Form 10-K/A for the fiscal year ended December 31, 1996, and incorporated herein by reference.) 10.8 Advertising and Media Agreement by and between the Registrant and Marketing Direct Concepts, Inc., dated April 1, 1997 (Filed as Exhibit 10.36 to Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1997, and incorporated herein by reference.) 10.9 Financial Consulting Agreement by and between the Registrant and Integrated Capital Development Group, Inc., dated May 1, 1997 (Filed as Exhibit 10.37 to Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1997, and incorporated herein by reference.) 10.10 Stock Purchase Agreement, by and between HARC and Guilinyang Farm, dated December 29, 1997. (Filed as Exhibit 10.39 to Annual Report on Form 10-K for the fiscal year ended December 31, 1997 and incorporated herein by reference.) 14 10.11 Agreement for the Sale and Purchase of Share in Hainan Zhongwei Agricultural Resources Company Ltd., dated April 30, 1998, by and between Guilinyang Farm and the Company. (Filed as Exhibit 10.41 to Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1998 and incorporated herein by reference.) 10.12 Employment Agreement between the Company and Li Feilie, dated August 1, 1998 (Filed as Exhibit 10.42 to Annual Report on Form 10-K for the fiscal year ended December 31, 1998 and incorporated herein by reference.) 10.13 Employment Agreement between the Company and Tam Cheuk Ho, dated February 1, 1999 (Filed as Exhibit 10.43 to Annual Report on Form 10-K for the fiscal year ended December 31, 1998 and incorporated herein by reference.) 10.14 Employment Agreement between the Company and Wong Wah On, dated February 1, 1999 (Filed as Exhibit 10.44 to Annual Report on Form 10-K for the fiscal year ended December 31, 1998 and incorporated herein by reference.) 10.15 Service Agreement between the Company and Ching Lung Po, dated February 1, 1999 (Filed as Exhibit 10.45 to Annual Report on Form 10-K for the fiscal year ended December 31, 1998 and incorporated herein by reference.) 10.16 Long-Term Sale and Purchase Supplementary Agreement No. 3 by and among Farming Bureau, HARC, First Supply and Second Supply, dated May 21, 1999 (Certified English translation of original Chinese version filed as Exhibit 10.22 to Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1999 and incorporated herein by reference.) 10.17 Assets and Staff Transfer Agreement by and among the Farming Bureau, HARC, First Supply, Second Supply and Sales Centre dated March 3, 2000 (Certified English translation of original Chinese version filed as Exhibit 10.23 to Current Report on Form 8-K dated March 3, 2000, and incorporated herein by reference.) 10.18 Shareholders' Agreement on Business Restructuring by and among the Farming Bureau, the Company and Billion Luck dated March 3, 2000 (Certified English translation of original Chinese version filed as Exhibit 10.24 to Current Report on Form 8-K dated March 3, 2000, and incorporated herein by reference.) 11 Computation of Earnings/(Loss) Per Share (Contained in Financial Statements in Part I, Item I hereof.) 27.1 Financial Data Schedule (Filed herewith. For SEC use only.) (b) During the three months ended March 31, 2000, the Company filed one current report on Form 8-K, dated March 3, 2000. That report reported, in Item 2, the Company's disposition of certain assets in connection with the restructuring of HARC, the cessation of its two primary businesses and the transfer of certain assets, liabilities and related staff to the Farming Bureau. No financial statements were filed therewith. 15 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CHINA RESOURCES DEVELOPMENT, INC. May 15, 2000 By: /s/ Ching Lung Po --------------------------- Ching Lung Po, President By: /s/ Tam Cheuk Ho ---------------------------- Tam Cheuk Ho, Chief Financial Officer 16 EXHIBIT INDEX Exhibit No. Exhibit Description 3.1 Articles of Incorporation of the Registrant, filed on January 15, 1986 (Filed with Annual Report on Form 10-K/A for the fiscal year ended December 31, 1994, and incorporated herein by reference.) 3.2 By-laws of the Registrant (Filed with Annual Report on Form 10-K/A for the fiscal year ended December 31, 1994, and incorporated herein by reference.) 3.3 Certificate of Amendment of Articles of Incorporation of the Registrant, filed on November 18, 1994 (Filed with Annual Report on Form 10-K/A for the fiscal year ended December 31, 1994, and incorporated herein by reference.) 3.4 Certificate of Amendment of Articles of Incorporation of the Registrant, filed on November 18, 1994 (Filed with Annual Report on Form 10-K/A for the fiscal year ended December 31, 1994, and incorporated herein by reference.) 3.5 Certificate of Amendment of Articles of Incorporation of the Registrant, effective March 31, 1995, and filed on June 19, 1995 (Filed with Quarterly Report on Form 10-Q/A for the fiscal quarter ended March 31, 1995, and with Current Report on Form 8-K dated June 19, 1995, and incorporated herein by reference.) 3.6 Certificate of Amendment of Articles of Incorporation of the Registrant, effective December 30, 1996 (Filed with Annual Report on Form 10-K/A for the fiscal year ended December 31, 1996, and incorporated herein by reference.) 3.7 Amended and Restated By-laws of the Registrant, as amended on December 30, 1996 (Filed with Annual Report on Form 10-K/A for the fiscal year ended December 31, 1996, and incorporated herein by reference.) 4.1 Certificate of Designation of Series B Convertible Preferred Stock, filed on December 13, 1995 (Filed with Current Report on Form 8-K dated March 8, 1996, and incorporated herein by reference.) 4.2 Certificate of Amendment of Certificate of Designation of Series B Convertible Preferred Stock, effective December 31, 1997 (Filed with Annual Report on Form 10-K/A for the fiscal year ended December 31, 1996, and incorporated herein by reference.) 10.1 Rental Agreement, by and between General Bureau of Hainan State Farms (the Farming Bureau) and Hainan Agricultural Resources Company Limited (Original Chinese version with English Translation filed as Exhibit 10.14 to Annual Report on Form 10-K/A for the fiscal year ended December 31, 1994, and incorporated herein by reference.) 10.2 China Resources Development, Inc., 1995 Stock Option Plan, adopted as of March 31, 1995 (Filed as Exhibit 10.18 to Quarterly Report on Form 10-Q/A for the fiscal quarter ended March 31, 1995, and the Current Report on Form 8-K dated June 19, 1995, and incorporated herein by reference.) 10.3 Contract on Investment in the Xilian Timber Mill between HARC and the State-Run Xilian Farm of Hainan Province dated July 7, 1994, and Supplementary Agreement dated December 24, 1994 (Original Chinese version with English translation filed as Exhibit 10.26 to Annual Report on Form 10-K for the fiscal year ended December 31, 1995, and incorporated herein by reference.) 17 10.4 Loan Agreement between HARC and the Farming Bureau, dated March 25, 1996, and the supplementary agreement dated December 31, 1996 (Certified English translation of original Chinese version filed as Exhibit 10.28 to Annual Report on Form 10-K/A for the fiscal year ended December 31, 1996,and incorporated herein by reference.) 10.5 Loan Agreement between HARC and the Registrant, dated March 25, 1996 (Certified English translation of original Chinese version filed as Exhibit 10.29 to Annual Report on Form 10-K/A for the fiscal year ended December 31, 1996, and incorporated herein by reference.) 10.6 Rental Agreement between HARC and the Hainan Farming Bureau Testing Center, dated August 9, 1996 (Certified English translation of original Chinese version filed as Exhibit 10.30 to Annual Report on Form 10-K/A for the fiscal year ended December 31, 1996, and incorporated herein by reference.) 10.7 China Resources Development, Inc., Amended and Restated 1995 Stock Option Plan, as amended on December 30, 1996 (Filed as Exhibit 10.34 to Annual Report on Form 10-K/A for the fiscal year ended December 31, 1996, and incorporated herein by reference.) 10.8 Advertising and Media Agreement by and between the Registrant and Marketing Direct Concepts, Inc., dated April 1, 1997 (Filed as Exhibit 10.36 to Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1997, and incorporated herein by reference.) 10.9 Financial Consulting Agreement by and between the Registrant and Integrated Capital Development Group, Inc., dated May 1, 1997 (Filed as Exhibit 10.37 to Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1997, and incorporated herein by reference.) 10.10 Stock Purchase Agreement, by and between HARC and Guilinyang Farm, dated December 29, 1997. (Filed as Exhibit 10.39 to Annual Report on Form 10-K for the fiscal year ended December 31, 1997 and incorporated herein by reference.) 10.11 Agreement for the Sale and Purchase of Share in Hainan Zhongwei Agricultural Resources Company Ltd., dated April 30, 1998, by and between Guilinyang Farm and the Company. (Filed as Exhibit 10.41 to Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1998 and incorporated herein by reference.) 10.12 Employment Agreement between the Company and Li Feilie, dated August 1, 1998 (Filed as Exhibit 10.42 to Annual Report on Form 10-K for the fiscal year ended December 31, 1998 and incorporated herein by reference.) 10.13 Employment Agreement between the Company and Tam Cheuk Ho, dated February 1, 1999 (Filed as Exhibit 10.43 to Annual Report on Form 10-K for the fiscal year ended December 31, 1998 and incorporated herein by reference.) 10.14 Employment Agreement between the Company and Wong Wah On, dated February 1, 1999 (Filed as Exhibit 10.44 to Annual Report on Form 10-K for the fiscal year ended December 31, 1998 and incorporated herein by reference.) 10.15 Service Agreement between the Company and Ching Lung Po, dated February 1, 1999 (Filed as Exhibit 10.45 to Annual Report on Form 10-K for the fiscal year ended December 31, 1998 and incorporated herein by reference.) 10.16 Long-Term Sale and Purchase Supplementary Agreement No. 3 by and among Farming Bureau, HARC, First Supply and Second Supply, dated May 21, 1999 (Certified English translation of original Chinese version filed as Exhibit 10.22 to Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1999 and incorporated herein by reference.) 18 10.17 Assets and Staff Transfer Agreement by and among the Farming Bureau, HARC, First Supply, Second Supply and Sales Centre dated March 3, 2000 (Certified English translation of original Chinese version filed as Exhibit 10.23 to Current Report on Form 8-K dated March 3, 2000, and incorporated herein by reference.) 10.18 Shareholders' Agreement on Business Restructuring by and among the Farming Bureau, the Company and Billion Luck dated March 3, 2000 (Certified English translation of original Chinese version filed as Exhibit 10.24 to Current Report on Form 8-K dated March 3, 2000, and incorporated herein by reference.) 11 Computation of Earnings/(Loss) Per Share (Contained in Financial Statements in Part I, Item I hereof.) 27.1 Financial Data Schedule (Filed herewith. For SEC use only.) 19 EX-27 2 FDS --
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FORM 10-Q REPORT OF CHINA RESOURCES DEVELOPMENT, INC. FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH REPORT. 1,000 RENMINBI YUAN 3-MOS DEC-31-2000 JAN-01-2000 MAR-31-2000 8.28 28,281 93,562 55 0 2,847 214,793 12,280 1,171 342,616 45,385 0 0 3 5 182,580 342,616 1,397 1,397 1,296 1,296 4,649 0 0 8,511 1,957 2,137 0 0 0 2,137 3.60 3.60
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