<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
------------------------------
FORM 10-Q
(Mark One)
[X] Quarterly report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 For the quarterly period ended June 30, 1996 or
-------------
[ ] 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.)
23/F Office Tower, Convention Plaza
1 Harbour Road
Wanchai, Hong Kong
(Address of principal executive offices)
Registrant's telephone number, including area code: 011-852-2537-6689
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: 41,528,000 shares
of common stock, $.001 par value, as of August 13, 1996.
Page 1 of 28 pages Exhibit Index on Page 23
<PAGE> 2
CONVENTIONS
Unless otherwise specified, all references in this report to "U.S.
Dollars," "Dollars," "U.S.$," or "$" are to United States 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 yuan. The financial statements of the Company and its
subsidiaries are prepared in Renminbi. Translations of amounts from Renminbi
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 June 30, 1996, which was U.S.$1.00
= Rmb8.32. 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" refer 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 Billion Luck,
HARC, First Supply, and Second Supply (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 "Guilinyang Farm" are to Hainan Province Guilinyang
State Farm, a PRC entity which is owned and controlled by the Farming Bureau.
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 "HARC" are to Hainan 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 Guilinyang Farm.
References to "Operating Subsidiaries" are to the consolidated
operations, assets and/or activities, as the context indicates, of First Supply
and Second Supply.
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<PAGE> 3
References to the "PRC" or "China" are to the People's Republic of
China and include all territory claimed by or under the control of the Central
Government, except Hong Kong, Macau, and Taiwan.
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 "Tons" are to metric tons.
-3-
<PAGE> 4
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
CHINA RESOURCES DEVELOPMENT, INC., AND SUBSIDIARIES
CONDENSED CONSOLIDATED INCOME STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(Amounts in thousands, except share and per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
Note June 30, June 30,
------------------------------- ---------------------------------
1996 1995 1996 1996 1995 1996
RMB RMB US$ RMB RMB US$
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
SALES 540,599 420,709 64,976 795,719 598,139 95,639
COST OF SALES (478,773) (403,052) (57,545) (719,794) (569,741) (86,514)
-------- ------ ------- ------- ------- ------
GROSS PROFIT 61,826 17,657 7,431 75,925 28,398 9,125
DEPRECIATION OF FIXED (613) (616) (74) (1,208) (1,192) (145)
ASSETS
SELLING AND (15,187) (14,203) (1,825) (25,173) (22,729) (3,026)
ADMINISTRATIVE EXPENSES ------ ------ ------- ------- ------- ------
OPERATING INCOME 46,026 2,838 5,532 49,544 4,477 5,954
FINANCIAL (EXPENSES), (16,487) (934) (1,982) (21,676) (2,502) (2,605)
NET
OTHER INCOME/ (LOSSES), (5,095) 13,421 (612) 4,243 15,541 510
NET ------ ------ ------- ------- ------- ------
INCOME BEFORE INCOME 24,444 15,325 2,938 32,111 17,516 3,859
TAXES
INCOME TAXES (3,586) (1,941) (431) (5,577) (2,612) (670)
------ ------ ------- ------- ------- ------
NET INCOME BEFORE 20,858 13,384 2,507 26,534 14,904 3,189
MINORITY INTERESTS
MINORITY INTERESTS (10,221) (5,962) (1,228) (13,401) (6,807) (1,611)
------ ------ ------- ------- ------- ------
NET INCOME FOR THE 10,637 7,422 1,279 13,133 8,097 1,578
PERIOD ====== ====== ======= ======= ======= ======
EARNINGS PER SHARE 2 0.479 0.619 0.058 0.592 0.675 0.071
====== ====== ======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
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<PAGE> 5
CHINA RESOURCES DEVELOPMENT, INC., AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 1996 AND DECEMBER 31, 1995
(Amounts in thousands)
<TABLE>
<CAPTION>
June 30, 1996 December 31, 1995 June 30, 1996
------------- ----------------- -------------
RMB RMB US$
Notes (unaudited) (audited) (unaudited)
----
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents 92,156 56,942 11,076
Trade receivables 52,675 31,991 6,331
Other receivables, deposits
and prepayments 123,836 52,871 14,884
Inventories 3 65,031 103,776 7,816
Amounts due from related
companies 330,394 288,503 39,711
Amount due from Farming
Bureau 24,351 80,427 2,927
Other current assets --- 19,448 ---
------- ------- ------
TOTAL CURRENT ASSETS 688,443 633,958 82,745
FIXED ASSETS 4 21,795 21,491 2,620
INVESTMENTS 12,163 11,963 1,462
GOODWILL 1,063 1,076 128
------- ------- ------
TOTAL ASSETS 723,464 668,488 86,955
======= ======= ======
LIABILITIES AND
SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Bank loans 292,560 293,000 35,164
Amounts due to related 17,966 22,654 2,159
companies
Amounts due to shareholders 300 15,727 36
Accounts payable 90,182 39,876 10,839
Income taxes payable 14,267 10,265 1,715
Other payables and accrued
liabilities 58,080 21,533 6,981
Short term advances -- 86,917 --
------- ------- ------
TOTAL CURRENT 473,355 489,972 56,894
LIABILITIES
MINORITY INTERESTS 87,304 74,067 10,493
------- ------- ------
TOTAL LIABILITIES 560,659 564,039 67,387
======= ======= ======
</TABLE>
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<PAGE> 6
<TABLE>
<CAPTION>
June 30, 1996 December 31, 1995 June 30, 1996
------------- ----------------- -------------
RMB RMB US$
Notes (unaudited) (audited) (unaudited)
-----
<S> <C> <C> <C> <C>
SHAREHOLDERS' EQUITY
Common Stock, US$0.001 par
value: Authorized -
200,000,000 shares in 1996 and
1995
Issued and outstanding -
41,528,000 shares in 1996 and
12,000,000 shares in 1995 347 101 42
Preferred stock, authorized -
10,000,000 shares in 1996 and
1995: Series A preferred
stock. US$1 par value:
Authorized, issued and
outstanding - 6,400,000 shares
in 1996 and 1995 53,930 53,930 6,482
Series B convertible preferred
stock, US$0.001 par value:
Authorized - 2,500 shares in
1996 and 1995. Issued and
outstanding - none in 1996 and --- --- ---
370 shares in 1995
Additional paid-in capital 65,938 20,961 7,925
Reserves 8,930 8,930 1,073
Retained earnings 33,660 20,527 4,046
------- ------- -------
TOTAL SHAREHOLDERS' EQUITY 162,805 104,449 19,568
------- ------- -------
TOTAL LIABILITIES AND 723,464 668,488 86,955
SHAREHOLDERS' EQUITY ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
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<PAGE> 7
CHINA RESOURCES DEVELOPMENT, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(Amounts in thousands, except share and per share data)
<TABLE>
<CAPTION>
Series B
Series A Convertible Additional
Common Preferred Preferred Paid-In Retained
Stock Stock Stock Capital Reserves Earnings
RMB RMB RMB RMB RMB RMB
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1994 101 -- -- 1,407 2,657 7,625
Issuance of 6,400,000 shares of -- 53,930 -- -- -- --
Series A preferred stock
Issuance of 370 shares of Series -- -- -- 19,554 -- --
B preferred stock, net of share
issuance costs
Net income -- -- -- -- -- 19,175
Transfer to reserves -- -- -- -- 6,273 (6,273)
------ ------- ---------- ------ ------ -------
Balance at December 31, 1995 101 53,930 -- 20,961 8,930 20,527
Issuance of 883 shares of Series -- -- -- 45,223 -- --
B convertible preferred stock,
net of shares issuance costs
Issuance of 29,528,582 shares of 246 -- -- (246) -- --
common stock pursuant to the
conversion of 1,253 shares of
series B convertible preferred
stock
Net income -- -- -- -- -- 13,133
------ ------- ---------- ------ ------ ------
Balance at June 30, 1996 347 53,930 -- 65,938 8,930 33,660
====== ======= ========== ====== ====== ======
</TABLE>
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<PAGE> 8
CHINA RESOURCES DEVELOPMENT, INC., AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(Amounts in thousands)
<TABLE>
<CAPTION>
Six months ended June 30
----------------------------------------------------
1996 1995 1996
RMB RMB US$
(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income 13,133 8,097 1,578
Adjustments to reconcile net income to net
cash provided by operating activities:
Minority interests 13,401 6,807 1,611
Depreciation and amortization 1,208 1,192 145
Loss on disposal of fixed assets 5 385 1
Decrease/(increase) in assets:
Trade receivables (20,684) (1,341) (2,486)
Other receivables, deposits and prepayments (70,965) (18,355) (8,530)
Inventories 38,745 28,923 4,657
Amount due from Farming Bureau 56,076 (11,517) 6,740
Amounts due from related companies (41,891) (1,525) (5,035)
Other current assets 19,448 -- 2,337
Increase/(decrease) in liabilities:
Amounts due to related companies (4,688) 1,196 (563)
Accounts payable 50,306 3,865 6,046
Income taxes payable 4,002 2,612 481
Other payables and accrued liabilities 36,547 4,959 4,393
Amounts due to Farming Bureau -- (14,978) --
Net cash provided by operating ------- ------- ------
activities 94,643 10,320 11,375
------- ------- ------
CASH FLOWS PROVIDED BY/(USED IN)
INVESTING ACTIVITIES:
Purchases of fixed assets (1,504) (3,481) (181)
Purchases of investments (200) -- (24)
Reduction of minority interests (164) -- (20)
Additions to construction in progress -- (1,658) --
Proceeds from sale of fixed assets -- 1,603 --
------- ------- ------
Net cash used in investing activities (1,868) (3,536) (225)
------- ------- ------
</TABLE>
-8-
<PAGE> 9
<TABLE>
<CAPTION>
Six months ended June 30,
----------------------------------------------------
1996 1995 1996
RMB RMB US$
(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C>
CASH FLOWS PROVIDED BY/(USED IN)
FINANCING ACTIVITIES:
Issue of share capital less share offering costs 45,223 -- 5,436
Loans from shareholders -- 4,131 --
Repayment of loans to shareholders (15,427) -- (1,854)
Repayments of bank borrowings (440) (4,200) (53)
Cash remitted to Farming Bureau -- (849) --
Short term advances (86,917) -- (10,447)
Loans to related companies -- (18,506) --
Cash from repayment of loans by
related companies -- 8,403 --
------- ------- ------
Net cash used in financing activities (57,561) (11,021) (6,918)
------- ------- ------
NET INCREASE/(DECREASE) IN CASH
AND CASH EQUIVALENTS: 35,214 (4,237) 4,232
Cash and cash equivalents, at beginning of period 56,942 69,157 6,844
------- ------- ------
Cash and cash equivalents, at end of period 92,156 64,920 11,076
======= ======= ======
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
-9-
<PAGE> 10
CHINA RESOURCES DEVELOPMENT, INC., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share data)
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 six months period ended June
30, 1996 is not necessarily indicative of the results that may be
expected for the year ending December 31, 1996. The unaudited
condensed consolidated financial statements should be read in
conjunction with the consolidated financial statements and footnotes
thereto included in the Company's annual report on Form 10-K for the
year ended December 31, 1995.
2. EARNINGS PER SHARE:
The computations of primary earnings per share for the three months
and six months ended on June 30, 1996, are based on the weighted
average number of common stock outstanding after giving effect to
dilutive stock options and series B convertible preferred stock, which
are included as common share equivalents using the treasury stock
method and assumed to be converted to common stock, respectively. The
number of shares used in computing the primary earnings per share is
22,192,850. Fully diluted earnings per share is not materially
different from primary earnings per share.
For the three months and six months ended June 30, 1995, primary
earnings per share is based on an aggregate of 12,000,000 shares of
common stock outstanding.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
3. INVENTORIES:
June 30, December 31,
1996 1995
----------- ------------
RMB RMB
(unaudited) (audited)
Inventories comprise:
Finished goods 65,031 103,776
========== ============
<CAPTION>
4. FIXED ASSETS:
June 30, December 31,
1996 1995
----------- ------------
RMB RMB
(unaudited) (audited)
Cost:
Buildings 5,739 5,739
Plant, machinery and equipment 11,435 10,267
Transportation vehicles and equipment 8,772 8,448
----------- -----------
25,946 24,454
----------- -----------
</TABLE>
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<PAGE> 11
<TABLE>
<S> <C> <C> <C>
Accumulated depreciation:
Buildings 837 607
Plant, machinery and equipment 2,015 1,563
Transportation vehicles and equipment 1,299 793
------ ------
4,151 2,963
------ ------
Net book value 21,795 21,491
====== ======
5. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Six months ended June 30
--------------------------
1996 1995
RMB RMB
(unaudited) (unaudited)
Cash paid during the period for interest expenses 12,801 17,826
====== ======
</TABLE>
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<PAGE> 12
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 statements data of the Company and its subsidiaries for the
three months and six months ended June 30, 1995 and 1996. The data should be
read in conjunction with the unaudited Condensed Consolidated Financial
Statements of the Company and related Notes thereto:
(Amounts in thousands)
<TABLE>
<CAPTION>
Three months Six months
ended ended
June 30, June 30,
-------- --------
1996 1995 1996 1995
RMB RMB RMB RMB
<S> <C> <C> <C> <C>
Sales:
Distribution of natural rubber
354,069 375,239 587,420 519,027
Procurement of materials and
supplies 186,530 45,470 208,299 79,112
------- ------- ------- -------
540,599 420,709 795,719 598,139
------- ------- ------- -------
Gross profit 61,826 17,657 75,925 28,398
Gross profit margin (%) 11.44 4.20 9.54 4.75
Income before income taxes 24,444 15,325 32,111 17,516
Income taxes (3,586) (1,941) (5,577) (2,612)
------- ------- ------- -------
Net income 20,858 13,384 26,534 14,904
Minority interests (10,221) (5,962) (13,401) (6,807)
------- ------- ------- -------
Net income after minority interests 10,637 7,422 13,133 8,097
======= ======= ======= =======
</TABLE>
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<PAGE> 13
SALES AND GROSS PROFIT
For the second quarter of fiscal 1996, the Company's total sales
increased by 28% to Rmb541 million from Rmb421 million for the corresponding
quarter in last year, which was due to the increase in procurement of materials
and supplies. Following the completion of the Company's offshore private
placement on March 8, 1996, the net proceeds raised from the offering were
injected into the Company's subsidiaries in Hainan as working capital to expand
the distribution operations. The Company has expanded into the trading of
other agricultural products, such as coffee beans, and the corresponding sales
revenue was included under the procurement of materials and supplies. The total
sales of such agricultural products for the quarter amounted to approximately
Rmb150 million with a gross profit of approximately Rmb25 million, or a gross
profit margin of 17%. The natural rubber sales and the procurement of other
materials and supplies were comparable to the corresponding quarter in last
year.
For the second quarter of fiscal 1996, the gross profit margin of
natural rubber sales increased to 6.1% from 4.1% for the corresponding period
in fiscal 1995. The increase was mainly the result of purchase discounts
received from farms in 1996. The overall gross profit margin increased from
4.2% to 11.4% for the second quarter of fiscal 1996 as compared with the
corresponding quarter in last year, which was due to the higher gross profit
margin resulting from trading of other agricultural products, as well as the
purchase discounts received from rubber distribution.
For the first half year of 1996, the Company's total sales increased
by 33% to Rmb796 million from Rmb598 million for the corresponding period in
last year. The overall gross profit margin also increased from 4.7% to 9.5%.
The increase of both net sales and gross profit margin was due to the
contribution from the trading of other agricultural products as previously
discussed.
SELLING AND ADMINISTRATIVE EXPENSES
Selling and administrative expenses increased by 11%, or Rmb2.5
million, for the first half year of fiscal 1996 compared to the same period in
fiscal 1995. The increase was mainly due to the increase in salaries and staff
welfare expenses, and more selling expenses were incurred for the distribution
of the agricultural products.
FINANCIAL EXPENSES, NET
The net financial expenses increased by Rmb19.2 million from Rmb2.5
million for the first half year of fiscal 1995 to Rmb21.7 million for the
corresponding period in 1996. The net financial expenses for the second
quarter of fiscal 1996 also increased by Rmb15.5 million as compared with the
corresponding quarter in last year. The increase was due to the fact that less
interest income was received from related companies as a result of the overall
decrease in advances to related companies in fiscal 1996.
OTHER INCOME/(LOSSES), NET
Other income/(losses) mainly represented income from long term
investments, rental income and profits or losses on trading of futures
contracts. The decrease of net income of Rmb11.3 million from Rmb15.5 million
for the first half year of fiscal 1995 to Rmb4.2 million for the same period of
fiscal 1996
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<PAGE> 14
was mainly due to the fact that greater profits on trading of futures contracts
were realized in fiscal 1995 than in fiscal 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary liquidity needs are to fund accounts receivable,
inventories and rubber purchase deposits and to expand business operations.
The Company has financed its working capital requirements through a combination
of internally generated cash, short term bank borrowing and issuance of share
capital.
Net cash provided by operating activities was Rmb94.6 million and
Rmb10.3 million for the six months ended June 30, 1996 and 1995, respectively.
Net cash flows from the Operating Subsidiaries' operating activities are
attributable to the Operating Subsidiaries' income and changes in operating
assets and liabilities.
During the six months ended June 30, 1996, the Company issued an
additional 883 shares of series B convertible preferred stock at US$10,000 per
share with a gross proceeds of US$8.83 million. All the 1,253 shares of series
B convertible preferred stock issued by the Company were converted to common
stock as of June 30, 1996.
There has been no other significant change in financial condition and
liquidity since the fiscal year ended December 31, 1995. The Company believes
that the net proceeds from its capital raising efforts, together with the
internally generated funds, will be sufficient to satisfy its anticipated
working capital needs for at least the next 12 months.
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<PAGE> 15
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS:
None.
ITEM 2. CHANGES IN SECURITIES:
As of July 1, 1995, pursuant to the recommendation of a committee of
disinterested persons appointed by the board of directors in accordance with
the terms of the Stock Option Plan (the "Plan") adopted by the Company as of
March 31, 1995, the board of directors granted options to the following
officers and directors to purchase shares of the Company's Common Stock:
<TABLE>
<S> <C>
Yiu Yat Hung 6,000 shares
Tam Cheuk Ho 6,000 shares
Han Jianzhun 6,000 shares
Li Feilie 100,000 shares
</TABLE>
In addition, the board of directors granted options to the following employees
and consultant to purchase shares of the Company's Common Stock:
<TABLE>
<S> <C>
Brender Services Limited 100,000 shares
Wong Wah On 6,000 shares
Cheung Yu Shum 500,000 shares
Tse Chi Kai 300,000 shares
Ma Sin Ling 500,000 shares
Cheung Siu Yin 10,000 shares
Woo Pui Yan 10,000 shares
Kwok Kwan Hung 386,000 shares
Fu Yang Guang 200,000 shares
Lin Jia Ping 270,000 shares
</TABLE>
All of the stock options were issued in accordance with the terms of the Plan
at an exercise price of US$3.78 (the fair market value of the Common Stock as
of July 1, 1995) and would have been exercisable beginning on July 1, 1996, and
until July 1, 2005.
As of May 20, 1996, the board of directors, in accordance with the
recommendation, with respect to stock options granted to directors and
officers, of a committee of disinterested persons appointed by the board of
directors in accordance with the terms of the Plan, reduced the exercise prices
of all of the outstanding options to US$0.42 (the fair market value of the
Common Stock as of May 20, 1996). By virtue of this action, the outstanding
options are now exercisable beginning on May 20, 1997, and until May 20, 2006.
Stock options have now been granted with respect to all 2,400,000 shares of
Common Stock subject to the Plan, and all stock options remain outstanding.
-15-
<PAGE> 16
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:
<TABLE>
<CAPTION>
Exhibit No. Exhibit Description
----------- -------------------
<S> <C>
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 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.)
</TABLE>
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<PAGE> 17
<TABLE>
<S> <C>
10.1 Assignment Agreement dated January 21, 1994, by and between
Hong Wah (Holdings) Limited and Billion Luck Company Ltd.
(Filed with Annual Report on Form 10-K/A for the fiscal year
ended December 31, 1994, and incorporated herein by reference.)
10.2 Contract on Investment for the Setting up of Hainan
Agricultural Resources Company Ltd. dated January 31, 1994, by
and among Hainan Province Agricultural Reclamation General
Company (the Farming Bureau), Hainan Province Guilinyang State
Farm, and Billion Luck Company Ltd. (Original Chinese version
with English translation filed with Annual Report on Form
10-K/A for the fiscal year ended December 31, 1994, and
incorporated herein by reference.)
10.3 Loan Agreement dated May 10, 1994, by and among Everbright
Finance & Investment Co. Limited, Worlder International Company
Limited, Hong Wah Investment Holdings Limited, Silverich
Limited, Brender Services Limited, and Billion Luck Company
Ltd. (Filed with Annual Report on Form 10-K/A for the fiscal
year ended December 31, 1994, and incorporated herein by
reference.)
10.4 Credit Agreement dated June 1, 1994, by and among Everbright
Finance & Investment Co. Limited, Worlder International Company
Limited, Hong Wah Investment Holdings Limited and Billion Luck
Company Ltd. (Filed with Annual Report on Form 10-K/A for the
fiscal year ended December 31, 1994, and incorporated herein by
reference.)
10.5 Contract on the Transfer of Share Ownership of Hainan Zhongya
Aluminum Co., Ltd. dated July 11, 1994, by and between Hainan
Province Guilinyang State Farm and Hainan Agricultural
Resources Co., Ltd. (Filed with Annual Report on Form 10-K/A
for the fiscal year ended December 31, 1994, and incorporated
herein by reference.)
10.6 Letter Agreement dated August 8, 1994, by and among Everbright
Finance & Investment Co. Limited, Worlder International Company
Limited, Hong Wah Investment Holdings Limited and Billion Luck
Company Ltd., supplementing Credit Agreement dated June 1, 1994
(Filed with Annual Report on Form 10-K/A for the fiscal year
ended December 31, 1994, and incorporated herein by reference.)
10.7 Letter Agreement dated October 24, 1994, by and among
Everbright Finance & Investment Co. Limited, Worlder
International Company Limited, and Billion Luck Company Ltd.
(Filed with Annual Report on Form 10-K/A for the fiscal year
ended December 31, 1994, and incorporated herein by reference.)
10.8 Acquisition Agreement, by and among the Registrant and the
shareholders of Billion Luck Company Ltd. (Filed with Annual
Report on Form 10-K/A for the fiscal year ended December 31,
1994, and incorporated herein by reference.)
10.9 Agreement on Service and Cooperation dated November 5, 1994, by
and between Hainan Province Agricultural Reclamation General
Company (the Farming Bureau) and Hainan Agricultural Resources
Company Ltd. (Original Chinese version with English
translation
</TABLE>
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<PAGE> 18
<TABLE>
<S> <C>
filed with Annual Report on Form 10-K/A for the fiscal year
ended December 31, 1994, and incorporated herein by reference.)
10.10 Land Use Agreement dated November 5, 1994, by and between
Hainan Province Agricultural Reclamation No. 1 Materials Supply
& Sales Company (First Supply) and Hainan Province Agricultural
Reclamation Jin Long Materials General Company (Original
Chinese version with certified English translation filed with
Annual Report on Form 10-K/A for the fiscal year ended December
31, 1994, and incorporated herein by reference.)herewith.)
10.11 Land Use Agreement dated November 5, 1994, by and between
Hainan Province Agricultural Reclamation No. 2 Materials Supply
& Sales Company (Second Supply) and Hainan Province
Agricultural Reclamation Jin Huan Materials General Company
(Original Chinese version with certified English translation
filed with Annual Report on Form 10-K/A for the fiscal year
ended December 31, 1994, and incorporated herein by reference.)
10.12 Long-Term Sale and Purchase Agreement dated November 5, 1994,
by and among Hainan Province Agricultural Reclamation General
Company (the Farming Bureau), Hainan Agricultural Resources
Company Ltd., Hainan Province Agricultural Reclamation No. 1
Materials Supply & Marketing Company (First Supply), and Hainan
Province Agricultural Reclamation No. 2 Materials Supply &
Marketing Company (Second Supply) (Original Chinese version
with English translation filed with Annual Report on Form
10-K/A for the fiscal year ended December 31, 1994, and
incorporated herein by reference.)
10.13 Agreement on Assignment of Accounts Receivable dated November
5, 1994, by and among Hainan Province Agricultural Reclamation
General Company (the Farming Bureau), Billion Luck Company
Ltd., Hainan Province Guilinyang State Farm, Hainan
Agricultural Resources Company Ltd., Hainan Province
Agricultural Reclamation No. 1 Materials Supply & Marketing
Company (First Supply), and Hainan Province Agricultural
Reclamation No. 2 Materials Supply & Marketing Company (Second
Supply) (Original Chinese version with English translation
filed with Annual Report on Form 10-K/A for the fiscal year
ended December 31, 1994, and incorporated herein by reference.)
10.14 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 with Annual Report on Form 10-K/A for the
fiscal year ended December 31, 1994, and incorporated herein by
reference.)
10.15 Guaranty Agreement, by and among Hainan Province Agricultural
Reclamation General Company (the Farming Bureau), Hainan
Agricultural Reclamation No. 1 Materials Supply & Sales Company
(First Supply) and Hainan Agricultural Reclamation No. 2
Materials Supply & Sales Company (Second Supply) (Original
Chinese version with certified English Translation filed with
Annual Report on Form 10-K/A for the fiscal year ended December
31, 1994, and incorporated herein by reference.)
</TABLE>
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<PAGE> 19
<TABLE>
<S> <C>
10.16 Financial Consulting Agreement dated February 1, 1994, by and
between Brender Services Limited and Billion Luck Company Ltd.,
and Extension Agreement dated November 1, 1994, by and between
Brender Services Limited and Billion Luck Company Ltd. (Filed
with Annual Report on Form 10-K/A for the fiscal year ended
December 31, 1994, and incorporated herein by reference.)
10.17 Exchange Agreement, by and among the Registrant, Hong Wah
Investment Holdings Limited, Everbright Finance & Investment
Co. Ltd., Worlder International Company Limited and Silverich
Limited, executed as of March 31, 1995 (Filed with Quarterly
Report on Form 10-Q/A for the fiscal quarter ended March 31,
1995, and incorporated herein by reference.)
10.18 China Resources Development, Inc., 1995 Stock Option Plan,
adopted as of March 31, 1995 (Filed with 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.)
10.19 Consulting Agreement between the Registrant and Brender
Services Limited, dated April 30, 1995 (Filed with Quarterly
Report on Form 10-Q for the fiscal quarter ended June 30, 1995,
and incorporated herein by reference.)
10.20 Letter dated June 1, 1995, extending the repayment date to
December 31, 1995, for loans extended to Billion Luck by
Everbright Finance & Investment Co. Limited, Worlder
International Company Limited and Hong Wah Investment Holdings
Limited, pursuant to Credit Agreement dated June 1, 1994
(Filed with Quarterly Report on Form 10-Q for the fiscal
quarter ended September 30, 1995, and incorporated herein by
reference.)
10.21 Agreement on Administrative Expenses Apportionment between
First Supply and Jin Ling Corporation, dated March 15, 1995
(Original Chinese version with English translation filed with
Annual Report on Form 10-K for the fiscal year ended December
31, 1995, and incorporated herein by reference.)
10.22 Agreement on Administrative Expenses Apportionment between
Second Supply and Jin Huan Corporation, dated March 15, 1995
(Original Chinese version with English translation filed with
Annual Report on Form 10-K for the fiscal year ended December
31, 1995, and incorporated herein by reference.)
10.23 Agreement on Rubber Purchase Deposits among HARC, First Supply,
Second Supply and the Farming Bureau, dated March 30, 1995
(Original Chinese version with English translation filed with
Annual Report on Form 10-K for the fiscal year ended December
31, 1995, and incorporated herein by reference.)
10.24 Employment Agreement between Billion Luck and Han Jian Zhun,
dated August 1, 1995 (Filed with Annual Report on Form 10-K
for the fiscal year ended December 31, 1995, and incorporated
herein by reference.)
</TABLE>
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<PAGE> 20
<TABLE>
<S> <C>
10.25 Employment Agreement between Billion Luck and Li Fei Lie, dated
August 1, 1995 (Filed with Annual Report on Form 10-K for the
fiscal year ended December 31, 1995, and incorporated herein by
reference.)
10.26 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 with
Annual Report on Form 10-K for the fiscal year ended December
31, 1995, and incorporated herein by reference.)
11 Computation of Earnings (Loss) Per Share (Contained in
Financial Statements in Part I, Item 1, hereof.)
27 Financial Data Schedule, For SEC Use Only (Filed herewith.)
(b) During the three months ended June 30, 1996, the Company did
not file a Current Report on Form 8-K.
</TABLE>
-20-
<PAGE> 21
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.
August 13, 1996 By: /s/ Li Shunxing
------------------------------
Li Shunxing, President
By: /s/ Tam Cheuk Ho
------------------------------
Tam Cheuk Ho,
Chief Financial Officer
-21-
<PAGE> 22
EXHIBITS
-22-
<PAGE> 23
EXHIBITS INDEX
<TABLE>
<CAPTION>
Exhibit No. Exhibit Description Page No.
----------- ------------------- --------
<S> <C>
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 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 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 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 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 incorporated 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.)
10.1 Assignment Agreement dated January 21, 1994, by and between Hong
Wah (Holdings) Limited and Billion Luck Company Ltd. (Filed with
Annual Report on Form 10-K/A for the fiscal year ended December
31, 1994, and incorporated herein by reference.)
10.2 Contract on Investment for the Setting up of Hainan Agricultural
Resources Company Ltd. dated January 31, 1994, by and among
Hainan Province Agricultural Reclamation General Company (the
Farming Bureau), Hainan Province Guilinyang State Farm, and
Billion Luck Company Ltd. (Original Chinese version with English
translation filed with Annual Report on Form 10-K/A for the
fiscal year ended December 31, 1994, and incorporated herein by
reference.)
10.3 Loan Agreement dated May 10, 1994, by and among Everbright
Finance & Investment Co. Limited, Worlder International Company
Limited, Hong Wah Investment Holdings Limited, Silverich Limited,
Brender Services Limited, and Billion Luck Company Ltd. (Filed
with Annual Report on
</TABLE>
-23-
<PAGE> 24
<TABLE>
<S> <C>
Form 10-K/A for the fiscal year ended December 31, 1994, and
incorporated herein by reference.)
10.4 Credit Agreement dated June 1, 1994, by and among Everbright
Finance & Investment Co. Limited, Worlder International Company
Limited, Hong Wah Investment Holdings Limited and Billion Luck
Company Ltd. (Filed with Annual Report on Form 10-K/A for the
fiscal year ended December 31, 1994, and incorporated herein by
reference.)
10.5 Contract on the Transfer of Share Ownership of Hainan Zhongya
Aluminum Co., Ltd. dated July 11, 1994, by and between Hainan
Province Guilinyang State Farm and Hainan Agricultural Resources
Co., Ltd. (Filed with Annual Report on Form 10-K/A for the
fiscal year ended December 31, 1994, and incorporated herein by
reference.)
10.6 Letter Agreement dated August 8, 1994, by and among Everbright
Finance & Investment Co. Limited, Worlder International Company
Limited, Hong Wah Investment Holdings Limited and Billion Luck
Company Ltd., supplementing Credit Agreement dated June 1, 1994
(Filed with Annual Report on Form 10-K/A for the fiscal year
ended December 31, 1994, and incorporated herein by reference.)
10.7 Letter Agreement dated October 24, 1994, by and among Everbright
Finance & Investment Co. Limited, Worlder International Company
Limited, and Billion Luck Company Ltd. (Filed with Annual Report
on Form 10-K/A for the fiscal year ended December 31, 1994, and
incorporated herein by reference.)
10.8 Acquisition Agreement, by and among the Registrant and the
shareholders of Billion Luck Company Ltd. (Filed with Annual
Report on Form 10-K/A for the fiscal year ended December 31,
1994, and incorporated herein by reference.)
10.9 Agreement on Service and Cooperation dated November 5, 1994, by
and between Hainan Province Agricultural Reclamation General
Company (the Farming Bureau) and Hainan Agricultural Resources
Company Ltd. (Original Chinese version with English translation
filed with Annual Report on Form 10-K/A for the fiscal year ended
December 31, 1994, and incorporated herein by reference.)
10.10 Land Use Agreement dated November 5, 1994, by and between Hainan
Province Agricultural Reclamation No. 1 Materials Supply & Sales
Company (First Supply) and Hainan Province Agricultural
Reclamation Jin Long Materials General Company (Original Chinese
version with certified English translation filed with Annual
Report on Form 10-K/A for the fiscal year ended December 31,
1994, and incorporated herein by reference.)herewith.)
</TABLE>
-24-
<PAGE> 25
<TABLE>
<S> <C>
10.11 Land Use Agreement dated November 5, 1994, by and between
Hainan Province Agricultural Reclamation No. 2 Materials Supply
& Sales Company (Second Supply) and Hainan Province
Agricultural Reclamation Jin Huan Materials General Company
(Original Chinese version with certified English translation
filed with Annual Report on Form 10-K/A for the fiscal year
ended December 31, 1994, and incorporated herein by reference.)
10.12 Long-Term Sale and Purchase Agreement dated November 5, 1994,
by and among Hainan Province Agricultural Reclamation General
Company (the Farming Bureau), Hainan Agricultural Resources
Company Ltd., Hainan Province Agricultural Reclamation No. 1
Materials Supply & Marketing Company (First Supply), and Hainan
Province Agricultural Reclamation No. 2 Materials Supply &
Marketing Company (Second Supply) 0(Original Chinese version
with English translation filed with Annual Report on Form
10-K/A for the fiscal year ended December 31, 1994, and
incorporated herein by reference.)
10.13 Agreement on Assignment of Accounts Receivable dated November
5, 1994, by and among Hainan Province Agricultural Reclamation
General Company (the Farming Bureau), Billion Luck Company
Ltd., Hainan Province Guilinyang State Farm, Hainan
Agricultural Resources Company Ltd., Hainan Province
Agricultural Reclamation No. 1 Materials Supply & Marketing
Company (First Supply), and Hainan Province Agricultural
Reclamation No. 2 Materials Supply & Marketing Company (Second
Supply) (Original Chinese version with English translation
filed with Annual Report on Form 10-K/A for the fiscal year
ended December 31, 1994, and incorporated herein by reference.)
10.14 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 with Annual Report on Form 10-K/A for the
fiscal year ended December 31, 1994, and incorporated herein by
reference.)
10.15 Guaranty Agreement, by and among Hainan Province Agricultural
Reclamation General Company (the Farming Bureau), Hainan
Agricultural Reclamation No. 1 Materials Supply & Sales Company
(First Supply) and Hainan Agricultural Reclamation No. 2
Materials Supply & Sales Company (Second Supply) (Original
Chinese version with certified English Translation filed with
Annual Report on Form 10-K/A for the fiscal year ended December
31, 1994, and incorporated herein by reference.)
10.16 Financial Consulting Agreement dated February 1, 1994, by and
between Brender Services Limited and Billion Luck Company Ltd.,
and Extension Agreement dated November 1, 1994, by and between
Brender Services Limited and Billion Luck Company Ltd. (Filed
with Annual Report on Form
</TABLE>
-25-
<PAGE> 26
<TABLE>
<S> <C>
10-K/A for the fiscal year ended December 31, 1994, and
incorporated herein by reference.)
10.17 Exchange Agreement, by and among the Registrant, Hong Wah
Investment Holdings Limited, Everbright Finance & Investment
Co. Ltd., Worlder International Company Limited and Silverich
Limited, executed as of March 31, 1995 (Filed with Quarterly
Report on Form 10-Q/A for the fiscal quarter ended March 31,
1995, and incorporated herein by reference.)
10.18 China Resources Development, Inc., 1995 Stock Option Plan,
adopted as of March 31, 1995 (Filed with 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.)
10.19 Consulting Agreement between the Registrant and Brender
Services Limited, dated April 30, 1995 (Filed with Quarterly
Report on Form 10-Q for the fiscal quarter ended June 30, 1995,
and incorporated herein by reference.)
10.20 Letter dated June 1, 1995, extending the repayment date to
December 31, 1995, for loans extended to Billion Luck by
Everbright Finance & Investment Co. Limited, Worlder
International Company Limited and Hong Wah Investment Holdings
Limited, pursuant to Credit Agreement dated June 1, 1994 (Filed
with Quarterly Report on Form 10-Q for the fiscal quarter ended
September 30, 1995, and incorporated herein by reference.)
10.21 Agreement on Administrative Expenses Apportionment between
First Supply and Jin Ling Corporation, dated March 15, 1995
(Original Chinese version with English translation filed with
Annual Report on Form 10-K for the fiscal year ended December
31, 1995, and incorporated herein by reference.)
10.22 Agreement on Administrative Expenses Apportionment between
Second Supply and Jin Huan Corporation, dated March 15, 1995
(Original Chinese version with English translation filed with
Annual Report on Form 10-K for the fiscal year ended December
31, 1995, and incorporated herein by reference.)
10.23 Agreement on Rubber Purchase Deposits among HARC, First Supply,
Second Supply and the Farming Bureau, dated March 30, 1995
(Original Chinese version with English translation filed with
Annual Report on Form 10-K for the fiscal year ended December
31, 1995, and incorporated herein by reference.)
10.24 Employment Agreement between Billion Luck and Han Jian Zhun,
dated August 1, 1995 (Filed with Annual Report on Form 10-K for
the fiscal year ended December 31, 1995, and incorporated
herein by reference.)
</TABLE>
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<PAGE> 27
<TABLE>
<S> <C>
10.25 Employment Agreement between Billion Luck and Li Fei Lie, dated
August 1, 1995 (Filed with Annual Report on Form 10-K for the
fiscal year ended December 31, 1995, and incorporated herein by
reference.)
10.26 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 with
Annual Report on Form 10-K for the fiscal year ended December
31, 1995, and incorporated herein by reference.)
11 Computation of Earnings (Loss) Per Share (Contained in
Financial Statements in Part I, Item 1, hereof.)
27 Financial Data Schedule, For SEC Use Only (Filed herewith.)
</TABLE>
-27-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> RMB
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 8.32
<CASH> 92,156
<SECURITIES> 0
<RECEIVABLES> 52,675
<ALLOWANCES> 0
<INVENTORY> 65,031
<CURRENT-ASSETS> 688,443
<PP&E> 25,946
<DEPRECIATION> 4,151
<TOTAL-ASSETS> 723,464
<CURRENT-LIABILITIES> 473,355
<BONDS> 0
0
53,930
<COMMON> 347
<OTHER-SE> 108,528
<TOTAL-LIABILITY-AND-EQUITY> 723,464
<SALES> 795,719
<TOTAL-REVENUES> 799,962
<CGS> 719,794
<TOTAL-COSTS> 746,175
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 21,676
<INCOME-PRETAX> 32,111
<INCOME-TAX> 5,577
<INCOME-CONTINUING> 13,133
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,133
<EPS-PRIMARY> 0.592
<EPS-DILUTED> 0.592
</TABLE>
