-----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, DHikRcuJ766b2/PI7M4ryyyoZDkSlM5XflR687YcsbeOnT4oel5xTsZNbpeTs/Ms lwkAceZL0JXijGa1Zm44XA== 0000939802-03-000184.txt : 20030530 0000939802-03-000184.hdr.sgml : 20030530 20030530105516 ACCESSION NUMBER: 0000939802-03-000184 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20030331 FILED AS OF DATE: 20030530 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: 03724653 BUSINESS ADDRESS: STREET 1: GOLDION DIGITAL NETWORK CENTER STREET 2: 138 TI YU RD. E. 4TH FL CITY: TIAN HE GUANGZHOU STATE: K3 ZIP: 00000 BUSINESS PHONE: 01185298826818 MAIL ADDRESS: STREET 1: GOLDION DIGITAL NETWORK CENTER STREET 2: 138 YI TU RD E. CITY: TIAN HE GUANGHOU STATE: K3 ZIP: 00000 FORMER COMPANY: FORMER CONFORMED NAME: TXON INTERNATIONAL DEVELOPMENT CORP DATE OF NAME CHANGE: 19990329 10QSB 1 form10qsb033103.txt OMB APPROVAL OMB Number: 3235-0416 Expires: December 31, 2005 Estimated average burden hours per response: 174.00 UNITED STATES 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 March 31, 2003 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT For the transition period from _________________ to _________________ Commission file number 000-26119 CHINA WORLD TRADE CORPORATION ______________________________________________________ (Exact name of small business issuer as specified in its charter) Nevada 87-0629754 _____________________________ _________________________________ (State or other jurisdiction of (IRS Employer Identification No.) incorporation or organization) 4th Floor, Goldlion Digital Network Center 138 Tiyu Road East, Tianhe Guangzhou, PRC _______________________________________________________ (Address of principal executive offices) (001-8620) 3878 - 0286 (Issuer's telephone number) _________________________________________________________ (Former name, address and fiscal year, if changed since last report) APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS Check whether the registrant filed all documents and reports required to be filed by Section l2, 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: As at March 27, 2003, there were 10,970,497 shares of common stock outstanding. Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X] PART I -- FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS. Unaudited financial statements China World Trade Corporation for the three months and six months ended March 31, 2003.
CHINA WORLD TRADE CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS Three months and six months ended March 31, 2003 and 2002 - --------------------------------------------------------------------------------------------------------------------------- Three months ended March 31, Six months ended March 31, --------------------------------- --------------------------------- 2002 2003 2002 2003 Note US$ US$ US$ US$ Unaudited Unaudited Unaudited Unaudited OPERATING REVENUES - 503,539 - 1,013,098 Operating costs and expenses - (112,700) - (221,402) Selling, general and administrative expenses (138,878) (646,435) (807,005) (1,426,486) --------------- --------------- --------------- --------------- LOSS FROM OPERATIONS (138,878) (255,596) (807,005) (634,790) NON-OPERATING (EXPENSES) INCOME Other income - 1,085 - 1,125 Interest expenses (2,016) (2,272) (3,974) (4,478) --------------- --------------- --------------- --------------- LOSS BEFORE INCOME TAXES AND MINORITY INTEREST (140,894) (256,783) (810,979) (638,143) Provision for income taxes - - - - --------------- --------------- --------------- --------------- LOSS BEFORE MINORITY INTEREST (140,894) (256,783) (810,979) (638,143) Minority interest - 40,207 - 120,156 --------------- --------------- --------------- --------------- NET LOSS (140,894) (216,576) (810,979) (517,987) =============== =============== =============== =============== LOSS PER SHARE OF COMMON STOCK - - Basic 4 (0.16) (0.02) (0.92) (0.06) =============== =============== =============== =============== Weighted average number of shares of common stock outstanding 881,416 9,903,830 881,416 8,421,046 =============== =============== =============== ===============
CHINA WORLD TRADE CORPORATION CONDENSED CONSOLIDATED BALANCE SHEET As of March 31, 2003 - --------------------------------------------------------------------------------------------------------------------------- As of As of September March 30, 2002 31, 2003 ASSETS NOTE US$ US$ Unaudited CURRENT ASSETS Cash and cash equivalents 32,888 481,650 Trade and other receivables 5 43,790 146,205 Rental and other deposits 341,731 363,171 Prepayments 2,420 106,857 Inventories 35,930 42,462 ---------------- ---------------- TOTAL CURRENT ASSETS 456,759 1,140,345 Goodwill 6 - 187,416 Property, plant and equipment, net 7 3,046 3,047,377 ---------------- ---------------- TOTAL ASSETS 459,805 4,375,138 ================ ================ LIABILITIES AND SHAREHOLDERS' DEFICIT CURRENT LIABILITIES Trade and other payables 8 807,715 1,252,929 Deferred income 8,114 323,996 ---------------- ---------------- TOTAL CURRENT LIABILITIES 815,829 1,576,925 Minority interest 17,777 - ---------------- ---------------- 833,606 1,576,925 ---------------- ---------------- STOCKHOLDERS' (DEFICIT) EQUITY Preferred stock, par value of US$0.001 each; 10,000,000 shares authorized, none issued or outstanding - - Common stock, par value of US$0.001 each; 50,000,000 shares authorized, 10,970,497 and 6,970,497 shares issued at March 31 and September 30, 2002 971 10,971 Common stock to be issued 6,000 - Additional paid-in capital 6,810,207 10,496,208 Accumulated deficit (7,190,979) (7,708,966) ---------------- ---------------- TOTAL STOCKHOLDERS' (DEFICIT) EQUITY (373,801) 2,798,213 ---------------- ---------------- TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY 459,805 4,375,138 ================ ================
CHINA WORLD TRADE CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (CONT'D) Six months ended March 31, 2003 and 2002 - --------------------------------------------------------------------------------------------------------------------------- Six Months Six Months Ended March Ended March 31, 2002 31, 2003 --------------- -------------- NOTE US$ US$ Unaudited Unaudited CASH FLOWS FROM OPERATING ACTIVITIES: Net loss (810,979) (517,987) Adjustments to reconcile net loss to net cash used in operating activities: Minority interest (98) (120,156) Stock issued for services 718,000 - Property, plant and equipment written off 278 - Depreciation - 11,839 Impairment of property, plant and equipment - 64,032 Increase in deferred income - 315,882 Changes in working capital: Trade and other receivables 362 4,213 Rental and other deposits - (10,822) Prepayments - (100,125) Inventories - (6,532) Trade and other payables 361,038 666,509 ---------------- ---------------- NET CASH PROVIDED BY OPERATING ACTIVITIES 268,601 306,853 ---------------- ---------------- CASH FLOWS FROM INVESTING ACTIVITIES Website development costs (300,000) - Acquisition of subsidiary 10 - 123,707 Acquisition of property, plant and equipment - (84,177) ---------------- ---------------- NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES (300,000) 39,530 ---------------- ---------------- CASH FLOWS FROM FINANCING ACTIVITIES Proceed from issuance of common stock 2,730 - Capital contribution from minority shareholder of a subsidiary 29,795 102,379 ---------------- ---------------- NET CASH PROVIDED BY FINANCING ACTIVITIES 32,525 102,379 ---------------- ---------------- NET INCREASE IN CASH AND CASH EQUIVALENTS 1,126 448,762 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 43 32,888 ---------------- ---------------- CASH AND CASH EQUIVALENTS AT END OF PERIOD 1,169 481,650 ================ ================
CHINA WORLD TRADE CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (CONT'D) Six months ended March 31, 2003 and 2002 - --------------------------------------------------------------------------------------------------------------------------- Six Months Six Months Ended March Ended March 31, 2002 31, 2003 --------------- --------------- NOTE US$ US$ Unaudited Unaudited ANALYSIS OF BALANCES OF CASH AND CASH EQUIVALENTS Cash and bank balances 1,169 481,650 =============== ================= NON-CASH INVESTING AND FINANCING ACTIVITIES Purchase of subsidiary by issuance of common stock - 3,200,000 =============== =================
CHINA WORLD TRADE CORPORATION NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS Three months and six months ended March 31, 2003 and 2002 - -------------------------------------------------------------------------------- 1. BASIS OF PRESENTATION The accompanying financial data as of March 31, 2003 and for the three and six months ended March 31, 2003 and 2002, have been prepared by the Company, without audit. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. However, the Company believes that the disclosures are adequate to make the information presented not misleading. These financial statements should be read in conjunction with the financial statements and the notes thereto included in the Company's audited annual financial statements for the year ended September 30, 2002. The preparation of financial statements in conformity with general accepted accounting principles requires management to make estimates that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities. Actual results could differ from these estimates. In the opinion of the management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows as of March 31, 2003 and for the three and six months ended March 31, 2003 and 2002, have been made. The results of operations for the three and six months ended March 31, 2003 and 2002 are not necessarily indicative of the operating results for the full year. 2. PREPARATION OF FINANCIAL STATEMENTS The Group has a negative working capital of US$436,580 and US$359,070 as of March 31, 2003 and September 30, 2002. Besides, the Group has net loss of US$216,576 and US$140,894 for the three-month periods ended March 31, 2003 and 2002 respectively. These conditions raise substantial doubt about the Group's ability to continue as a going concern. Continuation of the Group as a going concern is dependent upon obtaining additional working capital through additional equity funding and attaining profitable operations in the future. The management has developed a strategy, which it believes will accomplish these objectives which will enable the Group to operate in the future. However, there can be no assurance that the Group will be successful with its efforts to raise additional capital and attain profitable operations. The inability of the Group to secure additional financing and attain profitable operations in the near term could adversely impact the Group's business, financial position and prospects. CHINA WORLD TRADE CORPORATION NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS Three months and six months ended March 31, 2003 and 2002 - -------------------------------------------------------------------------------- 3. NEW ACCOUNTING PRONOUNCEMENTS In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based Compensation -Transition and Disclosure - an amendment of FASB Statement No. 123". This Statement amends SFAS No. 123, "Accounting for Stock-Based Compensation", to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, this Statement amends the disclosure requirements of SFAS No. 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. Certain provisions of SFAS No. 148 are effective from March 15, 2002. The management believes that adoption of this standard does not have an impact on the Group's financial statements. In January 2003, the FASB issued FASB Interpretation No. 46, ("FIN 46") "Consolidation of Variable Interest Entities" which changes the criteria by which one company includes another entity in its consolidated financial statements. FIN 46 requires a variable interest entity to be consolidated by a company if that company is subject to a majority of the risk of loss from the variable interest entity's activities or entitled to receive a majority of the entity's residual returns or both. The consolidation requirements of FIN 46 apply immediately to variable interest entities created after January 31, 2003, and apply in the first fiscal period beginning after June 15, 2003, for variable interest entities created prior to February 1, 2003. The management believes that adoption of this statement does not have impact on the Group's financial statements. In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities". The SFAS No. 149 amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts (collectively referred to as derivatives) and for hedging activities under SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities". Subject to certain exceptions, this Statement is effective for contracts entered into or modified after June 30, 2003 and for hedging relationships designated after June 30, 2003 and all provisions of this Statement should be applied prospectively. The Group had no derivative instruments outstanding. The management does not expect the adoption of SFAS No. 149 will have a material impact on the Group's consolidated financial statements. 4. LOSS PER SHARE OF COMMON STOCK On September 1, 2002, all of the Company's issued and outstanding shares of common stock of US$0.001 each underwent a one for thirty reverse stock split, with no change in their par value. The Company's authorized share capital of 50,000,000 shares of common stock of US$0.001 each remains unchanged. The comparative amount of the loss per share of common stock and the weighted average number of shares of common stock outstanding have been adjusted as a result of the reverse stock split mentioned above. CHINA WORLD TRADE CORPORATION NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS Three months and six months ended March 31, 2003 and 2002 - -------------------------------------------------------------------------------- 5. TRADE AND OTHER RECEIVABLES
As of As of September March 30, 2002 31, 2003 NOTE US$ US$ Trade receivables 5(a) - 66,934 Due from related parties 9(c) 4,504 41,421 Other receivables 39,286 37,850 -------------- -------------- 43,790 146,205 ============== ==============
(a) Included in trade receivables are amounts receivable from Goldlion Holdings Limited of US$14,388, Mr. John Hui of US$8,964 and Mr. William Tsang of US$3,358. These balances are unsecured, interest-free and have credit period ranges from 1 to 3 months. For relationship of these related parties with the Company, please refer to note 9 to these financial statements. 6. BUSINESS ACQUISITION Pursuant to a Share Exchange Agreement entered into between the Company and Mr. Tsang Chi Hung ("Mr. Tsang") on December 17, 2002, Mr. Tsang agreed to transfer 10,000 ordinary shares of GBN to the Company in exchange for the issuance by the Company of 4,000,000 shares of its common stock with par value of US$0.001 each and a two-year warrant (the "Warrant") to purchase up to 4,000,000 shares of the common stock of the Company. The Warrant is exercisable at a price of US$0.92 per share. The acquisition, which was carried out mainly for the Group's expansion purposes, was completed on January 24, 2003 and GBN became a wholly-owned subsidiary of the Company. GBN was incorporated in Hong Kong on July 15, 2002 and is principally engaged in property investments and investment holding. The acquisition of GBN has been accounted for under the purchase method of accounting. The purchase price was allocated based on the estimated fair values at the date of acquisition. This allocation has resulted in acquired goodwill of US$187,416, which is subject to impairment review annually. The results of GBN have been included in the consolidated financial statements since the acquisition date. The following unaudited pro forma information presents a summary of our consolidated results of operations as if the acquisition had been taken place on July 15, 2002, the date when GBN was incorporated.
Three months ended March 31, Six months ended March 31, ---------------------------------- ------------------------------ 2002 2003 2002 2003 US$ US$ US$ US$ Unaudited Unaudited Unaudited Unaudited OPERATING REVENUES - 503,539 - 1,013,098 =============== =============== ============= ============== NET (LOSS) PROFIT (140,894) (257,933) (810,979) (631,998) =============== =============== ============= ============== (LOSS) EARNINGS PER SHARE (0.16) (0.03) (0.92) (0.08) =============== =============== ============= ==============
7. PROPERTY, PLANT AND EQUIPMENT In view of the sluggish property economy and the operating loss experienced by the rental operations of the Group, management has carried out a review of the recoverability of certain properties held by reference to the prevailing market price of similar properties. Management believes that an impairment loss of US$64,032 should be provided. That loss has been recognized as an expense and included in "selling, general and administrative expenses" in the current period's statement of operations. CHINA WORLD TRADE CORPORATION NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS Three months and six months ended March 31, 2003 and 2002 - -------------------------------------------------------------------------------- 8. TRADE AND OTHER PAYABLES
A. As of As of September March 30, 2002 31, 2003 NOTE US$ US$ Trade payables - 72,257 Accrued charges 8(a) 296,316 392,905 Other payables 165,664 77,321 Notes payables 72,796 77,273 Due to related parties 9(d) 272,939 584,914 Deposits received - 112,291 -------------- -------------- 807,715 1,316,961 ============== ==============
(a) Included in accrued charges are accrued rental and related expenses payable to Guangzhou Goldlion City Properties Co., Ltd. and Guangzhou Goldlion Commercial Network Co., Ltd. of US$140,723. For relationship of these companies with the Company, please refer to note 9 to these financial statements. 9. RELATED PARTY TRANSACTIONS (a) Names and relationship of related parties
Existing relationships with the Company --------------------------------------- Mr. Alfred Or A shareholder and director of the Company Mr. Bernard Chan A shareholder of the Company Mr. Bobby Yu A director of a subsidiary Mr. James Mak A shareholder and director of the Company Mr. John Hui A shareholder and director of the Company Mr. Steven Hui Close family member of a director of the Company Mr. William Tsang A shareholder and director of the Company Beijing Man Lung Economy Consulting PRC partner of a subsidiary Company Goldlion Holdings Limited A company controlled by close family members of a director Guangzhou City International Exhibition PRC partner of a subsidiary Co. Guangzhou Cyber Strategy Limited A company in which a director of the Company has beneficial interest Guangzhou Goldlion City Properties Co., A company controlled by close family members of a director Ltd Guangzhou Goldlion Commercial Network A company controlled by close family members of a director Co., Ltd. Health & Wealth Inc. A company in which a director of the Company has beneficial interest Powertronic Holdings Limited A shareholder of the Company
9. RELATED PARTY TRANSACTIONS (CONT'D) (b) Summary of related party transactions
Three Six months months ended ended March March 31, 2003 31, 2003 US$ (2) US$ Consultancy fee expenses to --------------------------- Mr. Bernard Chan 5,128 5,128 Mr. Bobby Yu 4,231 8,462 Mr. John Hui 25,641 32,051 Mr. William Tsang 25,641 25,641 Beijing Man Lung Economy Consulting Company 4,531 9,061 Guangzhou City International Exhibition Co. 4,531 9,061 Health & Wealth Inc. - 15,024 =============== =============== Rental and related expenses to ------------------------------ Guangzhou Goldlion City Properties Co., Ltd. and Guangzhou Goldlion Commercial Network Co., Ltd. 170,798 354,344 =============== =============== Consultancy fee income from --------------------------- Guangzhou Cyber Strategy Limited 96,154 192,308 =============== =============== Membership fee income from -------------------------- Guangzhou Cyber Strategy Limited 16,008 32,016 =============== ===============
(c) Due from related parties
As of March 31, 2003 ------------- US$ Mr. John Hui 5,444 Mr. Alfred Or 1,208 Goldlion Holdings Limited 34,769 ------------- Classified as current assets 41,421 =============
The amounts due from related parties represent unsecured advances which are interest-free and repayable on demand. CHINA WORLD TRADE CORPORATION NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS Three months and six months ended March 31, 2003 and 2002 - -------------------------------------------------------------------------------- 9. RELATED PARTY TRANSACTIONS (CONT'D) (d) Due to related parties
As of March 31, 2003 ------------- US$ Mr. William Tsang 263,159 Mr. Benny Cho 10,795 Mr. James Mak 2,340 Mr. John Hui 22,207 Mr. Steven Hui 41,179 Guangzhou Cyber Strategy Limited 96,395 Beijing Man Lung Economy Consulting Company 22,647 Health & Wealth Inc. 18,422 Powertronic Holdings Limited 107,770 ------------- Classified as current liabilities 584,914 =============
The amounts due to related parties represent unsecured advances which are interest-free and repayable on demand. 10. SUPPLEMENTARY DISCLOSURE OF CASH FLOW INFORMATION (a) Summary of effect of acquisition of subsidiary
Three and Six months ended March 31, 2003 US$ NET ASSETS ACQUIRED Property, plant and equipment 3,036,025 Cash and cash equivalents 123,707 Trade and other receivables 106,628 Rental and other deposits 10,618 Prepayments 4,312 Trade and other payables (268,706) -------------- 3,012,584 Add: Goodwill arising from acquisition of subsidiary 187,416 -------------- Consideration 3,200,000 ==============
10. SUPPLEMENTARY DISCLOSURE OF CASH FLOW INFORMATION (CONT'D) (b)Analysis of the net inflow of cash and cash equivalents in respect of acquisition during the period
Three and Six months ended March 31, 2003 US$ Consideration (3,200,000) Bank balance and cash acquired 123,707 Issuance of common stock for satisfying the consideration 3,200,000 -------------- Net inflow of cash and cash equivalents 123,707 ==============
11. CAPITAL COMMITMENT On August 26, 2002, the Company signed an agreement with ACV Ltd ("ACV") pursuant to which both parties agreed to form a wholly-foreign owned enterprise named General Business Network (Guangzhou) Limited ("GBN(GZ)"). GBN(GZ) was approved and registered with the Guangzhou Industrial and Commercial Administrative Management Bureau, the PRC, on December 31, 2002. The license granted for the operation of GBN(GZ) is valid for a period of ten years from December 25, 2002 through to December 25, 2012. The registered capital of GBN(GZ) is HK$500,000 (US$64,102). Pursuant to the joint venture agreement, each party shall contribute 50% of the registered capital of GBN(GZ) and in return each party will enjoy 50% interest in GBN(GZ). GBN(GZ) is still in set up stage and will be engaged in the provision of information technology related services. As of date of these financial statements, both parties had not yet contributed its share of capital contribution of HK$250,000 (US$32,051) yet. 12. OPERATING LEASES COMMITMENTS At the balance sheet date, the Group had total outstanding commitments under non-cancellable operating leases, which are payables as follows:
As of March 31, 2003 US$ 2004 557,816 2005 566,885 2006 594,411 2007 637,905 2008 217,467 --------------- 2,574,484 ===============
In addition, the Group has committed to pay contingent rent at 2% to 10% on the monthly turnover of a subsidiary when the subsidiary's monthly turnover has exceeded RMB500,000 (US$60,408) during the lease period ending in July 2007. 12. OPERATING LEASES COMMITMENTS (CONT'D) At the balance sheet date, the Group had total outstanding commitments under non-cancellable operating leases, which are receivable as follows:
As of March 31, 2003 US$ 2004 62,821 2005 20,461 --------------- 83,282 ===============
13. BUSINESS SEGMENT INFORMATION
Three months ended March 31, Six months ended March 31, --------------------------------- -------------------------------- 2002 2003 2002 2003 US$ US$ US$ US$ OPERATING REVENUES Club services - 386,045 - 799,451 Consultancy services - 96,155 - 192,308 Rental - 15,444 15,444 Sale of goods - 5,895 - 5,895 -------------- -------------- -------------- -------------- - 503,539 - 1,013,098 ============== ============== ============== ============== (LOSS) PROFIT FROM OPERATIONS Club services - (178,923) - (499,880) Consultancy services - 92,920 - 46,347 Rental - (118,148) (118,148) Sale of goods - (14,304) - (14,304) -------------- -------------- -------------- -------------- - (218,455) - (585,985) Corporate expenses (138,878) (37,141) (807,005) (48,805) -------------- -------------- -------------- -------------- CONSOLIDATED OPERATING LOSS (138,878) (255,596) (807,005) (634,790) Other income - 1,085 - 1,125 Interest expenses (2,016) (2,272) (3,974) (4,478) -------------- -------------- -------------- -------------- CONSOLIDATED LOSS BEFORE INCOME TAXES AND MINORITY INTEREST (140,894) (256,783) (810,979) (638,143) ============== ============== ============== ==============
13. BUSINESS SEGMENT INFORMATION (CONT'D)
Three months ended March 31, Six months ended March 31, --------------------------------- -------------------------------- 2002 2003 2002 2003 US$ US$ US$ US$ DEPRECIATION Club services - 5,837 - 7,518 Rental - 4,321 - 4,321 -------------- -------------- -------------- -------------- - 10,158 - 11,839 ============== ============== ============== ==============
Three months ended March 31, Six months ended March 31, --------------------------------- -------------------------------- 2002 2003 2002 2003 US$ US$ US$ US$ PROPERTY, PLANT AND EQUIPMENT ADDITIONS Club services - 31,171 - 74,950 Rental - 9,227 - 9,227 -------------- -------------- -------------- -------------- - 40,398 - 84,177 ============== ============== ============== ==============
Three months ended March 31, Six months ended March 31, --------------------------------- -------------------------------- 2002 2003 2002 2003 US$ US$ US$ US$ IMPAIRMENT LOSS ON PROPERTY, PLANT AND EQUIPMENT Club services - - - - Rental - 64,032 - 64,032 -------------- -------------- -------------- -------------- - 64,032 - 64,032 ============== ============== ============== ==============
As of March 31, 2003 US$ TOTAL ASSETS Club services 1,049,283 Consultancy services 6,702 Rental 3,126,670 Others 192,483 ----------------- Consolidated total 4,375,138 =================
No geographical segments information is presented as all of the Group's revenues are generated from China. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION. CHINA WORLD TRADE CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATION PRELIMINARY NOTE REGARDING FORWARD-LOOKING STATEMENTS All forward-looking statements contained herein are deemed by China World Trade Corporation (the "Company") to be covered by and to qualify for the safe harbor protection provided by the private securities litigation reform act of 1995. Prospective shareholders should understand that several factors govern whether any forward - looking statement contained herein will be or can be achieved. Any one of those factors could cause actual results to differ materially from those projected herein. These forward - looking statements include plans and objectives of management for future operations, including plans and objectives relating to the products and the future economic performance of the Company. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions, future business decisions, and the time and money required to successfully complete development projects, all of which are difficult or impossible to predict accurately and many of which are beyond the control of the Company. Although the Company believes that the assumptions underlying the forward - looking statements contained herein are reasonable, any of those assumptions could prove inaccurate and, therefore, there can be no assurance that the results contemplated in any of the forward - looking statements contained herein will be realized. Based on actual experience and business development, the Company may alter its marketing, capital expenditure plans or other budgets, which may in turn affect the company's results of operations. In light of the significant uncertainties inherent in the forward - looking statements included therein, the inclusion of any such statement should not be regarded as a representation by the Company or any other person that the objectives or plans of the company will be achieved. OVERVIEW Pursuant to the Share Exchange Agreement dated as of August 10, 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 15th September 2000, Main Edge held 15,689,400 shares of our common stock. Furthermore, subsequent to two private placement financings by Powertronic Holdings Limited ("Powertronic") in September 2002 and December 2002, the acquisition of all the issued and outstanding shares of General Business Network (Holdings) Ltd. ("GBN") in December 2002 and an 1-for-30 reverse split that was effective on 1st September 2002, Mr. Chi Hung Tsang now holds 4,000,000 shares of our common stock (representing approximately 36.4%* of the total issued and outstanding shares of our common stock), Powertronic holds 2,000,000 shares (or approximately 18.2%*), and as a result, Main Edge holds only 522,980 shares (or approximately 4.8%*). *Not including shares of common stock to be issued on the exercise of warrants issued by the Company. RESULTS OF OPERATIONS The following table shows selected data of the Company and its subsidiaries for the three-month and six-month periods ended March 31, 2003 and 2002 as extracted from the Condensed Consolidated Financial Statements of this Form 10-QSB.
Three months ended Six months ended (Amounts in thousands US$) March 31, March 31, 2003 2002 2003 2002 Operating Revenue 504 ---- 1,013 ---- Operating costs and expenses (113) ---- (221) ---- Selling, general & administrative expenses (646) (139) (1,427) (807) ---- ---- ------ ---- Loss from operations (255) (139) (635) (807) Non-operating (expenses) income Other income 1 -- 1 (4) Interest expenses (2) (2) (4) -- Minority interest 40 ---- 120 ---- ---- ---- ------ ---- Net loss (216) (141) (518) (811) ==== ==== ====== ====
Three-month Period Ended March 31, 2003 Compared to Three-Month Period Ended March 31, 2002 OPERATING REVENUE The aim of the Company is to continue to establish and operate World Trade Center Cubs (in association with the World Trade Center Association) and to provide trade agency business linking companies in China and the rest of the world. As of March 31, 2003, we had four operating arms, namely the Beijing World Trade Center Club ("BWTCC"), Guangzhou World Trade Center Club ("GWTCC"), Infotech Enterprises Limited ("Infotech), and General Business Network (Holdings) Limited. 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. 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 for the Company as well as providing system integration related services to third parties customers and members. GBN is an investment holding company which primarily engages in property investments and trading business. The Company has started to recruit members, and to provide consultancy, catering and business center services through its subsidiary GWTCC located in Guangdong Province, the PRC since June 2002. Sales revenue for the three-month period ended March 31, 2002 was $504,000, compared to none for the same corresponding period in year 2002. Of the $504,000 revenue in year 2003, approximately $386,000 (77%) was generated from catering services, business center and conference services provided by GWTCC, $96,000 (19%) from providing consultancy services to a member, $16,000 (3%) from rental income generated by GBN, and the remaining revenue of $6,000 (1%) from trading businesses. Costs of sales increased by $113,000 for the three-month period ended March 31, 2003, as compared to none for the same corresponding period in year 2002. The $113,000 is primarily incurred in relation to the catering services that the Company provided through GWTCC. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Selling, general and administrative expenses increased by $507,000 to $646,000 for the three-month period ended March 31, 2003 from $139,000 for the same corresponding period in 2002. The increase was mainly due to: i) Salaries and Welfare Expenses: Salaries and welfare expenses were $185,000 for the three-month period ended March 31, 2003, compared to none for the same corresponding period in year 2002. The increase was mainly due to the salaries paid to staff to support the operation of GWTCC. ii) Rental Expense: Rental expense was $188,000 for the three-month period ended March 31, 2003, compared to none for the same corresponding period in year 2002. The increase was primarily due to costs for renting premises for the operation of GWTCC in Guangzhou, the PRC. iii) Utility and Office Expenses: Utility and office expenses were $56,000 for the three-month period ended March 31, 2003, compared to none for the same corresponding period in year 2002. The increase was primarily the result of the additional cost for the operation of GWTCC. iv) Legal and Professional Fee: Legal and professional fee was $60,000 for the three-month period ended March 31, 2003, an increase of $56,000 over the same corresponding period in year 2002. The increase was primarily due to the costs incurred in preparation of legal and financial reports for the corporate compliance as a public company. FINANCIAL INCOME/(EXPENSES), NET Interest expenses were $2,000 for the three-month period ended March 31, 2003. INCOME TAXES The Company is still operating at a loss for the three-month period ended March 31, 2003. Thus, no income taxes incurred for the reporting periods. LIQUIDITY AND CAPITAL RESOURCES The Company and Powertronic Holdings Limited entered into two share purchase agreements dated September 3, 2002 and December 17, 2002 to purchase 2,000,000 shares and warrants (to purchase up to another 4,000,000 shares) for a total purchase price of $1,000,000. These two private financings were completed on January 24, 2003 and the respective shares were issued accordingly. six-month Period Ended March 31, 2003 Compared to six-Month Period Ended march 31, 2002 OPERATING REVENUE Sales revenue for the six-month period ended March 31, 2002 was $1,013,000, compared to none for the same corresponding period in year 2002. Of the $1,013,000 revenue in year 2003, approximately $799,000 (79%) was generated from catering services, business center and conference services provided by GWTCC, $192,000 (19%) from providing consultancy services to a member, $16,000 (1.5%) from rental income generated by GBN, and the remaining revenue of $6,000 (0.5%) from trading businesses. Costs of sales increased by $221,000 for the six-month period ended March 31, 2003, as compared to none for the same corresponding period in year 2002. The $221,000 is primarily incurred in relation to the catering services that the Company provided through GWTCC. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Selling, general and administrative expenses increased by $620,000 to $1,427,000 for the six-month period ended March 31, 2003 from $807,000 for the corresponding period in 2002. The increase was mainly due to: v) Salaries and Welfare Expenses: Salaries and welfare expenses were $373,000 for the six-month period ended March 31, 2003, compared to only $3,000 for the same corresponding period in year 2002, an increase of $370,000. The increase was mainly due to the salaries paid to staff to support the operation of GWTCC. vi) Rental and Building Management Fee:Rental expense was $437,000 for the six-month period ended March 31, 2003, compared to only $13,000 for the same corresponding period in year 2002, an increase of $424,000. The increase was primarily due to costs for renting premises for the operation of GWTCC in Guangzhou, the PRC. vii) Utility and Office Expenses: Utility and office expenses were $144,000 for the six-month period ended March 31, 2003, compared to none for the same corresponding period in year 2002. The increase was primarily the result of the additional cost for the operation of GWTCC. viii) Legal and Professional Fee: Legal and professional fee was $75,000 for the six-month period ended March 31, 2003, compared to only $4,000 for the same corresponding period in year 2002, an increase of $71,000. The increase was primarily due to the costs incurred in preparation of legal and financial reports for the corporate compliance as a public company. The increase in selling, general and administrative expenses was partially offset by the decrease in expenses of management fee and website content design fee. FINANCIAL INCOME/(EXPENSES), NET Interest expenses were $4,000 for the six-month period ended March 31, 2003. INCOME TAXES The Company is still operating at a loss for the six-month period ended March 31, 2003. Thus, no income taxes incurred for the reporting periods. LIQUIDITY AND CAPITAL RESOURCES As of March 31, 2003, the Company had $482,000 cash on hand. This was the result of positive cash flows from operating activities in the amount of $307,000; $40,000 from investing activities; and $102,000 from financing activity. 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. CRITICAL ACCOUNTING POLICIES Besides the accounting policies as described in note 1 to the financial statements for the year ended September 30, 2002, the management considers that the Group has not adopted any other critical accounting policies. ITEM 3. CONTROLS AND PROCEDURES. Within the 90-day period prior to the filing of this report, an evaluation was carried out under the supervision and with participation of the Company's management, including the Chief Executive Officer and Principal Financial Officer, of the effectiveness of the disclosure controls and procedures (as defined in Rule 13a-14(c) under the Securities Exchange Act of 1934). Based on the evaluation, the Chief Executive Officer and Principal Financial Officer have concluded that disclosure controls and procedures are, to the best of their knowledge, effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. Subsequent to the date of their evaluation, there were no significant changes in the Company's internal controls or in other factors that could significantly affect these controls, including any corrective actions with regard to significant deficiencies and material weaknesses. PART II -- OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS. We are not a party to any pending or to the best of our knowledge, any threatened legal proceedings. No director, officer or affiliate, or owner of record of more than five percent (5%) of our securities, or any associate of any such director, officer or security holder is a party adverse to us or has a material interest adverse to ours in any pending litigation. ITEM 2. CHANGES IN SECURITIES. None 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) Exhibits: 99.1 CEO Certification 99.2 CFO Certification (b) Reports on Form 8-K; On March 3, 2003, a Form 8K in connection with events taking place in September 8, 2002, regarding items 1,2 and 7 was filed with the SEC. 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 _______________________________ (Registrant) Date: May 28, 2003 /s/ John H.W. Hui _______________________________ _______________________________ John H.W. Hui Chief Executive Officer Date: May 28, 2003 /s/ Keith Wong _______________________________ _______________________________ Keith Wong Cheif Financial Officer *Print the name and title of each signing officer under his signature. CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, John H.W. Hui, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of China World Trade Corporation; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: (a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; (b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and (c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): (a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial date and have identified for the registrant's auditors any auditors any material weaknesses in internal controls; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: May 28, 2003 _/s/ John H.W. Hui__________ John H.W. Hui Chief Executive Officer CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Keith Wong, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of China World Trade Corporation; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: (a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; (b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and (c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): (a) significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial date and have identified for the registrant's auditors any auditors any material weaknesses in internal controls; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: May 28, 2003 /s/ Keith Wong_______ Keith Wong Chief Financial Officer EXHIBIT 99.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 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, a Nevada company (the "Company") on Form 10-QSB for the period ending March 31, 2003 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 ss. 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge: (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 Date: May 28, 2003 EXHIBIT 99.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 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, a Nevada company (the "Company") on Form 10-QSB for the period ending March 31, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Keith Wong, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge: (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/_Keith Wong____________ Keith Wong Chief Financial Officer Date: May 28, 2003 -----END PRIVACY-ENHANCED MESSAGE-----