[TYPE]10KSB/A
<SEQUENCE>1
[DESCRIPTION]AMENDMENT NO.1 TO FORM 10-KSB FYE 12/31/97
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1 ON
FORM 10-KSB/A
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934.
FOR FISCAL YEAR ENDED DECEMBER 31, 1997
Commission File Number: 0-24624
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U.S.-CHINA INDUSTRIAL EXCHANGE, INC.
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(Name of Small Business Issuer in Its Charter)
NEW YORK 13-3097642
- ---------------------------------------------- ----------------
(State or Other Jurisdiction of Incorporation) (I.R.S. Employer
or Organization) Identification No.)
7201 WISCONSIN AVENUE
BETHESDA, MARYLAND 20814
- ---------------------------------------- ----------
(Address of Principal Executive Offices) (Zip Code)
(301) 215-7777
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(Issuer's Telephone Number, Including Area Code)
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $.01 par value
Class A Warrants
Class B Warrants
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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 [_]
Check if disclosure of delinquent filers in response to item 405 of Regulation
S-B is not contained in this form, and no disclosure will be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB [X].
Issuer's revenues for its most recent fiscal year: $24,381,000.
The aggregate market value of the voting stock held by non-affiliates computed
by reference to the price at which the stock was sold, the average bid and asked
prices of such stock, as of March 26, 1998 was approximately $13,124,000.
The number of shares outstanding of each of the issuer's classes of common
equity, as of March 26, 1998, was 4,772,500 shares of Common Stock and 2,000,000
shares of Class B Common Stock.
Documents Incorporated by Reference: None.
<PAGE>
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.
The directors and executive officers of the Company and their present
positions with the Company are as follows:
Name Positions with the Company
- ---- --------------------------
Roberta Lipson (1) Chairperson of the Board of Directors,
Chief Executive Officer and President
Elyse Beth Silverberg(1) Executive Vice President, Secretary and
Director
Lawrence Pemble Executive Vice President Finance and Business
Development and Director
Robert C. Goodwin, Jr. Executive Vice President Operations, Treasurer,
Assistant Secretary, General Counsel and Director
A. Kenneth Nilsson (2) Director
Julius Y. Oestreicher (2) Director
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(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
All directors of the Company hold office until the next annual
meeting of the shareholders and until their successors have been elected and
qualified. The officers of the Company are elected by the Board of Directors at
the first meeting after each annual meeting of the Company's shareholders and
hold office until their resignation, removal from office or death.
Set forth below is certain information with respect to each director:
ROBERTA LIPSON, 42, co-founded the Company in 1981. Ms. Lipson has
served as the Chairperson of the Board of Directors, Chief Executive Officer and
President since that time. From 1979 until founding the Company in 1981, Ms.
Lipson was employed in China by Sobin Chemical, Inc., a worldwide trading
company, as Marketing Manager, coordinating marketing and sales of various
equipment in China. Ms. Lipson was employed by Schering-Plough Corp. in the area
of product marketing until 1979. Ms. Lipson received a B.A. degree in East Asian
Studies from Brandeis University and an M.B.A. from Columbia University Graduate
School of Business.
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<PAGE>
ELYSE BETH SILVERBERG, 40, co-founded the Company in 1981. Ms.
Silverberg has served as the Company's Executive Vice President and Secretary
and as a Director since that time. Prior to founding the Company, from 1980 to
1981, Ms. Silverberg worked with Ms. Lipson at Sobin Chemical, Inc. and was an
intern in China with the National Council for U.S.-China Trade from 1979 to
1980. Ms. Silverberg received a B.A. degree in Chinese Studies and History from
the State University of New York at Albany.
LAWRENCE PEMBLE, 41, joined the Company in 1984 and has served as
Executive Vice President Finance and Business Development since January 1996.
From 1986 until 1996, Mr. Pemble served as Vice President of Marketing. From
1986 through April 1992 and September 1993 to the present, Mr. Pemble has also
served as a Director of the Company. Prior to joining the Company, Mr. Pemble
was employed by China Books and Periodicals, Inc. as Manager, East Coast Center.
Mr. Pemble received a B.A. degree in Chinese Studies and Linguistics from the
State University of New York at Albany.
ROBERT C. GOODWIN, JR., 57, has served as Executive Vice President
Operations since January 1996, as Assistant Secretary since June 1995 and as
General Counsel, Treasurer and a Director of the Company since October 1992. In
addition to his other duties, from October 1992 until January 1996, Mr. Goodwin
served as Vice President of Operations for the Company. Prior to joining the
Company, Mr. Goodwin was engaged in the private practice of law from 1979 to
1992, with a specialty in international law, in Washington, D.C. and had served
as the Company's outside counsel since 1984. Prior to such employment, Mr.
Goodwin served for two years as the Assistant General Counsel for International
Trade and Emergency Preparedness for the United States Department of Energy and
for three years as the Deputy Assistant General Counsel for the Federal Energy
Administration. From 1969 until 1974, Mr. Goodwin served as an attorney-advisor
for the U.S. Department of Commerce. Mr. Goodwin received a B.A. degree from
Fordham University and a J.D. from Georgetown University Law Center.
A. KENNETH NILSSON, 65, has served as a Director of the Company since
January 1996. Since 1989, Mr. Nilsson has served as Chairman of Eureka Group,
Inc., a consulting firm he founded in 1972. Prior to 1989, Mr. Nilsson served
as Vice Chairman of Cooper Companies, Inc., and as President of Cooper
Laboratories, Inc.,
and President of Cooper Lasersonics, Inc. He previously served as an executive
of Max Factor & Co., Ltd. and of Pfizer International, Inc. Mr. Nilsson received
a B.A. degree in Telecommunications from the University of Southern California
and an M.A. in Political Science from the University of California.
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<PAGE>
JULIUS Y. OESTREICHER, 68, has served as a Director of the Company
since January 1996. Mr. Oestreicher has been a partner with the law firm of
Oestreicher & Ennis, LLP and its predecessor firms for thirty years, engaged
primarily in estate, tax and business law. Mr. Oestreicher received a B.S.
degree in Business Administration from City College of New York and a J.D. from
Fordham University School of Law.
ITEM 10. EXECUTIVE COMPENSATION.
The following table sets forth information concerning the annual
compensation of the Company's chief executive officer and other most highly
compensated executive officers whose salary and bonus exceeded $100,000 during
1996 for services in all capacities to the Company during that year:
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation
------------------------------------------------- ------------
Other
Name and Annual Shares Under-
Principal Position Year Salary Bonus Compensation lying Options
- ------------------ ---- ------ ----- ------------ -------------
<S> <C> <C> <C> <C>
Roberta Lipson, 1997 $167,670 $ -- $ 26,421(1) --
Chairperson of 1996 $154,913 $ 43,000 $ 18,620(1) --
the Board, Chief 1995 $135,000 $ -- $ -- --
Executive Officer
and President
Elyse Beth Silverberg, 1997 $161,460 $ -- $ 29,834(2) --
Executive Vice 1996 $149,175 $43,000 $ 22,936(2) --
President and 1995 $130,000 $ -- $ 23,600(2) --
Secretary
Lawrence Pemble, 1997 $161,221 $ -- $ -- --
Executive Vice 1996 $144,278 $ 43,000 $ -- --
President Finance 1995 $123,733 $ -- $ -- --
and Business
Development
Robert C. Goodwin, Jr 1997 $141,875 $ 31,203 $ -- 20,000
Executive Vice 1996 $126,602 $ 73,003 $ -- 10,000
President Operations, 1995 $110,000 $ -- $ -- --
General Counsel,
Assistant Secretary
and Treasurer
</TABLE>
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(1) Includes tuition expense for Ms. Lipson's sons in China in the amount
of $23,971.
(2) Includes yearly rental expense in the amount of $9,400 for Ms.
Silverberg's housing in China and tuition expense in the amounts of
$20,434 for 1997, $13,536 for 1996, and $14,200 for 1995 for Ms.
Silverberg's son in China.
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<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
% OF TOTAL VALUE AT ASSUMED
NUMBER OF OPTIONS ANNUAL RATES OF STOCK
SECURITIES GRANTED TO PRICE APPRECIATION FOR
UNDERLYING EMPLOYEES EXERCISE OR EXPIRATION OPTION TERMS
NAME OPTIONS GRANTED IN FISCAL 1996 BASE PRICE DATE 5%($) 10%($)
- ---- --------------- -------------- ---------- ---------- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Robert C. Goodwin, Jr. 20,000(1) 24.2% $4.25/share January 9, 2007 $53,456 $135,468
</TABLE>
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(1) The options are exercisable as to one-third of the total number of
shares on each of January 9, 1997, 1998 and 1999.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION
VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
SHARES UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-THE-
ACQUIRED VALUE OPTIONS AT FISCAL YEAR END MONEY OPTIONS AT FISCAL YEAR
NAME ON EXERCISE (#) REALIZED ($) EXERCISABLE/ UNEXERCISABLE END EXERCISABLE/UNEXERCISABLE(1)
- ---- --------------- ------------ -------------------------- --------------------------------
<S> <C> <C> <C> <C> <C> <C>
Robert C. Goodwin, Jr. 0 $0 29,333/16,667 0/0
</TABLE>
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(1) Based on the closing bid price per share of $1.75 on the last day of
fiscal 1997.
EMPLOYMENT AGREEMENTS
The Company has entered into an employment agreement, with each of
Mmes. Lipson and Silverberg and Messrs. Pemble and Goodwin providing for base
salaries to be subject to annual review and adjustment as determined by the
company, and which currently are $167,670, $161,460, $155,250 and $136,620,
respectively. Each such executive officer also receives additional benefits,
including those generally provided to other executive officers of the Company.
In addition, each of Mmes. Lipson and Silverberg also receives reimbursement
of expenses relating to residing in China. Each employment agreement also
contains non-competition provisions that preclude each executive from competing
with the Company for a period of two years from the date of termination
of employment unless his or her employment is terminated by the Company without
cause, as such term is defined in the employment agreements. Each employment
agreement has been automatically extended for the one-year period ending April
30, 1999, and is subject to successive annual renewal.
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<PAGE>
The Company has obtained individual term life insurance policy
covering each of Mmes. Lipson and Silverberg in the amount of $2,000,000 per
person. The Company is the sole beneficiary under these policies.
COMPENSATION OF DIRECTORS
Each director who is not an employee of the Company is paid for
service on the Board of Directors a retainer at the rate of $1,000 per annum and
an additional $500 for each meeting of the Board of Directors attended. The
Company also reimburses each director for reasonable expenses in attending
meetings of the Board of Directors. Directors who are also employees of the
Company are not separately compensated for their services as directors.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's directors and executive officers, and persons who own
more than 10% of the Company's Common Stock, to file with the Securities and
Exchange Commission (the "SEC") initial reports of ownership and reports of
changes in ownership of Common Stock and other equity securities of the Company.
Officers, directors and greater than 10% shareholders are required by SEC
regulation to furnish the Company with copies of all Section 16(a) reports they
file. To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company during the one-year period ended December 31,
1996, all Section 16(a) filing requirements applicable to its officers,
directors and greater than 10% shareholders were complied with.
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<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth information as to the ownership of
shares of the Company's Common Stock and Class B Common Stock as of April 15,
1998 with respect to (i) holders known to the Company to beneficially own more
than five percent of the outstanding Common Stock or the Class B Common Stock,
(ii) each director and nominee for director, (iii) each executive officer of the
Company named in the Summary Compensation Table under the caption "Executive
Compensation" herein and (iv) all directors and executive officers of the
Company as a group.
<TABLE>
<CAPTION>
Amount and Nature
of Beneficial
Ownership (2)(3) Percent of:
--------------------------------- ------------------------
Name and Address of Common Class B Common Class B
Beneficial Shareholder (1) Stock Common Stock(4)(5) Stock Common Stock
- -------------------------- ----- ------------------ ----- ------------
<S> <C> <C> <C> <C>
Roberta Lipson 488,000(6) 1,040,000(7) 9.3% 52.0%
Elyse Beth Silverberg 359,000(8) 680,000 7.0% 34.0%
Lawrence Pemble 100,300(9) 200,000 2.1% 10.0%
Robert C. Goodwin, Jr 82,333(10) 0 1.7% 0%
A. Kenneth Nilsson 10,000 0 * 0%
P.O. Box 2510
Monterey, California
Julius Y. Oestreicher 74,000(11) 0 1.5% 0%
235 Mamaroneck Avenue
White Plains, New York
All Executive Officers and 1,113,633(12) 2,000,000 19.1% 96%
Directors as a Group (6
persons)
</TABLE>
- ---------------------
* Less than 1%.
(1) Unless otherwise indicated, the business address of each person named in
the table is c/o U.S.-China Industrial Exchange, Inc., 7201 Wisconsin
Avenue, Bethesda, Maryland 20814.
(2) Except as otherwise indicated, each of the parties listed has sole voting
and investment power with respect to all shares indicated below.
(3) Beneficial ownership is calculated in accordance with Regulation S-B as
promulgated by the Securities and Exchange Commission.
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<PAGE>
(4) Mmes. Lipson and Silverberg and Mr. Pemble have placed 240,000, 153,000
and 51,000 shares, respectively, of Class B Common Stock in escrow and may
vote, but not dispose of, any of such shares during the term of the escrow
agreement. See "Escrow Shares" below.
(5) The Class B Common Stock is entitled to six votes per share, whereas the
Common Stock is entitled to one vote per share.
(6) Includes 486,000 shares that may be purchased pursuant to Class A Warrants
and Class B Warrants.
(7) Includes 40,000 shares held by the Ariel Benjamin Lee Trust, of which Ms.
Lipson is a Trustee.
(8) Includes 324,000 shares that may be purchased pursuant to Class A Warrants
and Class B Warrants.
(9) Includes 96,000 shares that may be purchased pursuant to Class A Warrants
and Class B Warrants.
(10) Includes 32,250 shares that may be purchased pursuant to Class A Warrants
and Class B Warrants and 39,333 shares that may be purchased pursuant to
stock options that are exercisable currently or within 60 days.
(11) Does not include 80,000 shares of Common Stock beneficially owned by Mr.
Oestreicher's wife, which includes 60,000 shares that may be purchased
pursuant to Class A Warrants and Class B Warrants, as to which Mr.
Oestreicher disclaims beneficial ownership. Includes 64,000 shares
issuable upon the exercise of 16,000 Unit Purchase Options, as defined
below. Each such option represents the right to purchase one Unit, each of
which consists of one share of Common Stock, one Class A Warrant and one
Class B Warrant. Also includes 10,000 shares that may be purchased
pursuant to currently exercisable stock options.
(12) Includes an aggregate of 1,051,583 shares that may be purchased pursuant
to Unit Purchase Options, Class A Warrants, Class B Warrants and
currently exercisable stock options.
ESCROW SHARES
Of the 2,000,000 shares of Class B Common Stock outstanding on the
date hereof, 450,000 shares (the "Escrow Shares") are held in escrow and will
not be assignable or transferable (but may be voted) until such time, if ever,
as the Escrow Shares are released from escrow in accordance with terms of the
escrow agreement. Each current holder of Class B Common Stock of the Company
contributed pro rata to the number of Escrow Shares in accordance with their
percentage ownership of Class B Common Stock. All Escrow Shares remaining in
escrow on March 31, 1999 will be forfeited and then canceled and contributed to
the Company's capital. The arrangement relating to the Escrow Shares was
required by the underwriter as a condition to the Company's initial public
offering.
A shareholder's rights to his or her shares in escrow are not
affected by any change in his or her status as an employee, officer or director
of, or his or her relationship with, the Company, and, in the event of such
shareholder's death, the terms of the escrow agreement will be binding on such
shareholder's executor, administrator, estate and legatees.
All Escrow Shares will be released from escrow if and only if: (a)
the Minimum Pretax Income (as defined below) is at least $3,750,000 for the
fiscal year ending December 31, 1997, or (b) the Minimum Pretax Income is at
least $5,000,000 for the fiscal year ending December 31, 1998,
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<PAGE>
or (c) the closing Bid Price of the Common Stock averages in excess of $14.60
per share (subject to adjustment in the event of any stock split, dividend or
distribution, reverse stock split or other similar event) for 20 consecutive
trading days at any time prior to August 18, 1997. Conditions (a) and (c) above
are not possible to be achieved.
"Minimum Pretax Income" means for any fiscal year the Company's
income before provision for income taxes and exclusive of any extraordinary
earnings and exclusive of any charges to income resulting from the release of
any Escrow Shares, all as reflected on the Company's audited financial
statements. For purposes of calculating Minimum Pretax Income, if additional
shares of Common Stock are issued, then the foregoing Minimum Pretax Income
levels for any year are subject to proportional increase. Accordingly, the
Minimum Pretax Income levels set forth above are subject to proportional
increase to reflect the issuance of shares of Common Stock, including shares of
Common Stock issuable upon exercise of Warrants, in connection with the second
public offering by the Company that was completed in November 1996. Since the
principal market for the Common Stock presently is the NASDAQ National Market
the term "Bid Price" presently means the closing sales price of the Common Stock
as reported on that market.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Not applicable.
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<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
Company caused this Form 10-KSB/A to be signed on its behalf by the undersigned,
thereunto duly authorized.
U.S.-CHINA INDUSTRIAL EXCHANGE, INC.
April 28, 1997 By: /s/ Robert C. Goodwin, Jr.
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Robert C. Goodwin, Jr.
Executive Vice President and
General Counsel
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