-----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, IGaZ54cSryMkXwDDZ1Fhx3IcmNSHv+kmgLuaJX0m00OHREkeNBDEpqp8x5FcY5oB e11EPlBFK+5ZirE27Z82YQ== 0001264931-04-000207.txt : 20041119 0001264931-04-000207.hdr.sgml : 20041119 20041119123738 ACCESSION NUMBER: 0001264931-04-000207 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20040930 FILED AS OF DATE: 20041119 DATE AS OF CHANGE: 20041119 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: 041157115 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 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 September 30, 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) 3rd 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 September 30, 2004, there were 25,896,699 shares of common stock outstanding. Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X] INDEX TO FORM 10-QSB Page No -------- PART I - ------- Item 1. Financial Statements Condensed Consolidated Balance Sheets - As of September 30, 2004 3 Condensed Consolidated Statements of Operations - Nine Months Ended September 30, 2004 and 2003 4 Condensed Consolidated Statements of Cash Flows - Nine Months Ended September 30, 2004 and 2003 5 Notes to Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition And Results of Operations 14 Item 3. Controls and Procedures 17 PART II - -------- Item 1. Legal Proceedings 18 Item 2. Changes in Securities 18 Item 3. Defaults Upon Senior Securities 18 Item 4. Submission of Matters to a Vote of Security Holders 18 Item 5. Other Information 18 Item 6. Exhibits 18 PART I -- FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS. Unaudited financial statements China World Trade Corporation for the nine months ended September 30, 2004 and 2003. CHINA WORLD TRADE CORPORATION UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET As of September 30, 2004 ============================================================================== ASSETS NOTE US$ -------------- CURRENT ASSETS Cash and cash equivalents 1,137,278 Trade and other receivables 3 8,236,107 Rental and other deposits 1,549,172 Prepayments 206,845 Inventories 8,588 Short-term investment 24,163 -------------- Total current assets 11,162,153 -------------- INTANGIBLE ASSET 1,722,676 GOODWILL 8,965,499 PROPERTY, PLANT AND EQUIPMENT, NET 3,879,057 -------------- Total assets 25,729,385 ============== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Trade and other payables 4 6,165,838 Deferred income 10,495 Short-term bank loans 1,570,598 Long-term bank loan - current portion 5 44,746 -------------- TOTAL CURRENT LIABILITIES 7,791,677 Long-term bank loan - non-current portion 5 414,597 Due to a shareholder 8(e) 333,722 -------------- TOTAL LIABILITIES 8,539,996 MINORITY INTEREST 3,376,955 COMMITMENTS AND CONTINGENCIES 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$0.001 each; 50,000,000 shares authorized, 25,896,699 shares (including 433,333 shares to be issued)issued at September 30, 2004 6 25,897 Additional paid-in capital 26,987,112 Accumulated deficit (13,200,575) -------------- TOTAL STOCKHOLDERS' EQUITY 13,812,434 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 25,729,385 ============== The financial statements should be read in conjunction with the accompanying notes.
CHINA WORLD TRADE CORPORATION UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS Three-month and nine-month periods ended September 30, 2004 and 2003 ================================================================================================================= THREE-MONTH PERIOD ENDED SEPTEMBER 30, NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2004 2003 2004 2003 ------------ ------------ ------------ ------------ US$ US$ US$ US$ UNAUDITED UNAUDITED UNAUDITED UNAUDITED OPERATING REVENUES 943,526 995,145 1,582,866 2,379,536 Operating costs and expenses (191,066) (620,546) (538,611) (1,085,454) Selling, general and administrative expenses (1,337,440) (1,556,410) (3,839,486) (3,192,166) ------------ ------------ ------------ ------------ LOSS FROM OPERATIONS (584,980) (1,181,811) (2,795,231) (1,898,084) NON-OPERATING INCOME (EXPENSES) Other income 27,733 1,065 129,883 2,572 Interest expense (23,235) (11,251) (31,965) (17,083) Equity in net loss of affiliate - - - (32,051) ------------ ------------ ------------ ------------ LOSS BEFORE INCOME TAXES AND MINORITY INTEREST (580,482) (1,191,997) (2,697,313) (1,944,646) Provision for income taxes (15,836) - (15,836) - ------------ ------------ ------------ ------------ LOSS BEFORE MINORITY INTEREST (596,318) (1,191,997) (2,713,149) (1,944,646) Minority interest (162,095) - (161,467) 40,522 ------------ ------------ ------------ ------------ NET LOSS (758,413) (1,191,997) (2,874,616) (1,904,124) ============ ============ ============ ============ LOSS PER SHARE OF COMMON STOCK- Basic (0.03) (0.11) (0.15) (0.18) ============ ============ ============ ============ Weighted average number of shares of common stock outstanding 23,362,506 10,970,497 19,148,417 10,618,849 ============ ============ ============ ============
The financial statements should be read in conjunction with the accompanying notes.
CHINA WORLD TRADE CORPORATION UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Nine-month period ended September 30, 2004 =============================================================================================================== NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2004 2003 ------------ ------------ Note US$ US$ UNAUDITED UNAUDITED CASH FLOWS FROM OPERATING ACTIVITIES: Net loss (2,874,616) (1,904,125) Adjustments to reconcile net loss to net cash used in operating activities: Minority interest 161,467 (40,522) Amortization of intangible assets 270,000 - Equity in net loss of affiliate - 32,051 Stock issued for services 640,407 600,000 Depreciation 149,456 77,622 Impairment loss on property, plant and equipment - 106,975 Impairment loss on goodwill 251,448 - Decrease in deferred income (12,682) (357,628) Changes in working capital: Trade and other receivables (1,108,413) 300,578 Rental and other deposits (722,766) (9,821) Prepayments 362,923 45,499 Inventories 64,795 (268,917) Trade and other payables 726,645 767,727 ------------ ------------ NET CASH USED IN OPERATING ACTIVITIES (2,091,336) (650,561) ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Acquisition of subsidiaries 9 (3,459,562) 123,707 Acquisition of an affiliate - (32,051) Acquisition of property, plant and equipment (63,707) (49,045) Purchase of investment securities (11,840) - ------------ ------------ NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES (3,535,109) 42,611 ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Capital contribution from minority shareholder of a subsidiary 2,821,824 4,477 Advance from a shareholder 333,722 - Proceed from new bank loans - 812,820 Repayment of amount borrowed (1,008,972) (10,482) Issuance of new shares 4,302,378 - ------------ ------------ NET CASH PROVIDED BY FINANCING ACTIVITIES 6,448,952 806,815 ------------ ------------ NET INCREASE IN CASH AND CASH EQUIVALENTS 822,507 198,865 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 314,771 74,355 ------------ ------------ CASH AND CASH EQUIVALENTS AT END OF PERIOD 1,137,278 273,220 ============ ============ ANALYSIS OF BALANCES OF CASH AND CASH EQUIVALENTS Cash and bank balances 1,137,278 273,220 ============ ============ NON-CASH INVESTING AND FINANCING ACTIVITIES Common stocks issued for services 640,407 600,000 Purchase of subsidiaries by: - issuance of common stock 7,703,768 3,200,000 - purchase consideration in arrear 70,000 - ============ ============
The financial statements should be read in conjunction with the accompanying notes. CHINA WORLD TRADE CORPORATION NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS THREE-MONTH AND NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2004 AND 2003 1. BASIS OF PRESENTATION The accompanying financial data as of September 30, 2004 and for the three-month and nine-month periods ended September 30, 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 with effect from the period ended December 31, 2003, these quarterly financial statements have been 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 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 September 30, 2004 and for the three-month and nine-month periods ended September 30, 2004 and 2003, have been made. The results of operations for the three-month and nine-month periods ended September 30, 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$758,413 and US$2,874,616 for the three-month and nine-month periods ended September 30, 2004. The Company is an investment holding company. The subsidiaries are principally engaged in the businesses of providing club services, business traveling services and properties investments. Management has developed a strategy, which it believes can be accomplished and will enable the Company to operate in the future. However, there can be no assurance that the Company will be successful with its efforts to attain profitable operations. The inability of the Company to attain profitable operations in the near term could adversely impact the Company's business, financial position and prospects. 3. TRADE AND OTHER RECEIVABLES AS OF SEPTEMBER 30, 2004 Note US$ ------------- Trade receivables 1,288,475 Due from related parties 8(c) 6,751,033 Other receivables 196,599 ------------- 8,236,107 4. TRADE AND OTHER PAYABLES AS OF SEPTEMBER 30, 2004 Note US$ ------------- Trade payables 2,808,570 Income tax payable 12 1,165,343 Accrued charges 133,778 Other payables 12 1,808,388 Due to related parties 8(d) 197,012 Deposits received 52,747 ------------- 6,165,838 5. LONG-TERM BANK LOAN The outstanding loan balance of US$459,343 as of September 30, 2004 bears interest at 4% per annum and is repayable serially from 2004 to 2013. The maturity of the long-term bank loan is as follows: PRINCIPAL PAYABLES DURING THE FOLLOWING PERIODS US$ 44,746 October 2004 to September 2005 - --------- 46,568 October 2005 to September 2006 48,466 October 2006 to September 2007 50,440 October 2007 to September 2008 52,495 October 2008 to September 2009 216,628 from October 2009 onwards - --------- 414,597 - --------- 459,343 ========= 6. ISSUANCE OF SHARES THE FOLLOWING CAPITAL STOCK TRANSACTIONS, WHICH WERE ALL RECORDED AT FAIR VALUES AS OF THEIR RESPECTIVE DATES OF AGREEMENT, OCCURRED DURING THE THREE-MONTH PERIOD ENDED SEPTEMBER 30, 2004: a) On July 12, 2004, the Company issued 43,500 shares to CEO cast Inc. for consulting services provided. b) On July 20, 2004, Mr. William Tsang and Powertronic Holdings Limited ("Powertronic") exercised a two-year warrant. Mr. Tsang and Powertronic purchased 1,500,000 and 2,000,000 shares of the common stock of the Company at a price of US$0.92 and US$0.575 per share respectively. As of September 30, 2004, Mr. Tsang held 4,500,000 and 2,500,000 warrants to purchase 4,500,000 and 2,500,000 shares at a price of US$0.75 and US$0.92 respectively, and Powertronic held 2,000,000 warrants to purchase 2,000,000 shares at a price of US$0.575. c) On July 21, 2004, the Company entered into an agreement with Duncan Capital LLC for private placement. 433,333 shares of US$1.499 cash to be issued were included in common stock as of September 30, 2004. d) On July 30, 2004, the Company issued 4,081,238 shares to the shareholders of Guangdong New Generation Commercial Management ("GNGCM") and Guangdong Hauhao Insurance Agency Limited ("GHIAL") as consideration for acquisition of 51% interest in GNGCM. e) On August 31, 2004, the Company issued 2,000 shares to The Equitis Group as a compensation for termination of a contact. 7. STOCK-BASED COMPENSATION The Company records compensation expense for stock-based employee compensation plans using the intrinsic value method in which compensation expense, if any, is measured as the excess of the market price of the stock over the exercise price of the award on the measurement date. On December 31, 2003, the Board of Directors adopted a stock option plan (the 2003 Plan). The 2003 Plan allows the Board of Directors to grant stock options to various employees of the Company. 1,000,000 stock options were issued in accordance with the terms of the 2003 Plan on December 31, 2003 to certain officers and directors at an exercise price of US$0.673 per share. The stock options will vest and become exercisable according to the following schedule: On April 30, 2004: 25 % On December 30, 2004: 25 % Each quarter thereafter: 6.25% (until fully vested) Had compensation expenses for the same stock options been determined based on their fair values at the dates of grant and been amortized over the period from the date of grant to the date that the award is vested, consistent with the provisions of SFAS No. 123, the Company's net loss and loss per share would have been reported as follows:
Three-month period ended September 30, Nine-month period ended September 30, 2004 2003 2004 2003 ------------ ------------ ------------ ------------ US$ US$ US$ US$ Net loss As reported (758,413) (1,191,997) (2,874,616) (1,904,124) ------------ ------------ ------------ ------------ Total stock-based compensation expenses (60,881) - (263,819) - ============ ============ ============ ============ Pro forma (819,294) (1,191,997) (3,138,435) (1,904,124) ============ ============ ============ ============ Basic net loss per share As reported (0.03) (0.11) (0.15) (0.18) ------------ ------------ ------------ ------------ Pro forma (0.04) (0.11) (0.16) (0.18) ============ ============ ============ ============
The options granted had a weighted average "fair value" per share on date of grant of US$0.65. For purposes of pro forma disclosure, the estimated fair value of the options is amortized to expenses over the options' vesting periods, i.e., 3 years as prescribed under the 2003 Plan. The fair value of the option is estimated on the date of the grant using the Black-Scholes option price model, assuming no dividends and with the following assumptions : Risk-free interest rate 2.1 % Expected volatility 2.24% Contractual life 3 years 8. RELATED PARTY TRANSACTIONS (a) Names and relationship of related parties Existing relationships with the Company ---------------------------------------- Mr. Bernard Chan A shareholder and officer 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 former director of the Company Mr. William Tsang A shareholder and director of the Company Beijing Wanlong Economic Consultancy Corporation Ltd. PRC partner of a subsidiary General (Guangzhou) Business Network Ltd. An affiliate of the Company Guangzhou City International Exhibition Co. PRC partner of a subsidiary Guangzhou Cyber Strategy Limited A company in which a director of the Company has beneficial interest Guangzhou Goldlion City Properties Co., Ltd. A company controlled by close family members of a director Xelex Inc. A company in which a shareholder of the Company has beneficial interest Top Link Ventures Limited A company in which a director of the Company has beneficial interest Union East Consultants Limited A company in which a former director of a subsidiary has beneficial interest Dimension Marketing Limited A shareholder of a former subsidiary Mr. Simon Guo A director of a subsidiary Mr. Li Jingping A director of a subsidiary Mr. Yang Xin A shareholder of the Company Mr. Zhao Lin A shareholder of the Company Mr. Cui Wencheng A shareholder of the Company Mr. Ho Chi Kin An independent director of the Company Huahao Industries Group Co. Ltd. A shareholder of a subsidiary Guangzhou SRX Travel Service Limited A company in which a director of the company has beneficial interest Guangzhou XZR International Travel Services Limited A company in which a director of the company has beneficial interest Huang Ze Hua A shareholder of a subsidiary Chen De Xiong A shareholder of a subsidiary 8. RELATED PARTY TRANSACTIONS (CONTINUED) (b) Summary of related party transactions
Three-month period ended Nine-month period ended September 30, September 30, 2004 2003 2004 2003 ------------ ------------ ------------ ------------ US$ US$ US$ US$ Consulting fee expenses to - ----------------------------- Mr. Ringo Leung - - 5,128 - Mr. Chan Chi Ming - 15,385 - 30,769 Mr. Bernard Chan - 3,846 2,564 12,821 Mr. Bobby Yu - - - 4,231 Mr. John Hui - 57,692 57,692 141,026 Mr. William Tsang - 57,692 57,692 141,026 Mr. Luo Chao Ming 4,349 - 13,048 - Mr. Ho Chi Kin 1,500 - 1,500 - Beijing Wanlong Economic Consultancy Corporation Ltd. 4,531 4,531 13,592 13,592 Guangzhou City International Exhibition Co. 4,531 4,531 13,592 13,592 Xelex Inc. 15,384 - 35,897 - Top Link Ventures Limited 15,385 - 46,154 - Guangzhou Cyber Strategy Limited - - 1,938 - ============ ============ ============ ============ Rent and related expenses to - -------------------------------- Guangzhou Goldlion City Properties Co., Ltd. 116,607 187,713 337,526 541,389 Huahao Industries Group Co. Ltd. 37,622 - 37,622 - ============ ============ ============ ============ Consultancy fee income from - ------------------------------ Guangzhou Cyber Strategy Limited - - - 192,308 ============ ============ ============ ============ Membership fee income from - ----------------------------- Guangzhou Cyber Strategy Limited - - - 32,016 Union East Consultants Limited - - 16,008 32,016 ============ ============ ============ ============ Loans advanced to - ------------------- Dimension Marketing Limited - 1,194 - 2,692 ============ ============ ============ ============ Assets purchase from - ---------------------- Huahao Industries Group Co. Ltd. 451,970 - 451,970 - ============ ============ ============ ============
8. RELATED PARTY TRANSACTIONS (CONTINUED) (c) Due from related parties AS OF September 30, 2004 US$ ------------------ Guangzhou Cyber Strategy Limited 159,876 Guangdong Huahao Industrial Group Co. Limited 5,643,874 Guangzhou SRX Travel Service Limited 2,508 Guangzhou XZR International Travel Services Limited 42,285 Huang Ze Hua 360,029 Chen De Xiong 542,461 ------------------ 6,751,033 ================== The amount due from related parties represent unsecured advances which are interest-free and repayable on demand. (d) Due to related parties AS OF September 30, 2004 US$ ------------------ Suo Hong Xia 24,163 Mr. John Hui 11,626 Mr. Ringo Leung 1,095 Guangzhou Goldlion City Properties Co., Ltd. 4,450 Beijing Wanlong Economic Consultancy Corporation Ltd. 22,653 Guangzhou City International Exhibition Company 13,592 Cui Wencheng 11,616 Yang Xin 7,488 Simon Guo 28,942 Li Jingping 65,771 Zhao Lin 5,616 ------------------ 197,012 ================== The amounts due to related parties represent unsecured advances which are interest-free and repayable on demand. 8. RELATED PARTY TRANSACTIONS (CONTINUED) (e) Due to a shareholder AS OF September 30, 2004 US$ ------------------ Mr. William Tsang 333,722 ================== The amount due to a shareholder represents unsecured advances which is interest-free and not repayable within one year. 9. SUPPLEMENTARY DISCLOSURE OF CASH FLOW INFORMATION (a) Summary of effect of acquisition of subsidiaries NINE MONTHS ENDED SEPTEMBER 30, 2004 2003 ---------- ---------- US$ US$ NET ASSETS ACQUIRED Property, plant and equipment 1,106,022 2,971,993 Intangible assets 222,676 - Cash and cash equivalents 1,259,274 123,707 Trade and other receivables 6,941,366 106,628 Rental and other deposits 569,237 10,618 Prepayments 11,733 4,312 Short-term investments 12,323 - Trade and other payables (3,905,614) (268,706) Short-term bank loans (2,247,164) - Minority interest (390,133) - ---------- ---------- 3,579,720 2,948,552 Add: Goodwill arising from acquisition of subsidiaries 8,965,499 251,448 ---------- ---------- Consideration 12,545,219 3,200,000 ========== ========== 9. SUPPLEMENTARY DISCLOSURE OF CASH FLOW INFORMATION (CONTINUED) (b) Analysis of the net inflow of cash and cash equivalents in respect of acquisition during the period NINE MONTHS ENDED SEPTEMBER 30, 2004 2003 ---------- ---------- US$ US$ Consideration (12,545,219) (3,200,000) Bank balance and cash acquired 1,259,274 123,707 Issuance of common stock for satisfying the consideration 7,706,383 3,200,000 Purchase consideration in arrear 120,000 - ---------- ---------- Net outflow of cash and cash equivalents (3,459,562) 123,707 ========== ========== In addition to the above consideration of US$12,545,219, the Company has committed to inject cash of US$120,000 to a newly acquired subsidiary as operating funds. 10. MATERIAL BUSINESS COMBINATIONS 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 Guangdong New Generation Commercial Management Limited ("GNGCM") and Guangdong Hauhao Insurance Agency Limited ("GHIAL") (the "Transferors"), pursuant to which the Transferee would acquire from the Transferors 51% interest in GNGCM (the "Acquisition") 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 advance the said amount to GNGCM as part of the transaction. Completion of the Agreement was subject to a group reorganization to be completed by GNGCM. Upon completion of the reorganization, GNGCM shall hold 7 subsidiaries (collectively "GNGCM Group"). 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. Completion of the acquisition of GNGCM Group enables the Company to expand its business to the high growth, travel-related businesses. The acquisition has been accounted for under the purchase method of accounting. The purchase price of US$10,232,000 was allocated to the assets and liabilities acquire based on their estimated fair value at the date of acquisition. This allocation has resulted in acquired goodwill of US$8,652,530. The results of GNGCM Group have been included in the consolidated financial statements since the acquisition date. 10. PRO FORMA RESULTS PRESENTATION (CONTINUED) The following unaudited pro forma information presents a summary of our consolidated results of operations as if the Acquisition had been taken place on January 1, 2003.
Three-month period ended Nine-month period ended September 30, September 30, 2004 2003 2004 2003 ------------ ------------ ------------ ------------ US$ US$ US$ US$ UNAUDITED UNAUDITED UNAUDITED UNAUDITED OPERATING REVENUES 1,356,217 1,992,518 5,002,939 4,415,469 ============ ============ ============ ============ NET LOSS (148,650) (1,149,021) (1,208,279) (1,871,461) ============ ============ ============ ============ LOSS PER SHARE (0.01) (0.1) (0.06) (0.18) ============ ============ ============ ============ 11. BUSINESS SEGMENT INFORMATION Three-month period ended Nine-month period ended September 30, September 30, 2004 2003 2004 2003 ------------ ------------ ------------ ------------ US$ US$ US$ US$ OPERATING REVENUES Club services 176,831 418,654 349,920 1,307,391 Consultancy service - - - 192,309 Rental 184,169 18,517 527,013 48,741 Sale of goods - 543,043 123,560 814,111 Travel ticketing agency 540,969 - 540,969 - Travel insurance 39,788 - 39,788 - Travel information service - - - - Sales of clothing 1,769 - 1,769 - Others - 14,931 (153) 16,984 ------------ ------------ ------------ ------------ 943,526 995,145 1,582,866 2,379,536 ============ ============ ============ ============ 11. BUSINESS SEGMENT INFORMATION (CONTINUED) Three-month period ended Nine-month period ended September 30, September 30, 2004 2003 2004 2003 ------------ ------------ ------------ ------------ US$ US$ US$ US$ PROFIT (LOSS) FROM OPERATIONS Club services (222,106) (117,064) (726,285) (388,147) Consultancy service - - - 101,128 Rental (25,266) (196,595) (111,009) (575,585) Sale of goods (3,029) (4,154) (31,019) (37,682) Travel ticketing agency 330,671 - 330,671 - Travel insurance 16,328 - 16,328 - Travel information service (77,879) - (77,879) - Sales of clothing (92) - (92) - Others - (37,405) - (25,512) ------------ ------------ ------------ ------------ 18,627 (355,218) (599,285) (925,798) Corporate expenses (603,607) (826,593) (2,195,946) (972,286) ------------ ------------ ------------ ------------ Consolidated operating loss (584,980) (1,181,811) (2,795,231) (1,898,084) Other income 27,733 1,065 129,883 2,572 Interest expense (23,235) (11,251) (31,965) (17,083) Equity in net loss of an affiliate - - - (32,051) Minority interest (162,095) - (161,467) 40,522 Income taxes (15,836) - (15,836) - ------------ ------------ ------------ ------------ Net loss (758,413) (1,191,997) (2,874,616) (1,904,124) Income taxes included in segment profit (loss) above 15,836 - 15,836 - ------------ ------------ ------------ ------------ Net loss before income taxes (742,577) (1,191,997) (2,858,780) (1,904,124) ============ ============ ============ ============
12. CONTINGENT LIABILITIES Prior to the completion of acquisition by the Company, GNGCM had been paying mainland China income tax at a basis of calculation which was not in accordance with the standard basis of calculation as stipulated by the mainland China tax law. The shortfall of the underpaid tax liabilities, related surcharges and penalty up to the date of acquisition by the Company has already been fully provided in the consolidated financial statements. However, GNGCM would potentially be liable to further surcharge for late payment and penalty, additional to the amount being provided, for the period since the date of acquisition by the Company and up to the balance sheet date. A shareholder of GNGCM has undertaken to indemnify the Company against such shortfall and additional tax-related liabilities. As of September 30, 2004, the estimated further surcharges and penalties which GNGCM was potentially liable amounted to US$25,183. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION. CHINA WORLD TRADE CORPORATION 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 is completed and fully operational in the 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. 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. Tsang for a five year period in December 2003, and (v) the exercise of warrant by Mr. Tsang and Powertronic in March 2004 and in July 2004. As a result of these transactions, Mr. Chi Hung Tsang became the new major shareholder and owns over 10,700,000 shares of our common stock and Powertronic owns 4,000,000 shares. Mr. Chi Hung Tsang is currently President and Chairman of our Board of Directors. The aim of the Company is to continue to provide travel and trade agency businesses linking companies in China and the rest of the world. As of September 30, 2004, China World Trade Corporation ("CWTC") has established its businesses into three distinct divisions, namely the club and business center; the business traveling services; and the business value-added services. The Club and Business Center Division is devoted to the building of the World Trade brand in China. Its 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 the company as the platform to facilitate trade between China and the world market. CWTC currently operates the Guangzhou World Trade Center Club, consisting of over 4,000 square meters, and The Beijing World Trade Center Club, which is located at 2nd Floor, Office Tower II, Landmark Towers Beijing, 8 North Dongsanhuan Road, Beijing PRC, and consisting of 730 square meters. In addition, since the acquisition of CEO Clubs China Limited ("CEO Clubs") in May 2004, CEO Clubs will complement China World Trade's offerings by targeting higher profile leadership from larger companies than those normally associated with China World Trade. CEO Clubs has thirteen chapters in the US and China. It focuses on recruiting CEO's of companies with annual sales exceeding $2 million as members. The average club member has $20 million in annual sales. Since the completion of the acquisition of majority stake of Guangdong New Generation Commercial Management Limited (the "New Generation Group" or "New Generation") in August 2004, the Business Traveling Services Division will provide the necessary platform for China World Trade Corporation to focus on the high growth, travel related businesses. New Generation is the pioneer and one of the market leaders in the travel agency businesses through the operations of its 10 subsidiaries in Southern China in ticketing sales for international and domestic flights as well as inbound business travel. Being one of the leading consolidators of hotel accommodations and airline tickets in China, New Generation has already acquired the necessary licenses to operate as a ticketing and travel agent in the PRC. These licenses include 26 licenses as a ticketing agent for international and domestic flights for both cargo and passengers issued by the Civil Aviation Administration of China ("CAAC") and the International Air Transport Association ("IATA") and 3 licenses as a domestic and international travel agent issued by the Administrative Bureau of Tourism of China. In addition, New Generation is also an authorized/licensed insurance agent in China to provide, in particular, accidental and life insurances. New Generation also provides premium "red carpet" airport based services to prestigious clients and will participate in the opening of the new airport in Guangzhou, the PRC. New Generation is believed to contribute a superior revenue base to the Company. The Business Value-Added Services Division concentrates on value-added services of credit cards and merchant related businesses as well as on consultancy services. Guangdong World Trade Link Information Services Limited ("WTC Link"), a subsidiary of CWTC, formed a partnership with the Agricultural Bank of China to manage the Company's co-brand credit card project. WTC Link is an active provider of CRM solution and services in China. It helps China Telecom to develop and manage the merchants' privilege VIP member services. WTC Link also formed a partnership with China Unionpay to develop the royalty systems for bank card holders in Guangdong Province, China. In addition, this Division also provides consultancy services to CWTC's members and clients in the financial services areas including mergers and acquisitions, corporate restructuring and financing. RESULTS OF OPERATIONS The following table shows the selected audited and unaudited condensed consolidation income statement data of the Company and its subsidiaries for the three-month period and nine-month period ended September 30, 2004 and 2003. The data should be read in conjunction with the audited Consolidated Financial Statements of the Company for the year ended September 30, 2003 and related notes thereto.
Three months ended Nine months ended September 30, September 30, 2004 2003 2004 2003 (Amounts in thousands US$) ------------ ------------ ------------ ------------ US$ US$ US$ US$ Operating revenue 944 994 1,582 2,379 Operating costs and expenses (191) (620) (539) (1,085) Selling, general & administrative expenses (1,337) (1,556) (3,839) (3,192) ------------ ------------ ------------ ------------ Loss from Operations (584) (1,182) (2,796) (1,898) Other Income 27 1 130 2 Interest (23) (11) (32) (17) Equity in net loss of affiliate 0 0 0 (32) Provision for income taxes (16) 0 (16) 0 Minority interest (162) 0 (161) 41 ------------ ------------ ------------ ------------ Net Loss (758) (1,192) (2,875) (1,904)
THREE-MONTH PERIOD ENDED SEPTEMBER 30, 2004 COMPARED TO THREE-MONTH PERIOD ENDED SEPTEMBER 30, 2003 OPERATING REVENUE 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. Operating revenue for the three-month period ended September 30, 2004 was $944,000, compared to $994,000 for the same corresponding period in year 2003, a decrease of $50,000 or 5.0%. The decrease was mainly the result of the decrease in revenue generated from club related business and trading business, which were partially offset by an increase in rental income and travel related businesses. The reason for the decrease in club related businesses was due to the closing down of the Chinese restaurant to further trim costs of the club facilities in Guangzhou. The trading business of the Company is under restructuring and expects to resume business in the fourth quarter of 2004. Of the $944,000 revenue for the three-month period ended September 30, 2004, approximately $177,000 (19%) was generated from providing club related services by GWTCC and BWTCC, none from trading business, $184,000 (20%) from rental and $583,000 (61%) from travel related businesses, resulting from the acquisition of the New Generation Group. Operating costs and expenses was $191,000 for the three-month period ended September 30, 2004, as compared to the same corresponding period in year 2003 of $620,000, a decrease of $429,000. The $429,000 decrease was primarily incurred in relation to the decrease in the cost of sales in the trading business. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Selling, general and administrative expenses decreased by $219,000 or 14% to $1,337,000 for the three-month period ended September 30, 2004 from $1,556,000 for the same corresponding period in 2003. The increase was mainly because professional fee: Professional fee paid to Powertronic for its advisory services were decreased to none for the three-month period ended September 30, 2004, as compared to $600,000 for the same corresponding period in year 2003. This professional fee was partially offset by the increase of selling and G&A expenses incurred by the New Generation Group resulting from the merger of its accounts ($255,000); the additional audit fee for the acquisition of the New Generation Group ($64,000), and the increase from professional fees in relation to the private placement financing ($107,000). FINANCIAL INCOME/(EXPENSES), NET There was an insignificant amount of approximately $23,000 of interest expenses for the three-month period ended September 30, 2004, as compared to $11,000 for the same corresponding period in year 2003. The majority of the increase was the result of the interest expenses by the New Generation in relation to a bank loan in the amount of RMB10,000,000 (approximately equals US$1.2 million) 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. However, the Company has recorded income tax provision in the amount of $15,836 for the three-month period ended September 30, 2004, resulting from the consolidation of New Generation's 2 months' accounts after the acquisition in August 2004. In addition, the Company also consolidated a tax payable amount of approximately $3 million from the acquisition of New Generation. This tax payable is fully indemnified by Guangdong Hua Hao Industrial Group Co., Ltd., former holding company and now the minority shareholders of New Generation. NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2004 COMPARED TO NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2003 OPERATING REVENUE Operating revenue for the nine-month period ended September 30, 2004 was $1,582,000, compared to $2,379,000 for the same corresponding period in year 2003, a decrease of $797,000 or 33%. The decrease was mainly the result of the decrease in revenue generated from club related and trading businesses, which were partially offset by an increase in rental income and travel related businesses. The reason for the decrease in club related businesses was due to the closing down of the Chinese restaurant to further trim costs of the club facilities in Guangzhou. The trading business of the Company is under restructuring and expects to resume business in the fourth quarter of 2004. Of the $1,582,000 revenue in year 2004, approximately $350,000 (22%) was generated from providing club related services by GWTCC and BWTCC, $122,000 (7%) from trading business, $527,000 (34%) from rental and $583,000 (37%) from travel related businesses, resulting from the consolidation of 2 months operation of the New Generation Group. Operating costs and expenses was $538,000 for the nine-month period ended September 30, 2004, as compared to the same corresponding period in year 2003 of $1,085,000, a decrease of $547,000. The $547,000 decrease was primarily incurred in relation to the decrease in the cost of sales in the trading business and the cessation of the Chinese restaurant in GWTCC. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Selling, general and administrative expenses increased by $647,000 or 20% to $3,839,000 for the nine-month period ended September 30, 2004 from $3,192,000 for the same corresponding period in 2003. The increase was mainly due to: i) Professional Fees: Professional fees increased by approximately $1,035,000 for the nine-month period ended September 30, 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 mainly paid by consultant shares rather than by cash. ii) New Generation's S,G&A expenses: These expenses increased by approximately $255,000, resulting from the consolidation of 2 months operating results of the New Generation Group. The above increases were partially offset by the decrease of the professional fee paid to Powertronic in the amount of $600,000. FINANCIAL INCOME/(EXPENSES), NET There was an amount of approximately $32,000 of interest expenses for the nine-month period ended September 30, 2004, as compared to approximately $17,000 for the same corresponding period in year 2003. The increase was the result of the interest expenses on the New Generation bank loan and the revolving loan of GBN(GZ), an indirectly wholly owned subsidiary. LIQUIDITY AND CAPITAL RESOURCES During the reporting period, a total of 7,633,738 shares of the common stock of China World Trade Corporation were issued, of which 4,081,238 shares were paid part of the total consideration for the acquisition of New Generation Group in August 2004, 3,500,000 shares were issued to Mr. Chi Hung Tsang and Powertronic for their respective exercise of warrants, and the remaining were paid to NewsUSA and CEOCast, Inc for their professional services rendered. 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 The Company entered into an Equity Transfer Agreement dated April 20, 2004 and a Supplementary Agreement dated June 1, 2004 to acquire 51% of the capital stock of Guangdong New Generation Commercial Management Limited, a limited liability company organized under the laws of the Peoples' Republic of China ("New Generation") from Guangdong Huahao Industries Group Co., Ltd. New Generation is engaged in flight ticketing, insurance and travel agents services. The total consideration of this acquisition was approximately US$10,232,000, of which approximately US$1.2 million in cash was paid on closing (with the payment of approximately US$1.5 million in cash to be deferred until the remaining ownership of the four subsidiaries of New Generation are successfully transferred, expecting to be completed by March 30, 2005), and the remaining approximately US$7.5 million was paid by issuing a total of 4,081,238 restricted shares of the common stock of the Company. This acquisition was closed on August 2, 2004. On July 20, 2004, the major controlling shareholder and Chairman of China World Trade Corporation, Mr. Chi Hung Tsang and a second major shareholder, Powertronic Holdings Limited exercised warrants to purchase additional 3.5 million shares of the common stock of the Company. As a result, the Company received total net proceeds of approximately US$2.5 million, which was used to complete the acquisition of New Generation and to provide addition working capital to further advance the development of the China World Trade Corporation. On August 26, 2004, we closed a private placement financing from two private accredited investors to raise a total of US$650,000. In connection to this private placement, new shares were issued to the two investors on October 29, 2004. 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: 3.1 Articles of incorporation are hereby incorporated by reference into Form 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. 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: November 16, 2004 /s/ John H.W. Hui ------------------------------- -------------------- John H.W. Hui Chief Executive Officer EX-31.1 2 doc2.txt CERTIFICATIONS OF CEO Exhibit 31.1 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, the Chief Executive Officer of the Company, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of China World Trade Corporation; 2. Based on my knowledge, this 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 report; 3. Based on my knowledge, the financial statements, and other financial information included in this 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 report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) for the registrant and have: a. Designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, 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 report is being prepared; b. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, 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 and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: November 16, 2004 /s/ John H.W. Hui - -------------------- John H.W. Hui Chief Executive Officer EX-31.2 3 doc3.txt CERTIFICATIONS OF CFO Exhibit 31.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Bernard Chan, the Chief Financial Officer of the Company, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of China World Trade Corporation; 2. Based on my knowledge, this 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 report; 3. Based on my knowledge, the financial statements, and other financial information included in this 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 report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) for the registrant and have: a. Designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, 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 report is being prepared; b. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, 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 and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: November 16, 2004 /s/ Bernard Chan - ------------------ Bernard Chan Chief Financial Officer EX-32.1 4 doc4.txt SECTION 1350 CERTIFICATIONS OF CEO Exhibit 32.1 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 June 30, 2004 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: November 16, 2004 EX-32.2 5 doc5.txt SECTION 1350 CERTIFICATIONS OF CFO Exhibit 32.2 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 June 30, 2004 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Bernard Chan, 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/ Bernard Chan - ------------------ Bernard Chan Chief Financial Officer Date: November 16, 2004 -----END PRIVACY-ENHANCED MESSAGE-----