-----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, Qx54cNYE3ZVCMknqT6Wwwy6K8GmtreSG/XWw1Fnoyv8EI1u1V7x4i3a7lKepGN2T vGZF7Q6nPwR1pQTrMA9u2Q== 0000939802-02-000343.txt : 20020830 0000939802-02-000343.hdr.sgml : 20020830 20020830105746 ACCESSION NUMBER: 0000939802-02-000343 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20020630 FILED AS OF DATE: 20020830 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHINA WORLD TRADE CORP CENTRAL INDEX KEY: 0001081834 STANDARD INDUSTRIAL CLASSIFICATION: OPERATIVE BUILDERS [1531] IRS NUMBER: 870629754 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-26119 FILM NUMBER: 02753608 BUSINESS ADDRESS: STREET 1: C/O LOEB & LOEB LLP DAVID FICKSMAN STREET 2: 10100 SANTA MONICA BLVD STE 2200 CITY: LOS ANGELES STATE: CA ZIP: 900674164 BUSINESS PHONE: 8015748000 MAIL ADDRESS: STREET 1: LOEB & LOEB STREET 2: 10100 SANTA MONICA BLVD STE 2200 CITY: LOS ANGELES STATE: CA ZIP: 90067 FORMER COMPANY: FORMER CONFORMED NAME: TXON INTERNATIONAL DEVELOPMENT CORP DATE OF NAME CHANGE: 19990329 10QSB 1 form10qsb063002.txt U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB (Mark One) __X_ Quarterly report under section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended June 30, 2002. _____ Transition report under section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from ________ to __________. Commission File No.: ________ CHINA WORLD TRADE CORPORATION (Name of small business in its charter) Nevada 87-0629754 (State or other Jurisdiction of Incorporation)(IRS Employer Id. No.) 4th Floor Goldlion Digital Network Center 138 Tiyu Road East Tianhe, Guangzhon The PRC 510620 (Address of Principal Office)(Zip Code) Issuer's telephone number:011-852-988-26818 Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Applicable only to issuers involved in bankruptcy proceedings during the past five years. Check whether the issuer has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. Yes _______ No _______ Applicable only to corporate issuers. State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date. At June 30, 2002 there were 29,051,520 shares of common stock outstanding. Transitional Small Business Disclosure Format (Check one): Yes _______ No X --------- PART I ITEM 1. FINANCIAL STATEMENTS AND EXHIBITS The unaudited financial statements of the Registrant required for this item at set forth below. The financial statements reflect all adjustments that are, in the opinion of management, necessary to a fair statement of the results for the interim period presented. PART I ITEM 1. FINANCIAL STATEMENTS INDEPENDENT ACCOUNTANT'S REPORT China World Trade Corporation (A Development Stage Company) We have reviewed the accompanying balance sheets of China World Trade Corporation (a development stage company) as of June 30, 2002 and September 30, 2001, and the related statements of operations for the three and nine month periods ended June 30, 2002 and 2001, and cash flows for the nine month periods ended June 31, 2002 and 2001. These financial statements are the responsibility of the Company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the accompanying financial statements for them to be in conformity with generally accepted accounting principles. Respectfully submitted /s/ Robison, Hill & Co. Certified Public Accountants Salt Lake City, Utah August 19, 2002 China World Trade Corporation (A Development Stage Company) BALANCE SHEETS
June 30, September 30, 2002 2001 --------------- -------------- Current Assets Cash and cash equivalent $ 1,124 $ 43 Other receivables 121 362 --------------- -------------- Total Current Assets 1,245 405 Fixed Assets Website Development Cost 300,000 - Furniture and fixtures 836 2,848 Less: Accumulated depreciation (15,000) (1,994) --------------- -------------- Total Fixed Assets 285,836 854 --------------- -------------- Total Assets $ 287,081 $ 1,259 LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities Current Liabilities Accrued Liabilities $ 120,413 $ 185,040 Notes Payable 1,094,737 998,128 Contractual Liabilites 180,000 - Current Portion of Deferred Income 830 - Due to related parties 1,856,054 1,522,654 --------------- -------------- Total Current Liabilities 3,252,034 - Long Term Liabilities Long-Term Deferred Income 8,354 - --------------- -------------- Total Liabilities 3,260,388 2,705,822 --------------- -------------- Minority Interest - 98 --------------- -------------- Stockholders' Equity Preferred stock (par value $0.001), 10,000,000 shares authorized, no shares issued at June 30, 2002 and September 30, 2001 - - Common stock (par value $0.001), 50,000,000 shares authorized, 29,051,520 and 23,822,800 shares issued at June 30, 2002 and September 30, 2001 29,052 23,823 Common stock to be issued 560 60 Capital in excess of par value 3,555,156 2,828,618 Deficit accumulated during development stage (6,558,075) (5,557,162) --------------- -------------- Total Stockholders' Equity (2,973,307) (2,704,661) --------------- -------------- Total Liabilities and Stockholders' Equity $ 287,081 $ 1,259 =============== ==============
See accompanying notes and accountants' report China World Trade Corporation (A Development Stage Company) STATEMENTS OF OPERATIONS
Cumulative since January 29, 1998 For the three months ended For the nine months ended inception of June 30, June 30, development ------------------------------ ----------------------------- 2002 2001 2002 2001 stage --------------- -------------- -------------- -------------- ----------------- Revenues $ 328 $ - $ 328 $ - $ 328 --------------- -------------- -------------- -------------- ----------------- Expenses Selling, general & administrative expenses 188,190 212,058 995,195 454,472 2,973,178 --------------- -------------- -------------- -------------- ----------------- Operating Loss (187,862) (212,058) (994,867) (454,472) (2,972,850) --------------- -------------- -------------- -------------- ----------------- Other income (expense): Interest (2,072) (2,703) (6,046) (2,703) (10,649) Write down of goodwill - - - (559,375) (3,606,457) --------------- -------------- -------------- -------------- ----------------- Minority Interest - 14,820 - 164,687 31,881 --------------- -------------- -------------- -------------- ----------------- Loss before taxes (189,934) (199,941) (1,000,913) (851,863) (6,558,075) Income taxes - - - - - --------------- -------------- -------------- -------------- ----------------- Net Loss $ (189,934)$ (199,941)$ (1,000,913)$ (851,863)$ (6,558,075) =============== ============== ============== ============== ================= Basic per Share Amounts Net Income (Loss) $ (0.01)$ (0.01) $ (0.04) $ (0.04) ============== =============== ============== ==============
See accompanying notes and accountants' report China World Trade Corporation (A Development Stage Company) STATEMENT OF CASH FLOWS
Cumulative since For the Nine January 29, 1998 Months Ended inception of June 30, development ------------------------------ 2002 2001 stage -------------- -------------- ------------------ Cash Flows from Operating Activities: Cash paid to suppliers and employees $ 298,381 $ (209,539) $ (63,105) -------------- -------------- ------------------ Net cash used in operating activities 298,381 (209,539) (63,105) -------------- -------------- ------------------ Cash Flows from Investing Activities: Website development (300,000) - (300,000) Investment in deferred development costs - - (6,000) -------------- -------------- ------------------ Net cash used by investing activities (300,000) - (306,000) -------------- -------------- ------------------ Cash Flows from Financing Activities: Proceeds from issuance of common stock 2,700 - 342,879 Proceeds from related party - 209,114 - Contributed capital from shareholders - - 27,350 -------------- -------------- ------------------ Net cash provided by financing activities 2,700 209,114 370,229 -------------- -------------- ------------------ Net change in cash and cash equivalents 1,081 (425) 1,124 Cash and cash equivalents at beginning of year 43 479 - -------------- -------------- ------------------ Cash and cash equivalents at end of year $ 1,124 $ 54 $ 1,124 ============== ============== ==================
China World Trade Corporation (A Development Stage Company) STATEMENT OF CASH FLOWS
Cumulative since For the Nine January 29, 1998 Months Ended inception of June 30, development ------------------------------ 2002 2001 stage -------------- -------------- ------------------ Reconciliation of Net Loss to Net Cash Used in Operating Activities: Net loss $ (1,000,913) $ (851,863) $ (6,558,075) Adjustments used to reconcile net loss to Net cash used in operating activities: Depreciation 15,000 427 15,624 Loss on Investments - - 6,000 Goodwill writedown - 559,375 3,606,457 (Increase) Decrease in rental deposits - - 258,299 (Increase) Decrease in receivables (241) - (241) Increase (Decrease) in accrued liabilities (64,627) 184,506 563,266 Increase (Decrease) in notes payable 96,609 62,703 1,094,737 Increase (Decrease) in contracted liabilities 180,000 - 180,000 Increase (Decrease) in accounts payable to officers - - 16,200 Increase (Decrease) in accounts payable to officers 9,184 - 9,184 Increase (Decrease) in due to related parties 333,400 - (9,170) Stock issued for services 729,969 - 782,535 Stock issued for salaries - - 4,000 Minority Interest - (164,687) (31,881) -------------- -------------- ------------------ Net cash used in operating activities $ 298,381 $ (209,539) $ (63,105) ============== ============== ==================
Supplemental Disclosure of Non-Cash Investing and Financing Activities: - - On October 18, 2000, 2,500,000 shares of common stock were issued to acquire 49% of Infotech Enterprises Limited pursuant to a share exchange agreement. See accompanying notes and accountants' report CHINA WORLD TRADE CORPORATION AND SUBSIDIARIES (A Development Stage Company) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND NINE MONTHS ENDED JUNE 30, 2002 AND 2001 NOTE 1 - ORGANIZATION AND SUMMARY OF ACCOUNTING POLICIES This summary of accounting policies for China World Trade Corporation is presented to assist in understanding the Company' financial statements. The accounting policies conform to generally accepted accounting principles and have been consistently applied in the preparation of the financial statements. Interim Statements The unaudited financial statements as of June 30, 2002 and 2001 for the three and nine month periods then ended reflect, in the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to fairly state the financial position and results of operations for the nine months. Operating results for interim periods are not necessarily indicative of the results which can be expected for full years. Organization and Basis of Presentation The Company was incorporated under the laws of the state of Nevada on January 29, 1998 as Weston International Development Corporation. On July 28, 1998 the name of the Company was changed to Txon International Development Corporation. On August 14, 2000 the Company acquired 100% of Virtual Edge Limited (a British Virgin Islands Company) pursuant to a share exchange agreement. On September 15, 2000 the Company changed its name to China World Trade Corporation. The Company is in the development stage since January 29, 1998 (inception) and has not commenced planned principal operations. Principles of Consolidation The consolidated financial statements include the accounts of China World Trade Corporation ("CWTC") and its wholly-owned subsidiaries: o Virtual Edge Limited ("VEL"), a British Virgin Islands Company (100% owned by CWTC) o Infotech Enterprises Limited ("Infotech"), a British Virgin Islands Company (49% owned by CWTC and 51% owned by VEL) o Beijing World Trade Center Club ("BWTCC"), a People's Republic of China Company (75% owned by VEL) o Guangzhou World Trade Centre Club Limited ("GWTCC"), a People's Republic of China Company (75% owned by VEL) The results of subsidiaries acquired during the year are consolidated from their effective dates of acquisition. All significant inter-company accounts and transactions have been eliminated. CHINA WORLD TRADE CORPORATION AND SUBSIDIARIES (A Development Stage Company) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND NINE MONTHS ENDED JUNE 30, 2002 AND 2001 (Continued) NOTE 1 - ORGANIZATION AND SUMMARY OF ACCOUNTING POLICIES (continued) - -------------------------------------------------------------------- Nature of Business The Company through its subsidiaries intends to build a bilingual (Chinese and English) Business to Business Portal, and establish a club in Beijing to provide food and beverages, recreation, business center services, communication and information services, product exhibition services and trading brokerage services to its member. Cash Equivalents For the purpose of reporting cash flows, the Company considers all highly liquid debt instruments purchased with maturity of three months or less to be cash equivalents to the extent the funds are not being held for investment purposes. Pervasiveness of Estimates The preparation of financial statements in conformity with generally accepted accounting principles required management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Translation of Foreign Currrency The Companies functional currencies include U.S. Dollars and Chinese Renminbi. All balance sheet accounts of foreign operations are translated into U.S. dollars at the year-end rate of exchange and statement of operations items are translated at the weighted average exchange rates for the year. The resulting translation adjustments are made directly to a separate component of the stockholders' equity. Gains or losses from other foreign currency transactions, such as those resulting from the settlement of foreign receivables or payables, are included in the Statements of Operations. Concentration of Credit Risk The Company has no significant off-balance-sheet concentrations of credit risk such as foreign exchange contracts, options contracts or other foreign hedging arrangements. The Company maintains the majority of its cash balances with one financial institution, in the form of demand deposits. CHINA WORLD TRADE CORPORATION AND SUBSIDIARIES (A Development Stage Company) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND NINE MONTHS ENDED JUNE 30, 2002 AND 2001 (Continued) NOTE 1 - ORGANIZATION AND SUMMARY OF ACCOUNTING POLICIES (continued) - -------------------------------------------------------------------- Depreciation Property, plant and equipment, are stated at cost. Depreciation and amortization are computed using the straight-line method over the estimated economic useful lives of the related assets as follows: Furniture & Fixtures 5-10 years Equipment 5- 7 years Maintenance and repairs are charged to operations; betterments are capitalized. The cost of property sold or otherwise disposed of and the accumulated depreciation thereon are eliminated from the property and related accumulated depreciation accounts, and any resulting gain or loss is credited or charged to income. The Company has adopted the Financial Accounting Standards Board SFAS No., 121, "Accounting for the Impairment of Long-lived Assets." SFAS No. 121 addresses the accounting for (i) impairment of long-lived assets, certain identified intangibles and goodwill related to assets to be held and used, and (ii) long-live lived assets and certain identifiable intangibles to be disposed of. SFAS No. 121 requires that long-lived assets and certain identifiable intangibles be held and used by an entity be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If the sum of the expected future cash flows from the used of the asset and its eventual disposition (undiscounted and without interest charges) is less than the carrying amount of the asset, an impairment loss is recognized. Net Loss per Common Share There are no dilutive potential common stock equivalents for 2002 and 2001 and are thus not considered. The reconciliations of the numerators and denominators of the basic EPS computations are as follows: CHINA WORLD TRADE CORPORATION AND SUBSIDIARIES (A Development Stage Company) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2002 AND 2001 (Continued) NOTE 1 - ORGANIZATION AND SUMMARY OF ACCOUNTING POLICIES (continued) - -------------------------------------------------------------------- Net Loss per Common Share (Continued) Per-Share Loss Shares Amount -------------- -------------- --------------- (Numerator) (Denominator) For the three months ended June 30, 2002 ----------------------------------------------- BASIC LOSS PER SHARE Loss to common shareholders $ (189,934) 29,511,690 $ (0.01) ============== ============== =============== For the nine months ended June 30, 2002 ----------------------------------------------- BASIC LOSS PER SHARE Loss to common shareholders $ (1,000,913) 27,474,840 $ (0.04) ============== ============== =============== For the three months ended June 30, 2001 ----------------------------------------------- BASIC LOSS PER SHARE Loss to common shareholders $ (199,941) 23,822,800 $ (0.01) ============== ============== =============== For the nine months ended June 30, 2001 ----------------------------------------------- BASIC LOSS PER SHARE Loss to common shareholders $ (851,863) 23,822,800 $ (0.04) ============== ============== =============== NOTE 2 - INCOME TAXES The Company has accumulated tax losses estimated at $2,906,202 expiring in years beginning 2013. Current tax laws limit the amount of loss available to be offset against future taxable income when a substantial change in ownership occurs. The amount of net operating loss carryforward available to offset future taxable income will be limited if there is a substantial change in ownership. In accordance with SFAS No. 109, a valuation allowance is provided when it is more likely than not that all or some portion of the deferred tax asset will not be realized. Due to the uncertainty with respect to the ultimate realization of the net operating loss carry forward, the Company established a valuation allowance for the entire net deferred income tax asset as of September 30, 2001. CHINA WORLD TRADE CORPORATION AND SUBSIDIARIES (A Development Stage Company) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND NINE MONTHS ENDED JUNE 30, 2002 AND 2001 (Continued) NOTE 3 - GOING CONCERN / DEVELOPMENT STAGE The Company has not begun principal operations and as is common with a development stage company, the Company has had recurring losses during its development stage. Continuation of the Company as a going concern is dependent upon obtaining the additional working capital necessary to be successful in its planned activity, and the management of the Company has developed a strategy, which it believes will accomplish this objective through additional equity funding and long term financing, which will enable the Company to operate for the coming year. NOTE 4 - COMMITMENTS As of June 30, 2002 all activities of the Company have been conducted by corporate officers from either their homes or business offices. Currently, there are no outstanding debts owed by the company for the use of these facilities and there are no commitments for future use of the facilities. NOTE 5 - DEMAND NOTE On February 15, 2001 the Company entered into a promissory note with a third party in the amount of 60,000 with a 12% annual interest rate and is due upon demand. As of June 30, 2001 accrued principal and interest outstanding is 70,655. CHINA WORLD TRADE CORPORATION AND SUBSIDIARIES (A Development Stage Company) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND NINE MONTHS ENDED JUNE 30, 2002 AND 2001 (Continued) NOTE 6 - RELATED PARTY TRANSACTIONS (a) Names and relationship of related parties Existing relationships with the Company
Mr. Roy Wu Vice President, Club Management and Director Mr. James Mak Director Mr. John H. W. Hui President, Chairman of the Board and Secretary Mr. Steven K. F. Hui Close family member of a director of the Company Mr. Alfred Or Chief Operating Office and Director Mr. David Jones Vice President, Information Technology Mr. Wai Tung Cheung Director Vast Opportunity Limited ("VOL") Minority shareholder of a subsidiary Belford Enterprises Limited A company in which a director of the Company has beneficial interest Yes Mind Investments Limited A shareholder of the Company Main Edge International Limited Major shareholder of the Company PRC Partner PRC partner of a subsidiary
(b) As of June 30, 2002, the Company owes the following amounts to related parties:
June 30, 2002 ------------------ Mr. James Mak $ 87,500 Mr. Roy Wu 87,500 Mr. John H. W. Hui 733,621 Mr. Steven K.F. Hui 54,082 Mr. Alfred Or 156,645 Belford Enterprises Limited 13,552 Main Edge International Limited 695,976 PRC Partner 27,178 ------------------ $ 1,856,054 ==================
The amounts due to related parties represent unsecured advances which are interest-free and repayable on demand. CHINA WORLD TRADE CORPORATION AND SUBSIDIARIES (A Development Stage Company) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND NINE MONTHS ENDED JUNE 30, 2002 AND 2001 (Continued) NOTE 7 - ACQUISITION OF SUBSIDIARIES Pursuant to a Share Exchange Agreement entered into between the Company and Vast Opportunity Limited ("VOL"), VOL transferred its 49 shares of the common stock, par value $1 of Infotech to the Company in exchange for the issuance by the Company of 2,500,000 shares of its common stock with par value of $0.001. The transaction was completed on October 18, 2000 when Infotech became a wholly-owned subsidiary of the Company, with 49% shareholding directly held by the Company and 51% shareholding held by Virtual Edge Limited, a wholly owned subsidiary of the Company. NOTE 8 - STOCK OPTIONS AND WARRANTS Pursuant to the 2000 Stock Option Plan, the Company issued 500,000 options to officers and consultants with an exercise price of $0.02 per shares with an expiration date of May 27, 2002. As of September 30, 2001, all options have been exercised. On October 20, 2000, the 2000 Stock Option Plan was approved by the written consent of a majority of shareholders. The purpose of the plan is to attract, motivate and retain directors, officers and key employees and consultants through the use of long-term incentives which are tied to shareholder value. The plan provides for a maximum of 3,000,000 shares of common stock awarded under the plan. As of September 30, 2001 no options have been granted under the plan NOTE 9 - AGREEMENTS On November 10, 2001, Virtual Edge Limited signed an agreement with Guangzhou City International Exhibition Company ("GCIEC") pursuant to which both parties agreed to form a new jointly controlled entity named Guangzhou World Trade Centre Club Limited ("GWTCC"). The total investment cost is $1,200,000 and the registered capital is $850,000. The company is responsible for providing $1,200,000 in return to share 75% interest. GWTCC was been approved and registered with the Quangzhou Industrial and Commercial Administrative Management Bureau, the PRC, on December 29, 2001. The license granted for the operation of GWTCC is valid for a period of twenty years from December 2001 through to December 2021. GWTCC is still in development stage and is engaged in the establishment of a club located in Guangzhou, the PRC. The club will provide food and beverages, recreation, business center services, commercial and trading brokerage services to its members. On October 25, 2001, the Company signed on behalf of Infotech an agreement with CBIT Corporation Limited ("CBIT") whereby CBIT agrees to build a Business-to-Business Portal for the CHINA WORLD TRADE CORPORATION AND SUBSIDIARIES (A Development Stage Company) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND NINE MONTHS ENDED JUNE 30, 2002 AND 2001 (Continued) NOTE 9 - AGREEMENTS (Continued) consideration of $300,000. 40% of the consideration was settled by the issuance of new shares of common stock with value equivalent to $120,000 (the "Consideration Shares"). The issue price of the Consideration Shares was calculated as the average closing price of the last 10 trading days before the agreement was signed. On December 30, 2001 the Company issued 568,720 shares as consideration and the corresponding asset and remaining liability have been booked. On November 27, 2001 the Company entered into a consulting agreement with Guo Wei Bin. The Company agrees to appoint Guo Wei Bin as the consultant for the liaison with the relevant Chinese government officials in relation to the operations of the World Trade Center Clubs. The agreement shall be for the term of 24 months and may be terminated by either party upon one month advanced written notice. The Company agreed to compensate Guo Wei Bin for services provided through the issuance of 300,000 new shares of common stock of the Company. On December 30, 2001 the Company issued these shares as consideration and the corresponding expense has been booked. On November 29, 2001 the Company entered into a consulting agreement with Lee Kit Bing. The Company agrees to appoint Lee Kit Bing as the consultant for the liaison with the setting up of the World Trade Center Clubs in the PRC and the continuation to liaise with relevant Chinese Officials. The agreement shall be for the term of 24 months and may be terminated by either party upon one month advanced written notice. The Company agreed to compensate Lee Kit Bing for services provided through the issuance of 2,000,000 new shares of common stock of the Company. On December 30, 2001 the Company issued these shares as consideration and the corresponding expense has been booked. On December 3, 2001 the Company entered into a consulting agreement with Wong Chi Ming. The Company agrees to appoint Wong Chi Ming as the consultant to provide Hong Kong corporate finance services. The agreement shall be for the term of 24 months and may be terminated by either party upon one month advanced written notice. The Company agreed to compensate Wong Chi Ming for services provided through the issuance of 2,000,000 new shares of common stock of the Company. On December 30, 2001 the Company issued these shares as consideration and the corresponding expense has been booked. On December 4, 2001 the Company entered into a consulting agreement with Kwok Shuk Man. The Company agrees to appoint Kwok Shuk Man as the consultant for the liaison with the relevant Chinese government officials in relation to the operations of the World Trade Center Clubs. The agreement shall be for the term of 24 months and may be terminated by either party upon one month advanced written notice. The Company agreed to compensate Kwok Shuk Man for services CHINA WORLD TRADE CORPORATION AND SUBSIDIARIES (A Development Stage Company) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND NINE MONTHS ENDED JUNE 30, 2002 AND 2001 (Continued) NOTE 9 - AGREEMENTS (Continued) provided through the issuance of 300,000 new shares of common stock of the Company. On December 30, 2001 the Company issued these shares as consideration and the corresponding expense has been booked. On May 1, 2002 the Company entered into a consulting agreement with Mr. Bernard Chan. Mr Chan agrees to be a liaison with US SEC attorney, independent auditor, and public relations. He also agrees to assist with the compilation and preparation of financial projections and assist in the Companies business activities and operations. In return the Company agrees to pay $1,250 per month, issue stock worth $5,000 per month as determined by the closing price of the Company on the last trading day of the preceding month. This agreement shall be for a term of twelve months and automatically renew for an additional twelve months, unless notice is given by either party one month prior to renewal. NOTE 10 - STOCK SPLIT On June 3, 2002 the Board of Directors approved a reverse stock split by a factor of 30-to-1. This stock split has not been enacted as of June 30, 2002 and therefore has not been reflected in the accompanying financial statements. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION OVERVIEW Pursuant to the Share Exchange Agreement dated as of August 14, 2000, by us, Virtual Edge Limited ("VEL"), and Main Edge International Limited ("Main Edge"), Main Edge transferred all of the issued and outstanding shares of the capital stock of VEL to the Company in exchange of 1,961,175 shares of our pre-split common stock, representing approximately 75% of our outstanding shares of the common stock. As a result of an 8-for-1 forward split that was effective on 5th September 2000, Main Edge now holds 15,689,400 shares of our common stock. RESULTS OF OPERATIONS The following table shows the selected audited and unaudited condensed consolidation income statement data of the Company and its subsidiaries for the three-month period and nine-month period ended June 30, 2001 and 2002. The data should be read in conjunction with the audited and unaudited Condensed Consolidated Financial Statements of the Company and related notes thereto.
Three months ended Nine months ended Fr. Inception to (AMOUNTS IN THOUSANDS US$) June 30, June 30, June 30, 2002 2002 2001 2002 2001 Operating Revenue 0.3 --- 0.3 --- 0.3 Operating Expenses General & Admin Exp. (188) (212) (995) (454) (2,973) ----- Loss from Operations (188) (212) (995) (454) (2,973) Interest (2) (3) (6) (3) (11) Write down of Goodwill --- --- --- (559) (3,606) Minority interest 0 15 0 165 32 - Net Loss (190) (200) (1,001) (851) (6,558)
OPERATING REVENUE The Company has started to recruit members through its subsidiary Guangzhou World Trade Center Club located in Guangdong Province, the PRC since June 2002. The amount of $328 was new member subscription fees for the three-month and nine-month periods ended June 30, 2002, compared to none for the same periods in year 2001. Our aim is to continue to provide trade agency business linking companies in China and the rest of the world. We currently have three operating arms, namely the Beijing World Trade Center Club ("BWTCC"), Guangzhou World Trade Center Club ("GWTCC") and Infotech Enterprises Limited ("Infotech"). BWTCC will be engaged in the establishment of a business club located in Beijing and GWTCC is engaged in the operation with the business club in Guangzhou, the PRC. The GWTCC provides food and beverages, recreation, business center services, communication and information services, products exhibitions services, and commercial and trading brokerage services. Infotech will build a bilingual, English and Chinese, business-to-business portal. Three-Month Period Ended March 31, 2002 Compared to Three-Month Period Ended March 31, 2001 GENERAL AND ADMINISTRATIVE EXPENSES General and administrative expenses decreased by $24,000 or 11.0% to $188,000 for the three-month period ended June 30, 2002 from $212,000 for the corresponding period in 2001. The decrease was mainly due to: i) Hotel Expenses: The Company incurred no hotel expenses for the three month period ended June 30, 2002, compared to $33,000 for the same corresponding period in 2001, a decrease of $33,000. These expenses were reduced as a result of trimming travel related expenses by the Company. The above expenses were partially offset by the increase in staff salaries and entertainment expenses as a result of the operations of GWTCC and its related promotion activities. FINANCIAL INCOME/(EXPENSES), NET There was only $2,000 in interest expenses incurred from GWTCC for the three-month period ended June 30, 2002. INCOME TAXES The Company is still at it development stage and did not generate any income for period since inception to June 30, 2002. Thus, no income taxes incurred for the reporting periods. LIQUIDITY AND CAPITAL RESOURCES Virtual Edge Limited, our wholly owned subsidiary, underwent a capital restructuring in May 2000 in which long-team debt was partly reduced in the amount of $2.5 million by new issuance of share capital in the same amount. There has been no other significant change in financial condition and liquidity since inception on January 29, 1998 to June 30, 2002. We believe that the level of financial resources is a significant factor for our future development and accordingly may choose at any time to raise capital through debt or equity financing to strengthen its financial position, facilitate growth and provide us with additional flexibility to take advantage of business opportunities. Nine-Month Period Ended June 30, 2002 Compared to Nine-Month Period Ended June 30, 2001 GENERAL AND ADMINISTRATIVE EXPENSES General and administrative expenses increased by $540,000 or 118.9% to $995,000 for the nine-month period ended June 30, 2002 from $454,000 for the corresponding period in 2001. The increase was mainly due to: i) Professional Fees: Professional fees increased by $607,000 for the nine- month period ended June 30, 2002. These professional fees were paid in the form of stocks to hire consultants to act as liaison with the Chinese government and to provide different corporate finance services for the development of the World Trade Center Clubs. The increase was partly offset by a decrease in travel related expenses for the nine-month period ended June 30, 2002. FINANCIAL INCOME/(EXPENSES), NET There was a minimal interest income for the nine-month period ended June 30, 2002. INCOME TAXES The Company is still at it development stage and did not generate any income for period since inception to June 30, 2002. Thus, no income taxes incurred for the reporting periods. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS None. ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS On June 3, 2002 the Board of Directors approved a reverse stock split by a factor of 30- to-1. On May 1, 2002 the Company entered into a consulting agreement with Mr. Bernard Chan for which the Company will issue shares of its common stock equal to $5,000 per month as determined by the closing price of the Company on the last trading day of the preceding month. This agreement shall be for a term of twelve months. ITEM 3.DEFAULTS UPON SENIOR SECURITIES None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS ITEM 5. OTHER INFORMATION On May 22, 2002, Mr. Cheung Wai Tung, an independent director of the Company resigned for the Board of Directors. The position on the Board of Directors has not been filled. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: 99.1 CEO Certification 99.1 CFO Certification (b) Reports on Form 8-K: None. SIGNATURES In accordance with the requirements of the Exchange Act, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CHINA WORLD TRADE CORPORATION /s/ John H.W. Hui ----------------------------- Name: John H.W. Hui Title: President Date: August 24, 2002 EX-99 3 form10qsb063002ex_99-1.txt EXHIBIT 99.1 C.E.O. CERTIFICATION CERTIFICATION PURSUANT TO 18 U.S.C. SS 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of John H. W. Hui on Form 10-QSB for the period ending June 30, 2002, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, John H. W. Hui, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. SS 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge and belief: (1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. /s/ John H.W. Hui John H. W. Hui Chief Executive Officer August 20, 2002 EX-99 4 form10qsb063002ex_99-2.txt EXHIBIT 99.2 C.F.O. CERTIFICATION CERTIFICATION PURSUANT TO 18 U.S.C. SS 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of China World Trade Corporation on Form 10-QSB for the period ending June 30, 2002, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, John H. W. Hui, Chief Executive Officer (acting Chief Financial Officer) of the Company, certify, pursuant to 18 U.S.C. SS 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge and belief: (1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. /s/ John H.W. Hui John H. W. Hui Chief Executive Officer (Acting Chief Financial Officer) August 20, 2002 -----END PRIVACY-ENHANCED MESSAGE-----