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, 1998
Commission File Number: 0-24624
-------------------------------
U.S.-CHINA INDUSTRIAL EXCHANGE, INC.
----------------------------------------------
(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
--------------
(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[].
Issuer's revenues for its most recent fiscal year: $21,610,000.
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, 1999 was approximately $2,072,000.
The number of shares outstanding of each of the issuer's classes of common
equity, as of March 26, 1999, was 596,563 shares of Common Stock and 250,000
shares of Class B Common Stock.
Documents Incorporated by Reference: None.
<PAGE>
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Notes 5, 6 and 13 of the Consolidated Financial Statements have been amended.
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ITEM 7. CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5. STOCKHOLDERS' EQUITY
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The paragraphs of Note 5 after the heading "Stock Option Plan" are amended
to read as follows:
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Stock Option Plan
In April 1994, the Board of Directors adopted and the stockholders approved
the Company's 1994 Stock Option Plan (the Plan). On January 9, 1997, the Board
of Directors amended the Plan in accordance with changes to the rules and
regulations of the Securities and Exchange Commission governing such plans. The
Plan provides for the grant, at the discretion of the Board of Directors, of (i)
options that are intended to qualify as incentive stock options (Incentive Stock
Options) within the meaning of Section 422A of the Internal Revenue Code to
certain employees, consultants and directors, and (ii) options not intended to
so qualify (Nonqualified Stock Options) to employees, consultants and directors.
The total number of shares of common stock for which options may be granted
under the Plan is 62,500.
The Plan is administered by the Board of Directors, which determines the
terms of options, including the exercise price, the number of shares subject to
the options and the terms and conditions of exercise. No option granted under
the Plan is transferable by the optionee other than by will or the laws of
descent and distribution and each option is exercisable during the lifetime of
the optionee only by such optionee.
The exercise price of options granted under the Plan must be at least equal
to the fair market value of such shares on the date of grant. With respect to
any participant who owns stock possessing more than 10% of the voting rights of
the Company's outstanding capital stock, the exercise price of any Incentive
Stock Option may be not less than 110% of the fair market value on the date of
grant. With respect to any Incentive Stock Option granted to a participant who
owns stock possessing more than 10% of the total combined voting power of all
classes of the Company's outstanding capital stock, the maximum term is five
years.
The following is a summary of stock option activity during the years ended
December 31, 1997 and 1998:
<TABLE>
<CAPTION>
Exercise
1997 1998 Price
------ ------ --------
<S> <C> <C> <C>
Options outstanding, beginning of year: 21,008 30,071 $27.00 - $42.48
Granted 10,313 9,813 $16.00 - $36.88
Canceled ( 1,250) (1,028)
------- ------- ---------------
Options outstanding, end of year 30,071 38,856 $16.00 - $42.48
======= ======= ===============
</TABLE>
The Company has not provided disclosures under FAS 123 for proforma net income
and proforma earnings per share, as such amounts are not materially different
from reported amounts. The weighted average exercise price of options
outstanding is $35.04 and $30.32 and the weighted average remaining contractual
life of such options is 8.1 years and 7.7 years respectively as of December 31,
1997 and 1998.
Shares of Common Stock Reserved
At December 31, 1998 the Company has reserved 2,422,189 shares of common
stock for issuance upon exercise of stock options and purchase warrants.
<PAGE>
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Note 6 is amended to read as follows:
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6. EARNINGS PER SHARE
The following is an illustration of the reconciliation of the numerators
and denominators of the basic and diluted Earnings per Share (EPS) computations
for "income before extraordinary item and accounting change" and other related
disclosures:
<TABLE>
<CAPTION>
For the Year Ended 1997
-------------------------------------------
Loss Shares Per-Share
(Numerator) (Denominator) Amount
<S> <C> <C> <C>
Basic EPS
Net loss $(4,648,000) 790,313 $(5.88)
Effect of Dilutive Securities
Warrants and Options --
----------- --------- ------
Diluted EPS
Net loss $(4,648,000) 790,313 $(5.88)
=========== ========= ======
</TABLE>
<TABLE>
<CAPTION>
For the Year Ended 1998
-------------------------------------------
Income Shares Per-Share
(Numerator) (Denominator) Amount
<S> <C> <C> <C>
Basic EPS
Net loss $(2,039,000) 790,313 $(2.58)
Effect of Dilutive Securities
Warrants and Options --
----------- --------- ------
Diluted EPS
Net loss $(2,039,000) 790,313 $(2.58)
=========== ========= ======
</TABLE>
Options to purchase 30,071 and 38,856 of common stock between $16.00 and
$42.48 were outstanding during most of 1997 and 1998 respectively but were not
included in the computation of diluted EPS because the options would have been
antidilutive. See note 5.
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Note 13 has been amended to read as follows:
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13. SUBSEQUENT EVENTS
Effective February 26, 1999 the Company implemented a one-for-eight reverse
stock split in respect of all the issued and outstanding Common Stock, as well
as the Units, Class A Warrants, Class B Warrants, Class B common stock and
Options. As of the effective date of the reverse stock split, stockholders own
one-eighth the number of shares of Common Stock previously held. All financial
information and number of shares issued, authorized and outstanding, has been
retroactively restated to include the effect of the stock split. Without the
effect of the stock split, loss per share would have been .74 and .32 for the
years ended December 31, 1997 and 1998, respectively.
<PAGE>
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PART III, Items 9, 10, 11, 12 are to read as follows:
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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
- ---------------
(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, 43, 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.
ELYSE BETH SILVERBERG, 41, 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, 42, 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., 58, 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.
<PAGE>
A. KENNETH NILSSON, 66, 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.
JULIUS Y. OESTREICHER, 69, 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
1998 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, 1998 $152,300 $ -- $ 43,235(1) --
Chairperson of 1997 $167,670 $ -- $ 26,421(1) --
the Board, Chief 1996 $154,913 $ 43,000 $ 18,620(1) --
Executive Officer
and President
Elyse Beth Silverberg, 1998 $146,659 $ -- $ 31,443(2) --
Executive Vice 1997 $161,460 $ -- $ 29,834(2) --
President and 1996 $149,175 $ 43,000 $ 22,936(2) --
Secretary
Lawrence Pemble, 1998 $142,369 $ -- $ -- --
Executive Vice 1997 $161,221 $ -- $ -- --
President Finance 1996 $144,278 $ 43,000 $ -- --
and Business
Development
Robert C. Goodwin, Jr 1998 $125,129 $ -- $ -- 1,250
Executive Vice 1997 $141,875 $ 31,203 $ -- 2,500
President Operations, 1996 $126,602 $ 73,003 $ -- 1,250
General Counsel,
Assistant Secretary
and Treasurer
</TABLE>
- --------
(1) Includes tuition expense for Ms. Lipson's sons in China in the amount
of $40,785 for 1998, $23,971 for 1997 and $18,620 for 1996
(2) Includes yearly rental expense in the amount of $9,600 in 1998
and $9,400 in 1997 for Ms. Silverberg's housing in China and tuition
expense in the amounts of $21,800 for 1998, $20,434 for 1997 and
$13,536 for 1996 for Ms. Silverberg's son in China.
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
% OF TOTAL VALUE AT ASSUMED
NUMBER OF OPTIONS ANNUAL RATES OF STOCK
SECURITIES GRANTED TO PRICE APPRECIATION FOR
UNDERLYING EMPLOYEES EXERCISE OR EXPIRATION OPTION TERMS
NAME OPTIONS GRANTED IN FISCAL 1998 BASE PRICE DATE 5%($) 10%($)
- ---- --------------- -------------- ---------- ---------- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Robert C. Goodwin, Jr. 1,250(1) 12.7% $16.00/share June 17, 2008 $0 $31,875
</TABLE>
- ---------------
(1) The options have an exercise price of $16.00 per share. The options shall
be exercisable on the fifth anniversary of the date of grant (June 17,
1998); provided that such options shall be earlier exercisable on the first
date that the fair market value of the Common Stock equals or exceeds
$40.00 per share.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION
VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
SHARES UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-THE-
ACQUIRED VALUE OPTIONS AT FISCAL YEAR END MONEY OPTIONS AT FISCAL YEAR
NAME ON EXERCISE (#) REALIZED ($) EXERCISABLE/ UNEXERCISABLE END EXERCISABLE/UNEXERCISABLE(1)
- ---- --------------- ------------ -------------------------- --------------------------------
<S> <C> <C> <C> <C> <C> <C>
Robert C. Goodwin, Jr. 0 $0 4,917/2,083 0/0
</TABLE>
- ---------------
(1) Based on the closing bid price per share of $2.75 on the last day of
fiscal 1998.
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 $150,903, $145,314, $139,725 and $122,958,
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.
The Company has obtained individual term life insurance policies
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,
1998, all Section 16(a) filing requirements applicable to its officers,
directors and greater than 10% shareholders were complied with, except that
Elyse Beth Silverberg and Julius Oestreicher each inadvertently did not
timely file one report concerning common stock purchases.
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, 1999 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, (iii) the Company's Chief Executive Officer and each
other executive officer whose annual cash compensation for 1998 exceeded
$100,000 and (iv) all directors and executive officers of the Company as a
group. The following calculation takes into account the Company's one-for-
eight reverse stock split of its Common Stock, Class B Common Stock, Class A
Warrants, Class B Warrants and Units, effective February 26, 1999.
<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)(13) Stock Common Stock
- - -------------------------- -------------- -------------------- ------------ --------------
<S> <C> <C> <C> <C>
Roberta Lipson 61,000(5) 100,000(6) 9.3% 51.6%
Elyse Beth Silverberg 44,875(7) 65,125 7.0% 33.6%
Lawrence Pemble 12,538(8) 18,625 2.1% 9.6%
Robert C. Goodwin, Jr. 11,543(9) 0 1.9% 0%
Julius Y. Oestreicher 9,250(10) 0 1.5% 0%
A. Kenneth Nilsson 1,250 0 * 0%
D.H. Blair & Co., Inc. 127,488(11) 0 18.5% 0%
Kenton E. Wood
44 Wall Street
New York, New York
All Executive Officers and 140,456(12) 183,750 19.3% 94.8%
Directors as a Group (6 persons)
- - ----------------------
* Less than 1%.
</TABLE>
<PAGE>
(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.
(4) The Class B Common Stock is entitled to six votes per share, whereas
the Common Stock is entitled to one vote per share.
(5) Includes 60,750 shares that may be purchased pursuant to Class A
Warrants and Class B Warrants.
(6) Includes 5,000 shares held by the Ariel Benjamin Lee Trust, of which
Ms. Lipson is a Trustee.
(7) Includes 40,500 shares that may be purchased pursuant to Class A
Warrants and Class B Warrants.
(8) Includes 12,000 shares that may be purchased pursuant to Class A
Warrants and Class B Warrants.
(9) Includes 4,032 shares that may be purchased pursuant to Class A
Warrants and Class B Warrants and 6,167 shares that may be purchased
pursuant to stock options that are exercisable currently or within 60
days.
(10) Does not include 10,000 shares of Common Stock beneficially owned by
Mr. Oestreicher's wife, which includes 7,500 shares that may be
purchased pursuant to Class A Warrants and Class B Warrants, as to
which Mr. Oestreicher disclaims beneficial ownership. Includes 8,000
shares issuable upon the exercise of 2,000 Unit Purchase Options, as
defined herein. 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 1,250 shares that may
be purchased pursuant to currently exercisable stock options.
(11) The amount and nature of beneficial ownership of these shares by D.H.
Blair & Co., Inc. and Kenton E. Wood is based solely on the Schedule
13G filings, as submitted to the Company, of each of D.H. Blair & Co.,
Inc. and Kenton E. Wood. According to those filings, D.H. Blair & Co.,
Inc. may be deemed to beneficially own as of April 15, 1999 (as
adjusted for the Company's one-for-eight reverse stock split effective
February 26, 1999): (i) 18,000 shares underlying a Unit Purchase Option
to purchase 4,500 Units; and (ii) 35,562 shares of Common Stock, 20,419
shares that may be purchased pursuant to Class A Warrants and 52,507
shares that may be purchased pursuant to Class B Warrants. According
to those filings, Kenton E. Wood may be deemed to beneficially own an
additional 1000 shares of Common Stock underlying a Unit Purchase
Option to purchase 250 Units owned directly by him. The Company has no
independent knowledge of the accuracy or completeness of the
information set forth in such Schedule 13G filings, but has no reason
to believe that such information is not complete or accurate.
(12) Includes an aggregate of 132,699 shares that may be purchased
pursuant to Unit Purchase Options, Class A Warrants, Class B Warrants
and currently exercisable stock options.
(13) On March 31, 1999, a total of 56,250 shares of Class B Common Stock,
which had been held in escrow since the initial public offering of
the Company in August 1994, were canceled and contributed to the
Company's capital by Roberta Lipson, Elyse Beth Silverberg and
Lawrence Pemble in the amounts of 30,000, 19,875 and 6,375 shares,
respectively. Each such person is an executive officer and director
of the Company. As of April 15, 1999, there were 193,750 shares of
Class B Common Stock outstanding.
<PAGE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Not applicable.
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, 1998 By: /s/ Robert C. Goodwin, Jr.
------------------------------
Robert C. Goodwin, Jr.
Executive Vice President and
General Counsel
