<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 September 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)
<TABLE>
<S> <C> <C>
Nevada 33-5628-NY 87-0263643
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
</TABLE>
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: 82,833,414 shares
of common stock, $.001 par value, as of November 13, 1996.
Page 1 of 39 pages Exhibit Index on Page 22
<PAGE> 2
CONVENTIONS
Unless otherwise specified, all references in this report to "U.S.
Dollars," "Dollars," "U.S.$," 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 September 30, 1996, which was
U.S.$1.00 = Rmb8.30. 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" and "Registrant" 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.
-2-
<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 NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(Amounts in thousands, except share and per share data)
<TABLE>
Three Months Ended Nine Months Ended
Note September 30, September 30,
------------------------------------ --------------------------------------
1996 1995 1996 1996 1995 1996
RMB RMB US$ RMB RMB US$
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C> <C>
SALES 486,788 709,361 58,649 1,282,507 1,307,500 154,519
COST OF SALES (445,430) (685,638) (53,666) (1,165,224) (1,255,379) (140,388)
-------- -------- ------- ---------- ---------- --------
GROSS PROFIT 41,358 23,723 4,983 117,283 52,121 14,131
DEPRECIATION OF FIXED (484) (625) (58) (1,692) (1,817) (204)
ASSETS
SELLING AND (14,132) (10,962) (1,703) (39,305) (33,690) (4,736)
ADMINISTRATIVE EXPENSES -------- -------- ------- ---------- ---------- --------
OPERATING INCOME 26,742 12,136 3,222 76,286 16,614 9,191
FINANCIAL INCOME/ (10,122) (975) (1,220) (31,798) (3,388) (3,831)
(EXPENSES), NET
OTHER INCOME/ (LOSSES), 11,127 2,488 1,341 15,370 17,940 1,852
NET -------- -------- ------- ---------- ---------- --------
INCOME BEFORE INCOME 27,747 13,649 3,343 59,858 31,166 7,212
TAXES
INCOME TAXES (2,335) (2,399) (281) (7,912) (5,011) (953)
-------- -------- ------- ---------- ---------- --------
NET INCOME BEFORE 25,412 11,250 3,062 51,946 26,155 6,259
MINORITY INTERESTS
MINORITY INTERESTS (9,807) (6,106) (1,182) (23,208) (12,913) (2,796)
-------- -------- ------- ---------- ---------- --------
NET INCOME FOR THE 15,605 5,144 1,880 28,738 13,242 3,463
PERIOD ======== ======== ======= ========== ========== ========
PRIMARY EARNINGS PER 2 0.531 0.429 0.064 0.978 1.104 0.118
SHARE ======== ======== ======= ========== ========== ========
FULLY DILUTED EARNINGS 2 0.493 0.429 0.059 0.908 1.104 0.109
PER SHARE ======== ======== ======= ========== ========== ========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
-4-
<PAGE> 5
CHINA RESOURCES DEVELOPMENT, INC., AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1996 AND DECEMBER 31, 1995
(Amounts in thousands)
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996 DECEMBER 31, 1995 SEPTEMBER 30, 1996
------------------ ----------------- ------------------
RMB RMB US$
NOTES (UNAUDITED) (AUDITED) (UNAUDITED)
-----
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents 80,670 56,942 9,719
Trade receivables 135,475 31,991 16,322
Other receivables, deposits
and prepayments 135,671 52,871 16,346
Inventories 3 185,350 103,776 22,332
Amounts due from related
companies 253,871 288,503 30,587
Amount due from Farming
Bureau 48,548 80,427 5,849
Other current assets --- 19,448 ---
------- ------- -------
TOTAL CURRENT ASSETS 839,585 633,958 101,155
FIXED ASSETS 4 21,788 21,491 2,625
INVESTMENTS 12,163 11,963 1,465
GOODWILL 1,055 1,076 127
------- ------- -------
TOTAL ASSETS 874,591 668,488 105,372
======= ======= =======
LIABILITIES AND
SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Bank loans 292,560 293,000 35,248
Amounts due to related companies 35,709 22,654 4,302
Amounts due to shareholders 299 15,727 36
Accounts payable 149,167 39,876 17,972
Income taxes payable 13,873 10,265 1,672
Other payables and accrued
liabilities 78,748 21,533 9,488
Short term advances -- 86,917 --
------- ------- -------
TOTAL CURRENT 570,356 489,972 68,718
LIABILITIES
MINORITY INTERESTS 97,111 74,067 11,700
------- ------- -------
TOTAL LIABILITIES 667,467 564,039 80,418
======= ======= =======
</TABLE>
-5-
<PAGE> 6
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996 DECEMBER 31, 1995 SEPTEMBER 30, 1996
------------------ ----------------- ------------------
RMB RMB US$
NOTES (UNAUDITED) (AUDITED) (UNAUDITED)
-----
<S> <C> <C> <C>
SHAREHOLDERS' EQUITY
Common Stock, US$0.001 par
value: Authorized - 200,000,000
shares in 1996 and 1995
Issued and outstanding -
76,938,640 shares in 1996 and
12,000,000 shares in 1995 641 101 77
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 1995 -- 53,930 --
Series B convertible preferred
stock, US$0.001 par value:
Authorized - 2,500 shares in
1996 and 1995. Issued and
outstanding - 300 shares in -- --- __
1996 and 370 shares in 1995
Additional paid-in capital 148,288 20,961 17,866
Reserves 8,930 8,930 1,075
Retained earnings 49,265 20,527 5,936
------- ------- -------
TOTAL SHAREHOLDERS' EQUITY 207,124 104,449 24,954
------- ------- -------
TOTAL LIABILITIES AND 874,591 668,488 105,372
SHAREHOLDERS' EQUITY ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
-6-
<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 Total
RMB RMB RMB RMB RMB RMB RMB
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1994 101 -- -- 1,407 2,657 7,625 11,790
Issuance of 6,400,000 shares of -- 53,930 -- -- -- -- 53,930
Series A preferred stock
Issuance of 370 shares of Series -- -- -- 19,554 -- -- 19,554
B preferred stock, net of share
issuance costs
Net income -- -- -- -- -- 19,175 19,175
Transfer to reserves -- -- -- -- 6,273 (6,273) --
--- -------- --- ------- ------ ------- -------
Balance at December 31, 1995 101 53,930 -- 20,961 8,930 20,527 104,449
Issuance of 1,283 shares of -- -- -- 73,937 -- -- 73,937
Series B convertible preferred
stock, net of shares issuance
costs
Issuance of 32,938,640 shares of 274 -- -- (274) -- -- --
common stock pursuant to the
conversion of 1,353 shares of
series B convertible preferred
stock
Exchange of 6,400,000 shares of 266 (53,930) -- 53,664 -- -- --
Series A preferred stock into
32,000,000 shares of restricted
common stock
Net income -- -- -- -- -- 28,738 28,738
--- -------- --- ------- ------ ------- -------
Balance at September 30, 1996 641 -- -- 148,288 8,930 49,265 207,124
=== ======== === ======= ====== ======= =======
</TABLE>
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<PAGE> 8
CHINA RESOURCES DEVELOPMENT, INC., AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(Amounts in thousands)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
----------------------------------------------------
1996 1995 1996
RMB RMB US$
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income 28,738 13,242 3,462
Adjustments to reconcile net income to net
cash provided by operating activities:
Minority interests 23,208 12,913 2,796
Depreciation and amortization 1,713 1,838 206
Loss on disposal of fixed assets 5 466 1
Decrease/(increase) in assets:
Trade receivables (103,484) (7,500) (12,468)
Other receivables, deposits and prepayments (82,800) (23,731) (9,976)
Inventories (81,574) 16,589 (9,828)
Amount due from Farming Bureau 31,879 (17,772) 3,841
Amounts due from related companies 34,632 (12,083) 4,173
Other current assets 19,448 -- 2,343
Increase/(decrease) in liabilities:
Amounts due to related companies 13,055 (2,129) 1,573
Accounts payable 109,291 11,776 13,168
Income taxes payable 3,608 4,801 435
Other payables and accrued liabilities 57,215 6,620 6,893
Amounts due to Farming Bureau -- (14,978) --
--------- --------- ---------
Net cash provided by (used in) operating
activities 54,934 (9,948) 6,619
--------- --------- ---------
CASH FLOWS PROVIDED BY/(USED IN)
INVESTING ACTIVITIES:
Purchases of fixed assets (1,994) (3,530) (240)
Purchases of investments (200) (61) (24)
Reduction of minority interests (164) -- (20)
Additions to construction in progress -- (1,410) --
Proceeds from sale of fixed assets -- 1,500 --
-------- --------- --------
Net cash used in investing activities (2,358) (3,501) (284)
-------- --------- --------
</TABLE>
-8-
<PAGE> 9
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 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 73,937 -- 8,908
Loans from shareholders -- 4,170 --
Repayment of loans to shareholders (15,428) -- (1,859)
Repayments of bank borrowings (440) (8,993) (53)
Cash remitted to Farming Bureau -- (1,780) --
Short term advances (86,917) -- (10,472)
Loans to related companies -- (22,573) --
Cash from repayment of loans by
related companies -- 36,635 --
-------- -------- --------
Net cash provided by/(used in) financing activities (28,848) 7,459 (3,476)
-------- -------- --------
NET INCREASE/(DECREASE) IN CASH
AND CASH EQUIVALENTS: 23,728 (5,990) 2,859
Cash and cash equivalents, at beginning of period 56,942 69,157 6,860
-------- --------- --------
Cash and cash equivalents, at end of period 80,670 63,167 9,719
========= ========= ========
</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)
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 nine-month period ended
September 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 computation of primary earnings per share for the three months and
nine months ended September 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
average number of shares of common stock outstanding excludes the
32,000,000 shares of common stock with restricted rights in receiving
dividends or participating in the event of liquidation of the Company,
which might otherwise be payable to holders of the Company's capital
stock. The shares of restricted common stock were issued pursuant to
an Exchange Agreement dated July 22, 1996 (Filed herewith as Exhibit
10.27). The number of shares used in computing the primary earnings
per share and fully diluted earnings per share are 29,395,885 and
31,635,071, respectively.
For the three months and nine months ended September 30, 1995, primary
earnings per share and fully diluted earnings per share are based on
an aggregate of 12,000,000 shares of common stock outstanding.
3. INVENTORIES:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
------------- ------------
RMB RMB
(unaudited) (audited)
<S> <C> <C>
Inventories comprise:
Finished goods 185,350 103,776
========= =========
</TABLE>
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<PAGE> 11
4. FIXED ASSETS:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
------------- ---------------
RMB RMB
(unaudited) (audited)
<S> <C> <C>
Cost:
Buildings 5,739 5,739
Plant, machinery and equipment 11,926 10,267
Transportation vehicles and equipment 8,772 8,448
------- --------
26,437 24,454
------- --------
Accumulated depreciation:
Buildings 941 607
Plant, machinery and equipment 2,235 1,563
Transportation vehicles and equipment 1,473 793
------- --------
4,649 2,963
------- --------
Net book value 21,788 21,491
======= =======
</TABLE>
5. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------
1996 1995
RMB RMB
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
Cash paid during the period for interest expenses 19,959 31,191
====== ======
</TABLE>
-11-
<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 nine months ended September 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 Nine months
ended ended
September 30, September 30,
------------- -------------
1996 1995 1996 1995
RMB RMB RMB RMB
<S> <C> <C> <C> <C>
Sales:
Distribution of natural rubber
390,544 668,209 977,964 1,187,236
Procurement of materials and
supplies 96,244 41,152 304,543 120,264
------- ------- --------- ---------
486,788 709,361 1,282,507 1,307,500
------- ------- --------- ---------
Gross profit 41,358 23,723 117,283 52,121
Gross profit margin (%) 8.50 3.34 9.14 3.99
Income before income taxes 27,747 13,649 59,858 31,166
Income taxes (2,335) (2,399) (7,912) (5,011)
------- ------- --------- ---------
Net income 25,412 11,250 51,946 26,155
Minority interests (9,807) (6,106) (23,208) (12,913)
------- ------- --------- ---------
Net income after minority
interests 15,605 5,144 28,738 13,242
======= ======= ========= =========
</TABLE>
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<PAGE> 13
SALES AND GROSS PROFIT
The Company's total sales for the nine months ended September 30,
1996, were comparable to those of 1995. Of the total sales, the natural rubber
sales decreased by 17.6% to Rmb978 million from Rmb1,187 million for the
corresponding period in last year. This decrease was offset by the increase in
procurement of materials and supplies by 153% to Rmb305 million from Rmb120
million for the corresponding period in last year. The decrease in natural
rubber sales was mainly due to the decrease in the average unit selling price
from Rmb13,400 in 1995 to Rmb12,200 in 1996. In addition, the unit sales of
rubber for the nine months ended September 30, 1996, decreased by 5.7% from the
corresponding period in fiscal 1995 because more inventories were held as of
September 30, 1996, in anticipation of the increase in selling price in the
fourth quarter when there is less rubber output. Following the completion of
the Company's offshore private placements on March 8 and July 8, 1996, the net
proceeds raised from the offering were invested 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 nine months ended September 30, 1996, amounted to
approximately Rmb167 million, with a gross profit of approximately Rmb33
million, or a gross profit margin of 20%. The overall gross profit margin also
increased significantly from 3.99% in fiscal 1995 to 9.14% in fiscal 1996,
which was attributable to the high gross profit margin from the trading of
agricultural products and the purchase discounts received for rubber
distribution.
For the third quarter of fiscal 1996, total sales decreased by 31% to
Rmb487 million from Rmb709 million for the corresponding period in fiscal 1995.
The decrease was due to more rubber inventories being held as of September 30,
1996, in anticipation of the increase in selling price in the fourth quarter,
as previously discussed. The overall gross profit margin also increased to
8.50% from 3.34% for the corresponding period in fiscal 1995 due to the reasons
mentioned above.
SELLING AND ADMINISTRATIVE EXPENSES
Selling and administrative expenses increased by 16.7%, or Rmb5.6
million, for the nine months ended September 30, 1996, compared to the same
period in fiscal 1995. The increase was mainly due to increases in salaries
and staff welfare expenses, and additional selling expenses were incurred for
the distribution of the agricultural products.
FINANCIAL EXPENSES, NET
The net financial expenses increased by Rmb28.4 million, from Rmb3.4
million for the nine months ended September 30, 1995, to Rmb31.8 million for
the corresponding period in 1996. The net financial expenses for the third
quarter of fiscal 1996 also increased by Rmb9.1 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.
-13-
<PAGE> 14
OTHER INCOME/(LOSSES), NET
Other income/(losses) mainly represented income from long term
investments, rental income and profits or losses on trading of rubber futures
contracts. The Rmb2.6 million decrease in net income, from Rmb17.9 million for
the nine months ended September 30, 1995, to Rmb15.4 million for the same
period in fiscal 1996, was mainly due to less profits on the trading of rubber
futures contracts in fiscal 1996 compared to those of fiscal 1995.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary liquidity needs are to fund accounts receivable,
inventories, 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/(used in) operating activities was Rmb54.9
million and (Rmb9.9 million) for the nine months ended September 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 nine months ended September 30, 1996, the Company issued
1,283 shares of series B convertible preferred stock at US$10,000 per share,
with a gross proceeds of US$12.83 million. As of September 30, 1996, 300
shares of series B convertible preferred stock were still outstanding.
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
internally generated funds, will be sufficient to satisfy its anticipated
working capital needs for at least the next 12 months.
-14-
<PAGE> 15
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS:
None.
ITEM 2. CHANGES IN SECURITIES:
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES:
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS:
None.
ITEM 5. OTHER INFORMATION:
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K:
(a) The following Exhibits are filed as part of this Form 10-Q or
incorporated by reference as indicated below:
Exhibit No. Exhibit Description
3.1 Articles of Incorporation of the Registrant, filed on January
15, 1986 (Filed with Annual Report on Form 10-K/A for the
fiscal year ended December 31, 1994, and incorporated herein
by reference.)
3.2 By-laws of the Registrant (Filed with Annual Report on Form
10-K/A for the fiscal year ended December 31, 1994, and
incorporated herein by reference.)
3.3 Certificate of Amendment of Articles of Incorporation of the
Registrant, filed on November 18, 1994 (Filed with Annual
Report on Form 10-K/A for the fiscal year ended December 31,
1994, and incorporated herein by reference.)
3.4 Certificate of Amendment of Articles of Incorporation of the
Registrant, filed on November 18, 1994 (Filed with Annual
Report on Form 10-K/A for the fiscal year ended December 31,
1994, and incorporated herein by reference.)
-15-
<PAGE> 16
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.)
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.)
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<PAGE> 17
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.)
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.)
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<PAGE> 18
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 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.)
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<PAGE> 19
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.)
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.)
10.27 Exchange Agreement, by and between the Registrant and
Everbright Finance & Investment Co. Ltd., dated July 22, 1996
(Filed herewith.)
11 Computation of Earnings (Loss) Per Share (Contained in
Financial Statements in Part I, Item 1, hereof.)
27.3 Financial Data Schedule (Filed herewith.)
99.3 Press Release issued by Registrant, dated July 18, 1996 (Filed
with Current Report on Form 8-K dated July 8, 1996, and
incorporated herein by reference.)
(b) During the three months ended September 30, 1996, the Company
filed one Current Report on Form 8-K, dated July 8, 1996.
That Form 8-K reported Item 5 - Other Events, disclosing the
completion of the Registrant's private offering of shares of
Series B Convertible Preferred Stock, par value $.001 per
share, outside of the United States in reliance upon the
exemption from registration provided by Regulation S,
promulgated under the Securities Act of 1933, as amended. The
report also disclosed the issuance of a press release
concerning the completion of the offering, which was attached
thereto as Exhibit 99.3. No financial statements were filed
with the report.
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<PAGE> 20
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.
November 13, 1996 By: /s/ Li Shunxing
--------------------------------
Li Shunxing, President
By: /s/ Tam Cheuk Ho
--------------------------------------
Tam Cheuk Ho, Chief Financial Officer
-20-
<PAGE> 21
EXHIBITS
-21-
<PAGE> 22
EXHIBITS INDEX
Exhibit No. Exhibit Description
------------ ---------------------------------
3.1 Articles of Incorporation of the Registrant, filed on January
15, 1986 (Filed with Annual Report on Form 10-K/A for the
fiscal year ended December 31, 1994, and incorporated 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
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<PAGE> 23
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.)
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<PAGE> 24
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.)
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
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<PAGE> 25
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.)
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<PAGE> 26
<TABLE>
<S> <C> <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.)
10.27 Exchange Agreement, by and between the Registrant and
Everbright Finance & Investment Co. Ltd., dated July 22, 1996
(Filed herewith.) 28
11 Computation of Earnings (Loss) Per Share (Contained in
Financial Statements in Part I, Item 1, hereof.)
27.3 Financial Data Schedule (Filed herewith.) (for SEC use only) 39
99.3 Press Release issued by Registrant, dated July 18, 1996 (filed
with Current Report on Form 8-K dated July 8, 1996, and incorporated
herein by reference.)
</TABLE>
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<PAGE> 1
EXHIBIT 10.27
Exchange Agreement, by and between
the Registrant and Everbright Finance & Investment
Co. Ltd., dated July 22, 1996
-27-
<PAGE> 2
EXCHANGE AGREEMENT
THIS EXCHANGE AGREEMENT ("Agreement") is made as of the 22nd
day of July, 1996, by and among CHINA RESOURCES DEVELOPMENT, INC., a Nevada
corporation (the "Issuer"), and EVERBRIGHT FINANCE & INVESTMENT CO. LTD., a
Hong Kong company (the "Holder").
W I T N E S S E T H:
WHEREAS, the Issuer has previously issued to certain
shareholders an aggregate of 6,400,000 shares of the Issuer's Series A
Preferred Stock, $1.00 par value (the "Series A Stock"), all of which shares of
Series A Stock have been acquired by Holder; and
WHEREAS, the Holder has requested that the Issuer exchange the
Series A Stock for shares of Issuer's common stock, $.001 par value (the
"Common Stock"), and the Issuer has so agreed, subject to the terms of this
Agreement.
NOW, THEREFORE, for and in consideration of the agreements
contained herein and other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged and confessed, the parties agree as
follows:
1. Exchange.
a. Exchange Shares. All Series A Stock shall be
exchanged for Common Stock based on an exchange rate of five shares of Common
Stock for each share of Series A Stock. In accordance therewith, no later than
August 26, 1996, provided the conditions set forth in Sub-paragraph 1.c below
are met, the Holder shall deliver to the Issuer the stock certificate
representing the 6,400,000 shares of Series A Stock held by the Holder (which
constitute all of the Issuer's authorized, issued and outstanding shares of
Series A Stock), properly endorsed for transfer, and the Issuer shall deliver
to the Holder a stock certificate representing 32,000,000 shares of Common
Stock (the "Exchange Shares") in exchange (the "Exchange") for the Holder's
6,400,000 shares of Series A Stock.
b. Waiver of Dividend and Distribution Rights;
Restriction on Public Trading. In order to induce the Issuer to effect the
Exchange, the Holder hereby waives its rights and those of its transferees, for
a period of seven years from the date of this Agreement, (i) to receive
dividends in connection with the Exchange Shares, and (ii) to receive
distributions in the event of liquidation of the Issuer. The Holder further
agrees to the placement of a legend on the certificate or certificates
representing the Exchange Shares, for a period of seven years from the date
hereof, in substantially the following form:
THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE
HAVE BEEN ACQUIRED PURSUANT TO AN EXCHANGE
<PAGE> 3
AGREEMENT DATED JULY 22, 1996 (THE "AGREEMENT"), BETWEEN CHINA
RESOURCES DEVELOPMENT, INC. (THE "COMPANY") AND THE HOLDER
HEREOF, A COPY OF WHICH MAY BE OBTAINED FROM THE COMPANY,
AND ARE SUBJECT THE PROVISIONS OF THE AGREEMENT. IN ACCORDANCE
WITH THE AGREEMENT, THROUGH JULY 22, 2003, THE HOLDER HEREOF
HAS WAIVED ITS RIGHTS, AND THOSE OF ITS TRANSFEREES, TO RECEIVE
ANY DIVIDENDS IN CONNECTION WITH THE SHARES REPRESENTED
HEREBY OR DISTRIBUTIONS IN THE EVENT OF LIQUIDATION OF THE
COMPANY, WHICH MIGHT OTHERWISE BE PAYABLE TO HOLDERS OF THE
COMPANY'S CAPITAL STOCK.
In addition, the Holder and the Issuer agree that the Issuer, for a period of
four years from the date of this Agreement, will not include the Exchange
Shares in any registration statement filed by the Issuer and will not take any
action to facilitate the registration of the Exchange Shares. The Holder
further agrees to the placement of an additional legend on the certificate or
certificates representing the Exchange Shares, for a period of four years from
the date hereof, in substantially the following form:
THE HOLDER HEREOF UNDERSTANDS THAT THE SHARES REPRESENTED
HEREBY WILL NOT BE REGISTERED BY THE COMPANY PURSUANT TO THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES
LAWS, AND THAT THESE SHARES MAY NOT BE SOLD OR TRANSFERRED
ABSENT SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM.
The Holder also agrees that any transfer of the Exchange Shares will be
conditioned upon the receipt by the Issuer of the transferee's written waiver
of dividend and distribution rights and acceptance of restrictions on public
trading.
c. Exchange. The Exchange shall occur as of the
date of this Agreement (the "Effective Date"), provided that the Issuer's Board
of Directors shall have received a report from an independent valuation firm
selected by the Board of Directors at the Issuer's expense, which report
indicates that the market value of the Holder's 6,400,000 shares of Series A
Stock is equivalent to or greater than the market value of the Exchange Shares.
In the event that such a report is not received by the Issuer's Board of
Directors prior to August 26, 1996, then the Exchange shall not occur, this
Agreement shall cease to be effective and the parties hereto shall have no
obligation to consummate the Exchange as set forth in Sub-paragraph 1.a above.
The parties acknowledge and agree that there are no other conditions to the
obligation of the Holder to exchange the Series A Stock for the Exchange
Shares.
2. Representations and Warranties of Issuer. Issuer
represents and warrants to the Holder as follows:
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<PAGE> 4
a. Issuer. Issuer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Nevada.
b. Authority. Issuer has all necessary
corporate power and authority to enter into and carry out this Agreement. All
corporate actions and proceedings on the part of Issuer, its directors and
shareholders necessary for the authorization, execution, delivery and
performance by Issuer of this Agreement and the transactions contemplated
hereby, including, without limitation, the authorization, issuance and delivery
of the Exchange Shares, have been lawfully and validly taken. This Agreement
is the valid and binding obligation of the Issuer, enforceable in accordance
with its terms, except as such enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium or other laws and principles now or
hereafter in effect relating to or affecting the enforcement of creditors'
rights in general and by general principles of equity and except that the
enforcement of the indemnity provisions of Paragraph 5 may be limited by
federal or state securities laws, other laws or the public policy underlying
any such laws.
c. Fully Paid and Non-Assessable Shares. Upon
the Exchange, the Exchange Shares will be duly authorized, validly issued,
fully paid and non-assessable, and will be free of any liens, charges,
encumbrances, restrictions on transfer or preemptive rights (except such that
arise by acts of the Holder, under federal, state or foreign securities laws or
that exist by reason of any agreement heretofore entered into between the
Holder and the Issuer) (each, a "Lien").
d. No Violation. Neither the execution,
delivery and performance by Issuer of this Agreement, the consummation of the
transactions contemplated hereby nor the issuance of the Exchange Shares will:
(i) violate any provision of Issuer's Articles of Incorporation, as amended
from time to time, or Issuer's By-Laws; (ii) violate any provision of any
statute or law or any judgment, decree, order, regulation or rule of any court
or governmental authority to which Issuer or any of its properties or assets is
subject, which violation could have, singly or in the aggregate, a material
adverse effect on the business, properties, condition (financial or otherwise),
results of operations or prospects of Issuer; or (iii) violate, breach,
constitute a default under, permit the termination or acceleration of, or
result in the creation of any Liens upon the Exchange Shares or any material
property of Issuer under any agreement, instrument or obligation to which
Issuer is a party or by which it or any of its properties or assets is bound,
which violation, breach, default, termination acceleration or Lien could have,
singly or in the aggregate, any material adverse effect on the business,
properties, condition (financial or otherwise), results of operations or
prospects of Issuer.
-3-
<PAGE> 5
e. No Defaults. Issuer is not in violation of:
(i) its Articles of Incorporation or By-Laws as in effect on the effective date
of this Agreement; (ii) any statute or law or any judgment, decree, order,
regulation or rule of any court or governmental authority, which violation
could have, singly or in the aggregate, a material adverse effect on the
business, properties, condition (financial or otherwise), results of operations
or prospects of Issuer; or (iii) any material agreement to which Issuer is a
party or by which any of its properties or assets is bound, which violation
could have, singly or in the aggregate, a material adverse effect on the
business, properties, condition (financial or otherwise), results of operations
or prospects of Issuer.
f. No Consents. No notice to or filing with,
and no authorization, consent or approval of, any domestic or foreign court or
any public or governmental body or authority is necessary for the consummation
by Issuer of the transactions contemplated by this Agreement or the issuance of
the Exchange Shares except: (i) as may be required under the Securities Act of
1933, as amended (the "1933 Act"), the securities or Blue Sky laws of any
jurisdiction or the corporate laws of the State of Nevada (including the
Filing), (ii) notices or filings of which the failure to give or make, or
authorizations, consents and approvals of which the failure to obtain, is based
on information given to Issuer by the Holder with respect to the Holder or its
business, operations or ownership; and (iii) notices or filings of which the
failure to give or make, and authorizations, consents and approvals of which
the failure to obtain, would not individually or in the aggregate, have a
material adverse effect on the business, properties, condition (financial or
otherwise), results of operations or prospects of Issuer or adversely affect
the operations or prospects of Issuer to consummate the transactions
contemplated by this Agreement.
g. No Brokers or Finders. Issuer has retained
no finder or broker in connection transactions contemplated by this Agreement
and hereby agrees to indemnify and hold the Holder harmless from any liability
for any commission or compensation in the nature of an agent's fee to any
broker or other individual or entity (and the costs and expenses of defending
against such liability or asserted liability) arising from any act by Issuer or
any of its agents.
3. Representations and Warranties of Holder. The Holder
hereby represents and warrants to Issuer as follows:
a. Holder. The Holder is a company duly
organized, validly existing and in good standing under the laws of the
jurisdiction set forth in the preamble to this Agreement.
-4-
<PAGE> 6
b. Authority. The Holder has all necessary
power and authority to enter into and carry out this Agreement. This Agreement
is the valid and binding obligation of the Holder, enforceable in accordance
with its terms, except as such enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium or other laws and principles now or
hereafter in effect relating to or affecting the enforcement of creditors'
rights in general and by general principles of equity and except that the
enforcement of the indemnity provisions of Paragraph 5 may be limited by
federal or state securities laws, other laws or the public policy underlying
any of such laws.
c. No Violation. Neither the execution,
delivery and performance by the Holder of this Agreement nor the consummation
of the transactions contemplated hereby, will: (i) violate any provision of any
statute or law or any judgment, decree, order, regulation or rule of any court
or governmental authority to which the Holder or any of its properties or
assets is subject, which violation could have, singly or in the aggregate, a
material adverse effect on the Holder or its ability to perform its obligations
under this Agreement; or (ii) violate, breach, constitute a default under,
permit the termination or acceleration of, or result in the creation of any
Lien upon any material property of the Holder under any agreement, instrument
or obligation to which the Holder is a party or by which the Holder or any of
its properties or assets is bound, which violation, breach, default,
termination, acceleration or Lien could have, singly or in the aggregate, a
material adverse effect on the Holder its ability to perform its obligations
under this Agreement.
d. No Consents. No notice to or filing with,
and no authorization, consent or approval of, any domestic or foreign court or
any public or governmental body or authority is necessary for the consummation
by the Holder of the transactions contemplated by this Agreement or the receipt
of the Exchange Shares except: (i) as may be required under the 1933 Act, the
securities or Blue Sky laws of any jurisdiction or the corporate laws of the
State of Nevada; (ii) notices or filings of which the failure to give or make,
or authorizations, consents and approvals of which the failure to obtain, is
based on information given to the Holder by Issuer with respect to Issuer or
Issuer's business, operations or ownership; and (iii) notices or filings of
which the failure to give or make, and authorizations, consents and approvals
of which the failure to obtain, would not individually or in the aggregate,
have a material adverse effect on the Holder or adversely affect Holder's
ability to consummate the transactions contemplated by this Agreement.
e. Investment Intent. The Holder is acquiring
the Exchange Shares solely for the Holder's own account and not with a view to,
or for resale in connection with, any distribution thereof. The Holder
understands that the Exchange Shares have not
-5-
<PAGE> 7
been registered under the 1933 Act by reason of specified exemptions therefrom
which depend upon, among other things, the bona fide nature of the Holder's
investment intent as expressed in this Subparagraph (e).
f. Restricted Securities. The Holder
understands that the Exchange Shares may not be sold, transferred or otherwise
disposed of without registration and/or qualification under the 1933 Act and
any applicable state securities laws or Blue Sky Laws, or an exemption
therefrom, and that in the absence of appropriate registration and/or
qualification, or exemption therefrom, the Exchange Shares must be held
indefinitely. The Holder further understands that the Issuer will take no
action to effect or facilitate such registration and/or qualification for at
least four years from the date of this Agreement. The Holder will not sell,
transfer or otherwise dispose of the Exchange Shares except pursuant to
appropriate registration and/or qualification or an appropriate exemption
therefrom. Further, the Holder understands that the Issuer will require, as a
condition to any transfer of the Exchange Shares, that any transferee of the
Exchange Shares enter into an agreement by which such transferee will waive its
dividends rights and rights to distributions upon liquidation of the Issuer in
substantially the manner set forth in Paragraph 1.b. The Holder agrees to the
placement of a legend on the certificate or certificates representing the
Exchange Shares setting forth the foregoing restrictions, in addition the
legend set forth in Paragraph 1.b.
g. Experience. The Holder has such knowledge
and experience in financial and business matters and in making investments of
this type that it is capable of evaluating the merits and risks of acquiring
the Exchange Shares.
h. Receipt of Information. The Holder has been
furnished access to Issuer's business records relating to the Exchange Shares,
and such additional information and documents as the Holder has requested, and
has been afforded an opportunity to ask questions of and receive answers from
representatives of Issuer concerning the terms and conditions of this Agreement
and the acquisition of the Exchange Shares.
i. Accredited Investor. The Holder is an
"accredited investor," as such term is defined in Rule 501(a) promulgated by
the Securities and Exchange Commission under the 1933 Act.
j. No Dividends or Distributions. The Holder
understands that the Exchange Shares are shares of Common Stock, except that,
by virtue of the Holder's waiver of dividend and distribution rights in
Paragraph 1.b and for the period set froth in such paragraph, the Exchange
Shares do not entitle the Holder to receive dividends as may be declared by the
Board of Directors of
-6-
<PAGE> 8
the Issuer from time to time or to receive distributions in the event of
liquidation of the Issuer.
k. No Brokers or Finders. The Holder has
retained no finder or broker in connection with the transactions contemplated
by this Agreement and hereby agrees to indemnify and hold Issuer harmless from
any liability for any commission or compensation in the nature of an agent's
fee to any broker or other individual or entity (and the costs and expenses of
defending against such liability or asserted liability) arising from any act by
the Holder or any of its agents.
4. Survival of Representations and Warranties. All
representations and warranties set forth in this Agreement shall survive the
execution and delivery of this Agreement, and the consummation of the
transactions contemplated by this Agreement, for the period of any applicable
statutes of limitations.
5. Indemnification. Each party agrees to indemnify,
defend and hold harmless the other party from any claim, demand, loss,
liability, damage or expense, including, without limitation, interest,
penalties and reasonable attorneys' fees and costs of investigation, incurred
as a result of any material inaccuracy, misrepresentation or breach of any
representation, warranty, covenant or agreement on the part of such party under
or pursuant to this Agreement and the Exhibits and Schedules hereto, if any.
6. General Provisions.
a. Notices. All notices, requests, demands and
other communications which are required or may be given under this Agreement
shall be in writing and shall be deemed to have been duly given if transmitted
by facsimile with receipt acknowledged, or upon delivery, if delivered
personally or by a recognized commercial courier with receipt acknowledged, or
upon the expiration of 72 hours after mailing, if mailed by registered or
certified mail, return receipt requested, postage prepaid, addressed as
follows:
If to Issuer: CHINA RESOURCES DEVELOPMENT, INC.
Room 2005, 20th Floor
Universal Trade Center
3-5A Arbuthnot Road
Central, Hong Kong
Attn: Mr. Li Shunxing, President
Telephone No.: (852) 2810-6226
Facsimile No.: (852) 2810-6963
With a copy to: BAKER & HOSTETLER
Post Office Box 112
Orlando, FL 32802-0112
Attn: Kenneth C. Wright
-7-
<PAGE> 9
Telephone No.: (407) 649-4000
Facsimile No.: (407) 841-0168
If to Holder: EVERBRIGHT FINANCE &
INVESTMENT CO. LIMITED
23/F., Office Tower
Convention Plaza
1 Harbour Road
Wanchai, Hong Kong
Attn: Mr. I.P. Zhang, Director
Telephone No.: (852) 2537-6689
Facsimile No.: (852) 2526-9912
Any party from time to time may change its address, facsimile
number or other information for the purpose of notices to that party by giving
notice specifying such change to the other parties hereto.
b. Entire Agreement. This Agreement (including
the Schedules and Exhibits, if any, to this Agreement) constitutes the entire
agreement between the parties with respect to its subject matter and no party
shall be entitled to benefits other than those specified herein, and all prior
agreements, statements, representations and warranties with respect to the
subject matter of this Agreement are superseded by this Agreement.
c. Amendments and Waivers. Neither this
Agreement, nor any of its provisions, may be amended or modified in any way,
except by express written agreement of the parties hereto. Neither any
obligation of a party to this Agreement, nor any breach or default by a party
under this Agreement, may be changed, waived, discharged or terminated except
by a statement in writing signed by the party against which the enforcement of
such change, waiver, discharge or termination is sought. No waiver by any
party of any term or condition of this Agreement, in any one or more instances,
shall be deemed to be or construed as a waiver of the same or any other term or
condition of this Agreement on any future occasion. Notwithstanding the
foregoing, the Holder shall have no power to revoke, and the Issuer shall have
no power to allow the revocation of, the Holder's waiver of dividend and
distribution rights and the restrictions on public trading set forth in
Paragraph 1.b.
d. Successors and Assigns. This Agreement shall
be binding upon, and inure to the benefit of, the parties and their respective
successors, heirs, executors, administrators, legal representatives and
assigns.
e. Severability. If any provision of this
Agreement shall be construed as invalid, illegal or unenforceable for any
reason and in any respect, and if the extent of such invalidity, illegality or
unenforceability does not destroy the basis of the bargain herein, the
validity, legality and
-8-
<PAGE> 10
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby, and the remainder of this Agreement shall remain in full
force and effect, enforceable in accordance with its terms as if such
provisions had not been included, or had been modified as provided below, as
the case may be. To carry out the intent of the parties hereto as fully as
possible, the invalid, illegal or unenforceable provision(s) , if possible,
shall be deemed modified to the extent necessary and possible to render such
provision(s) valid and enforceable.
f. Headings. The captions and headings to the
Paragraphs and Subparagraphs of this Agreement are inserted for purposes of
convenience only, are not part of this Agreement and shall be given no force or
effect in construing or interpreting the meaning of this Agreement or any of
its provisions.
g. Counterparts. This Agreement shall be in
writing and may be executed in one or more counterparts, each of which shall be
deemed an original, and all of which taken together shall constitute one and
the same instrument.
h. Expenses. Issuer and the Holder shall each
pay its own expenses with respect to this Agreement and the transactions
contemplated hereby; provided that Issuer shall pay any stamp or other taxes
(excluding income taxes) which may be payable upon the issuance of the Exchange
Shares.
i. Governing Law and Venue. This Agreement
shall be governed by and construed, interpreted and enforced in accordance with
the law of the State of Florida without reference to the conflict of laws
principles thereof. The courts of Florida in the Ninth Judicial Circuit, and
the United States District Court for the Middle District of Florida (Orlando
Division), shall be the exclusive courts of jurisdiction and venue for any
litigation, special proceeding or other proceeding as between the parties that
may be brought, or arise out of, in connection with, or by reason of this
Agreement. The Holder hereby consents to the jurisdiction of such courts.
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed by their duly authorized signatories, effective as the date first
set forth above.
"Issuer"
CHINA RESOURCES DEVELOPMENT, INC.,
a Nevada corporation
By: /s/ Li Shunxing
------------------------------------
Li Shunxing, President
-9-
<PAGE> 11
"Holder"
EVERBRIGHT FINANCE & INVESTMENT CO.
LIMITED, a Hong Kong company
By: /s/ Zhang Yibing
--------------------------------
Zhang Yibing, Director and
Authorized Signatory
-10-
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<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> RMB
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<EXCHANGE-RATE> 8.30
<CASH> 80,670
<SECURITIES> 0
<RECEIVABLES> 135,475
<ALLOWANCES> 0
<INVENTORY> 185,350
<CURRENT-ASSETS> 839,585
<PP&E> 26,437
<DEPRECIATION> 4,649
<TOTAL-ASSETS> 874,591
<CURRENT-LIABILITIES> 570,356
<BONDS> 0
0
0
<COMMON> 641
<OTHER-SE> 206,483
<TOTAL-LIABILITY-AND-EQUITY> 874,591
<SALES> 1,282,507
<TOTAL-REVENUES> 1,297,877
<CGS> 1,165,224
<TOTAL-COSTS> 1,206,221
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 31,798
<INCOME-PRETAX> 59,858
<INCOME-TAX> 7,912
<INCOME-CONTINUING> 28,738
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 28,738
<EPS-PRIMARY> 0.978
<EPS-DILUTED> 0.908
</TABLE>
