UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly Period Ended December 31, 2001
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission File Number: 0-25963
AGROCAN CORPORATION
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(Exact name of small business issuer as specified in its charter)
Delaware N/A
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
Suite 706, Dominion Centre, 43-59 Queen's Road East, Hong Kong
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(Address of principal executive offices)
011-852-2519-3933
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(Issuer's telephone number)
Not applicable
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(Former name, former address and former fiscal year, if changed since last
report.)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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 [ ]
As of December 31, 2001, the Company had 2,684,970 shares of common stock issued
and outstanding.
Transitional Small Business Disclosure Format: Yes [ ] No [X]
Documents incorporated by reference: None.
1
AGROCAN CORPORATION
INDEX
Page
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . 3
Consolidated Balance Sheet (Unaudited) - December 31, 2001. . . 3
Consolidated Statements of Operations and Comprehensive Income
(Loss) (Unaudited) - Three Months Ended December 31, 2001 and
2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Consolidated Statements of Cash Flows (Unaudited) - Three Months
Ended December 31, 2001 and 2000. . . . . . . . . . . . . . . . . 5
Notes to Consolidated Financial Statements (Unaudited) - Three
Months Ended December 31, 2001 and 2000. . . . . . . . . . . . . 6
Item 2. Management's Discussion and Analysis or Plan of Operation. . . . . . . 8
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds. . . . . . . . . . . . . . . 14
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . 14
SIGNATURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
AGROCAN CORPORATION
CONSOLIDATED BALANCE SHEET (UNAUDITED)
DECEMBER 31, 2001
USD RMB
---------- ----------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 63,055 523,356
Accounts receivable, net 1,488,406 12,353,767
Other receivables and prepayments 58,255 483,518
Inventories 270,691 2,246,735
Deposits 24,691 204,939
Amount due from related parties, net 420,254 3,488,108
---------- ----------
TOTAL CURRENT ASSETS 2,325,352 19,300,423
ADVANCES RECEIVABLE, NET 984,200 8,168,860
PROPERTY, PLANT AND EQUIPMENT, NET 758,616 6,296,515
---------- ----------
TOTAL ASSETS $4,068,168 33,765,798
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term bank loan $ 203,976 1,693,000
Short-term loans-unsecured 390,989 3,245,212
Accounts payable 318,443 2,643,065
Other payables and accruals 89,250 740,778
Income tax payable 74,247 616,254
Deposits received 202,943 1,684,430
Amount due to related parties 548,614 4,553,497
---------- ----------
TOTAL LIABILITIES, ALL CURRENT 1,828,462 15,176,236
MINORITY INTEREST 134,058 1,112,682
SHAREHOLDERS' EQUITY
Preferred stock, par value US$0.0001 per share,
authorized 10,000,000 shares; none issued
Common stock, par value US$0.0001 per share,
authorized 25,000,000 shares; issued and
outstanding 2,684,970 shares at December 31, 2001 268 2,224
Capital in excess of par value 1,476,750 12,257,029
Retained earnings
Unappropriated 480,637 3,989,288
Appropriated 145,818 1,210,289
Other comprehensive income 2,175 18,050
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TOTAL SHAREHOLDERS' EQUITY 2,105,648 17,476,880
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $4,068,168 33,765,798
========== ==========
See notes to consolidated financial statements
3
AGROCAN CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE INCOME (LOSS) (UNAUDITED)
THREE MONTHS ENDED DECEMBER 31, 2001 AND 2000
2001 2001 2000
----------- ---------- ----------
USD RMB RMB
NET SALES $ 127,907 1,061,626 2,199,132
COST OF SALES 93,562 776,562 1,651,009
----------- ---------- ----------
GROSS PROFIT 34,345 285,064 548,123
ADMINISTRATIVE AND GENERAL EXPENSES (44,661) (370,686) (786,668)
SELLING EXPENSES (7,890) (65,490) (19,921)
----------- ---------- ----------
LOSS FROM OPERATIONS (18,206) (151,112) (258,466)
OTHER INCOME (EXPENSE)
Interest income 494 4,105 -
Interest expense (3,192) (26,497) (10,626)
Amortization of loan fees - - (151,153)
----------- ---------- ----------
LOSS BEFORE INCOME TAXES (20,904) (173,504) (420,245)
INCOME TAXES 584 4,845 (27,926)
----------- ---------- ----------
LOSS BEFORE MINORITY INTEREST (20,320) (168,659) (448,171)
MINORITY INTEREST 836 6,942 22,582
----------- ---------- ----------
NET LOSS $ (19,484) (161,717) (425,589)
=========== ========== ==========
WEIGHTED AVERAGE SHARES OUTSANDING
Basic and diluted 2,684,970 2,684,970 2,334,970
BASIC AND DILUTED LOSS PER SHARE $ (0.01) (0.06) (0.18)
=========== ========== ==========
See notes to consolidated financial statements
4
AGROCAN CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
THREE MONTHS ENDED DECMEBER 31, 2001 AND 2000
2001 2001 2000
--------- --------- -----------
USD RMB RMB
OPERATING ACTIVITIES
Net loss $(19,484) (161,717) (425,589)
Adjustments to reconcile net loss to net cash
(used in) provided by operating activities:
Amortization of deferred costs - - 151,153
Depreciation 17,325 143,800 149,245
Minority interest in net income (836) (6,942) (22,582)
(Increase) decrease in accounts receivable 47,592 395,010 (2,196,926)
Decrease (increase) in other receivables, deposits
and prepayments 11,218 93,116 (3,568,436)
(Increase) decrease in inventories (95,567) (793,207) (176,495)
(Increase) decrease in amounts due from related parties 15,670 130,065 767,091
Increase (decrease) in accounts payable 45,380 376,653 124,790
Increase (decrease) in income tax payable (19,369) (160,761) (29,823)
Increase (decrease) in other payables and accruals (51,908) (430,837) 632,075
Increase (decrease) in deposits received 108,919 904,026 -
Increase (decrease) in amounts due to related parties 24,598 204,163 39,991
--------- --------- -----------
Net cash (used in) provided by operating activities 83,538 693,369 (4,555,506)
--------- --------- -----------
INVESTING ACTIVITIES
Additions to property, plant and equipment (35,768) (296,877) (303,091)
--------- --------- -----------
Net cash used in investing activities (35,768) (296,877) (303,091)
--------- --------- -----------
FINANCING ACTIVITIES
Repayment of short term bank loan (36,144) (300,000) -
Repayment of short term loans - unsecured (19,880) (165,000) -
Increase in note payable - - 414,000
Short term bank loan - - 1,000,000
--------- --------- -----------
Net cash (used in) provided by financing activities (56,024) (465,000) 1,414,000
--------- --------- -----------
Net decrease in cash and cash equivalents (8,254) (68,508) (3,444,597)
Cash and cash equivalents beginning 71,309 591,864 4,616,686
--------- --------- -----------
Cash and cash equivalents end $ 63,055 523,356 1,172,089
========= ========= ===========
See notes to consolidated financial statements
5
AGROCAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED DECEMBER 31, 2001 AND 2000
(UNAUDITED)
(EXPRESSED IN RENMINBI)
1. THE INTERIM FINANCIAL STATEMENTS
The interim financial statements have been prepared by AgroCan Corporation
and in the opinion of management, reflect all material adjustments which
are necessary to a fair statement of results for the interim periods
presented, including normal recurring adjustments. Certain information and
footnote disclosures made in the most recent annual financial statements
included in our Form 10-KSB for the year ended September 30, 2001, have
been condensed or omitted for the interim statements. It is our opinion
that, when the interim statements are read in conjunction with the
September 30, 2001 financial statements, the disclosures are adequate to
make the information presented not misleading. The results of operations
for the three months ended December 31, 2001 and 2000 are not necessarily
indicative of the operating results for the full fiscal year, as the
Company's business fluctuates in accordance with planting seasons resulting
in increased revenues in the second and third quarters.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the amount of revenues and expenses during the
reporting periods. Management makes these estimates using the best
information available at the time the estimates are made; however, actual
results could differ materially from those results.
The Company reported a 51.7% decrease in sales during the three months
ended December 31, 2001 compared to the three months ended December 31,
2000 and a decrease in sales of 79.2% during the three months ended
December 31, 2000 compared to the three months ended December 31, 1999. At
December 31, 2001 the Company is in default on short-term loans with third
parties of approximately RMB 1.5 million. The Company believes that it has
adequate funds to support operations for the current fiscal year ending
September 30, 2002.
To address its on-going and long-term cash needs, the Company plans to
initiate discussions with investment banks and financial institutions and
attempt to raise funds to support current and future operations. This
includes attempting to raise additional working capital through the sale of
additional capital stock or through additional bank or third party
borrowings. The Company cannot provide any assurance that it will be able
to raise any such funds.
6
2. INVENTORIES
Inventories at December 31, 2001 and September 30, 2001 are comprised of
the following:
DECEMBER 31, 2001 SEPTEMBER 30, 2001
USD RMB RMB
RAW MATERIALS $ 137,782 1,143,588 1,020,669
FINISHED GOODS 132.909 1,103,147 432,859
------------------- ------------------ ------------------
$ 270,691 2,246,735 1,453,528
=================== ================== ==================
3. SHORT-TERM BANK LOANS
As of December 31, 2001, the Company had two bank loans of RMB693,000
(US$83,494) and RMB1,000,000 (US$120,482). The bank loans bear interest at
7.605% and 6.435%, respectively, per annum and are due during the year
ending September 30, 2002. One of the loans is guaranteed by a customer of
the Company's.
4. INCOME TAXES
During the three months ended December 31, 2001, our subsidiaries recorded
an income tax refund of RMB 4,845. We are subject to income taxes on an
entity basis on income arising in or derived from the tax jurisdiction in
which each entity is domiciled. Our British Virgin Islands subsidiary is
not liable for income taxes. Our PRC subsidiaries comprise two wholly owned
foreign enterprises and a 70% held Sino-Foreign Equity Joint Venture. PRC
Companies are generally subject to income taxes at an effective rate of 33%
(30% Chinese national income tax plus 3% Chinese state income tax). Two of
our PRC subsidiaries, Fenglin and Linmao, are manufacturing companies
operating in special zones, and they are entitled to a reduced national
income taxes rate of 24%. All the subsidiaries are exempt from state income
tax. Further, pursuant to the approval of the relevant PRC tax authorities,
all the subsidiaries have been granted a "tax holidays", whereby the
subsidiaries are fully exempted from PRC income taxes for two years
starting from the year profits are first made, followed by a 50% exemption
for the next three years. In 1999, the two-year, 100% exemption expired for
Fenglin and Linmao, subjecting them to income tax at a rate of 12%.
Effective January 1, 2001, the two-year, 100% exemption expired for Jiali
and it became subject to income tax at a rate of 15%. Losses incurred by
PRC companies may be carried forward for five years. Deferred tax assets
and liabilities are not considered material at December 31, 2001 and 2000.
5. EARNINGS PER SHARE
Basic earnings per share is based on the weighted average shares of common
stock outstanding. Diluted earnings per share assumes the conversion,
exercise or issuance of all potential common stock instruments such as
options, warrants and convertible securities, unless the effect is to
reduce loss per share or increase earnings per share.
7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Cautionary Statement Pursuant to Safe Harbor Provisions of the Private
Securities Litigation Reform Act of 1995:
This Quarterly Report on Form 10-QSB for the quarterly period ended December 31,
2001 contains "forward-looking" statements within the meaning of the Federal
securities laws. These forward-looking statements include, among others,
statements concerning our expectations regarding sales trends, gross and net
operating margin trends, political and economic matters, the availability of
equity capital to fund our capital requirements, and other statements of
expectations, beliefs, future plans and strategies, anticipated events or
trends, and similar expressions concerning matters that are not historical
facts. The forward-looking statements in this Quarterly Report on Form 10-QSB
for the quarterly period ended December 31, 2001 are subject to risks and
uncertainties that could cause actual results to differ materially from those
results expressed in or implied by the statements contained herein.
Overview:
AgroCan Corporation was incorporated on December 8, 1997 in the State of
Delaware. Effective December 31, 1997, we issued 1,598,646 shares of common
stock, which represented all of the capital stock outstanding at the completion
of this transaction, to the shareholders of AgroCan (China) Inc., a corporation
incorporated in the British Virgin Islands, in exchange for all of the capital
stock of AgroCan (China) Inc.
Prior to the above transaction, we had no material operations. The AgroCan China
transaction was accounted for as a recapitalization of AgroCan (China) Inc., as
the shareholders of AgroCan (China) Inc. acquired all of the capital stock of
the company in a reverse acquisition. Accordingly, the assets and liabilities of
AgroCan (China) Inc. were recorded at historical cost, and the shares of common
stock issued by the company were reflected in the consolidated financial
statements giving retroactive effect as if we had been the parent company from
inception.
We, through AgroCan (China) Inc., currently own 100% interest in two
wholly-owned subsidiaries, Guangxi Linmao Fertilizer Company Limited ("Guangxi
Linmao") and Jiangxi Jiali Chemical Industry Company Limited ("Jiangxi Jiali").
We, through AgroCan (China) Inc., also own a 70% interest in Jiangxi Fenglin
Chemical Industry Company Limited, a Sino-Foreign Equity Joint Venture ("Jiangxi
Fenglin"). All of the aforementioned entities are located in the People's
Republic of China ("China" or the "PRC").
We account for our interest in Jiangxi Fenglin similar to a majority-owned
subsidiary because of our 70% interest, our contractual ability to appoint four
out of six directors to the Board of Directors, which is the highest authority
for the joint venture, and our right to appoint the Chairman of the Board. Due
to the rights asserted by the PRC partner under customary joint venture
8
agreements, joint venture interests in the PRC are generally not consolidated in
the financial statements of companies that report under the periodic reporting
requirements of the United States Securities and Exchange Commission. However,
as a result of the aforementioned factors specific to Jiangxi Fenglin,
management believes that it is appropriate to consolidate the joint venture's
operations into our consolidated financial statements.
We produce various compound fertilizers. These ingredients used are blended in
different proportions and packed into 50 kilogram bags. As of September 30,
2001, we have established an annual production capacity of 125,000 metric tons
for compound fertilizers in Guangxi and Jiangxi, two of the largest agricultural
provinces in China, and we intend to enter markets in other provinces in China.
The consolidated financial statements of the Company include the accounts of the
Company and its wholly-owned and majority-owned subsidiaries. All material
intercompany balances and transactions are eliminated at consolidation. The
consolidated financial statements have been prepared in accordance with
generally accepted accounting principles in the United States and have been
presented in Chinese Renminbi ("RMB"). The functional currency of the Company's
PRC operations is the RMB. The accounts of foreign operations are prepared in
their local currency and are translated into RMB using the applicable rate of
exchange. The resulting translation adjustments are included in comprehensive
income (loss). Transactions denominated in currencies other than the RMB are
translated into RMB at the applicable exchange rates. Monetary assets and
liabilities denominated in other currencies are translated into RMB at the
applicable rate of exchange at the balance sheet date. The resulting exchange
gains or losses are credited or charged to the consolidated statements of
operations. For all purposes in this report, unless otherwise specifically
stated, the U.S. dollar equivalent for the PRC Renminbi is the official exchange
rate of 8.277 RMB=$1.00 (U.S.).
9
Consolidated Results of Operations:
Three Months Ended December 31, 2001 and 2000:
Sales. The sales for the three months ended December 31, 2001 were RMB
1,061,626 as compared to sales of RMB 2,199,132 for the three months ended
December 31, 2000, a decrease of RMB 1,137,506 or 51.7% was due to one of the
subsidiaries not resuming production until January 2002. Subsequent to December
31, 2001, we have increased production levels and management believes that sales
for the year ended September 30, 2002 will be approximate 80% of prior year
levels.
Gross Profit. Gross profit for the three months ended December 31, 2001 was
RMB 285,064 or 26.9% of revenues, as compared to RMB 548,123 or 24.9% of
revenues for the three months ended December 31, 2000. The gross profit margin
increased in 2001 as compared to 2000 as a result of the Company raising its
prices to focus on higher-margin customers, although total gross profit
decreased as a result of the decline in revenues.
Administrative and General Expenses. Administrative and general expenses for
the three months ended December 31, 2001 were RMB 370,686 or 34.9% of revenues,
as compared to RMB 786,668 or 35.8% of revenues for the three months ended
December 31, 2000, a decrease of RMB 415,982. In view of the reduced level of
sales and production during the quarter ended December 31, 2001, management was
able to reduce administrative and general expenses, primarily in discretionary
wages, travel and office expenses.
Selling Expenses. Selling expenses for the three months ended December 31,
2001 were RMB 65,490 or 6.2% of revenues, as compared to RMB 19,921 or 0.9% of
revenues for the three months ended December 31, 2000, an increase of RMB
45,569. Selling expenses increased in 2001 compared to 2000 as a result of
additional transportation costs incurred in connection with a large sales
contract. These additional costs are not expected to recur.
Loss from Operations. Loss from operations was RMB 151,112 for the three
months ended December 31, 2001, as compared to a loss from operations of RMB
258,466 for the three months ended December 31, 2000.
Other Income (Expense). We recorded interest income of RMB 4,105 and RMB 0
for the three months ended December 31, 2001 and 2000, respectively.
We recorded interest expense of RMB 26,497 and RMB 10,626 for the three months
ended December 31, 2001 and 2000, respectively. As of December 31, 2001, the
Company had two bank loans of RMB 693,000 (US$83,494) and RMB 1,000,000
(US$120,482). The bank loans bear interest at 7.605% and 6.435%, respectively,
per annum and are due during the year ending September 30, 2002.
10
The Company recorded amortization of loan fees of RMB 0 and RMB 151,153 for the
three months ended December 31, 2001 and 2000, respectively.
Income Taxes. During the three months ended December 31, 2001, the
Company received income tax refunds of RMB 4,845. We recognized income tax
expense of RMB 27,926 for the three months ended December 31, 2000.
Minority Interest. For the three months ended December 31, 2001 and 2000, we
recorded a minority interest of RMB 6,942 and RMB 22,582 respectively, to
reflect the interest of the Company's 30% joint venture partner in the net
income of Jiangxi Fenglin.
Net Loss. Net loss was RMB 161,717 for the three months ended December 31,
2001, as compared to a net loss of RMB 425,589 for the three months ended
December 31, 2000. The reason for less net loss for the three months ended
December 31, 2001 than December 31, 2000 was primarily as a result of the
decrease in administrative and general expenses, even though the gross profit
was less than the same period of last year.
Consolidated Financial Condition:
Liquidity and Capital Resources - December 31, 2001
The Company reported a 51.7% decrease in sales during the three months ended
December 31, 2001 compared to the three months ended December 31, 2000 and a
decrease in sales of 79.2% during the three months ended December 31, 2000
compared to the three months ended December 31, 1999. At December 31, 2001 the
Company is in default on short-term loans with third parties of approximately
RMB 1.5 million. The Company believes that it has adequate funds to support
operations for the current fiscal year ending September 30, 2002.
To address its on-going and long-term cash needs, the Company plans to initiate
discussions with investment banks and financial institutions and attempt to
raise funds to support current and future operations. This includes attempting
to raise additional working capital through the sale of additional capital stock
or through additional bank or third party borrowings. The Company cannot provide
any assurance that it will be able to raise any such funds.
Operating. For the three months ended December 31, 2001, our operations
generated cash resources of RMB 693,369 as compared to utilizing cash resources
of RMB 4,555,506 for the three months ended December 31, 2000. Our operations
generated more cash resources in 2001 as compared to utilizing cash resources in
2000 primarily as a result of receiving cash resources from settlement of
accounts receivable and receiving deposits from one of our major customers. At
December 31, 2001, cash and cash equivalents had decreased by RMB 68,508 to RMB
523,356, as compared to RMB 591,864 at September 30, 2001. We had working
capital of RMB 4,124,186, at December 31, 2001, as compared to RMB 4,445,923 at
September 30, 2001, resulting in current ratios of 1.27:1 and 1.30:1 at December
31, 2001 and September 30, 2001, respectively.
11
Accounts receivable. Accounts receivable decreased by RMB 395,010, to
RMB 12,353,767 at December 31, 2001, from RMB 12,748,777 at September 30, 2001.
Accounts receivable decreased during the three months ended December 31, 2001 as
a result of settlement of part of the accounts receivable. Subsequent to the
three months ended December 31, 2001, we have received RMB 2,700,000 for
settlements of current and long time accounts receivable.
Inventories. Inventories increased by RMB 793,207, to RMB 2,246,735 at
December 31, 2001, from RMB 1,453,528 at September 30, 2001 in anticipation of
the forthcoming selling season during the spring.
Amount due from related parties. Amount due from related parties decreased
by RMB 130,065, to RMB 3,488,108 at December 31, 2001, from RMB 3,618,173 at
September 30, 2001 as a result of settlement of part of the loan from a related
company.
Investing. During the three months ended December 31, 2001 and 2000,
additions to property, plant and equipment aggregated RMB 296,877 and RMB
303,091, respectively.
Financing. During the three months ended December 31, 2001, one of our
subsidiaries repaid RMB 300,000 of the short-term bank loans. Also, one of our
subsidiaries repaid RMB 165,000 of unsecured short-term loans.
Inflation and Currency Matters:
In recent years, the Chinese economy has experienced periods of rapid economic
growth as well as relatively high rates of inflation, which in turn has resulted
in the periodic adoption by the Chinese government of various corrective
measures designed to regulate growth and contain inflation. Since 1993, the
Chinese government has implemented an economic program designed to control
inflation, which has resulted in the tightening of working capital available to
Chinese business enterprises. Our success depends in substantial part on the
continued growth and development of the Chinese economy. During the fiscal
quarters ended December 31, 2001 and 2000, inflation and changing prices have
had a minor impact on our operations and financial position. The actual rate of
inflation in the agricultural sector has been nominal, and the price level of
fertilizer products has been stable.
Foreign operations are subject to certain risks inherent in conducting business
abroad, including price and currency exchange controls, and fluctuations in the
relative value of currencies. Changes in the relative value of currencies occur
periodically and may, in certain instances, materially affect the Company's
results of operations. In addition, the Renminbi is not freely convertible into
foreign currencies, and the ability to convert the Renminbi is subject to the
12
availability of foreign currencies. Effective December 1, 1998, all foreign
exchange transactions involving the Renminbi must take place through authorized
banks in China at the prevailing exchange rates quoted by the People's Bank of
China. The Company expects that a portion of its revenues will need to be
converted into other currencies to meet foreign exchange currency obligations,
including the payment of any dividends declared.
Although the central government of China has repeatedly indicated that it does
not intend to devalue its currency in the near future, recent announcements by
the central government of China indicate that devaluation is an increasing
possibility. Should the central government of China decide to devalue the
Renminbi, we do not believe that such an action would have a detrimental effect
on our operations, since we conduct virtually all of its business in China, and
the sale of our products is settled in Renminbi. However, devaluation of the
Renminbi against the United States dollar would adversely affect our financial
performance when measured in United States dollars.
New Accounting Pronouncements:
In July 2001, The Financial Accounting Standards Board (FASB) issued SFAS
No.141, "Business Combinations", and SFAS no.142, "Goodwill and Other Tangible
Assets". SFAS No.141 requires that the purchase method of accounting be used for
all business combinations initiated after June 30, 2001. Use of the
pooling-of-interests method will be prohibited after that date. SFAS No.142
changes the accounting for goodwill and intangible assets with indefinite lives
from an amortization method to an impairment-only approach and acquires
intangible assets with finite lives to be amortized over their useful lives.
Thus, amortization of goodwill and intangible assets with indefinite lives will
cease upon adoption of the statement. SFAS No.142 is required to be applied in
fiscal years beginning after December 15, 2001. We do not expect that the
adoption of SFAS No.141 or SFAS No.142 will have a significant immediate impact
on our financial condition or results of operations, as we have no pending
business combinations, nor do we have any goodwill or other intangible assets
recorded as of December 31, 2001.
In August 2001, the FASB issued SFAS No.144, "Accounting for Impairment or
Disposal of Long-Lived Assets", which addresses accounting and financial
reporting for the impairment or disposal of long-lived assets. This statement is
effective for fiscal years beginning after December 15, 2001. We are currently
assessing the impact, if any, that SFAS No.144 may have on our financial
condition and results of operations.
13
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
During the three months ended December 31, 2001, we did not issue any shares of
common stock.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
(b) Reports on Form 8-K:
Three Months Ended December 31, 2001 - None
14
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
AGROCAN CORPORATION
-------------------
(Registrant)
Date: February 6, 2002 By: /s/ LAWRENCE HON
--------------------------------
Lawrence Hon
President and Chief
Executive Officer
(Duly Authorized
Officer)
Date: February 6, 2002 By: /s/ CARL YUEN
--------------------------------
Carl Yuen
Chief Financial Officer
(Principal Financial
and Accounting Officer)
15