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, 1997
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 9, 1997, was 4,772,500 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,
1997 1996
___________ ____________
<S> <C> <C>
ASSETS
Current assets:
Cash & cash equivalents $11,631,000 $13,374,000
Receivables:
Trade accounts, less allowance 6,091,000 4,626,000
Current portion-long term trade accounts 3,616,000 3,612,000
Commissions receivable 391,000 449,000
Inventories 2,515,000 2,188,000
Other current assets 884,000 716,000
__________ __________
Total current assets 25,128,000 24,965,000
Plant, property & equipment 2,140,000 1,783,000
Accounts receivable, long term 2,531,000 2,068,000
Other 269,000 148,000
__________ __________
Total assets $30,068,000 $28,964,000
=========== ===========
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<CAPTION>
LIABILITIES AND SHAREHOLDER'S EQUITY
<S> <C> <C>
Current liabilities:
Accounts payable and accrued expenses $ 6,850,000 $ 6,118,000
Accrued contract training 744,000 724,000
Current portion-long term accounts payable, net 1,276,000 1,615,000
Income taxes payable 412,000 465,000
__________ __________
Total current liabilities 9,282,000 8,922,000
Long term accounts payable, net 1,743,000 1,126,000
__________ __________
Total liabilities 11,025,000 10,048,000
Shareholders' equity:
Preferred stock, $.01 par value:
Authorized - 5,000,000 shares,
none issued
Common stock, $.01 par value
Authorized - 30,000,000 shares
(including 2,000,000 designated class B);
Common stock - 4,772,500 shares issued
and outstanding 48,000 48,000
Common stock-Class B - 2,000,000 shares
issued and outstanding 20,000 20,000
Additional paid in capital 17,238,000 17,278,000
Foreign currency equity translation
adjustment (6,000) (8,000)
Retained earnings 1,743,000 1,578,000
__________ __________
Total shareholders' equity 19,043,000 18,916,000
__________ __________
Total liabilities and shareholders' equity $30,068,000 $28,964,000
=========== ===========
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U.S.-CHINA INDUSTRIAL EXCHANGE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
Three months ended March 31,
1997 1996
<S> <C> <C>
Net Sales $5,498,000 $3,660,000
Cost of goods sold 3,925,000 2,643,000
_________ _________
Gross profit on sales 1,573,000 1,017,000
Net commission income 114,000 166,000
_________ _________
Total gross profit on sales
and net commission income 1,687,000 1,183,000
Selling, general and administrative
Salaries and payroll taxes 835,000 695,000
Travel and entertainment 305,000 221,000
Other 640,000 574,000
_________ _________
(93,000) (307,000)
Other Income and Expenses
Interest Expense (16,000) (5,000)
Interest Income 209,000 106,000
Miscellaneous Income 139,000 136,000
_________ _________
Total Other Income/Expenses 332,000 237,000
Income/(loss) before provision for taxes 239,000 (70,000)
(Provision for)/benefit from income taxes (74,000) 25,000
_________ _________
Net income/(loss) $ 165,000 $ (45,000)
========== ==========
Net income/(loss) per share $ 0.03 $ (0.01)
========== ==========
Weighted average shares outstanding 6,336,372 3,390,000
========== ==========
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U.S.-CHINA INDUSTRIAL EXCHANGE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Three months ended March 31,
1997 1996
<S> <C> <C>
Operating activities
Net income/(loss) $ 165,000 $ (45,000)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation & amortization 45,000 24,000
Provision for doubtful accounts 5,000 5,000
Provision for deferred taxes (11,000) 0
Inventory write-down 20,000 30,000
Sales of demo equipment 11,000 0
Changes in operating assets and liabilities:
Accounts receivable (1,937,000) (826,000)
Commissions receivable 58,000 597,000
Inventories (347,000) (659,000)
Other current assets (168,000) (181,000)
Other assets (121,000) (24,000)
Accounts payable and accrued expenses 1,030,000 468,000
Income taxes payable (53,000) (46,000)
___________ _________
Net cash used in operating activities (1,303,000) (657,000)
Investing activities
Purchase of property and equipment (402,000) (48,000)
___________ _________
Net cash used in investing activities (402,000) (48,000)
Financing activities
Fee expense from issuance of common stock (40,000) 0
___________ _________
Net cash provided by financing activities (40,000) 0
___________ _________
Effect of foreign exchange rate changes on
cash and cash equivalents 2,000 0
___________ _________
Net increase/(decrease) in cash and
cash equivalents (1,743,000) (705,000)
Cash and cash equivalents at beginning of
period 13,374,000 3,599,000
___________ _________
Cash and cash equivalents at end of period $11,631,000 $2,894,000
=========== ==========
<FN>
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U.S.-CHINA INDUSTRIAL EXCHANGE, INC.
NOTES TO FINANCIAL STATEMENTS
March 31, 1997
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, 1997, the
results of operations for the quarter ended March 31, 1997 and 1996 and the
cash flows for the quarters ended March 31, 1997 and 1996. 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. FASB No. 128, Earnings Per Share
In February 1997, the Financial Accounting Standards Board (FASB) issued
Statement No. 128, Earnings per Share, which is required to be adopted on
December 31, 1997. At that time, the Company will be required to change the
method currently used to compute earnings per share and to restate all prior
periods. Under new requirements for calculating primary earnings per share,
the dilutive effect of stock options will be excluded. The impact is not
expected to result in an increase in earnings per share for the first quarter
ended March 31, 1997 and March 31, 1996 respectively.
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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, 1997 compared to quarter ended March 31, 1996
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. The Company often elects the form of each transaction based on the
circumstances of the transaction, including the nature of the products and
parties involved. Consequently, the Company does not believe that the changes
over the 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, 1997 increased
$1,838,000 or 50% and net commission income decreased $52,000 or 31% over the
quarter ended March 31, 1996. The total gross profit on sales and net
commission income increased $504,000 or 43%.
A portion of the Company's net sales for the quarter ended March 31, 1996
were facilitated by Export-Import bank financing to certain identified Chinese
organizations for the purchase of equipment sold by the Company. No such
financing was available for the Company's sales for the quarter ended
March 31, 1997. While the Company continues to explore additional financing
opportunities, including with the Export-Import bank, there can be no
assurances that any such financing will be available in the future.
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. While there has
been some recent relaxation of these restictions for some Chinese
organizations, the Company believes the restrictions on the availability of
credit will nevertheless continue to impact operations for the immediate
future.
The Company's gross profit on sales as a percentage of net sales for
the quarter ended March 31, 1997 was 29% as compared to 28% for the quarter
ended March 31, 1996.
Selling, general and administrative expenses for the quarters ended
March 31, 1997 and 1996 were $1,780,000 and $1,490,000, respectively,
representing an increase of 19%. These expenses represent costs associated
with an increase in the number of Company employees, including an increase
in the Company sales staff, and higher travel and entertainment expenses
than the previous year.
Interest income for the quarters ended March 31, 1997 and 1996 were
$209,000 and $106,000 respectively. The increase is principally due to the
Company's return on invested proceeds from the Company's second underwritten
public offering in November 1996.
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Liquidity and Capital Resources
During the first quarter of 1997 the Company continued to invest funds
toward the Beijing United Family Health Center. Through March 31, 1997 the
company has spent approximately $1.7 million toward equipment and building
improvements for the center. The total expenditure is expected to be
approximately $3,000,000 through completion.
Also during the quarter ended March 31, 1997, increased sales resulted in
a $1,937,000 increase in accounts receivable offset somewhat by a $1,030,000
increase in accounts payable.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a. None
b. Reports on Form 8-K
None
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U.S.-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, 1997 Lawrence Pemble
Date Lawrence Pemble
Executive Vice President Finance and
Director
May 14, 1997 Ronald Zilkowski
Date Ronald Zilkowski
Vice President Finance and Controller
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<PERIOD-END> MAR-31-1997
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0
0
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<INCOME-TAX> (74000)
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