8-K 1 doc1.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of Earliest Event Reported): October 12, 2004 CHINA WORLD TRADE CORPORATION ----------------------------- (Exact Name of Registrant as Specified in Charter) Nevada ------ (State or Other Jurisdiction of Incorporation) 000-26119 --------- (Commission File Number) 87-0629754 ---------- (I.R.S. Employer Identification No.) 4th Floor, Goldlion Digital Network Center 138 Tiyu Road East, Tianhe Guangzhou, The PRC 510620 ---------------------------------------------------- (Address of Principal Executive Offices) (Zip Code) 011-8620-3878-0286 ------------------ (Registrant's Telephone Number, Including Area Code) This Current Report on Form 8-K is hereby filed by China World Trade Corporation, a Nevada corporation (the "Registrant"). The Registrant files this Form 8-K in order to publish its unaudited pro forma financial statements as of June 30, 2004 and for the years ended June 30, 2004 and September 30, 2003, of the Registrant, Guangdong New Generation Commercial Management Limited, a limited liability company organized under the laws of the Peoples' Republic of China ("Guangdong Commercial"), and Guangdong Huahao Insurance Agency Limited, a limited liability company also organized under the laws of the Peoples' Republic of China ("Guangdong Huahao"). The Registrant previously filed a Current Report on Form 8-K with the Commission on August 13, 2004 in order to report the closing of the transactions contemplated by the Equity Transfer Agreement, dated April 20, 2004, as amended by a Supplementary Agreement to Share Exchange Agreement, dated June 1, 2004, pursuant to which the Registrant acquired Guangdong Commercial and Guangdong Huahao, among other companies, on August 2, 2004. As part of that report, the Registrant filed with the Commission copies of the audited financial statements of Guangdong Commercial and Guangdong Huahao for the years ended December 31, 2002 and 2003, and for the three months ended March 31, 2004, in addition to pro forma financial statements of the Registrant, Guangdong Commercial and Guangdong Huahao as of March 31, 2004 and for the years ended March 31, 2004 and September 30, 2003. Item 9.01(b) Pro Forma Financial Information. The following pro forma financial statements and notes of the Registrant and (i) Guangdong New Generation Commercial Management Limited and (ii) Guangdong Huahao Insurance Agency Limited (hereinafter, the "Constituent Companies") are set forth below: An Unaudited Pro Forma Condensed Consolidated Balance Sheet of the Constituent Companies as of June 30, 2004, and an Unaudited Pro Forma Condensed Consolidated Statement of Operations of the Constituent Companies for the six months ended June 30, 2004 and year ended September 30, 2003. The following unaudited pro forma condensed consolidated balance sheet as of June 30, 2004 and the unaudited pro forma condensed consolidated statements of operations for the six-month period ended June 30, 2004 and for the year ended September 30, 2003 are based on the historical financial statements of China World Trade Corporation (the "Company"), Guangdong New Generation Commercial Management Limited ("GNGCM") and Guangdong Hauhao Insurance Agency Limited ("GHIAL") after giving effect to the acquisition of GNGCM and GHIAL by the Company ("Acquisition") using the purchase method of accounting and the assumptions and adjustments described in the accounting notes to the unaudited pro forma condensed consolidated financial statements. The Acquisition was completed on August 2, 2004. The unaudited pro forma condensed consolidated balance sheet of the Company, GNGCM and GHIAL as of June 30, 2004 is presented to give effect to the Acquisition as if it had occurred on June 30, 2004. The unaudited pro forma condensed consolidated statements of operations of the Company, GNGCM and GHIAL for the six-month period ended June 30, 2004 and for the year ended September 30, 2003 are presented as if the Acquisition had taken place on October 1, 2002. The unaudited pro forma condensed consolidated financial statements should be read in conjunction with the historical consolidated financial statements and accompanying notes contained in the Company's Form 10-KSB for the year ended September 30, 2003 filed on January 13, 2004, the Company's Form-10QSB quarterly report for the six-month period ended June 30, 2004 filed on August 19, 2004, the audited financial statements of GNGCM and GHIAL for the year ended December 31, 2003 and the unaudited management accounts of GNGCM and GHIAL for the six-month period ended June 30, 2004 prepared in accordance with the accounting principles generally accepted in the United States of America ("USGAAP"). The unaudited pro forma condensed consolidated financial statements are not intended to be representative or indicative of the consolidated results of operations or financial condition of the Company that would have been reported had the Acquisition been completed as of the dates presented, and should not be taken as representative of the future consolidated results of operations or financial condition of the Company.
CHINA WORLD TRADE CORPORATION UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 2004 ----------------------- PRO FORMA Pro forma CONSOLIDATED GNGCM GHIAL The Company adjustments BALANCE ----------- ----------- ----------- ----------- ----------- US$ US$ US$ US$ US$ ASSETS CURRENT ASSETS Cash and cash equivalents 1,846,128 12,496 32,935 (2,745,000) (a) 1,646,559 2,500,000 (b) Trade receivables 1,038,457 - 22,084 1,060,541 Other receivables - 697,720 13,844 711,564 Due from related parties 2,505 - 75,818 78,323 Rental and other deposits 744,061 - 254,953 999,014 Prepayments - - 102,428 102,428 Inventories - - 9,142 9,142 ----------- ----------- ----------- ----------- TOTAL CURRENT ASSETS 3,631,151 710,216 511,204 4,607,571 Intangible asset - - 1,590,000 1,590,000 Goodwill - - 359,346 14,575,068 (c) 14,934,414 Property, plant and equipment, net 127,174 19,648 3,259,749 3,406,571 Investment in a subsidiary - - - 10,232,000 (a) - (10,232,000) (c) ----------- ----------- ----------- ----------- TOTAL ASSETS 3,758,325 729,864 5,720,299 24,538,556 =========== =========== =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Trade payables 3,707,934 - 18,176 3,726,110 Accrued charges 1,522,974 - 104,187 1,627,161 Other payables - 31,036 107,616 138,652 Tax payables 1,151,972 3,514 - 1,155,486 Due to related parties 696,215 - 235,327 931,542 Deposits received - - 40,315 40,315 Deferred income - - 6,551 6,551 Short term bank loan 1,206,695 - - 1,206,695 Long-term bank loan - current portion - - 44,301 44,301 ----------- ----------- ----------- ----------- TOTAL CURRENT LIABILITIES 8,285,790 34,550 556,473 8,876,813 Long-term bank loan - non-current portion - - 425,952 425,952 Due to a shareholder - - 954,995 954,995 ----------- ----------- ----------- ----------- Total liabilities 8,285,790 34,550 1,937,420 10,257,760 ----------- ----------- ----------- ----------- Minority interest - - - 510,917 (c) 510,917 ----------- ----------- ----------- ----------- STOCKHOLDERS' EQUITY 4,081 (a) 3,500 (b) Common 1,810,042 1,206,695 17,837 (3,016,737) (c) 25,418 Additional paid-in capital - - 16,207,204 7,482,919 (a) 26,186,623 2,496,500 (b) Due from related party (7,081,663) (1,313,152) - 8,394,815 (c) - Dedicated reserves 477,757 121,156 - (598,913) (c) - Accumulated (deficit) profit 266,399 680,615 (12,442,162) (947,014) (c) (12,442,162) ----------- ----------- ----------- ----------- TOTAL STOCKHOLDERS' EQUITY (4,527,465) 695,314 3,782,879 13,769,879 ----------- ----------- ----------- ----------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 3,758,325 729,864 5,720,299 24,538,556 =========== =========== =========== ===========
CHINA WORLD TRADE CORPORATION UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS SIX-MONTH PERIOD ENDED JUNE 30, 2004 ----------------------------------------- PRO FORMA Pro forma CONSOLIDATED GNGCM GHIAL The Company adjustments BALANCE ----------- ----------- ----------- ----------- ----------- US$ US$ US$ US$ US$ OPERATING REVENUES 2,650,848 289,469 639,340 3,579,657 OPERATING EXPENSES Operating costs and expenses (1,030,345) (19,916) (347,546) (1,397,807) Selling, general and administrative expenses (294,433) (103,413) (2,502,045) (2,899,891) ----------- ----------- ----------- ----------- PROFIT (LOSS) FROM OPERATIONS 1,326,070 166,140 (2,210,251) (718,041) NON-OPERATING (EXPENSES) INCOME Other income 3,193 96 102,150 105,439 Interest expenses (38,938) (8) (8,730) (47,676) ----------- ----------- ----------- ----------- PROFIT (LOSS) BEFORE INCOME TAXES AND MINORITY INTEREST 1,290,325 166,228 (2,116,831) (660,278) INCOME BEFORE INCOME TAXES AND MINORITY INTERESTS Provision for income taxes (116,440) (8,086) - (124,526) ----------- ----------- ----------- ----------- PROFIT (LOSS) BEFORE MINORITY INTEREST 1,173,885 158,142 (2,116,831) (784,804) MINORITY INTEREST - - 628 (116,203) (d) (115,575) ----------- ----------- ----------- ----------- NET PROFIT (LOSS) 1,173,885 158,142 (2,116,203) (900,379) =========== =========== =========== =========== LOSS PER SHARE OF COMMON STOCK - Basic - - (0.12) (0.04) =========== =========== =========== =========== Weighted average number of shares of common stock outstanding - - 17,018,219 4,081,238 (e) 21,099,457 =========== =========== =========== ===========
CHINA WORLD TRADE CORPORATION UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS YEAR ENDED SEPTEMBER 30, 2003 --------------------------------- PRO FORMA Pro forma CONSOLIDATED GNGCM GHIAL The Company adjustments BALANCE ----------- ----------- ----------- ----------- ----------- US$ US$ US$ US$ US$ OPERATING REVENUES 1,975,098 929,916 2,885,600 5,790,614 OPERATING EXPENSES Operating costs and expenses (899,503) (61,364) (1,213,169) (2,174,036) Selling, general and administrative expenses (572,878) (189,106) (3,954,066) (4,716,050) ----------- ----------- ----------- ----------- PROFIT (LOSS) FROM OPERATIONS 502,717 679,446 (2,281,635) (1,099,472) NON-OPERATING (EXPENSES) INCOME Other income 17,119 99 2,490 19,708 Interest expenses (75,251) - (14,811) (90,062) Equity in net loss of affiliate - - (32,051) (32,051) ----------- ----------- ----------- ----------- PROFIT (LOSS) BEFORE INCOME TAXES AND MINORITY INTEREST 444,585 679,545 (2,326,007) (1,201,877) INCOME BEFORE INCOME TAXES AND MINORITY INTERESTS Provision for income taxes (573,448) (25,979) - (599,427) ----------- ----------- ----------- ----------- PROFIT (LOSS) BEFORE MINORITY INTEREST (128,863) 653,566 (2,326,007) (1,801,304) MINORITY INTEREST - - 120,471 (417,097) (d) (296,626) ----------- ----------- ----------- ----------- NET PROFIT (LOSS) (128,863) 653,566 (2,205,536) (2,097,930) =========== =========== =========== =========== LOSS PER SHARE OF COMMON STOCK - Basic - - (0.23) (0.15) =========== =========== =========== =========== Weighted average number of shares of common stock outstanding - - 9,699,264 4,081,238 (e) 13,780,502 =========== =========== =========== ===========
1. BASIS OF PRO FORMA PRESENTATION The unaudited pro forma condensed consolidated financial statements should be read in conjunction with the historical consolidated financial statements and accompanying notes contained in the Company's Form 10-KSB for the year ended September 30, 2003 filed on January 13, 2004, the Company's Form-10QSB quarterly report for the six-month period ended June 30, 2004 filed on August 19, 2004, the audited financial statements of GNGCM and GHIAL for the year ended December 31, 2003 and the unaudited management accounts of GNGCM and GHIAL for the six-month period ended June 30, 2004 prepared in accordance with USGAAP. The Company has changed its financial year end date from September 30 to December 31 of each calendar year with effect from the period ended December 31, 2003. Therefore the Company's Form 10-KSB for its financial year ended December 31, 2003 covers the year ended September 30, 2003 and its Form 10-QSB for the second quarter falling into the financial year ending December 31, 2004 covers the six-month period ended June 30, 2004. The statutory financial statements of GNGCM and GHIAL are prepared in accordance with accounting principles generally accepted in the Peoples' Republic of China, which differ in certain significant respects from the USGAAP. For the purposes of preparing these unaudited pro forma condensed consolidated financial statements, management of GNGCM and GHIAL has prepared a set of financial statements for the year ended December 31, 2003 for each of the companies under USGAAP. These financial statements have been audited and adopted as the bases for preparing these unaudited pro forma condensed consolidated financial statements. However, the financial year end date of both GNGCM and GHIAL falls on December 31. Accordingly, their results for the year ended December 31, 2003 have been adopted in preparing the unaudited pro forma condensed statement of operations for the year ended September 30, 2003. On April 20, 2004, a wholly-owned subsidiary of the Company (the "Transferee") entered into an Equity Transfer Agreement (the "Agreement") with the major shareholders of GNGCM and GHIAL (the "Transferors"), pursuant to which the Transferee would acquire from the Transferors 51% interest in GNGCM for an aggregate consideration of approximately US$11,127,000 of which US$3,640,000 was to be paid in the form of cash and US$7,487,000 was to be paid in the form of restricted shares issued by the Company. The Agreement also contemplated a loan agreement in the amount of US$3,640,000 pursuant to which one of the Transferors would loan the said amount to GNGCM as part of the transaction. Completion of the Agreement was subject to a group reorganisation to be completed by GNGCM. Upon completion of the reorganisation, GNGCM shall hold 7 subsidiaries, with GHIAL being the most significant one. On June 1, 2004, a supplementary agreement to the Agreement was entered into by making several changes to the Agreement, amongst which the aggregate consideration was reduced to US$10,232,000, of which US$2,745,000 was to be paid in the form of cash and US$7,487,000 was to be paid in the form of restricted shares of the Company. The Acquisition, which was mainly carried out for the Company's expansion purposes, was completed on August 2, 2004 and the Company has issued 4,081,238 shares of US$0.001 to satisfy the consideration which was to be paid in the form of shares of the Company. 2. PRO FORMA ADJUSTMENTS Pro forma adjustments are necessary to reflect the adjustments necessary to give full effect to the acquisition as if it had been occurred at the beginning of the periods presented. These pro forma adjustments include the adjustments for the difference between the considerations paid for the assets acquired and the estimated fair value of such assets and to eliminate minority interests. As there were no intercompany transactions or balances, no pro forma adjustments for elimination in this respect is necessary. Certain reclassifications have been made to conform GNGCM's and GHIAL's historical amounts to the Company's presentation. The pro forma consolidated provision for income taxes does not reflect the amounts that would have resulted had the Company, GNGCM and GHIAL filed consolidated income tax returns during the periods presented. The pro forma adjustments included in the unaudited pro forma condensed consolidated financialstatements are as follows: (a) Adjustment to record the consideration for the acquisition of 51% interest in GNGCM and 26.52% effective interest in GHIAL. Of the total purchase price of US$10,232,000, approximately US$1,241,000 in cash was paid on August 2, 2004, approximately US$1,500,000 in cash was deferred until September 30, 2004 and the remainder of the purchase price was satisfied in the form of approximately US$7,487,000 in market value of 4,081,238 shares of US$0.001. (b) Adjustment to reflect exercise of warrants by two of the major shareholders. In July 2004, two of the major shareholders of the Company exercised warrants to purchase 3,500,000 shares of US$0.001 at a total consideration of US$2,500,000. Part of the consideration was used for settlement of the purchase price for the acquisition as mentioned in (a) above. (c) Elimination of investment in GNGCM and GHIAL: GNGCM GHIAL Total --------- --------- ---------- US$ US$ US$ Consideration 10,232,000 Common stock (1,810,042) (1,206,695) (3,016,737) Due from related party 7,081,663 1,313,152 8,394,815 Dedicated reserves (477,757) (121,156) (598,913) Retained earnings (266,399) (680,615) (947,014) Minority interests - 510,917 510,917 ---------- 14,575,068 (d) Adjustment to reflect the minority interest's share of results of GNGCM and GHIAL for the six-month period ended June 30, 2004 and for the year ended December 31, 2003. (e) Adjustment to reflect the increase in weighted average number of shares outstanding by 4,081,238 common stocks as if they had been issued on October 1, 2002. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. CHINA WORLD TRADE CORPORATION By: /s/ John H. Hui ------------------ John H. Hui Vice Chairman Date: October 12, 2004