6-K 1 chainataform6kq3.htm FORM 6-K

FORM 6-K


SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549


Report of Foreign Issuer


Pursuant to Rule 13a – 16 or 15d – 16 of

The Securities Exchange Act of 1934


For November, 2003




CHAI-NA-TA CORP.

Unit 100 – 11300 No. 5 Road

Richmond, BC  V7A 5J7




Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F


Form 20-F – [X]     Form 40-F – [  ]


REPORT

This Form 6-K consists of:


-  

Our news release dated November 17, 2003, titled “Chai-Na-Ta Reports 2003 Third Quarter Results”

-  

Our MD&A for the 2003 Q3 Financial Statements.

-  

Our 2003 Q3 Financial Statements



SIGNATURE



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.




CHAI-NA-TA CORP.


SIGNED “WILMAN WONG”

                                                                      

Wilman Wong

Chief Financial Officer/Corporate Secretary


Chai-Na-Ta Corp.

 

Unit 100 – 11300 No. 5 Road

Richmond, BC

Canada  V7A 5J7

FOR IMMEDIATE RELEASE

 

Toll Free in Canada & USA:

1-800-406-ROOT (7668)

Telephone: (604) 272-4118

Facsimile: (604) 272-4113


 

TSX:  “CC”    OTCBB: “CCCFF”

Web:  www.chainata.com

Chai-Na-Ta Corp. Reports 2003 Third Quarter Results


RICHMOND, BRITISH COLUMBIA – November 17, 2003 – Chai-Na-Ta Corp. (TSX: “CC”; OTCBB: “CCCFF”), the world’s largest supplier of North American ginseng, today announced a smaller net loss of $53,000 ($0.00 per basic share) in the quarter ended September 30, 2003 compared to a net loss of $249,000 ($0.02 per basic share) in the same period last year.


Revenue decreased to $0.5 million in the 2003 third quarter from $3.8 million in the quarter ended September 30, 2002. Third quarter revenue this year resulted mainly from seed sales, since nearly all of the 2002 fall harvest was sold in the first half of 2003. The gross profit margin rose to 71% in the third quarter of 2003 from a negative gross margin of 1% in the same period last year.


“We continue to anticipate that Chai-Na-Ta will be significantly more profitable on an operating earnings basis this year than it was in 2002 – and that net earnings will rise substantially year over year,” said William Zen, Chairman and Chief Executive Officer. “As we expected, ginseng root prices have moved above the $17 per pound range and we believe that they will continue to rise.


“Moreover, our financial position remains very strong, despite the seasonal impact of lower third quarter sales. Our fall harvest is about half completed and it is going well. We anticipate selling some of this root in the fourth quarter of 2003,” Mr. Zen added.


During the first nine months of 2003, revenue fell to $11.8 million from $12.7 million in the same period of the prior year. The gross profit margin was 33% in the nine months ended September 30, 2003 compared to a gross profit margin of 5% in the same period last year. Net earnings were $1.4 million ($0.10 per basic share) in the nine months ended September 30, 2003 compared to a net loss of $0.4 million ($0.02 per basic share) in the prior year period.


Chai-Na-Ta’s cash position at September 30, 2003 was $0.2 million compared to $2.8 million at December 31, 2002. The Company’s working capital position at the end of the 2003 third quarter was a surplus of $9.1 million, compared to a surplus of $12.1 million at December 31, 2002.


“I’m pleased to note that early this month, Chai-Na-Ta moved its headquarters from leased premises in Langley to office space that we bought in nearby Richmond, British Columbia,” said Mr. Zen. “Not only do we have the financial flexibility required to handle this purchase but it represents significant savings in rental payments over the long term. Furthermore, we now have the right premises to set up our first showroom, as we pursue plans to enhance Chai-Na-Ta’s profile.”


Chai-Na-Ta Corp., based in Richmond, British Columbia, is the world’s largest supplier of North American ginseng. The Company farms, processes and distributes North American ginseng as bulk root, and supplies processed material for the manufacture of value-added ginseng-based products.


This news release contains forward-looking statements that reflect the Company’s expectations regarding future events. These forward-looking statements involve risks and uncertainties, and actual events could differ materially from those projected. Such risks and uncertainties include, but are not limited to, the success of the Company’s ongoing research programs, general business conditions, and other risks as outlined in the Company’s periodic filings, Annual Report, and Form 20-F.


FOR FURTHER INFORMATION PLEASE CONTACT:


Chai-Na-Ta Corp.

Wilman Wong

Chief Financial Officer/Corporate Secretary

(604) 272-4118 or (Toll Free) 1-800-406-7668

(604) 272-4113  (FAX)

E-mail:  info@chainata.com

Website: www.chainata.com

Management’s Discussion and Analysis

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003


The following discussion and analysis should be read in conjunction with the unaudited interim consolidated financial statements of the Company and notes thereto. Amounts are expressed in Canadian dollars, unless otherwise specified.


Operating Results

For the three months ended September 30, 2003, revenue decreased 87% to $0.5 million from $3.8 million for the same period last year. Revenue in the third quarter of 2003 was mostly seeds sales and nearly all of the 2002 fall harvest was sold in the previous two quarters. For the nine months ended September 30, 2003, revenue decreased 7% to $11.8 million from $12.7 million for the same period last year.   


The Company recorded a gross profit margin of 71% in the third quarter of 2003 compared to a negative gross margin of 1% in the third quarter of 2002. For the nine months ended September 30, 2003 the Company recorded a gross margin of 33%, as compared to a gross margin of 5% for the nine months ended September 30, 2002. The lower gross margin in 2002 was mainly due to the 2001 harvest in British Columbia being hard hit by rust that reduced the prices of lower grade root.


For the three months ended September 30, 2003, selling, general and administrative expenses were $0.4 million, or 78% of revenue, compared to $0.3 million, or 9% of revenue, for the same period last year. These expenditures were $1.3 million, or 11% of revenue for the nine months ended September 30, 2003, compared to $1.3 million, or 10% of revenue for the same period last year.


The $1 million write-down of crop cost in the nine months ended September 30, 2003 was due to an unusually late frost at one of the Company’s farms in British Columbia, which severely damaged 57 acres of ginseng plants. The surviving plants represent insufficient return on investment to warrant ongoing cultivation.


The net loss was $53,000 ($0.00 per share) and $249,000 ($0.02 per share) for the three months ended September 30, 2003 and 2002, respectively. Net earnings were $1.4 million ($0.10 per share) for the nine months ended September 30, 2003, compared to net loss of $0.4 million ($0.02 per share) for the corresponding period last year.


Financial Position and Liquidity

The cash deficit from operations was $2.7 million for the three months ended September 30, 2003, compared to a surplus of $0.4 million for the same period in 2002. The cash surplus from operations was $2.6 million for the nine months ended September 30, 2003, compared to a surplus of $4.5 million for the same period in 2002.


The Company’s cash position as at September 30, 2003 was $0.2 million, compared to $2.8 million as at December 31, 2002. Cash flow from operations during the nine months period was used for the repayment of short-term borrowings and to finance the increase in ginseng crops and capital assets.


The working capital position of the Company as at September 30, 2003 was a surplus of $9.1 million, compared to a surplus of $12.1 million as at December 31, 2002.


Current and non-current crop costs totaled $24.4 million at September 30, 2003, a net increase of 5.9 million during the nine months ended September 30, 2003 as compared to $18.5 million at December 31, 2002.


Risks and Uncertainties

The Company has not had any significant changes to its risks and uncertainties from those that were disclosed in the Company’s fiscal 2002 Management’s Discussion and Analysis included in the 2002 Annual Report.


Outlook

With 1,221 acres currently under cultivation, the Company remains the market leader in ginseng farming and will continue to focus on reducing costs, increasing efficiency and maximizing production. The Company will also continue its balanced planting strategy in both Ontario and British Columbia growing regions and to explore opportunities to direct bulk roots into value-added markets.


Forward-Looking Statements

As a cautionary note, this MD&A contains forward-looking statements that reflect the Company's expectations regarding future events. Since forward-looking statements address future events and conditions by their very nature, they involve inherent risks and uncertainties. Actual results in each case could differ materially from those currently anticipated in such statements, by reasons of factors such as future changes in root prices.  



         
         
         
         
         

CHAI-NA-TA CORP.

         

Interim Consolidated Financial Statements

Nine-month period ended September 30, 2003

         

(Unaudited - Prepared by Management)

         
         
         
         
         
         





CHAI-NA-TA CORP.

    

Consolidated Balance Sheets

   

 September 30

 

 December 31

In thousands of

 

 2003

 

2002

Canadian dollars

 

(Unaudited)

 

(Audited)

   

 $

 

$

ASSETS

    

Current assets

    

  Cash and cash equivalents

 

           180

 

             2,757

  Accounts receivable

 

             92

 

                137

  Inventory

 

           394

 

             8,083

  Ginseng crops

 

       9,036

 

             7,578

  Prepaid expenses and other assets

 

             76

 

                  86

   

       9,778

 

           18,641

Ginseng crops

 

     15,357

 

           10,922

Capital assets

 

       7,023

 

             6,649

 

 

 

     32,158

 

           36,212

      

LIABILITIES

    

Current liabilities

    

  Short-term borrowings

 

              -   

 

             3,632

  Accounts payable and accrued liabilities

 

           667

 

                772

  Customer deposits

 

              -   

 

             1,994

  Current portion of long-term debt

 

             39

 

                126

   

           706

 

             6,524

Long-term debt

 

             91

 

                  26

Future income taxes

 

       1,444

 

             1,130

 

 

 

       2,241

 

             7,680

SHAREHOLDERS' EQUITY

    

  Share capital

 

     38,200

 

           38,200

  Cumulative translation adjustments

 

          (61)

 

                 (71)

  Deficit

 

 

     (8,222)

 

            (9,597)

 

 

 

     29,917

 

           28,532

 

 

 

     32,158

 

           36,212

      

On behalf of the Board:

    
      
 

 "William Zen"

 

 "Steven Hsieh"

      
 

 William Zen

 

 Steven T.M. Hsieh

 

 Director  

 

 Director

  



CHAI-NA-TA CORP.

        

Consolidated Statements of Deficit

        
         
         
    

 

 

 

 

 

Unaudited

 

Three months ended

 

Nine months ended

in thousands of

 

September 30

 

September 30

 

September 30

 

September 30

Canadian dollars

 

2003

 

2002

 

2003

 

2002

  

$

 

$

 

$

 

$

Balance, beginning of period

 

(8,169)

 

  (10,032)

 

  (9,597)

 

  (9,931)

         

Net earnings (loss) for the period

 

 (53)

 

    (249)

 

  1,375

 

    (350)

Balance, end of period

 

  (8,222)

 

   (10,281)

 

   (8,222)

 

 (10,281)

         
         
         
         
         




CHAI-NA-TA CORP.

        

Consolidated Statements of Operations

        
         
      

 

 

 

Unaudited

 

Three months ended

 

Nine months ended

in thousands of

 

September 30

 

September 30

 

September 30

 

September 30

Canadian dollars

 

2003

 

2002

 

2003

 

2002

  

$

 

$

 

$

 

$

Revenue

 

  485

 

    3,835

 

   11,781

 

 12,689

Cost of goods sold

 

  142

 

        3,860

 

   7,857

 

    12,086

 

 

  343

 

     (25)

 

   3,924

 

     603

         
         

Selling, general, and

        

  administrative expenses

 

  376

 

        345

 

  1,265

 

     1,278

Interest on short-term debt

 

    -   

 

    7

 

    -   

 

      20

Writedown of crop costs

 

     -   

 

       -   

 

  1,000

 

      -   

  

   376

 

   352

 

   2,265

 

    1,298

Operating income/(loss)

 

  (33)

 

    (377)

 

   1,659

 

    (695)

         

Other income (loss)

 

  (6)

 

    38

 

    30

 

       74

Earnings/(loss) before taxes

 

    (39)

 

   (339)

 

  1,689

 

    (621)

Provision for income taxes

 

  (14)

 

      90

 

   (314)

 

      271

         

NET EARNINGS/(LOSS) FOR THE PERIOD

 

 (53)

 

  (249)

 

   1,375

 

    (350)

     

 

 

 

 

Basic earnings/(loss) per share

 

($0.00)

 

($0.02)

 

$0.10

 

($0.02)

Fully diluted earnings/(loss) per share

($0.00)

 

($0.02)

 

$0.04

 

($0.02)

         

Weighted average number of shares used to calculate basic earnings/(loss) per share

 

 14,264,508

 

   14,264,508

 

 14,264,508

 

   14,264,508

         

Weighted average number of shares used to calculate fully diluted earnings/(loss) per share

 

 34,663,657

 

   14,264,508

 

 34,663,657

 

   14,264,508

         


CHAI-NA-TA CORP.

       

Consolidated Statements of Cash Flows

       
    

 

 

 

 

Unaudited

Three months ended

 

Nine months ended

in thousand of

September 30

 

September 30

 

September 30

 

September 30

Canadian dollars

2003

 

2002

 

2003

 

2002

 

$

 

$

 

 $

 

 $

OPERATING ACTIVITIES

       

  Net earnings/(loss) for the period

  (53)

 

 (249)

 

    1,375

 

            (350)

        

Items not affecting cash

       

    Depreciation and amortization

  11

 

    19

 

      50

 

               58

    Gain on disposition of subsidiaries

   -   

 

       -   

 

        -   

 

              (20)

    Future income taxes

   14

 

     (90)

 

     314

 

            (271)

    Writedown of crop costs

   -   

 

       -   

 

    1,000

 

                -   

Net earnings/(loss) after items not affecting cash

    (28)

 

     (320)

 

   2,739

 

            (583)

        

Changes in non-cash operating assets

       

    and liabilities (Note 4)

  (305)

 

   2,709

 

    4,543

 

          9,161

Changes in non-current cash crop costs

(2,350)

 

   (2,008)

 

  (4,653)

 

         (4,076)

 

   (2,683)

 

     381

 

    2,629

 

          4,502

FINANCING ACTIVITIES

       

  Line of credit

      -   

 

       -   

 

        -   

 

         (1,650)

  Short-term borrowings

      -   

 

       -   

 

    (3,632)

 

         (2,982)

  Repayment of long term debt - net

      (4)

 

      (33)

 

    (22)

 

            (474)

 

       (4)

 

    (33)

 

     (3,654)

 

         (5,106)

INVESTING ACTIVITIES

       

  Net proceeds from disposition of subsidiaries

         -   

 

       -   

 

         -   

 

             459

  Purchase of capital assets, net

     (883)

 

     (70)

 

   (1,441)

 

            (480)

 

    (883)

 

  (70)

 

   (1,441)

 

              (21)

EFFECT OF EXCHANGE RATE CHANGES

       

 ON CASH AND CASH EQUIVALENTS

       (1)

 

      6

 

      (111)

 

              (23)

NET INCREASE (DECREASE) IN CASH

       

 AND CASH EQUIVALENTS

   (3,571)

 

  284

 

    (2,577)

 

            (648)

CASH AND CASH EQUIVALENTS

       

  BEGINNING OF THE PERIOD

    3,751

 

    1,155

 

   2,757

 

          2,087

CASH AND CASH EQUIVALENTS

       

  END OF THE PERIOD

     180

 

   1,439

 

      180

 

          1,439

Represented by:

       

 Cash

       180

 

    1,079

 

      180

 

          1,079

 Term deposits

        -   

 

      360

 

         -   

 

             360

 

    180

 

    1,439

 

     180

 

          1,439

        



CHAI-NA-TA CORP.

    

Notes to the Interim Consolidated Financial Statements

       

1.  Summary of significant accounting policies

   
       

a)

Interim financial statements

    
 

These consolidated financial statements have been prepared in accordance with the Canadian Institute of Chartered Accountants’ (“CICA”) recommendations for the preparation of interim financial statements. Certain information and note disclosures normally included in the Company’s annual consolidated financial statements are not presented. These interim consolidated financial statements and notes should be read in conjunction with the Company’s annual consolidated financial statements for the year ended December 31, 2002.  These interim consolidated financial statements are not necessarily indicative of the results to be expected for the year ending December 31, 2003.

      

b)

Use of estimates

    
 

The presentation of financial statements in conformity with Canadian generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and other disclosures as at the end of or during the reporting periods.  Significant estimates are used for, but not limited to, the accounting for doubtful accounts, net realizable value of assets, future income taxes and contingencies.  Actual results may differ from those estimates.

  

c)

These interim consolidated financial statements follow the same accounting policies and methods of their application as the Company’s most recent annual consolidated financial statements except for the changes in accounting principles for the disclosure of guarantees described below.

       
 

Disclosure of Guarantees


The Company has adopted the recommendations of the Accounting Guideline AcG-14 with respect to Disclosure of Guarantees effective January 1, 2002.  This section describes the nature and types of guarantees, provides examples of those guarantees covered by the scope of AcG-14, and details the prescribed disclosures. There is no material impact on the financial statements resulting from the adoption of AcG-14 either in the current period or the prior period presented.

     

2.  Earnings (loss) per common share

    
       

Basic earnings (loss) per share is computed by dividing net earnings (loss) available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted earnings (loss) per share reflects the potential dilution of common shares by including other common shares equivalents in the weighted average number of common shares outstanding for a period, if dilutive. Common share equivalents consist of convertible preferred shares and the incremental number of shares issuable upon the exercise of stock options and share purchase warrants.

 

 

 

 

 

 

 

   

Net Earnings

   
   

(Loss)

Number of shares

 

Earnings

Unaudited

 

in thousands

in thousands

 

(Loss)

Three months ended

(numerator)

(denominator)

 

per share

   

$

  

$

September 30, 2003

    

Basic

 

                  (53)

               14,265

 

        (0.00)

Effect of common share equivalents

                     -   

                        -   

 

               -   

Diluted

 

                  (53)

               14,265

 

        (0.00)

       

September 30, 2002

    

Basic

 

                  (249)

                 14,265

 

          (0.02)

Effect of common share equivalents

                     -   

                        -   

 

              -   

Diluted

 

                  (249)

                 14,265

 

          (0.02)

       

 

 

 

 

 

 

 

   

 Net Earnings

   
   

(Loss)

Number of shares

 

Earnings

Unaudited

 

in thousands

in thousands

 

(Loss)

Nine months ended

(numerator)

(denominator)

 

per share

   

$

  

$

September 30, 2003

    

Basic

 

               1,375

               14,265

 

          0.10

Effect of common share equivalents

                     -   

               20,399

 

        (0.06)

Diluted

 

               1,375

               34,664

 

          0.04

       

September 30, 2002

    

Basic

 

                  (350)

                 14,265

 

          (0.02)

Effect of common share equivalents

                     -   

                        -   

 

              -   

Diluted

 

                  (350)

                 14,265

 

          (0.02)

       

At September 30, 2003 there were 10,000 stock options outstanding that could potentially dilute basic earnings per share in the future, but were not included in the computation of diluted earnings per share because the effects would have been anti-dilutive.

       

3.  Share capital

    

 

 

 

 

 

 

 

Unaudited

  

Number of

  

In thousands

 

 

Shares

 

Amount

      

$

Common Shares

     

Balance as at December 31, 2002 and September 30, 2003

                 14,265

 

       24,321

       

Preferred Shares

    

Balance as at December 31, 2002 and September 30, 2003

                 20,399

 

       13,879

 

 

 

 

 

 

      38,200

       
       

4.  Changes in non-cash operating items

   

 

 

 

 

 

 

 

Unaudited

  

Three months ended

in thousands of

  

September 30

 

September 30

Canadian dollars

 

 

2003

 

2002

    

$

 

$

Accounts receivable

 

                     (46)

 

             (17)

Inventory

  

                     124

 

         3,749

Ginseng crops

  

                  (570)

 

           (514)

Prepaid expenses and other assets

 

                     100

 

                4

Accounts payable and accrued liabilities

 

                       87

 

               (5)

Customer deposits

 

                          -

 

           (508)

 

 

 

 

                  (305)

 

         2,709

       
       

 

 

 

 

   

Unaudited

  

Nine months ended

in thousands of

  

September 30

 

September 30

Canadian dollars

 

 

2003

 

2002

Accounts receivable

 

                       45

 

            169

Inventory

  

                  7,653

 

       10,066

Ginseng crops

  

               (1,226)

 

            388

Prepaid expenses and other assets

 

                       10

 

              34

Accounts payable and accrued liabilities

 

                  (105)

 

           (140)

Customer deposits

 

               (1,834)

 

        (1,356)

 

 

 

 

                  4,543

 

         9,161

       

5.  Segmented Information

    
       

The Company operates in one industry segment and three geographic regions.

 
       

Unaudited

 

 

Three months ended

in thousands of

  

September 30

 

September 30

Canadian dollars

 

 

2003

 

2002

Revenue from operations located in:

 

$

 

 $

 

Canada

  

                     391

 

            102

 

United States

 

                          -

 

              62

 

Asia

 

 

                       94

 

         3,671

 

 

 

 

                     485

 

         3,835

Net earnings (loss) from operations located in:

$

 

 $

 

Canada

  

                         9

 

            333

 

United States

 

                       (1)

 

              24

 

Asia

 

 

                     (61)

 

           (606)

 

 

 

 

                     (53)

 

           (249)

       
       

Unaudited

 

 

Nine months ended

in thousands of

  

September 30

 

September 30

Canadian dollars

 

 

2003

 

2002

Revenue from operations located in:

 

$

 

 $

 

Canada

  

                     400

 

            102

 

United States

 

                     169

 

            145

 

Asia

 

 

               11,212

 

       12,442

 

 

 

 

               11,781

 

       12,689

Net earnings (loss) from operations located in:

$

 

 $

 

Canada

  

                     482

 

            598

 

United States

 

                       68

 

              57

 

Asia

 

 

                     825

 

        (1,005)

 

 

 

 

                  1,375

 

           (350)

       

Long-lived assets comprise all assets not classfied as current assets.

  
       

Unaudited

 

 

 

in thousands of

  

September 30

 

September 30

Canadian dollars

 

 

2003

 

2002

Long-lived assets from operations located in:

$

 

 $

 

Canada

  

               22,374

 

       23,587

 

United States

 

                          -

 

                -

 

Asia

 

 

                         6

 

              24

 

 

 

 

               22,380

 

       23,611

       

Major customers:

    
 

For the nine months ended September 30, 2003, the Company had sales to two customers

 

that accounted for $11,105,000 of revenue (September 30, 2002 - three customers, $11,606,000)

       

6.  Reconciliation of earnings to U.S. GAAP

   
       

Unaudited

 

 

Three months ended

in thousands of

  

September 30

 

September 30

Canadian dollars

 

 

2003

 

2002

    

$

 

 $

Net loss under Canadian GAAP

 

                     (53)

 

           (249)

Adjustments to reflect GAAP differences:

    
 

 Accounting for interest

 

                         4

 

              44

 

 Financial instruments

 

                          -

 

              38

Net loss per US GAAP

 

                     (49)

 

           (167)

Basic loss per share - US GAAP

 

($0.00)

 

($0.01)

Fully diluted loss per share - US GAAP

 

($0.00)

 

($0.01)

       
       

Unaudited

 

 

Nine months ended

in thousands of

  

September 30

 

September 30

Canadian dollars

 

 

2003

 

2002

    

$

 

 $

Net earnings/(loss) under Canadian GAAP

 

                  1,375

 

           (350)

Adjustments to reflect GAAP differences:

    
 

 Accounting for interest

 

                     637

 

            705

 

 Financial instruments

 

                       54

 

            106

Net income per US GAAP

 

                  2,066

 

            461

Basic earnings per share - US GAAP

 

$0.14

 

$0.03

Fully diluted earnings per share - US GAAP

$0.06

 

$0.01

       

Basic earnings per share were diluted by the outstanding convertible preferred shares and stock options as at September 30, 2003, except where such a dilution would be anti-dilutive.