<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, 1997 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: 011-852-2810-7205
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: 6,029,004 shares of
common stock, $.001 par value, as of August 15, 1997.
Page 1 of 46 pages Exhibit Index on Page 22
<PAGE> 2
CONVENTIONS
Unless otherwise specified, all references in this report to "U.S.
Dollars," "Dollars," "U.S.$," 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 June 30, 1997, 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 Zhongwei 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 Zhongwei 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 "Restructuring Agreement" are to the Shareholders'
Agreement on Business Restructuring among Billion Luck, the Farming Bureau and
Guilinyang Farm, and the Assets and Staff Transfer Agreement among HARC, First
Supply, Second Supply and the Farming Bureau, both of which were effective as of
October 1, 1996.
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, 1997 AND 1996
(Amounts in thousands, except share and per share data)
<TABLE>
<CAPTION>
Note Three months ended Six months ended
June 30, June 30,
----------------------------------- ----------------------------------
1997 1996 1997 1997 1996 1997
RMB RMB USD RMB RMB USD
(unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
SALES 365,069 540,599 43,984 474,467 795,719 57,165
COST OF SALES (348,557) (478,773) (41,995) (449,675) (719,794) (54,178)
-------- -------- ------- -------- -------- -------
GROSS PROFIT 16,512 61,826 1,989 24,792 75,925 2,987
DEPRECIATION OF FIXED ASSETS (510) (613) (61) (844) (1,208) (102)
SELLING AND ADMINISTRATIVE EXPENSES (8,258) (15,187) (995) (15,717) (25,173) (1,893)
-------- -------- ------- -------- -------- -------
OPERATING INCOME 7,744 46,026 933 8,231 49,544 992
FINANCIAL INCOME/(EXPENSES), NET 243 (16,487) 29 890 (21,676) 107
OTHER INCOME 9,936 (5,095) 1,197 18,745 4,243 2,258
-------- -------- ------- -------- -------- -------
INCOME BEFORE INCOME TAXES 17,923 24,444 2,159 27,866 32,111 3,357
INCOME TAXES (4,027) (3,586) (485) (6,153) (5,577) (741)
-------- -------- ------- -------- -------- -------
NET INCOME BEFORE MINORITY INTERESTS 13,896 20,858 1,674 21,713 26,534 2,616
MINORITY INTERESTS (7,161) (10,221) (863) (11,598) (13,401) (1,397)
-------- -------- ------- -------- -------- -------
NET INCOME FOR THE PERIOD 6,735 10,637 811 10,115 13,133 1,219
======== ======== ======= ======== ======== =======
EARNINGS PER SHARE 2 1.12 4.79 0.13 1.70 5.92 0.20
======== ======== ======= ======== ======== =======
</TABLE>
The accompanying notes are an integra2l part of these condensed cconsolidated
financial statements.
-4-
<PAGE> 5
CHINA RESOURCES DEVELOPMENT, INC., AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 1997, AND DECEMBER 31, 1996
(Amounts in thousands)
<TABLE>
<CAPTION>
JUNE 30, 1997 December 31, June 30, 1997
------------- ------------ -------------
RMB 1996 US$
----
NOTE (UNAUDITED) RMB (unaudited)
---- (audited)
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents 85,423 131,006 10,292
Trade receivables 21,191 4,212 2,553
Other receivables, deposits and 106,644 48,755 12,849
prepayments
Inventories 3 60,626 55,452 7,305
Amounts due from related 164,380 147,221 19,805
companies
Amount due from Farming 4,528 298,570 546
Bureau
TOTAL CURRENT ASSETS 442,792 685,216 53,349
FIXED ASSETS 4 7,264 6,504 875
INVESTMENTS 11,159 12,344 1,344
GOODWILL 1,034 1,049 125
-------- ------- ------
TOTAL ASSETS 462,249 705,113 55,693
======= ======= ======
LIABILITIES AND
SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Bank loans -- 292,560 --
Amounts due to related companies 3,963 -- 478
Amounts due to shareholders 299 4,976 36
Accounts payable 78,694 25,848 9,481
Income taxes payable 19,830 17,063 2,389
Other payables and accrued liabilities 10,080 43,295 1,215
TOTAL CURRENT 112,866 383,742 13,599
LIABILITIES
MINORITY INTERESTS 120,178 108,580 14,479
------- ------- ------
TOTAL LIABILITIES 233,044 492,322 28,078
======= ======= ======
</TABLE>
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<PAGE> 6
<TABLE>
<CAPTION>
JUNE 30, 1997 December 31, June 30, 1997
------------- ------------ -------------
RMB 1996 US$
----
NOTE (UNAUDITED) RMB (unaudited)
---- (audited)
<S> <C> <C> <C> <C>
SHAREHOLDERS' EQUITY
Common Stock, US$0.001 par
value: Authorized - 200,000,000
shares in 1997 and 1996;
Issued and outstanding -
6,029,004 and 5,779,004 shares
in 1997 and 1996 respectively 48 48 6
Preferred stock, authorized -
10,000,000 shares in 1997 and
1996: Series B preferred stock,
US$0.001 par value: Authorized -
3,200,000 shares in 1997 and
1996; Issued and outstanding -
3,200,000 shares in 1997 and
1996 270 270 33
Additional paid-in capital 153,493 147,194 18,493
Reserves 17,748 17,748 2,138
Retained earnings 57,646 47,531 6,945
------- ------- ------
TOTAL SHAREHOLDERS' EQUITY 229,205 212,791 27,615
------- ------- ------
TOTAL LIABILITIES AND 462,249 705,113 55,693
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
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(Amounts in thousands)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
------------------------------
1997 1996 1997
RMB RMB USD
(UNAUDITED)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income 10,115 13,133 1,219
Adjustments to reconcile net income to net cash
provided by operating activities:
Minority interests 11,598 13,401 1,397
Depreciation and amortization 844 1,208 102
(Gain)/loss on disposal of fixed assets 405 5 49
Decrease/(increase) in assets:
Trade receivables (16,979) (20,684) (2,046)
Other receivables, deposits and prepayments (51,590) (70,965) (6,216)
Inventories (5,174) 38,745 (623)
Amount due from Farming Bureau 1,482 56,076 179
Amounts due from related companies (17,159) (41,891) (2,067)
Other current assets -- 19,448 --
Increase/(decrease) in liabilities:
Amounts due to related companies 3,963 (4,688) 477
Accounts payable 52,846 50,306 6,367
Income taxes payable 2,767 4,002 334
Other payables and accrued liabilities (33,215) 36,547 (4,002)
-------- ------- -------
Net cash provided by/(used in) operating activities (40,097) 94,643 (4,830)
-------- ------- -------
CASH FLOWS PROVIDED BY/(USED IN)
INVESTING ACTIVITIES:
Purchases of fixed assets (1,997) (1,504) (241)
Purchases of investments -- (200) --
Reduction of minority interests -- (164) --
Additions to construction in progress -- -- --
Proceeds from disposal of fixed assets 3 -- --
Proceeds from sale of investments 1,185 -- 143
-------- ------- -------
Net cash used in investing activities (809) (1,868) (98)
-------- ------- -------
CASH FLOWS PROVIDED BY/(USED IN)
FINANCING ACTIVITIES
Issue of share capital less share offering costs -- 45,223 --
Loans from shareholders -- -- --
Repayment of loans to shareholders (4,677) (15,427) (563)
Repayment of bank borrowings -- (440) --
Cash remitted to Farming Bureau -- -- --
Short term advances -- (86,917) --
Loans to related companies -- -- --
Cash from repayment of loans by related companies -- -- --
-------- ------- -------
Net cash used in financing activities (4,677) (57,561) (563)
======== ======= =======
NET INCREASE/(DECREASE) IN CASH AND
CASH EQUIVALENTS (45,583) 35,214 (5,491)
Cash and cash equivalents, at beginning of period 131,006 56,942 15,783
-------- ------- -------
Cash and cash equivalents, at end of period 85,423 92,156 10,292
======== ======= =======
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
-7-
<PAGE> 8
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 Additional
Common Preferred Paid-In Retained
Stock Stock Capital Reserves Earnings Total
RMB RMB RMB RMB RMB RMB
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996 48 270 147,194 17,748 47,531 212,791
Issuance of 250,000 shares of common -- -- 6,299 -- -- 6,299
stock as compensation for public relations
and consulting services received
Net income for the period -- -- -- -- 10,115 10,115
----- ----- ------- ------ ------ -------
Balance at June 30, 1997 48 270 153,493 17,748 57,646 229,205
===== ===== ======= ====== ====== =======
</TABLE>
-8-
<PAGE> 9
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 six months period ended June 30, 1997, are not necessarily indicative
of the results that may be expected for the year ending December 31, 1997.
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, 1996.
2. EARNINGS PER SHARE:
The computation of primary earnings per share for the three months and six
months ended June 30, 1997, are based on the weighted average number of
shares of common stock outstanding after giving effect to dilutive stock
options, which are included as common share equivalents using the treasury
stock method and assumed to be converted to common stock. The number of
shares used in computing the primary earnings per share for the three
months and six months ended June 30, 1997, were 6,029,004 and 5,945,671
respectively. Fully diluted earnings per share is not materially different
from primary earnings per share.
The computation of primary earnings per share for the three months and six
months ended June 30, 1996, is 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 was 2,219,285 as if the one-for-ten reverse
stock split had been completed at the beginning of the period. Fully
diluted earnings per share is not materially different from primary
earnings per share.
3. INVENTORIES:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
------------ -----------
RMB RMB
(Unaudited) (Unaudited)
<S> <C> <C>
Finished goods 60,626 55,452
======= ========
</TABLE>
Inventories are stated at the lower of cost or market. Cost is determined using
the first-in, first-out method.
-9-
<PAGE> 10
4. FIXED ASSETS:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
------------ ------------
RMB RMB
(unaudited) (audited)
<S> <C> <C>
Cost:
Buildings 4,418 3,806
Plant, machinery and equipment 1,854 1,645
Transportation vehicles and equipment 5,560 4,264
------ -----
11,832 9,715
------ -----
Accumulated depreciation:
Buildings 2,305 1,711
Plant, machinery and equipment 444 238
Transportation vehicles and equipment 1,819 1,262
------- -------
4,568 3,211
------- -------
Net book value 7,264 6,504
======= =======
</TABLE>
5. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
-------------------------------------
1997 1996
RMB RMB
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
Cash paid during the period for interest expenses 2,958 12,801
======= =======
</TABLE>
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<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITIONS AND RESULTS OF OPERATIONS
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, 1996 and 1997. The data should be read in
conjunction with the unaudited Condensed Consolidated Financial Statements of
the Company and related Notes thereto.
The discussions below are presented in the Company's primary operating
currency which is the Renminbi Yuan ("Rmb"). For information purposes the
amounts have been translated into U.S. dollars at an exchange rate of $1.00 =
Rmb8.30 which represents the single rate of exchange as quoted by the People's
Bank of China on June 30, 1997. No representation is made that Rmb amounts could
have been, or could be, converted into U.S. dollars at that rate or any other
rate.
(Amounts in thousands)
<TABLE>
<CAPTION>
Three months Six months
ended ended
June 30, June 30,
-------- --------
1997 1996 1997 1996
RMB RMB RMB RMB
<S> <C> <C> <C> <C>
Sales:
Distribution of natural rubber
Procurement of materials and 353,067 354,069 449,149 587,420
supplies 12,002 186,530 25,318 208,299
-------- -------- -------- --------
365,069 540,599 474,467 795,719
-------- -------- -------- --------
Gross profit 16,512 61,826 24,792 75,925
Gross profit margin (%) 4.52 11.44 5.23 9.54
Income before income taxes 17,923 24,444 27,866 32,111
Income taxes (4,027) (3,586) (6,153) (5,577)
-------- -------- -------- --------
Net income 13,896 20,858 21,713 26,534
Minority interests (7,161) (10,221) (11,598) (13,401)
-------- -------- -------- --------
Net income after minority 6,735 10,637 10,115 13,133
interests ======== ======== ======== ========
</TABLE>
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<PAGE> 12
SALES AND GROSS PROFIT
Total net sales for the second quarter of fiscal 1997 decreased by
approximately Rmb176 million (US$21 million) or 32.5% to approximately Rmb365
million (US$44 million), compared to approximately Rmb541 million (US$65
million) for the corresponding period in 1996. This decrease was mainly due to
the decrease in net sales from procurement of materials and supplies by
approximately Rmb175 million (US$21 million) or 93.6% to approximately Rmb12
million (US$1.4 million), compared to approximately Rmb187 million (US$22
million) for the corresponding period in 1996.
For the first half year of 1997, the Company's total net sales
decreased by Rmb321 million (US$39 million) or 40.4%. The net sales of natural
rubber, and materials and supplies, decreased by Rmb138 million (US$17 million)
or 23.5%, and Rmb183 million (US$22 million) or 88%, respectively, as compared
to the corresponding period in 1996.
The domestic natural rubber consumption market remained sluggish for
the first half of fiscal 1997. There is an excess supply of natural rubber in
the domestic market as a result of an influx of imported natural rubber and a
drop in worldwide rubber prices. The domestic natural rubber price further
dropped to approximately Rmb10,400 per ton at the end of the period, compared to
approximately Rmb12,000 per ton at the beginning of the period and approximately
Rmb13,000 per ton for the comparable period in 1996.
Net sales from procurement of materials and supplies remained low in
the first half of fiscal 1997 because of the weak consumption market. The
Company also reduced the scope of those procurement segments with unsatisfactory
net margin contribution. There was a high margin contribution from trading of
agricultural products in 1996. However, this market was not as favorable in 1997
as compared to 1996, which accounted for the drop in net sales and gross profit
margin.
For the first half of fiscal 1997, gross profit decreased by
Rmb51,133,000 (US$6,161,000) or 67% to Rmb24,792,000 (US$2,987,000), compared to
Rmb75,925,000 (US$9,148,000) for the corresponding period in 1996. The overall
gross profit margin also decreased from 9.54% to 5.23% due to the unsatisfactory
profit margin contribution from the procurement business.
SELLING AND ADMINISTRATIVE EXPENSES
For the first half of fiscal 1997, selling and administrative expenses
decreased by Rmb9,456,000 (US$1,139,000) or 37.6% to Rmb15,717,000
(US$1,894,000) compared to the corresponding period in fiscal 1996. The
reduction is primarily a result of the restructuring of operations implemented
effective from the last quarter of fiscal 1996. The restructuring has resulted
in reduced administrative overheads, staff costs and related welfare expenses.
The reduction in operating expenses achieved through the restructuring of
operations was partially offset by an increase in legal and professional fees
associated with regulatory compliance and public relations costs incurred as a
result of the NASDAQ listing status of the Company.
NET FINANCIAL INCOME/(EXPENSES)
The Company recorded net financial income of Rmb890,000 (US$107,000)
for the first half of fiscal 1997 compared to net financial expenses of
Rmb21,676,000 (US$2,612,000) for the corresponding period in fiscal 1996. This
was primarily attributable to the reduction in bank interest expenses following
the execution of the Restructuring Agreement effective on October 1, 1996.
Pursuant to the Restructuring Agreement, all outstanding bank loans of the
Company were deemed assigned to the Farming Bureau. As a result, all bank
interest incurred by the Company commencing October 1, 1996, was recovered from
the Farming Bureau. The net financial income for the first half of fiscal 1997
represented mainly bank interest income and foreign exchange gain.
-12-
<PAGE> 13
OTHER INCOME, NET
Other income increased by Rmb14,502,000 (US$1,747,000) or 342% to
Rmb18,745,000 (US$2,258,000) for the first half of fiscal 1997, compared with
Rmb4,243,000 (US$511,000) for the corresponding period in 1996. The increase was
mainly due to increased income from the trading of rubber futures contracts
during the first half of fiscal 1997, as compared to such income in the
corresponding period in 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary liquidity needs are to fund accounts receivable
and inventories and to expand business operations. The Company has financed its
working capital requirements mainly through a combination of internally
generated cash and proceeds from the offshore private placements completed in
the year 1996. Net cash used in operating activities was Rmb40 million (US$4.8
million) for the first half of fiscal 1997. Net cash provided by the operating
activities was Rmb94.6 million (US$11.4 million) for the corresponding period in
1996. The Company had a working capital surplus of approximately Rmb330 million
(US$39.8 million) as of June 30, 1997.
On March 28, 1997 and March 31, 1997, the Company completed formal
assignments, in the aggregate, of approximately Rmb293 million (US$35.3 million)
in bank loans to the Farming Bureau.
There has been no other significant change in financial condition and
liquidity since the fiscal year ended December 31, 1996. The Company believes
that the net proceeds retained 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 twelve months.
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<PAGE> 14
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS:
None.
ITEM 2. CHANGES IN SECURITIES:
On April 1, 1997, the Company entered into an Advertising and Media
Agreement with Marketing Direct Concepts, Inc., a Nevada corporation ("MDC"), a
copy of which is filed with this report as Exhibit 10.36 and incorporated herein
by reference. In consideration of the public relations services to be performed
by MDC, the Company issued to MDC 150,000 unregistered shares of common stock,
par value $0.001 per share (the "Common Stock"), as well as stock purchase
warrants with terms of three years (the "Warrants"). The Warrants entitle MDC to
purchase 125,000 shares of Common Stock at a price of $2.50 per share, 125,000
shares of Common Stock at a price of $4.50 per share, and 100,000 shares of
Common Stock at a price of $5.50 per share. The Warrants may be exercised, and
the Common Stock purchased, at any time during the three-year term. Neither the
Warrants nor the shares of Common Stock underlying them have been registered,
but such shares are subject to "piggyback" registration rights in the event that
that the Company files a registration statement.
On May 1, 1997, the Company entered into a Financial Consulting
Agreement with Integrated Capital Development Group, Ltd., a British Virgin
Islands company ("ICD"), a copy of which is filed with this report as Exhibit
10.37 and incorporated herein by reference. In consideration of the acquisition
target identification and public relations services to be performed by ICD, the
Company issued to ICD 100,000 unregistered shares of Common Stock.
Both of the transactions disclosed above were effected in reliance upon
the exemption from registration for transactions not involving any public
offering, which is set forth in Section 4(2) of the Securities Act of 1933.
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.)
- 14 -
<PAGE> 15
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 with Current Report
on Form 8-K dated June 19, 1995, and incorporated herein by
reference.)
3.6 Certificate of Amendment of Articles of Incorporation of the
Registrant, effective December 30, 1996 (Filed with Annual
Report on Form 10-K for the fiscal year ended December 31,
1996, and incorporated herein by reference.)
3.7 Amended and Restated By-laws of the Registrant, as amended on
December 30, 1996 (Filed with Annual Report on Form 10-K for
the fiscal year ended December 31, 1996, 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.)
4.2 Certificate of Amendment of Certificate of Designation of
Series B Convertible Preferred Stock, effective December 31,
1997 (Filed with Annual Report on Form 10-K for the fiscal
year ended December 31, 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.)
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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.)
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
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<PAGE> 17
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 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
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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.)
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. Limited, dated July 22,
1996 (Filed with Quarterly Report on Form 10-Q for the fiscal
quarter ended September 30, 1996, and incorporated herein by
reference.)
10.28 Loan Agreement between HARC and the Farming Bureau, dated
March 25, 1996, and the supplementary agreement dated December
31, 1996 (Certified English translation of original Chinese
version filed with Annual Report on Form 10-K/A for the fiscal
year ended December 31, 1996, and incorporated herein by
reference.)
10.29 Loan Agreement between HARC and the Registrant, dated March
25, 1996 (Certified English translation of original Chinese
version filed with Annual Report on Form 10-K/A for the fiscal
year ended December 31, 1996, and incorporated herein by
reference.)
10.30 Rental Agreement between HARC and the Hainan Farming Bureau
Testing Center, dated August 9, 1996 (Certified English
translation of original Chinese version filed with Annual
Report on Form 10-K for the fiscal year ended December 31,
1996, and incorporated herein by reference.)
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<PAGE> 19
10.31 Shareholders' Agreement on Business Restructuring among the
Farming Bureau, Guilinyang Farm and Billion Luck, dated as of
October 1, 1996 (Certified English translation of original
Chinese version filed with Annual Report on Form 10-K for the
fiscal year ended December 31, 1996, and incorporated herein
by reference.)
10.32 Assets and Staff Transfer Agreement among the Farming Bureau,
HARC, First Supply and Second Supply, dated as of October 1,
1996 (Certified English translation of original Chinese
version filed with Annual Report on Form 10-K for the fiscal
year ended December 31, 1996, and incorporated herein by
reference.)
10.33 Exchange Agreement, by and between the Registrant and
Everbright Finance & Investment Co. Limited, dated December
31, 1996 (Filed with Annual Report on Form 10-K for the fiscal
year ended December 31, 1996, and incorporated herein by
reference.)
10.34 China Resources Development, Inc., Amended and Restated 1995
Stock Option Plan, as amended on December 30, 1996 (Filed with
Annual Report on Form 10-K for the fiscal year ended December
31, 1996, and incorporated herein by reference.)
10.35 Agency Agreement on Natural Rubber Distribution between Hainan
General Bureau Jin Huan Materials Supply General Company and
HARC, dated January 2, 1997 (Certified English translation of
original Chinese version filed with Quarterly Report on Form
10-Q for the fiscal quarter ended March 31, 1997, and
incorporated herein by reference.)
10.36 Advertising and Media Agreement by and between the Registrant
and Marketing Direct Concepts, Inc., dated April 1, 1997
(Filed herewith.)
10.37 Financial Consulting Agreement by and between the Registrant
and Integrated Capital Development Group, Inc., dated May 1,
1997 (Filed herewith.)
11 Computation of Earnings (Loss) Per Share (Contained in
Financial Statements in Part I, Item 1, hereof.)
27.2 Financial Data Schedule (Filed herewith. For SEC use only.)
(b) During the three months ended June 30, 1997, the Company filed
no Current Reports on Form 8-K.
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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.
August 18, 1997 By: /s/ Li Shunxing
---------------------------------
Li Shunxing, President
By: /s/ Tam Cheuk Ho
----------------------------------
Tam Cheuk Ho, Chief Financial Officer
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EXHIBITS INDEX
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<TABLE>
<CAPTION>
Exhibit No. Exhibit Description Page No.
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<S> <C> <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 with Current Report
on Form 8-K dated June 19, 1995, and incorporated herein by
reference.)
3.6 Certificate of Amendment of Articles of Incorporation of the
Registrant, effective December 30, 1996 (Filed with Annual
Report on Form 10-K for the fiscal year ended December 31,
1996, and incorporated herein by reference.)
3.7 Amended and Restated By-laws of the Registrant, as amended on
December 30, 1996 (Filed with Annual Report on Form 10-K for
the fiscal year ended December 31, 1996, 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.)
4.2 Certificate of Amendment of Certificate of Designation of
Series B Convertible Preferred Stock, effective December 31,
1997 (Filed with Annual Report on Form 10-K for the fiscal
year ended December 31, 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.)
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</TABLE>
<PAGE> 22
<TABLE>
<S> <C>
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 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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<TABLE>
<C> <C>
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.)
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> 24
<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> 25
<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.)
10.27 Exchange Agreement, by and between the Registrant and
Everbright Finance & Investment Co. Limited, dated July 22,
1996 (Filed with Quarterly Report on Form 10-Q for the fiscal
quarter ended September 30, 1996, and incorporated herein by
reference.)
10.28 Loan Agreement between HARC and the Farming Bureau, dated
March 25, 1996, and the supplementary agreement dated December
31, 1996 (Certified English translation of original Chinese
version filed with Annual Report on Form 10-K/A for the fiscal
year ended December 31, 1996, and incorporated herein by
reference.)
10.29 Loan Agreement between HARC and the Registrant, dated March
25, 1996 (Certified English translation of original Chinese
version filed with Annual Report on Form 10-K/A for the fiscal
year ended December 31, 1996, and incorporated herein by
reference.)
10.30 Rental Agreement between HARC and the Hainan Farming Bureau
Testing Center, dated August 9, 1996 (Certified English
translation of original Chinese version filed with Annual
Report on Form 10-K for the fiscal year ended December 31,
1996, and incorporated herein by reference.)
10.31 Shareholders' Agreement on Business Restructuring among the
Farming Bureau, Guilinyang Farm and Billion Luck, dated as of
October 1, 1996 (Certified English translation of original
Chinese version filed with Annual Report on Form 10-K for the
fiscal year ended December 31, 1996, and incorporated herein
by reference.)
10.32 Assets and Staff Transfer Agreement among the Farming Bureau,
HARC, First Supply and Second Supply, dated as of October 1,
1996 (Certified English translation of original Chinese
version filed with Annual Report on Form 10-K for the fiscal
year ended December 31, 1996, and incorporated herein by
reference.)
10.33 Exchange Agreement, by and between the Registrant and
Everbright Finance & Investment Co. Limited, dated December
31, 1996 (Filed with Annual Report on Form 10-K for the fiscal
year ended December 31, 1996, and incorporated herein by
reference.)
10.34 China Resources Development, Inc., Amended and Restated 1995 Stock
Option Plan, as amended on December 30, 1996 (Filed with Annual Report
</TABLE>
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<PAGE> 26
<TABLE>
<S> <C>
on Form 10-K for the fiscal year ended December 31, 1996, and
incorporated herein by reference.)
10.35 Agency Agreement on Natural Rubber Distribution between Hainan
General Bureau Jin Huan Materials Supply General Company and
HARC, dated January 2, 1997 (Certified English translation of
original Chinese version filed with Quarterly Report on Form
10-Q for the fiscal quarter ended March 31, 1997, and
incorporated herein by reference.)
10.36 Advertising and Media Agreement by and between the Registrant
and Marketing Direct Concepts, Inc., dated April 1, 1997
(Filed herewith.)
10.37 Financial Consulting Agreement by and between the Registrant
and Integrated Capital Development Group, Inc., dated May 1,
1997 (Filed herewith.)
11 Computation of Earnings (Loss) Per Share (Contained in
Financial Statements in Part I, Item 1, hereof.)
27.2 Financial Data Schedule (Filed herewith. For SEC use only.)
</TABLE>
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<PAGE> 1
EXHIBIT 10.36
Advertising and Media Agreement by and
between the Registrant and Marketing Direct
Concepts, Inc., dated April 1, 1997
<PAGE> 2
EXHIBIT 10.36
ADVERTISING AND MEDIA AGREEMENT
This ADVERTISING AND MEDIA AGREEMENT ("Agreement") is entered into as of
April 1, 1997, by and between Marketing Direct Concepts, a Nevada Corporation
located at 333 N. Rancho Suite 900 Las Vegas, NV 89106 (hereinafter referred to
as "MDC") and China Resources Development, Inc. a Nevada Corporation located at
23 F, Office Tower, Convention Plaza, 1 Harbour Rd, Wan Chai, Hong Kong
(hereinafter referred to as the "Company").
1. PUBLIC RELATIONS CAMPAIGN.
The company hereby engages MDC to design and perform a national financial
public relations campaign for the benefit of the Company which shall be
comprised of the following two components (collectively, the "Campaign"):
(a) Advertisement in regional and/or national periodical publications
including: (i) inclusion in MDC's proprietary in-flight magazine series
which includes the in-flight magazines of United, Delta, Northwest,
U.S. Air, American and South West; (ii) nationally published magazines
such as Smart Money, Financial World, Golf, Inc., and Worth; (iii)
periodic inclusion of the Company in the MDC Stock Report, a monthly
newsletter authored by MDC focusing upon emerging growth public
companies (collectively, the "Print Media"). The Company shall not
appear in all of the foregoing magazines and MDC reserves the right,
subject to the restrictions set forth in this Agreement, to select in
consultation with the Company the proper combination of Print Media to
be utilized in the Campaign.
(b) MDC will maintain an Internet Web site with current information on the
Company which will be updated upon a written request of the Company
(which shall be no more than twice every 30 days) (the "Internet
Media") This Internet service shall be provided for two years from date
here of, and as compensation MDC will receive the Restricted Securities
as set forth in Exhibit B.
It is agreed that the term of the Campaign shall commence upon execution of
this Agreement and shall terminate once the full value of the Campaign is
reached as set forth in Exhibit A hereto. However, the term of this Agreement is
one year from the date of execution.
In connection with the Campaign, MDC shall provide Company management,
distribution, follow-up, and tracking data regarding inquiries from prospective
investors to the financial community, including stockbrokers, financial
consultants, financial advisors or any other person or persons who are part of
MDC's database, who may directly or indirectly want to participate in contacting
said prospective investors on behalf of the Company. MDC shall provide the toll
free phone number 1-888-STOCKUP (888-786-2587) to prospective investors for
inquiries on the Company. The Company shall be responsible for the expense of
the inbound telemarketing service; (telephone service only not to exceed
$1000.00 per month) MDC shall provide a detailed invoice to the Company monthly,
and the Company shall reimburse MDC for the expense of answering incoming calls
within 10 days of receipt of such invoice at the rate of $.30 per minute.
Attached hereto as Exhibit A is a description of the financial scope of the
Campaign. Attached hereto as Exhibit B is a calculation of the compensation due
MDC under this Agreement. Attached hereto as Exhibit C are guidelines for
providing material on behalf of Company's advertisements. Attached hereto as
Exhibit D is the price list used for calculating the cost of services and
advertising provided by MDC on behalf of the Company. Attached hereto as Exhibit
E is the description of the Demand Registration Rights provided to MDC by the
Company pursuant to paragraph 2 (b) (i)
While the Campaign shall constitute the sole obligation of MDC under this
Agreement, the parties understand that MDC may become involved, with the consent
of the Company and in the sole discretion of
<PAGE> 3
MDC, with other components of the Company's financial operations including an
introduction to an asset recovery and barter specialist to potentially improve
the Company's cash flow. MDC reserves the right to seek separate compensation
for this additional service.
2. REPRESENTATIONS, WARRANTIES AND COVENANTS.
(a) MDC. MDC hereby represents, warrants and/or covenants to the
Company as follows:
(i) MDC shall utilize its best efforts to design the Campaign in a
manner most beneficial to the Company, however, it is understood
that MDC makes no representations or warranties regarding the
eventual impact of the Campaign upon the market and price for the
Company's securities.
(ii) MDC shall, at the direction of the Company, prepare copy for
publication based on information provided by the Company. MDC
shall provide the Company with a copy of all Print Media it
intends to utilize; the Company shall have three (3) business
days to approve such Print Media. After the expiration of
(3)three business days, MDC will make a second request for
approval for response due in (24) twenty-four hours. If no
response is received to the second request within (24)
twenty-four hours, then the Company shall be deemed to have
approved such Print Media. It is understood that MDC shall not be
obligated to make an independent investigation of any information
provided by the Company and that MDC shall have the right to rely
exclusively upon the accuracy of statements and documents
provided by the Company to MDC.
(iii) MDC's activities at all times will comply with all applicable
laws.
(iv) MDC has all necessary licenses, permits, etc., to conduct its
affairs and to receive compensation.
(v) MDC is aware of restrictions on the use and publication of
material non-public information.
(b) THE COMPANY. The Company hereby represents, warrants and/or
covenants to MDC that:
(i) The Company agrees that it shall make all payments due under
this Agreement promptly as required by this Agreement. If, during
the term of this Agreement, the Company falls 30 or more days in
arrears on its payments to MDC, then MDC reserves the right to:
(i) immediately suspend the Campaign and (ii) withhold all
prospective investor leads pending timely payment by the Company.
Nothing contained herein shall require MDC to suspend the
Campaign or release the Company to pay its financial obligations
due hereunder. If the Company falls 60 or more days in arrears on
its payments to MDC, then in addition to any and all other rights
granted under applicable laws, MDC shall have the right to demand
registration of the Restricted Securities (or the securities into
which the Restricted Securities may be exercised/converted)
("Demand Registration Rights") as set forth in Exhibit E.
(ii) All information provided by the Company to MDC: (a) shall be
true, complete and accurate in all material respects and (b)
shall not omit information material to the operations of the
Company which is relevant to the advertorial pieces and shall be
disseminated pursuant to a press release provided to the Dow
Jones wire service prior to appearing in any MDC media. (ii) MDC
shall provide a series of guidelines, set forth in Exhibit C
hereto, regarding public disclosure of information and the
Company agrees to comply with such guidelines, as long as such
guidelines do not conflict with any of those provided by the
NASD, SEC or any other regulatory agency. In the event the
Company fails to comply with any of the foregoing
2
<PAGE> 4
requirements, then MDC's obligation to conduct the Campaign and
to provide potential investor leads shall be suspended until the
Company is in full compliance. Upon execution of this agreement
the Company shall appoint a company representative who shall be
the sole point of contact with MDC, brokers introduced by MDC and
prospective investors. The Company further represents that the
Company shall provide MDC with an immediate written update in the
event circumstances change causing information provided to MDC to
be materially inaccurate. The Company represents that it shall at
all times, commencing upon the date of this Agreement and
terminating upon the sale of all Restricted Securities by MDC,
comply in all material respects with applicable state and federal
securities laws including, but not limited to (i ) complying with
all notice and filing requirements and (ii) with certification
that the Company is listed in good standings with S & P. It is
understood that the design and implementation of a national media
campaign is an expensive endeavor requiring many months of
advanced planning, thus in the event the Company breaches this
subsection, and such breach shall continue for ten (10) business
days after Company's receipt of written notice of such breach of
MDC, then MDC shall have the following remedies: (a) Demand
Registration Rights; (b) immediate termination of the Campaign;
and (c ) immediate demand for all amounts due under this
Agreement.
(iii) During the first thirty days of this Agreement, at all times
during regular business hours, upon reasonable notice,
representative(s) from MDC will have full access to the books and
records of the Company, provided such documents are "public"
information, in order to insure that the Company is a suitable
client, such determination as to suitability to be made by MDC in
its sole discretion. In the event MDC determines that the Company
is not a suitable client, MDC shall return to the Company all
cash, shares and options issued by the Company to MDC hereunder,
with the exception of reasonable expenses. After the period of
thirty days has expired, the Company will, upon reasonable
notice, allow representative(s) of MDC access to books and
records, provided such documents are public information, for
ongoing consulting purposes. Should, during the term of this
Agreement, MDC determine in its sole discretion that the Company
is an unsuitable client, the Campaign may be immediately
terminated by MDC pursuant to a written notice to the Company. In
the event MDC elects to terminate the Campaign under this
subsection, then: (i) it shall be obligated to return all
unearned cash compensation; (ii) it shall be obligated to return
all unearned Restricted Securities and warrants, on a pro rata
basis calculated by dividing the total number of dollars spent
into the amount designated to be spent as stated in Exhibit A
hereto attached. The amount spent will be determined by adding up
all media, advertising, or other services provided as designated
in Exhibit D hereto attached. Company recognizes all media or
services that have been reserved for placement will also apply
against dollars spent. Upon cancellation MDC will provide proof
of all media and/or services both that have run, and that are
scheduled to run.
(iv) The Company agrees to indemnify and hold harmless MDC and each
of its officers, directors, and agents, employees and controlling
persons (collectively "Indemnified Persons") to the fullest
extent permitted by law, from any and all losses, claims,
damages, expenses (including reasonable fees, disbursements, and
other charges of counsel), actions, proceedings or investigations
(whether formal or informal), or threats thereof (all of the
foregoing being hereinafter referred to as "Liabilities"),
actually incurred by MDC as the proximate result of the Company
providing MDC inaccurate and false information. In connection
with the Company's obligation to indemnify for expenses as set
forth above the Company further agrees to reimburse each
Indemnified Person for all expenses (including reasonable fees,
disbursements and charges of counsel) as they are incurred by
such Indemnified Person. In order to provide for just and
equitable contribution in any case in which any person entitled
to indemnification hereunder makes claim for indemnification
pursuant hereto but it is judicially determined (by the entry of
a final judgment or decree by a court of competent jurisdiction
and expiration of time to appeal or the denial of the last right
of appeal) that such
3
<PAGE> 5
indemnification may not be enforced in such case notwithstanding
the fact that this Section provided for indemnification, then and
in each such case the Company and MDC shall contribute to the
aggregate losses, claims, damages or liabilities to which they
may be subject (after any contribution from others) in such
proportion taking into consideration the relative benefits
received by each party in connection with this Agreement, the
parties' relative knowledge and access to information concerning
the matter with respect to which the claim was assessed, the
opportunity to correct and present any statement or omission and
other equitable considerations appropriate under the
circumstances; and provided, that, in any such case, no person
guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities and Exchange Act of 1934) shall
be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation.
(v) The Company agrees to the following: (i) MDC shall be notified
(30) thirty business days prior to the commencement of any equity
or debt raised by the Company; provided, however, the Company
shall not sell any securities pursuant to Regulation S of the
Securities Act of 1933 without the express written consent of
MDC, which consent may be withheld in MDC's sole and absolute
discretion. (ii) the Company agrees that during MDC's awareness
program the Company shall not, subsequent to the date of this
agreement, issue or provide any exempt shares from registration
under Rule S-8, unless consent is granted from MDC prior to
issuance; (iii) MDC shall be provided copies of all filings by
the Company with the Securities & Exchange Commission within
three (3) business days of such filing; (iv) the Company shall
notify MDC of any other activities it becomes aware of which
might materially and adversely impact upon the market for the
Company's securities, including, but not limited to: trading
lock-up agreements and expirations, pending registration rights
and communications with the brokerage community and market-makers
for the Company's securities. In the event the Company shall
breach this subsection, and such breach shall continue for ten
(10) business days after Company receipt of written notice of
such breach from MDC, MDC shall have the right to: (i) terminate
or delay the Campaign; (ii) retain all Restricted Securities and
(iii) obtain reimbursement for all unreimbursed out-of-pocket
costs.
3. COOPERATION.
To the fullest extent possible, the Company will furnish MDC with all
financial and other information and data as MDC believes appropriate in
connection with its activities on the Company's behalf, and shall provide MDC
full access to its officers, directors, and professional advisors.
4. CONFIDENTIALITY.
MDC agrees that during and after the term of its relationship with the
Company, MDC will not, directly or indirectly, disclose to any third party, or
use or authorize any third party to use, any information relating to the
business or interests of the Company that MDC knows or has reason to know is
regarded as confidential and valuable to the Company. The parties acknowledge
and agree that in determining whether information is confidential information
and/or a trade secret, the fact that such information is not marked
"confidential" shall not adversely affect the confidentiality or trade secret
status of the same. MDC agrees that if its relationship or the discussions with
the Company are terminated for any reason, MDC will immediately return to the
Company all records and papers and all matter of whatever nature to the Company
(including without limitation business plans, customer lists, marketing
information and all other information). MDC shall, however, have the right to
disclose trade secrets or confidential information of the Company in either of
the following events: (1) with the Company's prior express written permission;
or (2) under order of a judicial or administrative process in connection with
any action, suit, proceeding, or claim.
5. MDC'S SERVICES TO OTHERS.
4
<PAGE> 6
The company acknowledges that MDC or its affiliates are in the business of
providing financial public relations services to others. Nothing herein
contained shall be construed to limit or restrict MDC in conducting such
business with respect to others, or in rendering such advice to others. MDC
shall perform its services hereunder as an independent contractor and not as an
employee of the Company or affiliate thereof. It is expressly understood and
agreed to by the parties hereto that MDC shall have no authority to act for,
represent or bind the Company or any affiliate thereof in any manner, except as
may be agreed to expressly by the Company in writing from time to time.
6. MISCELLANEOUS.
(a) Further Actions. At any time and from time to time, each party agrees,
at its expense, to take such actions and to execute and deliver such
documents as may be reasonably necessary to effectuate the purposes of
this Agreement.
(b) Notices. Any notice or other communication required or permitted to be
given hereunder shall be in writing and shall be mailed by certified
mail, return receipt requested (or by the most nearly comparable method
if mailed from or to a location outside of the United States), or
delivered against receipt to the party to whom it is to be given at the
address if such party set forth in the preamble to this Agreement (or
to such other address as the party shall have furnished in writing in
accordance with the provisions of this Section). Any notice given to
any corporate party shall be addressed to the attention of the
Corporation President. Any notice or other communication given by
certified mail (or by such comparable method) shall be deemed given at
the earlier of five (5) business days after certification or at the
time of receipt thereof.
(c) Early Termination or Interruption of Contract.
(i) Should the Company wish to terminate the services of MDC, without
cause, during the term of this Agreement, MDC will allow such
termination under the following terms and conditions.
(A) All Restricted Securities due MDC in this Agreement shall
have been issued and shall be non-refundable and
non-cancelable, except as set forth in section 2, (b)
(iii) above and section 6,(c ) (ii) below.
(B) The Company shall be required to give thirty (30) days
written notice to MDC. The Company shall pay MDC the
monthly fee specified in this Agreement that is due during
the month of cancellation, and the monthly fee due during
the subsequent month to cancellation. MDC's services
during said subsequent month will be limited to winding
down Campaign and providing all leads to Company.
(ii) The Company shall have the right to immediately terminate this
Agreement for "Cause" as hereinafter defined. "Cause" shall exist in
the event of MDC's: (i) malfeasance; (ii) willful refusal to perform
its duties under this Agreement; (iii) purposeful and willful breach of
the covenants contained in this Agreement; and/or (iv) acts of
dishonesty or the commission of any misdemeanor, felony, or other crime
involving moral turpitude. In the event this Agreement is terminated
for Cause as set forth in this section, MDC shall be; (1) obligated to
return all unearned cash compensation; and (2) shall be obligated to
return all unearned Restricted securities, options, and/or warrants on
a pro rata basis calculated by dividing the total number of dollars
spent into the amount designated to be spent as stated in Exhibit A
attached hereto. The amount spent will be determined by adding all
media, advertising, or other services provided as designated in Exhibit
D attached hereto. Company recognizes all media or services that have
been reserved for placement will also apply against dollars spent. Upon
cancellation MDC will provide proof of all media and/or services both
that have run, and are scheduled to run.
5
<PAGE> 7
(d) Waiver. Any waiver by any party of a breach of any provision of this
Agreement shall not operate as or be construed to be a waiver of any
other breach of that provision or any breach of any other provision of
this Agreement. The failure of a party to insist upon strict adherence
to any term of this Agreement on one or more occasions will not be
considered a waiver or deprive that party of the right thereafter to
insist upon strict adherence to that term or any other term of this
Agreement.
(e) Binding Effect. The Provisions of this Agreement shall be binding upon
and inure to the benefit of the company and MDC and their respective
successors and assigns, provided, however, that any assignment by any
party of its rights under this Agreement without the written consent of
the other party shall be void.
(f) Damages. In the event any covenant, representation, warranty or
other term of this Agreement is breached by either party and such
breach shall continue for a period of ten (10) business days after
receipt of written notice from the other party, the non-breaching party
shall be relieved of any obligations it may have hereunder, and the
non-breaching party, in addition to the rights and remedies granted
hereunder, shall be entitled to all other recourse provided by
applicable law.
(g) Severability. If any provision of this Agreement is invalid,
illegal or unenforceable, the balance of this Agreement shall remain in
effect, and any provision is inapplicable to any person or
circumstance, it shall nevertheless remain applicable to any other
persons and circumstances.
(h) Headings. The headings in this Agreement are solely for the
convenience of reference and shall be given no effect in the
construction or interpretation of this Agreement.
(i) Counterparts: Governing Law. This Agreement may be executed in any
number of counterparts, each of which shall be deemed original, but all
of which together shall constitute one and the same instrument. It
shall be governed by and construed in accordance with the laws of the
State of Nevada, without giving effect to conflict laws.
(j) Dispute Resolution. In the event of a dispute with respect to this
Agreement: (i) such dispute shall be arbitrated in accordance with the
rules of the State of Nevada and (ii) the prevailing party shall be
entitled to its reasonable attorney's fees and other costs and expenses
incurred in litigating or otherwise resolving or settling such dispute.
(E) Facsimile Copy. Both parties agree that upon receipt of signatures
via facsimile this Agreement can be deemed as an original and is
binding.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first set forth above.
China Resources Development, Inc.
a Nevada Corporation
By: /s/ Li Shunxing
-------------------------------
Li Shunxing, President
MARKETING DIRECT CONCEPTS, INC.
a Nevada Corporation
By: /s/ Michael Calderone
-------------------------------
Michael Calderone, CEO,
President
6
<PAGE> 8
EXHIBIT A
FINANCIAL SCOPE OF CAMPAIGN
MDC agrees to provide a national advertising recognition campaign with
the minimum value of $500,000, calculated as set forth below. This represents
the value the Company shall receive. There are no additional charges for these
items other than the telephone charges set forth in paragraph one of the
Agreement and those set forth in Exhibit B.
1. All Print Media shall be valued at the particular magazine's
published open rate (see attached Exhibit D) upon the date of this
Agreement. Inclusion of the Company in the MDC Stock Report shall
be valued at $75,000 per issue with a minimum mailing of 75,000 to
MDC subscribers (see attached Exhibit D). It is agreed that a
minimum of 70% of the financial value of the Campaign shall be in
the form of Print Media.
2. Internet Media shall be provided at the cost of $10,000 per month
as shown in Exhibit D hereto attached.
3. MDC represents that during the term of the Campaign it shall
provide at least 75,000 leads regarding prospective investors
during the term of the contract and in which time the Campaign is
in effect. In the event that the Campaign does not generate, or
MDC can not provide, the required number of names or leads, MDC
shall be required to continue the Campaign without additional
compensation or expense to the Company until the required number
of leads has been provided.
4. All other media including radio shows, teleconference services,
marketing fact piece and other services shall be provided at the
cost indicated in Exhibit D hereto attached.
5. The term of the advertising and media program shall be nine (9)
months subject to extension as provided in paragraph three (3)
herein above.
MDC agrees that it shall expend the aggregate financial value of the Campaign
during the term of this Agreement.
/s/ L /s/ MC
- -------------- -----------
Client Initial MDC Initial
7
<PAGE> 9
EXHIBIT B
MDC COMPENSATION
In consideration for the services rendered by MDC pursuant to the
Agreement to which this is Exhibit B, the Company shall pay MDC as set forth
below. There is no other compensation payable under the Agreement except for the
telephone expenses set forth in paragraph one of the Agreement and this Exhibit
B.
1. The Company shall make an initial payment of $125,000., due within seven
(7) days upon execution of this Agreement, payable in verifiable funds.
2. As additional compensation for the Internet services provided, the Company
shall remit to MDC, upon execution of this Agreement the following
securities of the Company: 150,000 shares of the Company's Restricted
Securities (the "Restricted Securities"). It is understood that the
Restricted Securities shall not have any rights of registration, unless
expressly set forth herein. MDC understands that the Restricted Securities
named herein are at risk of forfeiture if sold or are attempted to be
registered prior to the expiration of the applicable waiting period, or
pursuant to paragraph 6 ( c) (ii) of the Agreement. The Company agrees that
it will take all actions and execute all documents necessary to remove
restrictive trading legend contained on any Restricted Security upon
expiration of any applicable waiting period/registration of the subject
Restricted Securities.
3. As additional compensation hereunder, the Company shall remit to MDC upon
execution of this agreement 125,000 warrants at the strike price determined
by the closing bid price of the execution date on this Agreement, 125,000
warrants at the strike price of $4.50 per share and 100,000 warrants at the
strike price of $5.50 per share. All warrants shall have a term of (3)
three years. It is understood the shares underlying these warrants will
have piggy back registration rights, however such shares will not be
tradable until the Campaign is terminated.
/s/ L /s/ MC
- -------------- -----------
Client Initial MDC Initial
8
<PAGE> 10
EXHIBIT C
MARKETING DIRECT CONCEPTS, INC.
GUIDELINES FOR PROVIDING MATERIAL ON BEHALF OF YOUR COMPANY'S ADVERTORIAL.
Marketing Direct Concepts, Inc. (MDC)can not review all documents
provided by the Company, so it is important to provide MDC with information
about your Company using the following guidelines. MDC's staff writer will
construct an advertorial piece (to be used in all regional and national media)
based on the information provided by the Company.
The basic prohibitive in all of the important statutes and rules that
will create a liability under the Federal SEC laws is directed against making
false and misleading statements. The following are general guidelines to be used
when providing MDC with material for the purposes of writing Company advertorial
pieces.
1. The best information to use will be all materials that will
provide factual and truthful information on the Company" history,
operations, technology, research and development and products.
2. Financial information which is audited and public.
- Example: "For fiscal year end 1995 the Company revenues
were $XXXX.XX."
3. Names of outside persons, companies or products may not be used
without the express, written permission of the "entity". This
involves providing the "entity" with a copy of the proposed
statement specifying where it will be printed and obtaining
written consent of the "entity".
4. All references must have verifiable sources.
- Example: "The market of this technology has been
estimated to be in excess of $50 million. (See Forbes
Magazine pg. xx, Aug., 1996.)
5. Projections, whether of financials, sales, or otherwise are
dangerous as they may be relied upon as fact. If not met, they can
be the basis of law suits. All projections must be pre-released in
a Company press release prior to any MDC publishing.
6. Exaggerations, exclamations and (puffing) are to be avoided at
all times.
7. An omission of material fact is also considered misleading if
not fully disclosed.
- Example: "The Company received a large order for their
product - however, the Company failed to state the order
was given at a 60% discount off the Company's regular
prices. The statement could then be fraudulent and
misleading.
Follow the above guidelines and you will build a more loyal shareholder base. At
Marketing Direct Concepts, Inc. we believe if you UNDER PROMISE and OVER DELIVER
THE SKY IS THE LIMIT
9
<PAGE> 11
EXHIBIT D
MARKETING DIRECT CONCEPTS, INC.
PRICE LIST FOR PURCHASING MEDIA & SERVICES
There are no additional charges for these items other than the telephone charges
set forth in paragraph one of the Agreement and those set forth in Exhibit B.
PRINT MEDIA (Prices are for full page, full-color ads unless otherwise
specified):
Readership in most of magazines listed below is at least 3x circulation
<TABLE>
<CAPTION>
MAGAZINE CIRCULATION RETAIL COST
<S> <C> <C>
United Airlines Hemisphere 525,000 $42,360.00
Delta Sky 525,000 $42,360.00
US Airways (Attache) 442,000 $31,865.00
North West Traveler 350,000 $23,820.00
American Way 600,000 $38,244.00
South West Spirit 375,000 $20,000.00
Robb Report 220,000 $10,400.00
Worth 550,000 $32,400.00
Financial World 560,000 $23,000.00
Golf 1,500,000 $77,000.00
Registered Representative 90,000 $15,000.00
</TABLE>
THERE IS A $400 CHARGE WITH EVERY CHANGE IN AN ADVERTORIAL PIECE, FOR FILM AND
MATCH PRINTS.
DESIGN:
Creation, Design and Layout of Full-Color $50,000.00
Corporate Marketing Fact Piece
(Includes risk and upside potential all graphics, pictures ,text, printing of
35,000 and mailing to brokers.)
(All information must be gathered and compiled by an independent analyst group)
<TABLE>
<S> <C> <C>
INTERNET:
Web Site 40,000 - 50,000 $10,000/mo
hits per day*
1,350,000
hits per month*
RADIO:
StockUp Radio Network 1,200,000* est. $15,000.00 per each 6
Listeners per show min. corporate segment
TELECONFERENCES:
Line Set Up Cost $1500.00
800 Service/active or non-active listeners Up to 550 people $.50/min. per listener
</TABLE>
STOCKUP REPORT:
(Includes Production of StockUp Report and Tri-Fold High Gloss Brochure.)
Note: MDC does a Maximum mailing to subscribers every 2 months to avoid
saturation
<TABLE>
<S> <C> <C>
Mailings to Subscribers 75,000 $75,000.00
Additional Mailings per 10,000 $6,000.00
*Both Hits and Listeners are increasing weekly
</TABLE>
10
<PAGE> 12
EXHIBIT E
DEMAND REGISTRATION RIGHTS
As set forth in Section 2.(b)(i) of the Agreement, if the Company falls
sixty days or more in arrears on its payments to MDC as set forth in the
Agreement, then, in addition to any and all other rights granted under the
Agreement and under applicable laws, MDC shall have the right to demand
registration of the Restricted Securities (including the securities into which
the Restricted Securities may be exercised/converted) (the "Demand Registration
Right"). This Exhibit E sets forth in detail the terms of such Demand
Registration Right.
(a) At any time beginning sixty days after the date the Company
falls into arrears on its payments to MDC under the Agreement,
MDC shall have the right, exercisable by written notice to the
Company, to have the Company prepare, file, and use its best
efforts to have declared effective by the Securities and
Exchange Commission (the "SEC"), a registration statement and
such other documents, including a prospectus, as may be
necessary in the opinion of both counsel for the Company and
counsel for MDC, if any, in order to comply with the provisions
of the Securities Act of 1933 (the "Act"), so as to permit a
public offering and sale of all shares of the Company issued to
MDC, including shares underlying options and/or warrants.
(b) In connection with any registration of securities pursuant to
this Agreement, the Company and MDC covenant and agree as
follows (all references to the terms "Registration Statement"
herein shall include, as the case may be, the registration
statement with respect to the Demand Registration Right):
(i) The Company shall use its best efforts to cause the
Registration Statement to be declared effective at the
earliest possible time, and shall furnish MDC such
number of prospectuses as MDC shall reasonably request.
The Company shall cause the Registration Statement to
remain effective, and shall file all post-effective
amendments necessary, to cause the Registration
Statement to remain effective nine months following the
effective date of such registration.
(ii) The Company shall pay all costs, fees and expenses
incurred by the Company and MDC in connection with the
Registration Statement and the offering thereunder
including, without limitation, the Company's legal and
accounting fees, fees and expenses of MDC's counsel,
printing expenses, and blue sky fees and expenses (but
excluding discounts or selling commissions of any
underwriter or broker-dealer acting on behalf of MDC).
(iii) The Company shall take all necessary action which may be
reasonably required in qualifying or registering the
securities included in the Registration Statement for
offering and sale under the securities or blue sky laws
of all states reasonably requested by holder, provided
that the Company shall not be obligated to execute or
file any general consent to service of process or to
qualify as a foreign corporation to do business under
the laws of any such jurisdiction.
(iv) The Company shall indemnify MDC and each person, if any,
who controls MDC within the meaning of Section 15 of the
Act or Section 20(a) of the Exchange Act, against all
loss, claims, damage, expense, or liability (including
all expenses reasonably incurred in investigating,
preparing, or defending against any claim whatsoever) to
which any of them may become subject under the Act, the
Exchange Act or otherwise, arising from the Registration
Statement.
(v) MDC shall indemnify the Company, its officers and
directors, and each person, if any, who controls the
Company within the meaning of Section 15 of the Act or
Section 20(a) of the Exchange Act, against all loss,
claim, damage, expense, or liability (including all
expenses reasonably incurred in investigation,
preparing, or defending against a claim) to which they
may become subject under the Act, the Exchange Act, or
otherwise, arising from information furnished by or on
behalf of MDC for specific inclusion in the Registration
Statement.
(vi) The Company shall, as soon as practicable after the
effective date of the Registration Statement, and in any
event within fifteen (15) months thereafter, make
"generally available to its security holders" (within
the meaning of Rule 158 under the Act) an earnings
statement (which need not be audited) complying with
Section 11(a) of the Act and covering a period of at
least twelve (12) consecutive months beginning after the
effective date of the Registration Statement.
(vii) The Company shall (A) deliver promptly to any managing
underwriter upon request, copies of all correspondence
between the SEC and the Company, its counsel or auditors
and all memoranda relating to discussions with the SEC
or its staff with respect to the Registration Statement
and (B) permit any managing underwriter to perform such
investigation, upon reasonable advance notice, with
respect to information contained in or omitted from the
Registration Statement, as it deems reasonably necessary
to comply with applicable securities laws or rules of
the National Association of Securities Dealers, Inc.
("NASD"). Such investigation shall include, but not be
limited to, access to financial and accounting
information and opportunities to discuss the business of
the Company with the Company's officers and independent
auditors, all to such reasonable extent, at such
reasonable time and as often as any managing underwriter
shall reasonably request.
(viii) The Company shall furnish to any managing underwriter a
signed counterpart, addressed to MDC, of (A) the opinion
of counsel to the Company, dated the closing date with
respect to the Registration Statement, and (B) the "cold
comfort" letter, dated the closing date with respect to
the Registration Statement, in each case, delivered to
any underwriter(s) in connection with the offering.
(ix) The Company shall cause all securities (including,
without limitation, the Common Stock) of MDC registered
pursuant to a Registration Statement to be listed on any
national securities exchange or quoted on any automated
quotation system on which similar securities of the
Company are then listed or quoted.
<PAGE> 1
EXHIBIT 10.37
Financial Consulting Agreement by and between
the Registrant and Integrated Capital
Development Group, Inc., dated May 1, 1997
<PAGE> 2
EXHIBIT 10.37
FINANCIAL CONSULTING AGREEMENT
This Agreement is made this 1st day of May, 1997, between Integrated Capital
Development Group, Ltd., a corporation domiciled in the British Virgin Islands,
hereinafter referred to as ("ICD") with offices at P.O. Box 3444, Road Town,
Tortola, British Virgin Islands, and China Resources Development, Inc., a
corporation domiciled in the State of Nevada, hereinafter referred to as
("CRDI"), with offices at 23rd floor, Office Tower, Convention Plaza, 1 Harbour
Road, Wanchai, Hong Kong.
WHEREAS, ICD is in the financial consulting business and engages in activities
such as capital formation, raising private venture capital, general investment
banking, financial management services, mergers, acquisitions, brokering
companies and selling of public and private companies.
WHEREAS, CRDI, is a public company listed on the NASDAQ and is mainly engages in
the distribution of natural rubber. CRDI is desirous of retaining ICD to perform
certain financial services for the benefit of CRDI. These services are outlined
in ARTICLE 2, Section 2.2. of this Financial Consulting Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and on the terms and
conditions stated herein and for other good and valuable consideration the
sufficiency of which is hereby acknowledged by the parties hereto, it is agreed
between the parties as follows:
ARTICLE 1
1.1 INDEPENDENT CONTRACTOR STATUS
Parties to this contract intend that the relation between them created by this
Financial Consulting Agreement will result in ICD being considered an
independent contractor. No agent, employee or servant of the independent
contractor shall be, or shall be deemed to be an employee, agent or servant or
CRDI. None of the benefits provided by CRDI to its employees, officers and
directors, which include, but are not limited to compensation, health insurance,
unemployment insurance or various stock option plans will be available to the
contractor, or its employees. ICD as an independent contractor will be solely
and entirely responsible for its acts and for the acts of its agent, employees,
affiliates and subcontractors during the performance of this Agreement. Each
party agrees to indemnify the other and hold the other harmless, for any and all
actions, regardless of the nature, description or type.
<PAGE> 3
ARTICLE 2
2.1 STATEMENT OF GENERAL CONTRACT INTENT
ICD is primarily engaged as a financial consulting and investment company, which
specializing in the selling and brokering of companies and arranging capital to
buy private companies on an independent contractor basis. ICD derives its
revenues from consulting fees and commissions charged to client companies, from
capital appreciation of equity or services obtained as a portion of the
consulting fees received from client companies or directly from Buyers of client
companies in exchange for certain services. CRDI hereby confirms that by the
execution of this Agreement CRDI engages ICD on a non-exclusive basis to perform
specific services relating to promoting the public image of CRDI and to find
target companies for the acquisition of CRDI.
2.2. STATEMENT OF SPECIFIC CONTRACT INTENT
ICD shall serve as consultant and business broker on behalf of CRDI to perform
such duties as are normally associated with the acquisition of businesses and
public relations promotion, including but not limited to:
A. Assisting CRDI in locating and screening potential sellers of
target companies in the businesses of trading and
distribution natural rubber and other agricultural products
in the USA or Europe;
B. Advising and assisting CRDI in negotiations concerning the
terms and conditions of the acquisition with the potential
sellers introduced by ICD;
C. Design and perform a public relations campaign for the
benefit of CRDI, targeting to promote CRDI's public image and
generate buying interests in the company's stock.
ARTICLE 3
3.1 TERM OF CONTRACT BETWEEN CRDI AND ICD
CRDI will contract ICD for a period of Three (3) years from the date of this
agreement to act in the capacity of a non-exclusive agent on behalf of CRDI and
its public relation consultant.
ARTICLE 4
4.1 COMPENSATION TO ICD
In consideration of the financial services enumerated above, to be
<PAGE> 4
provided to CRDI by ICD, as set forth in Article 2, CRDI agrees to provide
compensation to ICD as outlined below:
A. Reimbursement of expenses directly incurred in regard to
performing the duties outlined and related to Section 2 of
this Agreement;
B. Upon execution of this Agreement, CRDI shall remit to ICD 100,000
shares of CRDI's restricted common stocks. CRDI agrees that it will
take all actions and execute all documents necessary to remove
restrictive trading legend contained on any of the restricted common
stocks upon expiration of any applicable waiting period/registration of
the subject restricted common stocks.
ARTICLE 5
5.1 REPRESENTATIONS AND WARRANTIES BY ICD
A. ICD shall utilize its best efforts to find the target company
and negotiate terms on behalf of the company to the most
benefit of CRDI.
B. ICD's activities at all times will comply with all applicable
laws;
C. ICD has all necessary licenses, permits, etc., to conduct its
affairs and to receive compensations;
D. ICD is aware of restrictions on the use and publication of
material non-public information.
5.2 REPRESENTATIONS AND WARRANTIES BY CRDI
A. CRDI agrees that it shall make all payments due under this
Agreement within 30 days upon receipt of related invoices.
B. All information provided by CRDI to ICD are true, complete
and accurate in all material respects and shall not omit
information material to the operations of the company.
C. CRDI agrees to indemnify and hold harmless ICD and each of its
officers, directors, and agents, employees and controlling persons to
the fullest extent permitted by law, from any losses, claims, damages,
expenses, actions, proceedings, or investigations, or threats thereof,
actually incurred by ICD as the proximate result of the company
providing ICD inaccurate and false information
<PAGE> 5
ARTICLE 6
6.1 GOVERNING LAW
The construction validity and performance of this Agreement shall be governed by
the laws of the State of Nevada, without giving effect to the principles of
conflicts of law. The parties agree that the venue for any action is relation to
this Agreement shall be the state of Nevada.
6.2 SUCCESSORS IN INTEREST
It is expressly understood that this Agreement shall bind any successors,
assigns, subsidiaries or extensions to the parties hereto.
6.3 RELATIONSHIP OF THE PARTIES
It is expressly understood and agreed that CRDI and ICD are completely separate
entities and are not partners, joint ventures, nor agents for each other in any
sense whatsoever and neither party has the power or the right to obligate or
bind the other. It is also expressly understood that ICD has not represented
itself as a broker dealer as defined by the Securities laws of the United
States.
6.4 ENTIRE AGREEMENT
This Agreement is complete and constitutes the sole, entire and only Agreement
between all parties hereto with respect to the terms and conditions herein and
supersedes and supplants any and all other representations and agreements
pertaining thereto. It is mutually agreed and understood that no other
agreements, statements, inducements or representations, written or verbal, have
been made or relied upon by either party. The modifications hereto or amendments
hereto shall be binding only when presented in writing and signed by both
parties.
6.5 WARRANTIES OF ALL PARTIES
The parties hereby warrant that all necessary approvals and authorities have
been obtained by them to enable the completion of this Agreement and that the
signatories hereto are authorized by their respective organizations to sign this
Agreement and to legally bind the Parties.
6.6 EXECUTION IN COUNTERPART
This Agreement may be signed in counterpart.
<PAGE> 6
Integrated Capital Development China Resources Development, Inc.
Group, Ltd.
By: /s/ Robert J. McCormick By: /s/ Li Shunxing
------------------------------- ---------------------------------
Robert J. McCormick, President Li Shunxing, President
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