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,
$0.001 par value, as of May 15, 2000.
Page 1 of 21 pages Exhibit Index on Page 18
<PAGE>
CONVENTIONS
Unless otherwise specified, all references in this report to "U.S.
Dollars," "Dollars," "US$," 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
<PAGE>
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)
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
Note 2000 1999 2000
---- ---- ----
RMB RMB US$
<S> <C> <C> <C>
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
======== ======== ========
</TABLE>
* 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
<PAGE>
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)
<TABLE>
<CAPTION>
March 31, December 31, March 31
2000 1999 2000
RMB RMB US$
Notes (Unaudited) (Note) (Unaudited)
<S> <C> <C> <C> <C>
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$0.001 par value
Authorized -- 320,000 shares in 2000 and 1999
Issued and outstanding -- 320,000
in 2000 and 1999 3 3 --
Additional paid-in capital 156,632 156,632 18,917
Reserves 26,830 26,830 3,240
Accumulated deficits (881) (3,018) (106)
Accumulated other comprehensive loss (1) (18) --
------------ ------------ ------------
TOTAL SHAREHOLDERS' EQUITY 182,588 180,434 22,052
------------ ------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY 342,616 393,597 41,379
============ ============ ============
</TABLE>
Note: The balance sheet at December 31, 1999 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
See notes to condensed consolidated financial statements.
4
<PAGE>
CHINA RESOURCES DEVELOPMENT, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2000
(Amounts in thousands)
<TABLE>
<CAPTION>
Accumulated
Series B Additional other
Common preferred paid-in Accumulated comprehensive
stock stock capital Reserves deficits loss Total
RMB RMB RMB RMB RMB RMB RMB
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at January
1, 2000 5 3 156,632 26,830 (3,018) (18) 180,434
Net income - - - - 2,137 - 2,137
Currency translation
adjustment - - - - - 17 17
-------
Comprehensive
income 2,154
-------
------ ------ ------- ------ ------- ------ -------
Balance at March
31, 2000 5 3 156,632 26,830 (881) (1) 182,588
====== ====== ======= ====== ======= ====== =======
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE>
CHINA RESOURCES DEVELOPMENT, INC., AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(Amounts in thousands)
<TABLE>
<CAPTION>
Three months ended March 31,
----------------------------
2000 1999 2000
---- ---- ----
RMB RMB US$
<S> <C> <C> <C>
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
========== ========== ==========
</TABLE>
See notes to condensed consolidated financial statements.
6
<PAGE>
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
<PAGE>
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
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
RMB RMB
<S> <C> <C>
Raw materials 416 -
Work in progress 160 -
Finished goods 2,271 1,702
---------- ----------
2,847 1,702
====== ======
</TABLE>
4. PROPERTY AND EQUIPMENT, NET
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
RMB RMB
<S> <C> <C>
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
====== ======
</TABLE>
8
<PAGE>
CHINA RESOURCES DEVELOPMENT, INC., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--(Continued)
(Amounts in thousands)
5. SEGMENT FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Three months ended
March 31, 2000
RMB
<S> <C>
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
==========
</TABLE>
9
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
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.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> RENMINBI YUAN
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<EXCHANGE-RATE> 8.28
<CASH> 28,281
<SECURITIES> 93,562
<RECEIVABLES> 55
<ALLOWANCES> 0
<INVENTORY> 2,847
<CURRENT-ASSETS> 214,793
<PP&E> 12,280
<DEPRECIATION> 1,171
<TOTAL-ASSETS> 342,616
<CURRENT-LIABILITIES> 45,385
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0
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<COMMON> 5
<OTHER-SE> 182,580
<TOTAL-LIABILITY-AND-EQUITY> 342,616
<SALES> 1,397
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<CGS> 1,296
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<INCOME-PRETAX> 8,511
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<NET-INCOME> 2,137
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