UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended March 31, 1996
Commission file number 0-24624
U.S.-CHINA INDUSTRIAL EXCHANGE, INC.
(Exact name of registrant as specified in its charter.)
NEW YORK 13-3097642
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
7201 Wisconsin Avenue, Bethesda, MD 20814
(Address of principal executive offices (Zip Code)
Registrant's telephone number, including area code:
(301) 215-7777
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 practical
date:
The number of shares outstanding of each of the issuer's classes of common
equity, as of May 10, 1996, was 1,840,000 shares of Common Stock and
2,000,000 of Common Stock Class B.
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PART I. - FINANCIAL INFORMATION
U.S.-CHINA INDUSTRIAL EXCHANGE, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<CAPTION>
March 31, December 31,
1996 1995
___________ ____________
<S> <C> <C>
ASSETS
Current assets:
Cash & cash equivalents $ 2,894,000 $ 3,599,000
Accounts receivable, less allowance 4,222,000 3,725,000
Commissions receivable 365,000 962,000
Inventories 1,844,000 1,215,000
Current portion-long term
accounts receivable 2,345,000 2,396,000
Other current assets 871,000 690,000
__________ __________
Total current assets 12,541,000 12,587,000
Plant, property & equipment 430,000 406,000
Accounts receivable, long term 2,723,000 2,348,000
Other 117,000 93,000
__________ __________
Total assets $15,811,000 $15,434,000
=========== ===========
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<CAPTION>
LIABILITIES AND SHAREHOLDER'S EQUITY
<S> <C> <C>
Current liabilities:
Accounts payable and accrued expenses $ 4,561,000 $ 4,139,000
Accrued contract training 628,000 683,000
Current portion-long term accounts payable 636,000 984,000
Income taxes payable 140,000 186,000
__________ __________
Total current liabilities 5,965,000 5,992,000
Long term accounts payable, net 1,382,000 933,000
_________ _________
Total liabilities 7,347,000 6,925,000
Shareholders' equity:
Preferred stock, $.01 par value:
Authorized - 5,000,000 shares,
none issued
Common stock, $.01 par value
Authorized - 20,000,000 shares
(including 2,000,000 designated class B);
Common stock - 1,840,000 shares issued
and outstanding 18,000 18,000
Common stock-Class B - 2,000,000 shares
issued and outstanding 20,000 20,000
Additional paid in capital 7,477,000 7,477,000
Foreign currency equity translation
adjustment (8,000) (8,000)
Retained earnings 957,000 1,002,000
__________ __________
Total shareholders' equity 8,464,000 8,509,000
__________ __________
Total liabilities and shareholders' equity $15,811,000 $15,434,000
=========== ===========
<FN>
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U.S.-CHINA INDUSTRIAL EXCHANGE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
Three months ended March 31,
1996 1995
<S> <C> <C>
Sales $3,660,000 $2,810,000
Cost of goods sold 2,643,000 2,216,000
_________ _________
Gross profit on sales 1,017,000 594,000
Net commission income 166,000 305,000
_________ _________
Total gross profit on sales
and net commission income 1,183,000 899,000
Selling, general and administrative
Salaries and payroll taxes 695,000 613,000
Travel and entertainment 221,000 286,000
Other 574,000 425,000
_________ _________
(307,000) (425,000)
Other Income and Expenses
Interest Expense (5,000) (22,000)
Interest Income 106,000 117,000
Miscellaneous Income 136,000 3,000
_________ _________
Total Other Income/Expenses 237,000 98,000
Loss before provision for taxes (70,000) (327,000)
Benefit for income taxes 25,000 115,000
_________ _________
Net loss $ (45,000) $ (212,000)
========== ==========
Loss per share $ (0.01) $ (0.06)
========== ==========
Weighted average shares outstanding 3,390,000 3,390,000
========== ==========
<FN>
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U.S.-CHINA INDUSTRIAL EXCHANGE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Three months ended March 31,
1996 1995
<S> <C> <C>
Operating activities
Net loss $ (45,000) $ (212,000)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation & amortization 24,000 20,000
Provision for doubtful accounts 5,000 5,000
Provision for deferred taxes 0 (8,000)
Inventory write-down 30,000 20,000
Changes in operating assets and liabilities:
Accounts receivable (826,000) (800,000)
Commissions receivable 597,000 429,000
Inventories (659,000) (178,000)
Other current assets (181,000) (4,000)
Other assets (24,000) 63,000
Accounts payable and accrued expenses 468,000 81,000
Income taxes payable (46,000) (130,000)
_________ _________
Net cash used in operating activities (657,000) (714,000)
Investing activities
Interest from investment security 0 (35,000)
Purchase of property and equipment (48,000) (17,000)
_________ _________
Net cash used in investing activities (48,000) (52,000)
Financing activities
Proceeds from short term borrowings 0 500,000
_________ _________
Net cash provided by financing activities 0 500,000
_________ _________
Net increase/(decrease) in cash and
cash equivalents (705,000) (266,000)
Cash and cash equivalents at beginning of
period 3,599,000 3,139,000
_________ _________
Cash and cash equivalents at end of period $2,894,000 $2,873,000
========== ==========
<FN>
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U.S.-CHINA INDUSTRIAL EXCHANGE, INC.
NOTES TO FINANCIAL STATEMENTS
March 31, 1996
Note 1. Statement of Information Furnished
The accompanying unaudited consolidated financial statements have
been prepared in accordance with form 10-QSB instructions and in the opinion
of management contain all adjustments and normal or recurring accruals as
necessary to present fairly the financial position as of March 31, 1996, the
results of operations for the quarter ended March 31, 1996 and 1995 and the
cash flows for the quarters ended March 31, 1996 and 1995. These results
have been determined on the basis of generally accepted accounting principles
and practices applied consistently with those used in the preparation of the
Company's Form 10-KSB.
Certain information and footnote disclosure normally included in
financial statements presented in accordance with generally accepted
accounting principles have been condensed or omitted. It is suggested that
the accompanying consolidated financial statements be read in conjunction
with the financial statements and notes thereto incorporated in the
Company's Form 10-KSB.
Note 2. Concentrations of Credit Risk
The Company maintains a $900,000 credit facility for short term
working capital needs, standby letters of credit, and spot and forward
foreign exchange transactions. Collateral for the credit facility consists
of securities held in a safekeeping account by a bank. On March 22, 1996
the Company issued a standby letter of credit in the amount of $420,000 in
connection with its obligation for shipment of $8.4 million in Export-Import
Bank financed goods. This obligation expires April 30, 1997. As of May 10,
1996 the Company has available approximately $380,000 under the credit
facility.
<PAGE>
U.S.-CHINA INDUSTRIAL EXCHANGE, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operation
Quarter ended March 31, 1996 compared to quarter ended March 31, 1995
The Company's revenues are derived in two ways: net sales by the
Company for its own account and net commission income consisting of
commissions on sales made by manufacturers that are represented by the
Company. Since the Company generally elects the form of transactions, it
does not believe that the changes over periods in the mix comprising total
gross profit on sales and net commission income necessarily reflect any
trends.
The Company's net sales for the quarter ended March 31, 1996
increased $850,000 or 30% and net commission income decreased $139,000 or
46% over the quarter ended March 31, 1995. The total gross profit on sales
and net commission income increased $284,000 or 32%.
The Company believes that the total gross profit on sales and net
commission income has been negatively impacted during the quarter by
restrictions imposed by the Chinese government on the availability of credit
from the Chinese banking system to the Company's customers. The Company
believes the restrictions on the availability of credit will continue to
impact operations for the immediate future. Despite these credit
restrictions the Company was able to finalize and begin shipping a portion
of the $8.4 million of goods financed by the Export-Import Bank tied aid
credits to certain identified Chinese organizations for the purchase of
equipment sold by the Company.
The Company's gross profit on sales as a percentage of net sales for
the quarter ended March 31, 1996 was 28% as compared to 21% for the quarter
ended March 31, 1995. The improved gross profit margin is directly
attributable to decreased freight and training costs as compared with the
quarter ended March 31, 1995.
Selling, general and administrative expenses for the quarters ended
March 31, 1996 and 1995 were $1,490,000 and $1,324,000, respectively,
representing an increase of 13%. These expenses represent costs associated
with an increase in the number of Company employees, including an increase
in the Company sales staff, and increased rent expense related to the new
building housing the future Beijing United Family Health Center. These
expenses were offset somewhat by decreased travel and entertainment expenses
for the period.
Interest income for the quarters ended March 31, 1996 and 1995 were
$106,000 and $117,000 respectively. Miscellaneous income increase was due
to the Company's three year sub-lease of almost half of the building housing
the future Beijing United Family Health Center.
<PAGE>
Liquidity and Capital Resources
Most of the 1996 use of cash is attributable to a major commitment
of funds for the Beijing United Family Health Center and will continue
throughout 1996. The 1996 expenditure is expected to exceed $2,000,000.
During the first quarter the Company paid deposits of $362,000 toward the
purchase of capital equipment for the center.
The Company expects cash receipts in 1996 from the $8.4 million
Export-Import Bank financed sales to offset the decrease in cash.
Also during the quarter ended March 31, 1996, increased sales
resulted in a $901,000 increase in accounts receivables offset somewhat by
a $468,000 increase in accounts payable and a decrease of $597,000 due to
collections of commission receivables.
An increase in inventories of $659,000 is attributable to purchases
for the Export-Import Bank financed transaction and the purchases of
equipment and parts for resale.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a. None
b. Reports on Form 8-K
None
<PAGE>
US-CHINA INDUSTRIAL EXCHANGE, INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Company has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
U.S.-CHINA INDUSTRIAL EXCHANGE, INC.
May 14, 1996 Lawrence Pemble
Date Lawrence Pemble
Executive Vice President Finance and
Director
May 14, 1996 Ronald Zilkowski
Date Ronald Zilkowski
Vice President Finance and Controller
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<PERIOD-END> MAR-31-1996
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0
0
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