10QSB 1 doc1.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, 2004 [ ] 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 31, 2004, there were 17,725,601 shares of common stock outstanding. Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X] 1 INDEX TO FORM 10-QSB Page No. -------- PART I ------ Item 1. Financial Statements Condensed Consolidated Balance Sheet - As of March 31, 2004 3 Condensed Consolidated Statements of Operations - Three-Month period Ended March 31, 2004 and 2003 4 Condensed Consolidated Statements of Cash Flows - Three-Month period Ended March 31, 2004 and 2003 5 Notes to Condensed Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition And Results of Operations 13 Item 3. Controls and Procedures 18 PART II ------- Item 1. Legal Proceedings 19 Item 2. Changes in Securities 19 Item 3. Defaults Upon Senior Securities 19 Item 4. Submission of Matters to a Vote of Security Holders 19 Item 5. Other Information 19 Item 6. Exhibits 19 2 PART I -- FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS. Unaudited financial statements China World Trade Corporation for the three- month period ended March 31, 2004 and 2003. CHINA WORLD TRADE CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS As of March 31, 2004 ============================================================================== AS OF MARCH 31, 2004 UNAUDITED ASSETS NOTE US$ CURRENT ASSETS Cash and cash equivalents 827,792 Trade and other receivables 3 158,387 Rental and other deposits 338,732 Prepayments 87,989 Inventories 50,682 -------------- TOTAL CURRENT ASSETS 1,463,582 Intangible asset 1,680,000 Goodwill 30,000 Property, plant and equipment, net 3,041,713 -------------- TOTAL ASSETS 6,215,295 ============== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Trade and other payables 4 403,251 Deferred income 6,362 Long-term bank loan - current portion 5 43,861 -------------- TOTAL CURRENT LIABILITIES 453,474 Long-term bank loan - non-current portion 5 437,194 Due to a shareholder 8(e) 1,299,615 -------------- TOTAL LIABILITIES 2,190,283 -------------- COMMITMENTS AND CONTINGENCIES 6 STOCKHOLDERS' 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$0.001 each; 50,000,000 shares authorized, 17,725,601 shares issued at March 31, 2004 7 17,726 Additional paid-in capital 15,846,315 Accumulated deficit (11,839,029) -------------- TOTAL STOCKHOLDERS' EQUITY 4,025,012 -------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 6,215,295 ============== The financial statements should be read in conjunction with the accompanying notes. -------------------------------------------------------------------------------- 3 CHINA WORLD TRADE CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS Three-month period ended March 31, 2004 and 2003 ============================================================================== THREE-MONTH PERIOD ENDED MARCH 31 2004 2003 ---------- ---------- US$ US$ UNAUDITED UNAUDITED OPERATING REVENUES 303,771 503,539 Operating costs and expenses (186,001) (112,700) Selling, general and administrative expenses (1,626,937) (646,435) ---------- ---------- LOSS FROM OPERATIONS (1,509,167) (255,596) NON-OPERATING INCOME (EXPENSES) Other income 89 1,085 Interest expense (3,992) (2,272) ---------- ---------- LOSS BEFORE INCOME TAXES AND MINORITY INTEREST (1,513,070) (256,783) Provision for income taxes - - ---------- ---------- LOSS BEFORE MINORITY INTEREST (1,513,070) (256,783) Minority interest - 40,207 ---------- ---------- NET LOSS (1,513,070) (216,576) ========== ========== LOSS PER SHARE OF COMMON STOCK - Basic (0.09) (0.02) Weighted average number of shares of common stock outstanding 16,249,106 9,903,830 The financial statements should be read in conjunction with the accompanying notes. -------------------------------------------------------------------------------- 4 CHINA WORLD TRADE CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Three-month period ended March 31, 2004 and 2003 ============================================================================== THREE-MONTH PERIOD ENDED MARCH 31 2004 2003 ---------- ---------- US$ US$ UNAUDITED UNAUDITED CASH FLOWS FROM OPERATING ACTIVITIES: Net loss (1,513,070) (216,576) Adjustments to reconcile net loss to net cash used in operating activities: Minority interest - (40,207) Amortization of intangible assets 90,000 - Stock issued for services 375,200 - Depreciation 21,670 10,158 Impairment loss on property, plant and equipment - 64,032 Impairment loss on goodwill 217,917 - Decrease in deferred income (16,815) (73,623) Changes in working capital: Trade and other receivables 27,941 394,666 Rental and other deposits (81,563) (9,159) Prepayments 470,046 (31,327) Inventories 22,701 14,115 Trade and other payables (611,122) 211,276 ---------- ---------- NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES (997,095) 323,355 ---------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES: Acquisition of a subsidiary - 123,707 Acquisition of property, plant and equipment (204,599) (40,398) ---------- ---------- NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES (204,599) 83,309 ---------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES: Capital contribution from minority shareholder of a subsidiary - 631 Advance from a shareholder 900,409 - Repayment of amount borrowed (310,694) - Issuance of new shares 1,125,000 - ---------- ---------- NET CASH PROVIDED BY FINANCING ACTIVITIES 1,714,715 631 ---------- ---------- NET INCREASE IN CASH AND CASH EQUIVALENTS 513,021 407,295 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 314,771 74,355 ---------- ---------- CASH AND CASH EQUIVALENTS AT END OF YEAR 827,792 481,650 ========== ========== ANALYSIS OF BALANCES OF CASH AND CASH EQUIVALENTS Cash and bank balances 827,792 481,650 NON-CASH INVESTING AND FINANCING ACTIVITIES Common stocks issued for services 375,200 - Purchase of subsidiary by issuance of common stock - 3,200,000 The financial statements should be read in conjunction with the accompanying notes. -------------------------------------------------------------------------------- 5 1. BASIS OF PRESENTATION The accompanying financial data as of March 31, 2004 and for the three-month period ended March 31, 2004 and 2003, have been prepared by the Company, without audit. Following the change of the Company's financial year end date from September 30 to December 31, these quarterly financial statements are prepared based on the newly adopted financial year. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations. 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, 2003. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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, 2004 and for the three-month period ended March 31, 2004 and 2003, have been made. The results of operations for the three-month period ended March 31, 2004 and 2003 are not necessarily indicative of the operating results for the full year. 2. PREPARATION OF FINANCIAL STATEMENTS The Company has net loss of US$1,513,070 for the three-month period ended March 31, 2004. Management has developed a strategy, which it believes can be accomplished and will enable the Company to operate in the future. However, there can be no assurance that the Company will be successful with its efforts to attain profitable operations. The inability of the Company to attain profitable operations in the near term could adversely impact the Company's business, financial position and prospects. 6 3. TRADE AND OTHER RECEIVABLES AS OF MARCH 31, 2004 NOTE US$ Trade receivables 18,015 Due from related parties 8(c) 115,525 Other receivables 24,847 -------------- 158,387 ============== 4. TRADE AND OTHER PAYABLES AS OF MARCH 31, 2004 NOTE US$ Trade payables 19,671 Accrued charges 95,428 Other payables 107,755 Due to related parties 8(d) 140,926 Deposits received 39,471 -------------- 403,251 ============== 5. LONG-TERM BANK LOAN The outstanding loan balance of US$481,055 as of March 31, 2004 bears interest at 4% per annum and is repayable serially from 2004 to 2013. The maturity of the long-term bank loan is as follows: PRINCIPAL PAYABLES DURING THE FOLLOWING PERIODS US$ 43,861 April 2004 to March 2005 45,648 April 2005 to March 2006 47,508 April 2006 to March 2007 49,443 April 2007 to March 2008 51,457 April 2008 to March 2009 243,138 from April 2009 onwards ------- 481,055 ======= 7 6. COMMITMENTS During the period, the Company entered into agreements with contractors for decoration of the Company's premises located in Beijing, China. The total contracted sum was US$163,100. At the balance sheet date, the Company had capital expenditure commitments contracted but not provided for net of deposit paid amounting to US$56,900. 7. ISSUANCE OF SHARES The following capital stock transactions occurred during the three-month period ended March 31, 2004: a) On February 6 and 26, 2004, the Company issued 75,000 and 50,000 shares to Wall Street Strategies, Inc. respectively for consulting services provided. b) On February 13, 2004, the Company issued 69,000 shares to Greentree Financial Group, Inc. for professional services provided. c) On February 23, 2004, the Company issued 50,000 shares to Mr. Richard Romanelli for advisory services provided. d) On March 22, 2004, Mr. William Tsang exercised part of a two-year warrant. He purchased 1,500,000 shares of the common stock of the Company at a price of US$0.75 per share. As at March 31, 2004, Mr. Tsang held two two-year warrants to purchase 4,000,000 shares and 4,500,000 at a price of US$0.92 and US$0.75 respectively. For items (a) to (c), the shares were recorded at fair values of the dates of agreement. The amounts were recognised as expenses in the three-month period ended March 31, 2004. 8 8. RELATED PARTY TRANSACTIONS (a) Names and relationship of related parties Existing relationships with the Company --------------------------------------- Mr. Bernard Chan A shareholder of the Company Mr. Bobby Yu A former director of a subsidiary Mr. Chan Chi Ming A director of the Company Mr. Luo Chao Ming A director of the Company Mr. John Hui A director of the Company Mr. Ringo Leung A director of the Company Mr. William Tsang A shareholder and director of the Company Beijing Wanlong PRC partner of a subsidiary Economic Consultancy Corporation Ltd. General (Guangzhou) An affiliate of the Company Business Network Ltd. Guangzhou City PRC partner of a subsidiary International Exhibition Co. Guangzhou Cyber A company in which a director of the Company has Strategy Limited beneficial interest Guangzhou Goldlion City A company controlled by close family members Properties Co., Ltd. of a director Xelex Inc. A company in which a shareholder of the Company has beneficial interest Top Link Ventures A company in which a director of the Company has Limited beneficial interest 9 8. RELATED PARTY TRANSACTIONS (CONTINUED) (b) Summary of related party transactions THREE-MONTH PERIOD ENDED MARCH 31 2004 2003 ---------- ---------- US$ US$ Consulting fee expenses to -------------------------- Mr. Ringo Leung 5,128 - Mr. Bernard Chan 2,564 5,128 Mr. Bobby Yu - 4,231 Mr. John Hui 57,692 25,641 Mr. William Tsang 57,692 25,641 Mr. Luo Chao Ming 4,349 - Beijing Wanlong Economic Consultancy Corporation Ltd. 4,531 4,531 Guangzhou City International Exhibition Co. 4,531 4,531 Xelex Inc. 5,128 - Top Link Ventures Limited 15,385 - Guangzhou Cyber Strategy Limited 1,938 - Consulting fee income from -------------------------- Guangzhou Cyber Strategy Limited - 96,154 Rent and related expenses to ---------------------------- Guangzhou Goldlion City Properties Co., Ltd. 107,534 170,798 Personal guarantee granted from ------------------------------- Mr. William Tsang 19,231 19,231 Membership fee income from -------------------------- Guangzhou Cyber Strategy Limited - 16,008 10 8. RELATED PARTY TRANSACTIONS (CONTINUED) (c) Due from related parties AS OF MARCH 31, 2004 US$ Guangzhou Cyber Strategy Limited 71,077 General (Guangzhou) Business Network Limited 44,448 -------------- Classified as current assets 115,525 ============== The amounts due from related parties represent unsecured advances which are interest-free and repayable on demand. (d) Due to related parties AS OF MARCH 31, 2004 US$ Mr. Chan Chi Ming 10,256 Mr. John Hui 110,986 Mr. Ringo Leung 1,094 Guangzhou Goldlion City Properties Co., Ltd. 474 Beijing Wanlong Economic Consultancy Corporation Ltd. 13,585 Guangzhou City International Exhibition Company 4,531 -------------- Classified as current liabilities 140,926 ============== The amounts due from related parties represent unsecured advances which are interest-free and repayable on demand. (e) Due to a shareholder AS OF MARCH 31, 2004 US$ Mr. William Tsang 1,299,615 ============== The amount due to a shareholder represents unsecured advances which are interest-free and not repayable within one year. 11 9. BUSINESS SEGMENT INFORMATION THREE-MONTH PERIOD ENDED MARCH 31 2004 2003 ---------- ---------- US$ US$ OPERATING REVENUES Club services 71,395 386,045 Consultancy service - 96,155 Rental 160,256 15,444 Sale of goods 72,120 5,895 ---------- ---------- 303,771 503,539 ========== ========== LOSS FROM OPERATIONS Club services (223,000) (178,923) Consultancy service - 92,920 Rental (44,647) (118,148) Sale of goods (28,815) (14,304) ---------- ---------- (296,462) (218,455) Corporate expenses (1,212,705) (37,141) ---------- ---------- Consolidated operating loss (1,509,167) (255,596) Other income 89 1,085 Interest expense (3,992) (2,272) ---------- ---------- Consolidated loss before income taxes (1,513,070) (256,783) 10. POST BALANCE SHEET EVENT On April 20, 2004, the Company entered into an agreement to acquire certain interest in the companies engaged in ticketing services, insurance and travel agents at a consideration of Rmb91,800,000 (US$11,090,841). The consideration will be satisfied by cash of Rmb30,000,000 (US$3,624,458) and the issuance of new shares with fair value equivalent to Rmb61,800,000 (US$7,466,383). 12 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION. PRELIMINARY NOTE REGARDING FORWARD-LOOKING STATEMENTS All forward-looking statements contained herein are deemed by 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 We were incorporated in the State of Nevada in 1998 to engage in any lawful corporate undertaking. Our business objective is to open and operate business clubs in the major cities of China in association with the World Trade Center Association in order to position ourselves as the platform to facilitate trade between China and the world market. We currently operate a club in Guangzhou, PRC, and are in the process of opening a club in Beijing, PRC, which has completed the renovation in late April 2004. Additionally, we expect to open a club in Shanghai and Shenzhen, PRC in 2005. Finally, we plan to create a Chinese/English internet portal to serve foreign and Chinese small to medium sized business. No assurances can be given, however, that we will be successful in our endeavors. 13 Our growth and development as a business enterprise has been marked by a number of significant corporate events. Pursuant to a Share Exchange Agreement, dated as of August 10, 2000, between 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. According, we controlled the operations of VEL, and Main Edge became our majority stockholder. We then undertook an 8-for-1 forward split that was effective on 15th day of September 2000, which resulted in Main Edge owing 15,689,400 shares of our common stock. Then, five major developments occurred. These were: (i) the consummation of two private placement financings by Powertronic Holdings Limited ("Powertronic") in September 2002 and December 2002 in which it acquired shares of our common stock, (ii) an acquisition of all the issued and outstanding shares of General Business Network (Holdings) Ltd. in December 2002, (iii) a 1-for-30 reverse stock split that was effective on September 1, 2002. (iv) the assignment of the rights of the after tax rental income of certain premises from Mr. William Tsang for a five-year period in December 2003, and (v) the exercise of warrant by Mr. William Tsang in March 2004. As a result of these transactions, Mr. William Tsang became the new major shareholder and owns over 9,200,000 shares of our common stock and Powertronic owns 2,000,000 shares. Mr. William Tsang is currently Chairman of our Board of Directors. RESULTS OF OPERATIONS The following table shows the selected unaudited condensed consolidated income statement data of the Company and its subsidiaries for the three-month ended March 31, 2004 and 2003. The data should be read in conjunction with the unaudited Condensed Consolidated Financial Statements of the Company and related notes thereto. Three-month period (Amounts in thousands US$) ended March 31 2004 2003 ---------- ---------- Revenue 304 503 Operating costs and expenses (186) (113) ---------- ---------- Gross profit 118 390 Selling, general & administrative expenses (1,627) (646) ---------- ---------- Loss from operations (1,509) (256) Other operating income (expenses) -- 1 Interest income (expenses) (4) (2) Minority interests -- 40 ---------- ---------- Net loss (1,513) (217) ========== ========== 14 THREE-MONTH PERIOD ENDED MARCH 31, 2004 COMPARED TO THREE-MONTH PERIOD ENDED MARCH 31, 2003 OPERATING REVENUE The aim of the Company is to continue to provide trade agency business linking companies in China and the rest of the world. As of March 31, 2004, 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 ("GBN"). Subsequent to the reporting date, BWTCC has completed its renovation in late April 2004 and is engaged in the establishment of a business club located in Beijing, while GWTCC is engaged in the operation with the business club in Guangzhou, the PRC. In addition to provide recreation, business center services, communication and information services, products exhibitions services, and commercial and trading brokerage services by both BWTCC and GWTCC, GWTCC also provides food and beverages. 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, consulting and trading businesses. 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, and trading business through a subsidiary of GBN since March 2003. Sales revenue for the three-month period ended March 31, 2004 was $304,000, compared to $503,000 for the same corresponding period in year 2003, a decrease of $199,000 or 40%. The decrease was mainly the result of the decrease in revenue generated from club related businesses, which was partially offset by an increase in rental income. The reason for the decrease in club related businesses was due to the one-month renovation period of the club facilities in Guangzhou and the slowing down of businesses during Chinese New Year holiday between late January and early February. Of the $304,000 revenue in year 2004, approximately $72,000 (24%) was generated from providing club related services by GWTCC, $72,000 (24%) from trading business, and $160,000 (52%) from rental. Operating costs and expenses was $186,000 for the three-month period ended March 31, 2004, as compared to the same corresponding period in year 2003 of $113,000, an increase of $74,000. The $74,000 increase was primarily incurred in relation to the amortization of rental income rights. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Selling, general and administrative expenses increased by $981,000 or 152% to $1,627,000 for the three-month period ended March 31, 2004 from $646,000 for the same corresponding period in 2003. The increase was mainly due to: i) Professional Fees: Professional fees increased by $911,000 for the three-month period ended March 31, 2004, as compared to the same corresponding period in 2003. The increase was mainly due to the additional fees paid to accounting, outside consultants and US securities professionals to maintain the corporate status of the Company, to market the co-brand WTC Kim's Card, to provide IT advices, and to seek future capital raising opportunities. Due mainly to the tight working capital control policy imposing by the Company, the outside consultants and the US securities professionals were paid by consultant shares rather than by cash. The increase of $911,000 in professional fees was mainly a result of the non-cash accounting entries. Other increase in selling, general and administrative expenses includes commission expense ($18,000) and written off of goodwill ($218,000). All these increases were partially offset by the decrease in utility expenses ($35,000) and rental expenses ($23,000). 15 FINANCIAL INCOME / (EXPENSES), NET There was an insignificant amount of approximately $4,000 of interest expenses for the three-month period ended March 31, 2004, as compared to $2,000 for the same corresponding period in year 2003. INCOME TAXES The Group is subject to income taxes on an equity basis on income arising in or derived from the tax jurisdiction in which it is domiciled and operates. The Hong Kong subsidiaries incurred losses for taxation purposes for the period and thus Hong Kong Profits Tax has not been provided. Since the PRC subsidiaries have sustained losses for the PRC income tax purposes, the Company has not recorded any PRC income tax expense. PRC income tax in the future will be calculated at the applicable rates relevant to the PRC subsidiaries. LIQUIDITY AND CAPITAL RESOURCES In March 2004, Mr. William Tsang exercised warrants to acquire an additional of 1,500,000 shares of the common stock of the Company. As a result, additional cash in the amount of approximately $1.1 million was provided for the working capital of the Company during the reporting period. 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. OTHER SIGNIFICANT EVENTS Effective as of April 1, 2004, the Company has restructured its board of directors and appointed new independent directors and officers to prepare for future growth of its expansion programs. The summary of the background of the directors, independent directors and officers are depicted as follows: EXECUTIVE DIRECTORS MR. TSANG CHI HUNG WILLIAM, aged 42, is the Executive Chairman of the Board of Directors of China World Trade Corporation. Mr. Tsang has more than 15 years experience in leatherware manufacturing and property investment. Prior to joining the Company, he was an executive director with a listed company for over 10 years. He is a member of the Beijing Municipal Committee of the Chinese People's Political Consultative Conference; committee member of Chinese General Chamber of Commerce, Hong Kong; vice chairman of Hong Kong United Youth Association Limited; Chief President of New Territories Commercial & Industrial General Association Ltd; and Vice Chairman of both Hong Kong Chamber of Commerce in China - Guangdong and Guangzhou Federation of Industry & Commerce. He is also an honorary president of North-East Overseas Chinese Friendship Association U.S.A., and a citizen of Guangzhou, PRC. MR. JOHN H.W. HUI, aged 45, is the Vice Chairman of the Board of Directors, President and Chief Executive Officer of the Company. Mr. Hui has over 10 years' experience in China trade and investment. He is responsible for the overall corporate development of the Company. Mr. Hui is also the President of the Beijing World Trade Center Club and Guangzhou World Trade Center Club. He has excellent relationships with the China partners (CCPIT) and the principles of the World Trade Center Association in New York and other WTCs around the world. Mr. Hui is a current member of the Canada China Business Council Beijing, and American Chamber of Commerce, Guangdong. MR. CHAN CHI MING, aged 42, is a Director and General Manager of the Company. Mr. Chan is responsible for the strategic planning, corporate development and project implementation of the Company. Before joining us, Mr. Chan was a Corporate Development Strategist for Renren Holding Ltd., a publicly listed company on the Hong Kong Stock Exchange. Mr. Chan founded Asian Information Resources (Holding) Ltd. in 1995, which eventually listed on the Hong Kong Stock Exchange in 1999. A specialist in Chinese law and China affairs, Mr. Chan is an expert in networking, Internet technology, database technology and management of technical resources. He has developed an electronic database system for the Law-on-Line project of the University of Hong Kong and has provided technical consultancy to this project since 1991. He has also developed the Dongguan Network, which has become a successful model for other cities in China. He was appointed by the Asian Development Bank (ADB) as consultant for the TA Project No. 2702 - Study on PRC Legal Information System and the Electronic Data Expert for the TA project No. 3000. Mr. Chan holds a Master of Law degree from Lancaster University, the United Kingdom, a Master of Philosophy degree in Physics and Bachelor Degree in Physics both from the Chinese University of Hong Kong. MR. LUO CHAOMING, aged 54, is a Director of the Company. Mr. Luo has long-term collaborative relations with Hong Kong business circles and associations. He was employed at the Xinhua News Agency Hong Kong from 1984 to 1996, he then joined the Xinhua News Agency Hong Kong Branch Guangzhou Representative Office in 1996 before joining the Company. He is the Chief Council Member of Guangdong Overseas Friendship Association, and Council Member of Guangzhou Overseas Friendship Association Mr. Luo worked as the Electric Design Technician in the Guangzhou Design Institute and the Assistant of Electric Technology Specialty, Electric Engineering Department in Guangdong University of Technology. 16 INDEPENDENT DIRECTORS AND MEMBERS OF AUDIT COMMITTEE MR. HAMID R. SEYEDIN, aged 53, is an Independent Director and a member of the audit committee of the Company. Mr. Seyedin is the CEO of First Washington Group and President of the American Chamber of Commerce in Guangdong. Under his leadership since 2003, the American Chamber of Commerce in Guangdong has grown by more than 83% in membership and 300% in revenues. In 1991, former US President George Bush recognized him in writing for his involvement with the passage of the Fast Track Procedures for the North American Free Trade Agreement (NAFTA). Appointed by three governors of the State of Maryland to four terms of office, he served as the Chairman of Montgomery College and State Chairman of the Maryland Association of Community Colleges representing all seventeen colleges in the State. He served on the Board of Directors of the Kennedy Institute, by appointment of Cardinal James A. Hickey (then Archbishop of Washington). He was a recipient of an award in business from the US Department of Commerce. He received recognition from the US Senate Sergeant At Arms for this service to the US Senate Deliberations. Finally, he served two terms on the Maryland Advisory Committee of the US Civil Rights Commission. MR. SAMUEL YUNG, aged 46, is an Independent Director and a member of the audit committee of China World Trade Corporation. Mr. Yung is a Senior District Director of American International Assurance Co. (Bermuda) Ltd., a member company of American International Group, Inc. He was the President of The Life Underwriters Association of Hong Kong in 1991, President of the General Agents and Managers Association of Hong Kong between 1991 and 1996, and Advisory Board Chairman of the General Agents & Managers Association International between 1997 and 1999. Mr. Yung has also participated in numerous community services and served as council members for a number of Government Committees. In addition, he also serves as advisors to many educational associations. Mr. Yung is a Certified Financial PlannerCM, a Chartered Insurance Agency Manager, a Registered Financial Consultant, a Certified Manager of Financial Advisor, and a Chartered Financial Practitioner. MR. CHI KIN HO, aged 35, is an Independent Director and a member of the audit committee of the Company. Mr. Ho is a principal of CCP C.P.A. Limited of Hong Kong, an accounting firm focusing on providing statutory audit services. Mr. Ho is a US Certified Public Accountant, a member of the AICPA, and associate member of Hong Kong Accounting Association. He has over ten years of experiences in both US and China in the area of financial accounting, US taxation and reporting, as well as management advisory. Mr. Ho earned his Bachelor of Business Administration Degree from University of Hawaii and his Master of Business Administration Degree from Hawaii Pacific University. OFFICERS MR. BERNARD K. CHAN, aged 40, is the Chief Financial Officer of the Company. He oversees M&A and financial projects of China World Trade Corporation. Mr. Chan has over 15 years of experiences in the areas of financial advisory, direct private investments and corporate finance. He was a Managing Partner of a local firm concentrating on providing advice relating to US listing and capital raising. Prior to that, Mr. Chan was a member of senior management for several listed companies in Hong Kong and the largest private land owner in Hawaii, focusing on direct investments and assets management. He is also a Registered Investment Advisor. Mr. Chan earned his Master of Business Administration Degree in International Management and Investment Finance, Master of Science Degree in Applied Econometrics, and Bachelor of Business Administration Degree in Investment Finance, all from the University of Hawaii. MR. CHUN YU YIP, aged 39, is the Chief Operation Officer of China World Trade Corporation. Mr. Yip has extensive experience in the operation of information technology companies, legal consultancy in China law, and content management consultancy. He was involved with the Asian Development Bank (ADB) for the TA Project No. 2707 regarding the establishment of a digitized Chinese Legal System. Mr. Yip has participated in the strategic planning and implementation of several B2B e-commerce platforms, including but not limited to Comfirm.com of Sweden and i-textile.com of Hong Kong. Also, he represented CCTV in an arbitration case and took part in several reorganization of B-shares' companies. He also worked as a journalist and editor for several printed media. Mr. Yip earned his Master of Law Degree from Beijing University and Bachelor Degree from Chinese University of Hong Kong. On April 7, 2004, China World Trade Corporation entered into a share exchange agreement with CEO Clubs China Limited ("CEO Clubs") to acquire 51% of the total issued and outstanding shares of the common stock of CEO Clubs. In mid April of 2004, the BWTCC has completed its renovation of the 2nd Floor of the Landmark Tower in Beijing and has opened for business. On April 20, 2004, the Company entered into an agreement to acquire certain interest in the companies engaged in ticketing services, insurance and travel agents at a consideration of Rmb91,800,000 (US$11,090,841). The consideration will be satisfied by cash of Rmb30,000,000 (US$3,624,458) and the issuance of new shares with fair value equivalent to Rmb61,800,000 (US$7,466,383) respectively. CRITICAL ACCOUNTING POLICIES Besides the accounting policies as described in note 5 to the audited financial statements for the year ended September 30,2003, the management considers that the Group has not adopted any other critical accounting policies. 17 ITEM 3. CONTROLS AND PROCEDURES. 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. 18 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: 3.1 Articles of Incorporation are incorporated by reference herein from Exhibit 3 to the Form 10-SB of Txon International Development Corporation filed with the Commission on May 18, 1999. 31.1 CEO Certification Pursuant to Section 302 31.2 CFO Certification Pursuant to Section 302 32.1 CEO & CFO Certification Pursuant to Section 906 (b) Reports on Form 8-K; There were no 8-Ks filed in the last three months. 19 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 11, 2004 /s/ BERNARD K. CHAN ------------------ ---------------------- BERNARD K. CHAN Chief Financial Officer