UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
Current Report
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): September 16, 2005
DRAGON PHARMACEUTICAL INC.
(Exact name of registrant as specified in its charter)
Florida 0-27937 65-0142474
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(State or Other Jurisdiction (Commission File Number) (I.R.S. Employer
of Incorporation) Identification Number)
1055 Hastings Street, Suite 1900
Vancouver, British Columbia V6E 2E9
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(Address of Principal Executive Offices) (Zip Code)
(604) 669-8817
(Registrant's telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
[] Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
[] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Section 4 - Matters Related to Accountants and Financial Statements
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Item 4.02 (a) Non - Reliance on Previously Issued Financial Statements or a
Related Audit Report or Completed Interim Review.
After review of the accounting policies of Dragon Pharmaceutical Inc.
("Dragon") and applicable accounting pronouncements, the Board of Directors of
Dragon decided that the reduction of a future retirement benefit obligation
related to the acquisition of a land use right from an unrelated former
state-owned enterprise in China by Oriental Wave Holding Limited ("Oriental
Wave") in July 2003 should have been accounted for as a reduction to the
recorded cost of the land use right instead of as a non-operating gain from
extinguishment of debt, as previously disclosed in Oriental Wave's 2004
financial statements. As a result, Oriental Wave's 2004 financial statements and
Dragon's financial statements for the quarterly periods ended March 31, 2005 and
June 30, 2005 have been or will be restated to reflect such change in accounting
treatment.
During the preparation of Dragon's financial statements for the quarter
ended June 30, 2005, the Company's independent auditors, Ernst & Young, raised
an issue as to the propriety of the application of an accounting principal in
connection with the reduction in future retirement benefits related to certain
prior employees of a former state-owned enterprise in China assumed by Oriental
Wave, which is a wholly-owned subsidiary of the Company. Dragon also held
discussions with the subsidiary's former independent accountants, Webb &
Company, as to this change in accounting treatment.
After substantial review of the facts and circumstances surrounding this
transaction, and extensive discussion and review of appropriate accounting
pronouncements, the Board of Directors determined that the transaction should be
recorded as a reduction to the recorded cost of the land use rights, and adopted
this position on September 16, 2005. The reduction of the future retirement
benefit obligation during 2004, totaling $1,135,238, which had been recognized
as a non-operating gain, has now been recorded as a reduction to the cost of the
land use right. This adjustment also resulted in a reduction of depreciation
expense of $11,352 during 2004. On a going forward basis, any similar reduction
of the retirement benefit obligation will be treated as a reduction to the
recorded cost of the land use rights. This position was conveyed to Dragon's
independent accountant and Oriental Wave's former independent accountant, each
of whom concurred with this decision.
As a result, Oriental Wave's 2004 financial statements will be restated to
reflect the change in accounting treatment and Dragon will file a Form 8-K to
file Oriental Wave's restated financial statements. In addition, Dragon will
amend its Form 10-QSB for the quarter ended March 31, 2005 to reflect this
change. Dragon's Form 10-QSB for the quarter ended June 30, 2005 was filed with
the Securities and Exchange Commission on September 21, 2005 to reflect this
restatement.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
DRAGON PHARMACEUTICAL INC.
(Registrant)
Dated: September 23, 2005 By: /s/ Maggie Deng
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Maggie Deng
Chief Operating Officer