0000898430-95-001658.txt : 19950822 0000898430-95-001658.hdr.sgml : 19950822 ACCESSION NUMBER: 0000898430-95-001658 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950821 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHINA INDUSTRIAL GROUP INC CENTRAL INDEX KEY: 0000818726 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-FARM PRODUCT RAW MATERIALS [5150] IRS NUMBER: 840974043 STATE OF INCORPORATION: CO FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-16365 FILM NUMBER: 95565565 BUSINESS ADDRESS: STREET 1: CENTRAL PLZ 21ST FLOOR STREET 2: 18 HARBOUR RD CITY: WANCHAI STATE: K3 ZIP: 80030 BUSINESS PHONE: 8528773830 MAIL ADDRESS: STREET 1: CENTRAL PLAZA STREET 2: 18 HARBOUR ROAD 21ST FLOOR CITY: WANCHAI STATE: K3 FORMER COMPANY: FORMER CONFORMED NAME: GENERATION 5 TECHNOLOGY INC /CO/ DATE OF NAME CHANGE: 19920703 10-Q 1 FORM 10-Q, 06/30/95 UNITED STATES 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, 1995 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. Commission File Number 0-16365 CHINA INDUSTRIAL GROUP, INC. (Exact name of registrant as specified in its charter) Colorado 84-0974043 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 21st Floor, Central Plaza 18 Harbour Road Wanchai, Hong Kong (Address of principal executive offices) 011-852-2877-3830 (Registrant's telephone number, including area code) 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: Common Stock --23,465,048 shares outstanding on June 30, 1995. Page 1 of 16 CHINA INDUSTRIAL GROUP, INC. INDEX PART I -- FINANCIAL INFORMATION
Page No. -------- Item 1. Consolidated Financial Statements: Consolidated Balance Sheets at June 30, 1995 (unaudited) and December 31, 1994 3-4 Unaudited Consolidated Statements of Income - Three and Six months ended June 30, 1995 and 1994 5 Unaudited Consolidated Statements of Shareholders' Equity, Six months ended June 30, 1995 6 Unaudited Consolidated Statements of Cash Flows, Six months ended June 30, 1995 and 1994 7-8 Notes to Unaudited Consolidated Financial Statements 9-11 Item 2. Management Discussion and Analysis of Financial Condition and Results of Operations 12-14 PART II -- OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 15
2 ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS CHINA INDUSTRIAL GROUP, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (STATED IN UNITED STATES DOLLARS)
June 30, December 31, 1995 1994 ------------- ------------ (Unaudited) ASSETS Current assets: Cash $ 4,854,964 $ 6,009,700 Short-term investments 3,006,468 3,006,468 Accounts receivable 64,881,181 63,287,097 Inventories (Note 5) 20,556,679 21,838,540 Prepaid expenses 795,834 414,237 ------------ ------------ Total current assets 94,095,126 94,556,042 ------------ ------------ Property, plant and equipment: Leasehold land and buildings 10,451,299 10,451,299 Plant and equipment 11,822,904 11,822,904 Furniture and fixtures 651,993 588,285 Motor vehicles 460,421 460,421 Construction in progress 428,494 83,403 ------------ ------------ 23,815,111 23,406,312 Less accumulated depreciation and amortization 3,100,057 2,524,150 ------------ ------------ 20,715,054 20,882,162 ------------ ------------ Other assets: Pre-operating costs 1,052,617 885,556 Other 23,529 23,529 ------------ ------------ 1,076,146 909,085 ------------ ------------ $115,886,326 $116,347,289 ============ ============
3 (Continued) CHINA INDUSTRIAL GROUP, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (CONTINUED) (STATED IN UNITED STATES DOLLARS)
June 30, December 31, 1995 1994 ------------- ------------ (Unaudited) LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current portion of long-term debt $ 40,574 $ 40,574 Short-term bank borrowings 9,322,686 9,107,042 Accounts payable: Trade 12,495,925 23,636,664 Related parties 366,811 366,811 Customer deposits and other 2,819,942 5,072,997 Accrued expenses 715,102 1,210,146 ------------ ----------- Total current liabilities 25,761,040 39,434,234 ------------ ----------- Long-term debt, net of current portion 12,244,946 10,382,252 ------------ ----------- Minority interest 5,454,356 5,117,763 ------------ ----------- Commitments and contingencies (Note 6) Shareholders' equity (Notes 7 and 8): Preferred stock; authorized 10,000,000 shares: Series A convertible; issued and outstanding 24,375 shares 24,375 24,375 Series C convertible; issued and outstanding 212 shares 5,900,000 Common stock par value $0.001; authorized 100,000,000 shares; issued and outstanding 23,465,048 shares (1995) and 19,931,252 shares (1994) 23,465 19,931 Capital in excess of par 14,435,122 9,264,994 Retained earnings 54,518,288 41,777,471 Cumulative foreign currency translation adjustment 3,424,734 4,426,269 ------------ ------------ 72,425,984 61,413,040 ------------ ------------ $115,886,326 $116,347,289 ============ ============
See notes to consolidated financial statements 4 CHINA INDUSTRIAL GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (STATED IN UNITED STATES DOLLARS) (UNAUDITED)
Three months ended June 30, Six months ended June 30, 1995 1994 1995 1994 ------------ ------------ ------------- ------------- Revenues $73,669,278 $71,542,600 $150,450,676 $140,604,678 Cost of goods sold 62,251,624 60,596,150 127,464,819 118,923,339 ----------- ----------- ------------ ------------ Gross profit 11,417,654 10,946,450 22,985,857 21,681,339 ----------- ----------- ------------ ------------ Operating expenses: General and administrative 3,785,579 3,312,647 7,393,146 6,651,681 Selling 568,177 485,777 1,167,140 991,959 ----------- ----------- ------------ ------------ 4,353,756 3,798,424 8,560,286 7,643,640 ----------- ----------- ------------ ------------ Income from operations 7,063,898 7,148,026 14,425,571 14,037,699 ----------- ----------- ------------ ------------ Other income (expense): Interest expense: Related party (14,449) (28,898) Other (561,125) (533,926) (1,134,633) (1,078,827) Other income 18,339 Other expenses (2,149) ----------- ----------- ------------ ------------ (561,125) (548,375) (1,118,443) (1,107,725) ----------- ----------- ------------ ------------ Income before income taxes and minority interest 6,502,773 6,599,651 13,307,128 12,929,974 Income tax expense 109,553 79,690 229,718 124,963 ----------- ----------- ------------ ------------ Income before minority interest 6,393,220 6,519,961 13,077,410 12,805,011 Minority interest in earnings of subsidiaries 162,983 664,368 336,593 1,427,972 ----------- ----------- ------------ ------------ Net income $ 6,230,237 $ 5,855,593 $ 12,740,817 $ 11,377,039 =========== =========== ============ ============ Earnings per share (Note 4) $0.13 $0.13 $0.26 $0.27 =========== =========== ============ ============ Weighted average number of shares outstanding 48,457,000 43,518,000 48,425,000 42,495,000 =========== =========== ============ ============
See notes to consolidated financial statements 5 CHINA INDUSTRIAL GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (STATED IN UNITED STATES DOLLARS) SIX MONTHS ENDED JUNE 30, 1995 (UNAUDITED)
Series A Series C preferred preferred Common stock stock stock ---------------- ---------------------- -------------------- Shares Amount Shares Amount Shares Amount ------ ------- ------- ------------ ---------- ------- Balances, January 1, 1995 24,375 $24,375 295 $ 5,900,000 19,931,252 $19,931 Conversion of preferred stock to common stock (295) (5,900,000) 3,533,796 3,534 Costs related to securities (Note 8) Net income Translation adjustments ------ ------- ------- ------------ ---------- ------- Balances June 30, 1995 24,375 $24,375 0 $ 0 23,465,048 $23,465 ====== ======= ======= ============ ========== ======= Cumulative foreign Capital currency Total in excess Retained translation shareholders' of par earnings adjustment equity ---------- ----------- ------------ -------------- Balances, January 1, 1995 $9,264,994 $41,777,471 $ 4,426,269 $61,413,040 Conversion of preferred stock to common stock 5,896,466 Costs related to securities (Note 8) (726,388) (726,388) Net income 12,740,817 12,740,817 Translation adjustments (1,001,535) (1,001,535) ----------- ----------- ----------- ----------- Balances June 30, 1995 $14,435,122 $54,518,288 $ 3,424,734 $72,425,984 =========== =========== =========== ===========
6 See notes to consolidated financial statements CHINA INDUSTRIAL GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (STATED IN UNITED STATES DOLLARS) SIX MONTHS ENDED JUNE 30, 1995 AND 1994 (UNAUDITED)
1995 1994 -------------- -------------- Cash flows from operating activities: Net income $ 12,740,817 $ 11,377,039 ------------ ------------ Adjustment to reconcile net income to net cash used in operating activities: Depreciation and amortization 575,907 254,124 Gain on sale of securities and other assets Minority interest 336,593 (3,322,742) Translation adjustment (1,004,535) (514,183) Decrease (increase) in assets: Accounts receivable (1,591,084) (19,142,438) Inventories 1,281,861 (2,134,363) Prepaid expenses (381,597) (650,992) Other assets 357,219 Increase (Decrease) in accounts payable and accrued expenses (14,615,176) 11,042,753 ------------ ------------ Total adjustments (15,398,031) (14,110,622) ------------ ------------ Net cash used in operating activities (2,657,214) (2,733,583) ------------ ------------ Cash flows from investing activities: Proceeds from sales of securities and other assets 1,952,243 Purchases of securities and other assets (1,985,844) Acquisition of property, plant and equipment (408,799) (601,852) Pre-operating costs (167,061) (255,955) ------------ ------------ Net cash used in investing activities (575,860) (891,408) ------------ ------------
7 (Continued) CHINA INDUSTRIAL GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) (STATED IN UNITED STATES DOLLARS) SIX MONTHS ENDED JUNE 30, 1995 AND 1994 (UNAUDITED)
1995 1994 ------------ ------------ Cash flows from financing activities: Net increase in short-term bank borrowings 215,644 5,803,173 Repayment of shareholders loans (1,926,532) Increase (repayment) of long-term debt 1,862,694 (2,741,202) Proceeds from stock sales 2,382,559 ----------- ----------- Financing activities 2,078,338 3,517,998 ----------- ----------- Net decrease in cash (1,154,736) (106,993) Cash, beginning 6,009,700 948,408 ----------- ----------- Cash, ending $ 4,854,964 $ 841,415 =========== =========== Cash paid for: Interest $ 1,134,633 $ 1,078,827 =========== =========== Non-cash investing and financing activities: Conversion of 295 shares of Series C preferred stock into 3,533,796 shares of common stock $ 5,900,000 =========== Conversion of debentures to 386,960 shares of Common Stock $ 1,000,000 ===========
8 See notes to consolidated financial statement CHINA INDUSTRIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) THREE AND SIX MONTHS ENDED JUNE 30, 1995 AND 1994 (UNAUDITED) 1. Business and organization of the Company: Business of the Company: The Company's operations consist of distribution and manufacturing activities performed by its operating subsidiaries. Distribution activities primarily involve the purchase of wool products for sale within the Peoples Republic of China (China) and the purchase of chemicals and pharmaceuticals within China for export and sale outside of China. Manufacturing activities primarily involve the manufacture and sale of woolen products through two joint venture companies in China. The Company's subsidiaries are:
Name of Percent Place of Principal Subsidiary Ownership Incorporation Activities --------------------------- ----------------- -------------- ------------- Nova Industrial 100% British Holding Holdings Limited Virgin Company Islands Eyemouth Limited 100% British Marketing Virgin and Islands distribution M.S. Enterprise 100% Hong Kong Marketing Company Limited and distribution Eastern Assets 100% British Holding Management Limited Virgin Company Islands M.S. (Ping Yuan) 70% by China Manufacturing Industry Development M.S. Enterprise Company Limited (joint venture) Suzhou Nimrod Woolen 55% by China Manufacturing Textile Company Eastern Assets Limited (joint venture) Harrington Worldwide 100% British Holding Holdings Limited Virgin Company Islands Ascot Holdings Group 100% British Holding Limited Virgin Company Islands
9 CHINA INDUSTRIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) THREE AND SIX MONTHS ENDED JUNE 30, 1995 AND 1994 (UNAUDITED) 2. Interim consolidated financial statements: The interim consolidated financial statements have been prepared by the Company and, in the opinion of the management, reflect all material adjustments which are necessary to a fair statement of results for the interim periods presented. Certain information and footnote disclosure made in the last annual report on Form 10-KSB have been condensed or omitted for the interim consolidated statements. Certain costs are estimated for the full year and allocated to interim period based on activity associated with the interim period. Accordingly such costs are subject to year-end adjustment. It is the Company's opinion that, when the interim consolidated statements are read in conjunction with the December 31, 1994 annual report on Form 10-KSB, the disclosures are adequate to make information presented not misleading. The interim consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany accounts and transactions have been eliminated. 3. Basis of accounting: The financial statements are expressed in United States dollars and are in conformity with United States generally accepted accounting principles. The United States dollar was adopted as the reporting currency for the following reasons: (i) the majority of the Company's purchase and sales transactions are quoted in United States dollars; (ii) the majority of the expenses incurred by the Company are denominated in Hong Kong dollars and the exchange rate between Hong Kong dollars and United States dollars has been fixed at HK$7.8 to US$1.00; as a result, exchange differences on translating from Hong Kong dollars to United States dollars are minimal. 4. Earnings per share: The computation of earnings per share is based on the weighted average number of common shares outstanding. When dilutive, stock options and warrants are included as common stock equivalents using the treasury stock method. The shares issued in connection with the reverse acquisition in 1994, including the common stock equivalent of the Series A preferred stock, have been treated as being outstanding effective January 1, 1993. Shares issued in connection with the convertible debentures and the Series C preferred stock have been included in weighted average shares as if the conversions had occurred at the date the securities were issued. Shares issuable under the conversion provisions of the Series C preferred stock have been considered common stock equivalents. Primary and fully diluted earnings per share are the same for each period presented. 10 CHINA INDUSTRIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) THREE AND SIX MONTHS ENDED JUNE 30, 1995 AND 1994 (UNAUDITED) 5. Inventories The components of inventories are as follows:
June 30, December 31, 1995 1995 ------------ ------------ Raw materials $ 1,175,264 $ 1,096,326 Work-in-process 1,057,556 1,089,665 Finished goods 18,323,859 19,652,549 ----------- ----------- $20,556,679 $21,838,540 =========== ===========
6. Commitments and contingencies: Letters of credit: At June 30, 1995, the Company had approximately $4,908,606 in letters of credit outstanding. 7. Shareholders' equity Series A preferred stock: The 24,375 shares of Series A preferred stock were issued in connection with the reverse acquisition in 1994. Each share of Series A preferred stock is convertible into 1,000 shares of common stock. Series C preferred stock: During August 1994, the Company sold 465 shares of Series C convertible preferred stock, and warrants to purchase 309,997 shares of common stock at $5.50 per share for $9,300,000. The warrants are exercisable through August 1996. No warrants have been exercised through June 30, 1995. During the year ended December 31, 1994, 170 shares of Series C convertible preferred stock were converted into 1,236,358 shares of common stock. During the six months ended June 30, 1995, 295 shares of Series C convertible preferred stock were converted into 3,533,796 shares of common stock. As of June 30, 1995, all of the shares of Series C convertible preferred stock had been converted. 8. On June 2, 1995, the Company entered into a settlement agreement with an entity that provided services to the Company related to the reverse acquisition which occurred in January 1994. Under the terms of the settlement, the Company agreed to issue 363,169 shares of common stock. The issuance was valued at the market price of the Company's stock at the date of the agreement and has been charged to shareholders' equity. 11 ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Overview of Principal Activities -------------------------------- China Industrial Group, Inc. (the "Group") consists of Nova Industrial Holdings Limited, a British Virgin Islands corporation, which is a holding company for five operating entities. The operations of the Group are divided into distribution and manufacturing. The Group's distribution activities involve wool, industrial chemicals and pharmaceutical products. The Group purchases wool from unrelated persons mainly in New Zealand and Australia principally for US dollars and, in turn, sells the wool through its sales representative offices to its customers in the People's Republic of China (China). The Group is responsible for all aspects of delivery of wool to the factory, including customs clearance and transportation. To support its distribution, the Group leases a number of bonded warehouses in China which take delivery of the wool and arrange for shipment directly to the factories. The Group receives payment for the wool in Renminbi, the local Chinese Currency (RMB). The Group then uses RMB to purchase industrial chemicals and pharmaceutical products from manufacturers located in China. The pharmaceutical products are principally generic products in powder form, and are used by pharmaceutical manufacturers which convert the powder into tablets or capsules. The chemical products are mainly industrial raw materials used for various types of basic industries. Both the chemical and pharmaceutical products are exported from China and sold to customers located in India, Africa, Europe and Southeast Asia. The revenues of these products in turn generate US dollars, which are then used to purchase wool in Australia and New Zealand. Although the Group bears the risk of non-payments from its customers, the Group generally purchases products pursuant to outstanding orders. Thus, the Group's exposure to currency risk and inventory problems are minimized. The Group is also engaged in the manufacture of woolen products through its interest in two joint venture companies in China. These facilities produce a variety of wool products ranging from scoured wool (washed and comb wool), wool top (washed and comb wool that has been processed into a spool of rope), yarn, rolls of wool fabric to woolen sweaters mainly for the Chinese consumer market. 12 Three and Six Months Ended June 30, 1995 Compared to June 30, 1994 ------------------------------------------------------------------ Revenues. Revenues for the three and six months ended June 30, 1995 -------- increased by $2.1 million and $9.8 million, respectively, or approximately 3% and 7% compared to the three and six months ended June 30, 1994. Revenues from distribution activities for the three and six months ended June 30, 1995 increased by $2.8 million and $11.6 million or approximately 4% and 9%, respectively, compared to the three and six months ended June 30, 1994. The increases were primarily attributable to the increase in sales of wool as a result of the natural growth of the market and as a result of the change in consumers' behavior. Revenues from the manufacturing of woolen products for the three and six months ended June 30, 1995 decreased by $0.7 million and $1.8 million or approximately 14.6% and 15.5%, respectively, compared to the three and six months ended June 30, 1994. The decreases were primarily due to the decrease in domestic sales in China which were impacted by the governmental policy of "cooling down" the overheated economy. Gross Profit. Gross profit increased by $0.5 million and $1.3 ------------ million or approximately 4% and 6%, respectively, for the three and six months ended June 30, 1995 compared to the three and six months ended June 30, 1994. These increases are primarily due to the increases in revenues. Gross profit as a percent of revenue was 15% for the three and six month periods ended June 30, 1995 and 1994. General and Administrative Expenses. General and administrative ----------------------------------- expenses for the three and six month periods ended June 30, 1995 increased by $0.47 million and $0.74 million or approximately 14% and 11%, respectively, compared to the 1994 periods, primarily as a result of the increase in sales activities. General and administrative expenses as a percent of revenues remained constant at 5% of revenues for the three and six month period ended June 30, 1995 compared to the 1994 periods. Selling Expenses. Selling expenses for the three and six month ---------------- periods ended June 30, 1995 increased by $0.08 million and $0.18 million or approximately 17% and 18% respectively, compared to the 1994 periods, primarily as a result of the increase in the volume of sales. Selling expenses as a percent of revenues remained constant at 1% of revenues for the three and six month periods ended June 30, 1995 compared to the 1994 periods. Income from Operations. During the three and six months ended June ---------------------- 30, 1995, the Group generated income from operations of $7.1 million and $14.4 million, respectively, compared to $7.1 and $14.0 during the 1994 periods. Income from operations as a percent of revenues remained constant at 10% for the three and six month periods ended June 30, 1995 and 1994. Other Income (Expense). Interest expense was $0.56 million and ---------------------- $0.53 million for the three month periods ended June 30, 1995 and 1994, respectively, and $1.13 million and $1.08 million for the six month periods ended June 30, 1995 and 1994, respectively. The amount remained relatively constant because the average amount of short- and long-term borrowings were approximately the same during the 1995 and 1994 periods. Income Tax Expense. Income tax expense was $0.11 million and $0.08 ------------------ million for the three month periods ended June 30, 1995 and 1994, respectively, and $0.23 million and $0.12 million for the six month periods ended June 30, 1995 and 1994, respectively. The increase is primarily due to the increase in earnings from the Group's Hong Kong distribution subsidiary. Minority Interest in Earnings of Subsidiaries. Minority interest in --------------------------------------------- earnings of subsidiaries for the three and six month periods ended June 30, 1995 decreased by $0.5 million and $1.1 million, respectively, compared to the 1994 periods. The decreases were due to the decreases in net earnings of the Group's manufacturing subsidiaries. Net Income. Net income was $6.2 and $5.9 million for the three month ---------- periods ended June 30, 1995 and 1994, respectively, and $12.7 million and $11.4 million for the six month periods ended June 30, 1995 and 1994, respectively. This represents increases of 6% and 12% for the three and six month periods, respectively. Earnings per Share. Earnings per share were $0.13 for the three ------------------ month periods ended June 30, 1995 and 1994, and $0.26 and $0.27 for the six month periods ended June 30, 1995 and 1994, respectively. Even though net income was greater in the 1995 periods than in the 1994 periods, earnings per share were impacted by the increase in weighted average number of shares outstanding resulting from the sales of common and preferred stock throughout 1994. 13 Liquidity and Capital Resources ------------------------------- The Group's principal source of liquidity during the six months ended June 30, 1995 was the increase in long-term debts. As of June 30, 1995, the group had a working capital excess of approximately $68 million compared to $55 million as of December 31, 1994, primarily as a result of an increase in revenues from this period. Net cash used in operating activities was $2.66 million and $2.73 million for the six months ended June 30, 1995 and 1994, respectively. The group believes the cash provided by operations will be sufficient to meet its cash requirements for the next 12 months. Foreign Exchange ---------------- The financial statements of the Company's subsidiaries operating in China are generally measured using the local currency, Renminbi (RMB), as the functional currency. The exchange rates adopted in the translation of RMB to the United States dollar are the applicable Bank of China official rates that are set by the Chinese Government. For the Company's other subsidiaries, the United States dollar is the functional currency. Effect of Inflation ------------------- Inflation has little impact on the operations of the Group. The price of products the Group distributes is determined by the open market, and any increase in the price the Group pays for products is generally passed on to customers. However, the "cooling down" of China's overheated economy does have an effect on the volume of sales in the Group's products manufactured in China. In addition, inflation also affects the general and administration expenses. Commitments for Capital Expenditure ----------------------------------- The Group has no material commitment for capital expenditures. Seasonal Aspects ---------------- The Group's distribution of wool tend to increase in fall and winter while revenues from sales of wool tends to steady by late spring and summer. 14 PART II -- OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits: 27 Financial Data Schedule (b) Reports on Form 8-K: None. 15 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 INDUSTRIAL GROUP, INC. By: /s/ Benthony Ip -------------------------------- Benthony Ip, Chief Financial Officer (Chief financial officer and accounting officer and duly authorized officer) Dated: August 14, 1995 16 EX-27 2 FINANCIAL DATA SCHEDULE ARTICLE 5
5 6-MOS DEC-31-1994 JAN-01-1995 JUN-30-1995 4,854,964 3,006,468 64,881,181 0 20,556,679 90,095,126 23,815,111 3,100,057 115,886,326 25,761,040 0 23,465 0 24,375 72,378,144 115,886,326 150,450,676 150,450,676 127,464,819 8,560,286 2,149 0 1,134,633 13,307,128 229,718 12,740,817 0 0 0 12,740,817 0.26 0.26