UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended: September 30, 2000
Commission file Number: 0-18259
AG-BAG INTERNATIONAL LIMITED
(Exact name of registrant as specified in its charter)
Delaware 93-1143627
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
2320 SE Ag-Bag Lane, Warrenton OR 97146
(Address of principal executive offices) (Zip Code)
(503)861-1644
(Registrant's telephone number, including area code)
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 filing
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:
Common Stock, $.01 par value per share - 12,061,991 shares outstanding as of
October 12, 2000
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PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements.
AG-BAG INTERNATIONAL LIMITED
CONDENSED BALANCE SHEETS
ASSETS
September 30 December 31
(Unaudited)
2000 1999 1999
---------- ---------- ----------
Current assets:
Cash and cash equivalents $ 292,182 $ 656 $ 511,910
Accounts receivable 6,241,991 5,986,006 1,875,777
Inventories 8,574,248 6,805,406 7,168,740
Deferred income tax 355,608 294,000 121,000
Other current assets 222,748 509,296 305,289
---------- ---------- ----------
Total current assets 15,686,777 13,595,364 9,982,716
Deferred income tax - 41,000 -
Intangible assets, less
accumulated amortization 23,699 40,358 35,562
Property, plant and equipment
less accumulated depreciation 3,947,811 3,974,357 4,162,992
Other assets 540,438 488,968 393,969
---------- ---------- ----------
Total assets $20,198,725 $18,140,047 $14,575,239
========== ========== ==========
(Continued)
2
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AG-BAG INTERNATIONAL LIMITED
CONDENSED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
September 30 December 31
(Unaudited)
2000 1999 1999
---------- ---------- ----------
Current liabilities:
Notes payable to bank $ 3,492,098 $ 1,162,824 $ -
Current portion of long term
debt and capital lease
obligations 323,486 378,217 378,568
Current portion of notes
payable to shareholders' - 11,085 6,523
Accounts payable 1,553,423 1,948,741 1,133,994
Accrued expenses and other
current liabilities 1,485,028 1,359,725 1,295,745
Income tax payable 524,652 888,352 12,652
---------- ---------- ----------
Total current liabilities 7,378,687 5,748,944 2,827,482
Long term debt and capital
lease obligation, less
current portion 2,093,433 2,041,635 2,113,817
Deferred income taxes 69,000 - 7,000
---------- ---------- ----------
Total liabilities 9,541,120 7,790,579 4,948,299
---------- ---------- ----------
Commitments
Shareholders' equity:
Preferred stock, $4LV 8 1/2%
nonvoting 696,000 696,000 696,000
Common stock, $.01 par value 120,619 120,619 120,619
Additional paid-in capital 9,210,211 9,210,211 9,210,211
Retained earnings(deficit) 630,775 322,638 ( 399,890)
---------- ---------- ----------
Total shareholders' equity 10,657,605 10,349,468 9,626,940
---------- ---------- ----------
Total liabilities and
shareholders' equity $20,198,725 $18,140,047 $14,575,239
========== ========== ==========
See Notes to Condensed Financial Information
3
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<TABLE>
<CAPTION>
AG-BAG INTERNATIONAL LIMITED
CONDENSED STATEMENT OF SHAREHOLDERS' EQUITY
(Unaudited)
Preferred Stock Common Stock Paid-In Retained
Shares Amount Shares Amount Capital Earnings Total
------ ------ ------ ------ ------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance December 31, 1999 174,000 $696,000 12,061,991 $120,619 $9,210,211 $ ( 399,890) $ 9,626,940
Preferred stock dividends (14,790) (14,790)
Net loss ( 32,857) ( 32,857)
------- ------- ---------- ------- --------- --------- -----------
Balance March 31, 2000 174,000 696,000 12,061,991 120,619 9,210,211 ( 447,537) 9,579,293
Preferred stock dividends (14,790) (14,790)
Net income 596,700 596,700
------- ------- ---------- ------- --------- --------- -----------
Balance June 30, 2000 174,000 696,000 12,061,991 120,619 9,210,211 134,373 10,161,203
Preferred stock dividends (14,790) (14,790)
Net income 511,192 511,192
------- ------- ---------- ------- --------- --------- -----------
Balance September 30, 2000 174,000 $696,000 12,061,991 $120,619 $9,210,211 $ 630,775 $10,657,605
======= ======= ========== ======= ========= ========== ============
</TABLE>
See Notes to Condensed Financial Information
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AG-BAG INTERNATIONAL LIMITED
CONDENSED STATEMENTS OF OPERATIONS
Three Months
Ended September 30
(Unaudited)
----------------------
2000 1999
---- ----
Net sales $10,701,907 $12,846,414
Cost of sales 8,272,967 9,616,580
--------- ---------
Gross profit from operations 2,428,940 3,229,834
Selling expenses 903,318 977,154
Administrative expenses 708,179 739,604
Research and development expenses 22,088 82,432
--------- ---------
Income from operations 795,355 1,430,644
Other income (expense):
Interest income 10,176 8,186
Interest expense (141,380) (105,649)
Miscellaneous 55,955 113,664
--------- ---------
Income before provision for
income taxes 720,106 1,446,845
Provision for income taxes 208,914 577,000
--------- ---------
Net income $ 511,192 $ 869,845
========== =========
Basic and diluted net income
per common share $ .04 $ .07
========== =========
Basic and diluted weighted average
number of common shares outstanding 12,061,991 12,061,991
========== ==========
See Notes to Condensed Financial Information
5
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AG-BAG INTERNATIONAL LIMITED
CONDENSED STATEMENTS OF OPERATIONS
Nine Months
Ended September 30
(Unaudited)
----------------------
2000 1999
---- ----
Net sales $27,036,572 $28,382,079
Cost of sales 20,892,995 21,316,274
--------- ---------
Gross profit from operations 6,143,577 7,065,805
Selling expenses 2,563,225 2,596,309
Administrative expenses 1,935,839 2,035,038
Research and development expenses 105,596 180,837
--------- ---------
Income from operations 1,538,917 2,253,621
Other income (expense):
Interest income 23,167 10,225
Interest expense (351,576) (264,592)
Miscellaneous 187,441 225,055
--------- ---------
Income before provision for
income taxes 1,397,949 2,224,309
Provision for income taxes 322,914 868,000
--------- ---------
Net income $ 1,075,035 $ 1,356,309
========= =========
Basic and diluted net income
per common share $ .09 $ .11
========= =========
Basic and diluted weighted average
number of common shares outstanding 12,061,991 12,061,991
========== ==========
See Notes to Condensed Financial Information
6
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AG-BAG INTERNATIONAL LIMITED
CONDENSED STATEMENTS OF CASH FLOWS
Nine Months
Ended September 30
(Unaudited)
--------------------------
2000 1999
---- ----
Cash flows from operating activities:
Net income $ 1,075,035 $ 1,356,309
Adjustments to reconcile net income
to net cash used in operating activities:
Depreciation and amortization 457,353 418,954
Inventory obsolescence reserves 196,000 338,500
Loss(gain)on disposition of fixed assets (100) 1,394
Deferred income taxes (172,608) -
Changes in assets and liabilities:
Accounts receivable (4,366,214) (3,652,094)
Inventories (1,560,009) (1,426,947)
Other current assets 82,541 ( 48,604)
Accounts payable 419,429 1,116,819
Accrued expenses and other current
liabilities 189,283 39,715
Income tax payable 512,000 848,716
Other assets (146,469) (89,543)
---------- ----------
Net cash used in operating activities (3,313,759) (1,096,781)
---------- ----------
Cash flows from investing activities:
Capital expenditures (274,708) (230,397)
Proceeds from disposition of fixed assets 3,000 8,000
---------- ----------
Net cash used in investing activities (271,708) (222,397)
---------- ----------
Cash flows from financing activities:
Net proceeds from line of credit 3,492,098 1,162,824
Principal payments on debt (306,566) (283,976)
Proceeds from issuance of debt 231,100 136,752
Payment of shareholders' notes (6,523) (13,010)
Payment of preferred dividends (44,370) (44,370)
---------- ----------
Net cash provided by financing
activities 3,365,739 958,220
---------- ----------
Net decrease in cash (219,728) (360,958)
Cash and cash equivalents at beginning
of period 511,910 361,614
---------- -----------
Cash and cash equivalents at end of period $ 292,182 $ 656
========= ==========
See Notes to Condensed Financial Information
7
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AG-BAG INTERNATIONAL LIMITED
Notes to Condensed Financial Information
(Unaudited)
Note 1 - Description of Business and Summary of Significant
Accounting Policies
--------------------------------------------------------------------------------
The accompanying unaudited condensed financial statements have been prepared in
accordance with the instructions to Form 10-Q. The condensed balance sheet,
statement of operations, shareholders' equity and cash flows for the periods
ended September 30, 2000 have been reviewed by the Company's independent
accountants in accordance with the professional standards and procedures as set
forth in Statement of Auditing Standards No. 71 (SAS 71). SAS 71 procedures for
conducting a review of interim financial information generally are limited to
inquiries and analytical procedures concerning significant accounting matters
relating to the financial information to be reported. They do not include all
information and footnotes necessary for a fair presentation of financial
position and results of operations and cash flows in conformity with generally
accepted accounting principles. These condensed financial statements should be
read in conjunction with the financial statements and related notes contained in
the Company's Annual Report on Form 10-K for the year ended December 31, 1999.
In the opinion of Management, all adjustments considered necessary for a fair
presentation have been included in the interim period. Operating results for the
periods ended September 30, 2000 are not necessarily indicative of the results
that may be expected for the year ended December 31, 2000.
Inventories
-----------
Inventories consist of the following:
September 30 December 31
(Unaudited)
2000 1999 1999
---------- ---------- ----------
Finished goods $5,743,153 $5,102,367 $5,992,377
Work in process $2,094,715 $1,099,556 $1,131,439
Raw materials $ 736,380 $ 603,483 $ 44,924
---------- ---------- ----------
Total $8,574,248 $6,805,406 $7,168,740
========== ========== ==========
Provision for Income Taxes
--------------------------
The Company's effective income tax rate of approximately 29.01% in the third
quarter of 2000 and 23.10% for the nine months ended September 30, 2000 is less
than statutory tax rate due to the
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recognition of $100,000 of research and development credits in the third quarter
of 2000.
Other Comprehensive Income
--------------------------
For 1999 and through September 30, 2000, the Company had no items of other
comprehensive income. Thus, net income is equal to total comprehensive income.
Statement of Cash Flows
-----------------------
The Company transferred $75,717 from inventory held for sale to rental equipment
and $117,216 from rental equipment to inventory held for sale during 2000.
Reclassifications
-----------------
Certain reclassifications have been made to the financial statements for the
periods presented from amounts previously reported to conform with
classifications currently adopted. Such reclassifications had no effect on
previously reported shareholders' equity or results of operations.
9
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Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
Results of Operations
---------------------
Reference is made to Item 7 of "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included in the Company's annual
report on Form 10-K for the year ended December 31, 1999, on file with the
Securities and Exchange Commission. The following discussion and analysis
pertains to the Company's results of operations for the three-month period ended
September 30, 2000, compared to the results of operations for the three-month
period ended September 30, 1999, and to the results of operations for the
nine-month period ended September 30, 2000, compared to the results of
operations for the nine-month period ended September 30, 1999, and to changes in
the Company's financial condition from December 31, 1999 to September 30, 2000.
The core business of the Company is historically seasonal due to the
harvest seasons in North America and Europe. The Company's machinery tends to be
purchased in anticipation of the next harvest season, so most of the sales of
machinery occur in the spring and summer. This requires the Company to carry
significant amounts of inventory to meet rapid delivery requirements of
customers. Bag sales tend to occur as the harvest season approaches in the
summer, and during the harvest season in the fall.
Approximately 95% of the Company's business is concentrated in the Northern
Hemisphere resulting in between 70-75% of the Company's revenue being generated
during the spring and summer (2nd and 3rd Quarters). The following table
outlines the percentage of revenue over the past three years by quarter:
Quarter 1997* 1998 1999
------- ---- ---- ----
1st 14% 17% 15%
2nd 40% 35% 33%
3rd 35% 35% 39%
4th 11% 13% 13%
* In addition to seasonal factors, revenues which normally would have occurred
in the first quarter of 1997 were not earned until the second quarter due to the
delay in the start up of the Company's new production facility in Blair,
Nebraska.
Sales for the quarter ended September 30, 2000 declined 16.69% to
$10,701,907 compared to $12,846,414 for the quarter ended September 30, 1999.
Sales for the nine-month period ended September 30, 2000 declined 4.74% to
$27,036,572 compared to $28,382,079 for the nine-month period ended September
30, 1999. Sales for the quarter and nine-month period ended September 30, 2000
were affected by continued low U.S. milk prices, despite supplemental grain feed
costs remaining low which helped farmers continue to have farm operating funds
available. Additionally, competition in the silage bag market continued to
increase as farmers look to the most economic bag, not
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considering overall quality, customer service and recycling of the used plastic,
offered by the Company. Given the current economic situation in the farming
sector, the tightening of credit by financial institutions and higher interest
rates, farmers have become cautious on purchases of farm machinery and equipment
until there is upward movement in milk prices.
Machine revenue for the third quarter of 2000 declined 33% (due largely
to lower unit sales of the Company's smaller bagging machines) and bag revenue
declined 9% compared to the third quarter of 1999. Machine revenue for the
nine-month period ended September 30, 2000 declined 7% and bag revenue for the
nine-month period ended September 30, 2000 declined 3% compared to the same
period in 1999. Machine sales of the Company are directly tied to farmers'
income and therefore their ability to purchase new equipment. The Company's bag
and parts sales are driven by the total number of bagging machines that are in
the marketplace. However, there is not a perfect correlation between the
Company's bag sales and machine sales, as the Company's and competitors' bags
are interchangeable on all bagging machinery in the industry.
Although the Company sells its product primarily through a worldwide
dealer network, certain sales are made directly to large volume customers when a
dealer is not present in the customer's geographic market. For each of the last
3 years, the Company estimates direct sales at between 30-35% of total sales and
the Company expects this historical sales mix to remain relatively constant. The
gross margins on direct sales are typically within 2 to 3 percent of those sales
realized through the Company's dealer network. However, various economic, volume
and market factors in the geographic area impact the ultimate margin.
Gross profit as a percentage of sales declined 2.44% for the quarter
ended September 30, 2000 and 2.17% for the nine-month period ended September 30,
2000, compared to the same periods in 1999. The decline resulted from lower
margins on bags in certain geographic, highly competitive, high volume areas.
The decline was also the result of lower margins on machinery during the quarter
and nine-month periods, as a result of the mix of machines models sold.
11
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Selling expenses for the quarter ended September 30, 2000 decreased
7.56% to $903,318 compared to $977,154 for the quarter ended September 30, 1999.
Selling expenses for the nine-month period ended September 30, 2000 decreased
1.27% to $2,563,225 compared to $2,596,309 for the nine-month period ended
September 30, 1999. The decrease for the quarter and nine-month period was the
result of lower sales travel expenses which were offset by increased advertising
and promotional expenses.
Administrative expenses for the quarter ended September 30, 2000
decreased 4.25% to $708,179 compared to $739,604 for the period ended September
30, 1999. Administrative expenses for the nine-month period ended September 30,
2000 decreased 4.87% to $1,935,839 in comparison to $2,035,038 for the
nine-month period ended September 30, 1999. The decrease for the quarter and
nine-month period was the result of lower professional fees relating to ongoing
litigation which were offset by higher administrative personnel, general and
administrative operating overheads, and higher directors fees.
Research and development expenses for the quarter ended September 30,
2000 decreased 73.20% to $22,088 compared to $82,432 for the quarter ended
September 30, 1999. Research and development expenses for the nine-month period
ended September 30, 2000 decreased 41.61% to $105,596 compared to $180,837 for
the nine-month period ended September 30, 1999. The decrease for the quarter and
nine-month period was the result of completed research on various projects
undertaken regarding new silage and nutritional studies of bagged feed and their
effects on animal production. The Company continues its ongoing research related
to new silage and environmental machine development.
Interest expense for the quarter ended September 30, 2000 increased
33.82% to $141,380 in comparison to $105,649 for the period ended September 30,
1999. Interest expense for the nine-month period ended September 30, 2000
increased 32.87% to $351,576 compared to $264,592 for the nine-month period
ended September 30, 1999. The increase for the quarter and nine-month period was
the result of the Company utilizing a larger portion of its credit facilities
from increased production for seasonal inventory demands, coupled with higher
interest rates and some extended term sales offered during the quarter to remain
competitive.
The Company has undergone a study with a consulting firm to determine
if costs associated with the Company's research and development activities were
eligible for research and development tax credits in its open tax years. The
Company has completed the study and filed the necessary forms for its 1999 tax
year during the third quarter of 2000 generating net tax credit benefits of
approximately $100,000. The Company filed the necessary forms through its 1998
open tax years during the second quarter of 2000, generating net tax credit
benefits of approximately $170,000. The Company's effective income tax rate was
approximately 29.01% in the third quarter of 2000 and 23.10% for the nine months
ended September 30, 2000. Excluding the benefit of the research and development
tax credit, the income
12
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tax rates would have been 36.23% and 37.91%, respectively. The Company's
effective tax rates were 39.90% in the third quarter of 1999 and 39.02% for the
nine-months ended September 30, 1999.
Net income for the quarter ended September 30, 2000 decreased 41.23% to
$511,192 compared to $869,845 for the quarter ended September 30, 1999. Net
income for the nine-month period ended September 30, 2000 decreased 20.74% to
$1,075,035 compared to $1,356,309 for the nine-month period ended September 30,
1999. The decline for the quarter and nine-month period was the result of lower
sales caused by continued low U.S. milk prices, coupled with lower gross profit
from increased competition and product mix of machinery models sold, in addition
to higher interest costs incurred. These factors were offset by lower selling,
administrative, research and income tax expense (as discussed above).
Year 2000
---------
The Company did not experience any computer system transitional
problems as a result of the Year 2000 "bug". Management does not expect any year
2000 transitional issues to have a material impact on the operations, cash flows
or financial condition of the Company.
Liquidity and Capital Resources
-------------------------------
The seasonal nature of the northern hemisphere farming industry, the
production time for equipment and the time required to prepare bags for use
requires the Company to package and carry high inventories to meet rapid
delivery requirements. In particular, the Company must maintain a significant
level of bags during the spring and summer to meet the sales demands during the
harvest season. The Company uses working capital and trade credit to increase
its inventory so that it has sufficient inventory available to meet its seasonal
sales demands.
The Company relies on its suppliers to provide trade credit to enable
the Company to build its inventory. The Company's suppliers have provided
sufficient trade credit to meet the demand to date and management believes this
will continue. No assurance can be given that suppliers will continue to provide
sufficient trade credit in the future.
13
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Accounts receivable increased 4.28% at September 30, 2000 to $6,241,991
compared to $5,986,006 at September 30, 1999. The increase in accounts
receivable was the result of some extended term sales offered during the quarter
to remain competitive, coupled with the fact that a large amount of sales
occurred during the last half of the quarter.
Inventory increased 25.99% at September 30, 2000 to $8,574,248, compared
to $6,805,406 at September 30, 1999. The increase in inventory resulted from
increased production during the quarter to maintain production efficiencies and
to meet late seasonal demands and orders, and to have bags and machinery
available for the Company's fourth quarter seasonal ordering and flooring
programs.
The current asset, deferred income taxes, increased 20.96% at September
30, 2000 to $355,608 compared to $294,000 at September 30, 1999. The increase
was primarily the result of research tax credit benefits.
Other current assets decreased 56.26% at September 30, 2000 to $222,748
compared to $509,296 at September 30, 1999. The decrease was the result of lower
deposits and prepaid expenses.
Intangible assets at September 30, 2000 decreased 41.28% to $23,699
compared to $40,358 at September 30, 1999. The decrease was the result of normal
amortization expense.
The Company has a domestic operating line of credit with a limit of
$5,000,000, secured by accounts receivable, inventory, fixed asset blanket and
general intangibles. As of September 30, 2000, $3,492,098 had been drawn under
the credit line. On January 3, 2000, the Company obtained a $500,000 equipment
acquisition line for the purchase of new business equipment for the year 2000.
The equipment line is secured by a fixed asset lien on new equipment purchased.
As of September 30, 2000, $231,100 had been drawn under this equipment
acquisition line. Management believes that, funds generated from operations, its
operating line of credit and equipment line of credit, will be sufficient to
meet the Company's cash requirements through 2000.
Risk Factors
------------
The information set forth in this report relating to matters that are not
historical facts are "forward-looking statements" within the meaning of Section
21E of the Securities Exchange Act of 1934 and involve risks and uncertainties
which could cause actual results to differ materially from those set forth
below. Such risks and uncertainties include, but are not limited to, the
following:
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o We are dependent on the Dairy Industry
More than 75% of our revenues come from the dairy industry.
o A downturn in the dairy industry could cause a reduction in the Company's
revenues.
The Company's sales are highly correlated with the price of milk
products and revenues of the dairy industry. When dairy farmers make
money, they buy the Company's products. When dairy farmers are not
making money, the Company's sales decline.
o The Company's revenues are seasonal and dependent on weather conditions.
The core business of the Company is dependent on weather conditions
during the harvest seasons in North America and Europe. Adverse weather
conditions affect farmers' crops and reduce demand for the Company's
products. Approximately 70%-75% of the Company's revenue is generated
in the second and third quarters.
o The Company may lose one or both of the two class action lawsuits pending
against it.
Two class action lawsuits, both alleging antitrust violations, have
been filed against the Company and others. If the Company's efforts to
dismiss or favorably resolve the suits fails, the Company could incur
additional and significant litigation costs and experience a drain on
management and other resources. If the plaintiffs succeed in
establishing liability and obtain a judgment for damages, the award
could exceed the Company's entire net worth.
o The Company's intellectual property protection may not be adequate.
The Company has patents on its basic bagging machines and patents
pending on additional machines, bags and systems for silage bagging,
grain bagging and hay/straw bale bagging. The Company may not obtain
these patents and our patents may not withstand litigation challenges.
If the Company's patents do not withstand litigation challenges, the
Company's rights in its bag and machine technology could be diminished
or eliminated. Moreover, the issuance of patents covering any of the
Company's products may be insufficient to prevent competitors from
duplicating the Company's products. The patent laws of other countries
may differ from those of the United States as to the patentability of
the Company's products and processes, and the degree of protection
afforded by foreign patents may be different from that in the United
States.
15
<PAGE>
o The Company relies on one principal supplier for its bags.
The Company purchases nearly all of its bags from one supplier under a
long-term requirements contract. Any disruption of the manufacturing
process could affect that Company's ability to supply the Company's
needs, and could adversely affect the Company's sales.
o The Company's pricing is dependent on the price of resin.
The prices that the Company pays for bags, which account for
approximately half of our annual sales, are fixed annually in advance
and are tied directly to the price of resin. Resin prices have
historically been subject to significant price volatility. Increases in
the price of bags could adversely affect our profit margins if we are
unable to pass along the price increase, and would likely affect our
revenues if alternatives to our product become more attractive because
of the price increases.
o The Company's stock is quoted on the OTC Bulletin Board, which may make the
stock more difficult to sell.
The Company no longer satisfies the criteria for continued quotation on
The Nasdaq SmallCap Market. The Company's stock is, instead, quoted on
the OTC Bulletin Board. As a result, the Company's shareholders may
find it more difficult to dispose of, or to obtain accurate quotations
as to the market value of, the Company's common stock, and the market
price for the Company's common stock may decline. Trading in the
Company's common stock is subject to the requirements of Rule 15g-9
promulgated under the Securities Exchange Act of 1934. Under this rule,
broker/dealers who recommend low-priced securities to persons other
than established customers and accredited investors must satisfy
special sales practice requirements, including a requirement that they
make an individualized written suitability determination for the
purchaser and receive the purchaser's written consent prior to the
transaction. The Securities Enforcement Remedies and Penny Stock Reform
Act of 1990 also requires additional disclosure in connection with any
trades involving a stock defined as a penny stock (generally any equity
security not traded on an exchange or quoted on Nasdaq that has a
market price of less than $5.00 per share, subject to certain
exceptions), including the delivery, prior to any penny stock
transaction, of a disclosure schedule explaining the penny stock market
and the risks associated with the penny stock market. These
requirements could severely limit the market liquidity of the Company's
common stock and the ability of the Company's shareholders to dispose
of their shares, particularly in a declining market.
16
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Moss Adams LLP
222 SW Columbia St., Suite 400
Portland, OR 97201-6642
INDEPENDENT ACCOUNTANT'S REVIEW REPORT
To the Board of Directors and Shareholders
Ag-Bag International Limited
We have reviewed the accompanying condensed balance sheet of Ag-Bag
International Limited as of September 30, 2000, the related condensed
statements of operations, shareholders' equity, and cash flows for the
nine-month period ended September 30, 2000 and the condensed statement
of operations for the three-month period ended September 30, 2000.
These financial statements are the responsibility of the Company's
management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical
procedures to financial data and making inquiries of persons
responsible for financial and accounting matters. It is substantially
less in scope than an audit conducted in accordance with generally
accepted auditing standards, the objective of which is the expression
of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications
that should be made to the condensed financial statements referred to
above for them to be in conformity with generally accepted accounting
principles.
We have previously audited, in accordance with generally accepted
auditing standards, the balance sheet of Ag-Bag International limited
as of December 31, 1999, and the related statements of operations,
shareholders' equity, and cash flows for the year then ended not
presented herein; and in our report dated February 15, 2000, we
expressed an unqualified opinion on those financial statements. In our
opinion, the information set forth in the accompanying condensed
balance sheet as of December 31, 1999, is fairly presented, in all
material respects, in relation to the balance sheet from which it has
been derived.
Portland, Oregon
October 24, 2000
17
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PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibit 27, Financial Data Schedule (Edgar Only)
(b) No reports on Form 8-K were filed by the Company during the quarter
ended September 30, 2000.
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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.
AG-BAG INTERNATIONAL LIMITED,
a Delaware corporation
(Registrant)
Date: October 27, 2000 By: /s/ Michael R. Wallis
--------------------------
Michael R. Wallis
Chief Financial Officer and
Vice President, Finance
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EXHIBIT INDEX
Exhibit No. Description
27 Financial Data Schedule (Edgar Only)
