-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, T+7CYFjP6EZeffHOAoYcqSWQ3fniHYtr1LGV21hZc1t6gkxHcV7gZptz56wg/AhF RHVVrewxa0ydMHNMOEvvKA== 0000950144-97-009404.txt : 19970820 0000950144-97-009404.hdr.sgml : 19970820 ACCESSION NUMBER: 0000950144-97-009404 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970819 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHINA RESOURCES DEVELOPMENT INC CENTRAL INDEX KEY: 0000793628 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-MISCELLANEOUS NONDURABLE GOODS [5190] IRS NUMBER: 870263643 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-26046 FILM NUMBER: 97666309 BUSINESS ADDRESS: STREET 1: 23/F OFFICE TOWER, CONVENTION PLAZA STREET 2: 1 HARBOUR ROAD CITY: WANCHAI STATE: K3 ZIP: 84119 BUSINESS PHONE: 011-852-2810-7205 MAIL ADDRESS: STREET 1: C/O BAKER & HOSTETLER STREET 2: P O BOX 112 CITY: ORLANDO STATE: FL ZIP: 32802 FORMER COMPANY: FORMER CONFORMED NAME: MAGENTA CORP DATE OF NAME CHANGE: 19940217 10-Q 1 CHINA RESOURCES FORM 10-Q 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, $.001 par value, as of August 15, 1997. Page 1 of 46 pages Exhibit Index on Page 22 2 CONVENTIONS Unless otherwise specified, all references in this report to "U.S. Dollars," "Dollars," "U.S.$," 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. -2- 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- 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)
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) 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 ======== ======== ======= ======== ======== =======
The accompanying notes are an integra2l part of these condensed cconsolidated financial statements. -4- 5 CHINA RESOURCES DEVELOPMENT, INC., AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 1997, AND DECEMBER 31, 1996 (Amounts in thousands)
JUNE 30, 1997 December 31, June 30, 1997 ------------- ------------ ------------- RMB 1996 US$ ---- NOTE (UNAUDITED) RMB (unaudited) ---- (audited) 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 ======= ======= ======
-5- 6
JUNE 30, 1997 December 31, June 30, 1997 ------------- ------------ ------------- RMB 1996 US$ ---- NOTE (UNAUDITED) RMB (unaudited) ---- (audited) 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 ======= ======= ======
The accompanying notes are an integral part of these condensed consolidated financial statements. -6- 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)
SIX MONTHS ENDED JUNE 30, ------------------------------ 1997 1996 1997 RMB RMB USD (UNAUDITED) 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 ======== ======= =======
The accompanying notes are an integral part of these condensed consolidated financial statements. -7- 8 CHINA RESOURCES DEVELOPMENT, INC., AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Amounts in thousands, except share and per share data)
Series B Additional Common Preferred Paid-In Retained Stock Stock Capital Reserves Earnings Total RMB RMB RMB RMB RMB RMB 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 ===== ===== ======= ====== ====== =======
-8- 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:
JUNE 30, DECEMBER 31, 1997 1996 ------------ ----------- RMB RMB (Unaudited) (Unaudited) Finished goods 60,626 55,452 ======= ========
Inventories are stated at the lower of cost or market. Cost is determined using the first-in, first-out method. -9- 10 4. FIXED ASSETS:
JUNE 30, DECEMBER 31, 1997 1996 ------------ ------------ RMB RMB (unaudited) (audited) 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 ======= =======
5. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
SIX MONTHS ENDED JUNE 30, ------------------------------------- 1997 1996 RMB RMB (UNAUDITED) (UNAUDITED) Cash paid during the period for interest expenses 2,958 12,801 ======= =======
-10- 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)
Three months Six months ended ended June 30, June 30, -------- -------- 1997 1996 1997 1996 RMB RMB RMB RMB 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 ======== ======== ======== ========
-11- 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- 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. -13- 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 - 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.) -15- 16 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 -16- 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 -17- 18 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.) -18- 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. -19- 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 -20- 21 EXHIBITS INDEX --------------
Exhibit No. Exhibit Description Page No. ----------- ------------------- -------- 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.) -22-
22 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.)
-23- 23 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.)
-24- 24 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.)
-25- 25 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
-26- 26 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.)
-27- EX-10.36 2 ADVERTISING AND MEDIA AGREEMENT 1 EXHIBIT 10.36 Advertising and Media Agreement by and between the Registrant and Marketing Direct Concepts, Inc., dated April 1, 1997 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 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 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 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 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 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 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 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 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 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
MAGAZINE CIRCULATION RETAIL COST 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
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) 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
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 Mailings to Subscribers 75,000 $75,000.00 Additional Mailings per 10,000 $6,000.00 *Both Hits and Listeners are increasing weekly
10 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. EX-10.37 3 FINANCIAL CONSULTING AGREEMENT 1 EXHIBIT 10.37 Financial Consulting Agreement by and between the Registrant and Integrated Capital Development Group, Inc., dated May 1, 1997 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. 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 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 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. 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 EX-27.2 4 FINANCIAL DATA SCHEDULE
5 1,000 RENMINRI YUAN 6-MOS DEC-31-1996 JAN-01-1997 JUN-30-1997 8.30 85,423 0 21,191 0 60,626 442,792 11,832 4,568 462,249 112,866 0 0 270 48 228,887 462,249 474,467 494,102 449,675 466,236 0 0 0 27,866 6,153 10,115 0 0 0 10,115 1.70 1.70
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