-----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, Do2nZWBDEe+ROGESEOz6fulBEcDQqCvOnB44kdiyHTLkMxs7ev+e/XKPcfGMLWVu JsD8LaPgFPiueWP9AH2rjw== 0001264931-06-000514.txt : 20061114 0001264931-06-000514.hdr.sgml : 20061114 20061114172800 ACCESSION NUMBER: 0001264931-06-000514 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20060930 FILED AS OF DATE: 20061114 DATE AS OF CHANGE: 20061114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHINA WORLD TRADE CORP CENTRAL INDEX KEY: 0001081834 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-BUSINESS SERVICES, NEC [7389] 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: 061217058 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 form10qsb.htm CWTD 10QSB 09/30/2006 CWTD 10QSB 09/30/2006
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
FORM 10-QSB
 
 
x  QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2006

o  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 incorporation or organization)
(IRS Employer Identification No.)
 
3rd Floor, Goldlion Digital Network Center
138 Tiyu Road East, Tianhe
Guangzhou, PRC
(Address of principal executive offices)

(011-8620) 2886 - 0608
(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 o No o

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, 2006, there were 34,865,923 shares of Common Stock, $.001 par value, outstanding.

Transitional Small Business Disclosure Format (Check one): Yes o No x
 
 
 

 
Page No.
   
PART I
  
   
Item 1. Financial Statements
  
   
Unaudited Condensed Consolidated Balance Sheet
- As of September 30, 2006
4
   
Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss
- Three Months And Nine Months Ended September 30, 2006 and 2005
5
   
Unaudited Condensed Consolidated Statements of Cash Flows
- Nine Months Ended September 30, 2006 and 2005
6
   
Notes to Unaudited Condensed Consolidated Financial Statements
7-19
   
Item 2. Management’s Discussion and Analysis of Financial Condition And Results of Operations
20-29
   
Item 3. Controls and Procedures
29-31
   
PART II
  
   
Item 1. Legal Proceedings
31
   
Item 2. Changes in Securities
32
   
Item 3. Defaults upon Senior Securities
32
   
Item 4. Submission of Matters to a Vote of Security Holders
32
   
Item 5. Other Information
32
   
Item 6. Exhibits
  
   
Signatures
33

2

PART I -- FINANCIAL INFORMATION


Unaudited Condensed Consolidated Financial Statements of China World Trade Corporation - September 30, 2006 and 2005

China World Trade Corporation
 
-  
Unaudited Condensed Consolidated Balance Sheet as of September 30, 2006
-  
Unaudited Condensed Consolidated Statements of Operations for the three months and nine months period ended September 30, 2006 and 2005
-  
Unaudited Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2006 and 2005
-  
Notes to Unaudited Condensed Consolidated Financial Statements


3

                                                                                                 China World Trade Corporation
Condensed Consolidated Balance Sheet
(Unaudited)
As at September 30, 2006
       
       
   
US$
  
ASSETS
  
Current assets
     
Cash and cash equivalents
   
146,523
  
Accounts receivables, net
   
6,468
  
Prepaid expenses
    
542,360
  
Disposal consideration receivable
    
4,000,000
  
Other current assets
    
252,598
  
Rental and other deposits
   
248,981
  
Due from related companies
    
112,715
  
Total current assets
    
5,309,645
  
         
Property, plant and equipment, net
   
70,971
  
Investments in affiliates (refer to note 6)
    
9,074,667
  
         
Total assets
   
14,455,283
  
         
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
       
Accounts payable
    
11,557
  
Accrued expenses
    
408,524
  
Due to a shareholder
    
1,258,062
  
Due to related companies
    
48,700
  
Deferred income
    
5,179
  
Other current liabilities
    
169,886
  
Total current liabilities
   
1,901,908
  
         
Minority interest
   
28,080
  
         
Commitments and contingencies (refer to note 12)
        
         
Shareholders' 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, 34,865,923 shares issued and outstanding
   
34,866
  
Common stock to be issued
    
6,408,000
  
Additional paid-in capital
   
32,655,983
  
Accumulated other comprehensive loss
        
- foreign currency translation adjustment
    
8,597
  
Accumulated deficit
   
(26,582,151
)
Total shareholders’ equity
    
12,525,295
  
         
Total liabilities and shareholders’ equity
    
14,455,283
  

The accompanying notes are an integral part of the condensed consolidated financial statements. 

4

China World Trade Corporation
Condensed Consolidated Statements of Operations and Comprehensive Loss
(Unaudited)
For the Three Months and Nine months ended September 30, 2006 and 2005
           
           
   
Three Months Ended September 30,
  
Nine Months Ended September 30,
  
   
2006
  
Restated 2005
  
2006
  
Restated 2005
  
   
US$
  
US$
  
US$
  
US$
  
Operating revenues
                  
Club and business centre
    
184,903
    
159,805
    
511,999
    
710,666
  
Business traveling services
    
870,531
    
1,473,498
    
2,689,140
    
3,579,565
  
Business value-added services
    
--
    
254,644
    
927,368
    
871,413
  
Rental services
    
3,461
    
3,462
    
10,383
    
218,161
  
Trading and other services
    
--
    
236
    
--
    
122,109
  
                           
     
1,058,895
    
1,891,645
    
4,138,890
    
5,501,914
  
                           
                           
Operating costs and expenses
                          
Cost of Club and business centre
    
(9,584
)
  
(8,553
)
  
(26,323
)
  
(151,894
)
Cost of Business traveling services
    
(189,761
)
  
(261,674
)
  
(522,955
)
  
(381,466
)
Cost of Business value-added services
    
--
    
(1,742,587
)
  
(381
)
  
(2,510,398
)
Cost of Rental services
   
--
    
--
    
--
    
(98,762
)
Cost of Trading and other services
    
--
    
(135
)
  
--
    
(120,795
)
Bad debts recovered
    
12,730
    
--
    
12,730
    
--
  
Impairment, depreciation and amortization
    
(95,646
)
  
(74,751
)
  
(336,617
)
  
(200,891
)
Selling, general and administrative expenses
    
(2,104,244
)
  
(2,944,073
)
  
(6,769,228
)
  
(6,513,469
)
     
(2,386,505
)
  
(5,031,773
)
  
(7,642,774
)
  
(9,977,675
)
                           
Loss from operations
    
(1,327,610
)
  
(3,140,128
)
  
(3,503,884
)
  
(4,475,761
)
                           
Non-operating income(expense)
                          
Realized gains on marketable securities - available-for-sale
    
--
    
4,260,761
    
46,000
    
6,079,960
  
Other income
    
820
    
3,862
    
43,817
    
44,170
  
Interest income
    
13,688
    
--
    
34,625
    
--
  
Equity in earnings of affiliates
    
--
    
--
    
--
    
--
  
Impairment loss on investment in an affiliate
    
(2,140,359
)
  
--
    
(2,140,359
)
  
--
  
Loss on disposal of interest in a subsidiary
    
(3,210,538
)
  
--
    
(3,210,538
)
  
--
  
Loss on disposal of property, plant and equipment
    
(9,387
)
  
--
    
(9,387
)
  
--
  
Loss on disposal of leasehold land and buildings
    
--
    
--
    
--
    
(254,740
)
Interest expense
    
(79,649
)
  
(25,775
)
  
(210,418
)
  
(90,397
)
Other
    
--
    
(32
)
  
--
    
(1,177
)
                           
Profit (Loss) before income taxes and minority interest
    
(6,753,035
)
  
1,098,688
    
(8,950,144
)
  
1,302,055
  
Provision for income taxes
    
(29,487
)
  
(71,441
)
  
(103,037
)
  
(184,260
)
                           
Profit (Loss) before minority interest
    
(6,782,522
)
  
1,027,247
    
(9,053,181
)
  
1,117,795
  
Minority interest
    
156,452
    
(92,077
)
  
545,065
    
(313,989
)
                           
Net profit (loss)
    
(6,626,070
)
  
935,170
    
(8,508,116
)
  
803,806
  
                           
Other comprehensive income (loss)
                          
Unrealized gains on marketable securities - available-for-sale
                         
Unrealized holding gain/loss arising for the period
    
--
    
(7,976
)
  
(1,108,375
)
  
7,042,684
  
Less: Reclassification adjustment for gains or losses included in net profit (loss)
    
--
    
(4,260,761
)
  
(46,000
)
  
(6,079,960
)
Foreign currencies translation adjustments
    
--
    
(20,015
)
  
--
    
--
  
Less: Reclassification adjustment for gains or losses included in net profit (loss)
    
(15,393
)
  
--
    
(15,393
)
  
(20,015
)
                           
Comprehensive income (loss)
    
(6,641,463
)
  
(3,353,582
)
  
(9,677,884
)
  
1,746,515
  
                           
Profit (Loss) per share of common stock-Basic and diluted
    
(0.19
)
  
0.03
    
(0.25
)
  
0.03
  
Weighted average number of shares of common stock outstanding
    
34,465,923
    
30,969,118
    
34,030,578
    
30,950,070
  

The accompanying notes are an integral part of the condensed consolidated financial statements.

5

CHINA WORLD TRADE CORPORATION
Condensed Consolidated Statement of Cash Flows
           
       
Nine-month period ended September 30,
  
   
Note
 
2006
  
2005
  
       
Unaudited
  
Unaudited
  
       
US$
  
US$
  
Cash flows from operating activities:
             
Net income (loss)/profit
          
(8,508,118
)
  
803,806
 
Adjustments to reconcile net loss to net cash used in operating activities:
     
Minority interest
         
(545,065
)
  
313,989
  
Amortization on intangible asset
         
-
    
90,000
  
Depreciation and amortization
          
271,254
    
210,428
  
Loss on disposal of property, plant and equipment
          
9,387
    
25,676
  
Loss on disposal of interest in a subsidiary
          
3,210,538
    
-
 
Impairment loss on investment in an affiliate
          
2,140,359
        
Impairment loss on property, plant and equipment
         
-
    
-
 
Impairment loss on current assets
          
142,371
    
-
 
(Decrease) increase in deferred income
          
(902
)
  
(19,736
)
Provision for bad debts due from related companies
         
-
    
-
 
Stock issued for services
         
1,099,907
    
182,500
  
Realized gain on available-for-sale securities
          
(46,000
)
  
(6,079,960
)
Available for sale securities received as income
          
(375,000
)
  
(854,543
)
Changes in working capital:
         
-
    
-
 
Pledged deposit
          
165,487
    
-
 
Trade and other receivables
         
-
    
(843,133
)
Accounts receivables
          
(1,002,480
)
  
-
 
Other current assets
          
(249,785
)
  
-
 
Loans receivable
          
406,830
    
-
 
Due from related parties
          
(72
)
  
-
 
Due from related companies
          
(1,151,697
)
  
-
 
Rental and other deposits
         
220,297
    
(508,010
)
Prepayments
          
(687,427
)
  
(11,139
)
Inventories
         
-
    
170,888
  
Hire purchase creditor
          
71,032
    
-
 
Trade and other payables
          
-
    
1,470,429
 
Account payables
          
813,759
    
-
 
Accrued expenses
          
(62,469
)
  
-
 
Other current liabilities
          
273,028
    
-
 
Due to related parties
          
2,470
    
-
 
Due to related companies
          
(28,878
)
  
-
 
Due from a director
          
(8,265
)
  
-
 
Income tax payable
         
49,833
    
-
 
Net cash used in operating activities
         
(3,789,606
)
  
(5,048,805
)
Cash flows from investing activities:
                   
Acquisition of a subsidiary - net of cash required
          
(394,641
)
  
-
  
Disposal of a subsidiary
          
(1,353,749
)
  
-
  
Acquisition of property, plant and equipment
         
(408,331
)
  
(482,834
)
Proceeds from disposal of available-for-sale securities
          
146,000
    
6,728,020
  
Acquisition of available-for-sale securities
          
-
    
(3,675
)
Proceeds from disposal of short-term investment
          
-
    
24,163
  
Proceeds from disposal of property, plant and equipment
          
33,205
    
2,457,382
  
Proceeds from disposal of intangible assets
          
-
    
1,320,000
  
Loan advance to a related company
          
-
    
(1,111,481
)
Net cash used in (provided by) investing activities
         
(1,977,516
)
  
8,931,575
  
Cash flows from financing activities:
                   
Advance from (repayment to) a shareholder
         
1,120,931
    
(320,536
)
Proceeds from new bank loan
         
2,037,716
    
-
  
Repayment of amount borrowed
         
(524,866
)
  
(1,052,494
)
Capital contribution by minority shareholder of a subsidiary
          
45,000
        
Net cash provided by (used in) financing activities
         
2,678,781
    
(1,373,030
)
                     
Net increase (decrease) in cash and cash equivalents
         
(3,088,341
)
  
2,509,740
  
Cash and cash equivalents at beginning of period
         
3,234,864
    
1,824,268
  
Cash and cash equivalents at end of period
         
146,523
    
4,334,008
  
                     
Analysis of balances of cash and cash equivalents
                    
Cash and bank balances
          
146,523
    
4,334,008
  
                     
Supplemental disclosure information:
                   
Interest paid
         
210,418
    
92,676
  
Income tax paid
         
103,037
    
42,740
  
                     
Non-cash operating, investing and financing activities:
                   
Common stock issued for services (including shares to be issued)
          
1,099,907
    
182,500
  
Consideration for acquisition of an affiliate
          
6,408,000
    
-
  
Available-for-sale securities received
          
375,000
    
854,543
  
 
The financial statements should be read in conjunction with the accompanying notes.

6

NOTES TO FINANCIAL STATEMENTS
 
1. BASIS OF PRESENTATION

UNAUDITED INTERIM FINANCIAL STATEMENTS

The accompanying unaudited interim condensed consolidated financial statements of China World Trade Corporation (“the Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-QSB and Regulation S-B. As permitted by Form 10-QSB instructions, we have not disclosed the detailed information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. Accordingly, the unaudited interim condensed consolidated financial statements should be read in conjunction with the financial statements for the year ended December 31, 2005, which is included in the Company’s Annual Report on Form 10-KSB filed with the Securities and Exchange Commission on April 18, 2006. In the opinion of management, all adjustments considered necessary for a fair presentation, consisting solely of normal recurring adjustments, have been made. Operating results for the three months ended September 30, 2006 are not necessarily indicative of the results that may be expected for the year ending December 31, 2006.

The Company’s investments in its affiliates, which are detailed on note 6, are accounted for using the equity method of accounting.

Certain of the 2005 figures in the unaudited condensed consolidated statements of operations and comprehensive loss have been restated to conform with the presentation adopted in 2006.

New Accounting Pronouncement

In December 2004, the FASB issued SFAS No. 123R, “Share-Based Payments (revised 2004).” This statement eliminates the option to apply the intrinsic value measurement provisions of APB Board Opinion No. 25, “Accounting for Stock Issued to Employees,” to stock compensation awards issued to employees. Rather, the Statement requires companies to measure the cost of employee services received in exchange for an award of equity instruments based on the grant date fair value of the award. That cost will be recognized over the period during which an employee is required to provide services in exchange for the award - the requisite service period (usually the vesting period). In March 2005, the SEC staff expressed their views with respect to SFAS No. 123R in Staff Accounting Bulletin No. 107, “Share-Based Share Payment,” (SAB 107). SAB 107 provides guidance on valuing options.

Historically, for SFAS No. 123 pro forma disclosure was required for stock-based compensation to employees. We had recognized compensation expense for stock option awards issued to employees on a straight-line basis over the vesting period in the pro forma disclosure. This policy differs from the policy required to be applied to awards granted after the adoption of SFAS No. 123R, which requires that compensation expense be recognized for awards over the requisite service period of the award or to an employee’s eligible retirement date, if earlier. We will continue to recognize compensation expense over the applicable vesting periods for awards granted prior to adoption of SFAS No. 123R, but for all awards granted after December 31, 2005, compensation expense will be recognized over the requisite service period of the award or over a period ending with an employee’s eligible retirement date, if earlier.

Prior to the adoption of SFAS No. 123R, we had not reported any tax benefits resulting from the exercise of stock options, as we have incurred net operating losses since inception.
 
2. GOING CONCERN CONSIDERATIONS

Though the Company has a positive net working capital of US$3,407,737 as of September 30, 2006, it has a net loss of US$8,508,116 and a net loss of US$6,626,070 for the nine months and three months ended September 30, 2006 respectively. Continuation of the Company as a going concern is dependent upon obtaining additional working capital through additional equity funding and attaining profitable operations in the future. Management has developed a strategy, which they believe can be accomplished and will enable the Company to operate in the future. The inability of the Company to secure additional funding and attain profitable operations in the near term could adversely impact the Company's business, financial position and prospects.
 
7
 
3. AMOUNT DUE FROM/TO RELATED PARTIES

(a) Due from related parties

   
As of September 30, 2006
  
   
US $
  
       
Classified as current assets
    
--
  

(b) Due from related companies

   
As of September 30, 2006
  
   
US $
  
       
WTC Link International Limited
    
112,715
  
         
Classified as current assets
    
112,715
  
         
The amounts due from related company as of September 30, 2006 represented unsecured advances which are interest-free and repayable on demand.

(c) Due to related parties - others

   
As of September 30, 2006
  
   
US $
  
       
Classified as current liabilities
    
--
  

(d) Due to related companies

   
As of September 30, 2006
  
   
US $
  
       
Guangzhou Goldlion City Properties Co., Ltd.
    
3,184
  
Beijing Wanlong Economic Consultancy Corporation Ltd.
    
23,156
  
Guangzhou City International Exhibition Co.
    
13,893
  
Guangzhou Sanranxin Travel Ltd.
    
8,467
  
         
Classified as current Liabilities
    
48,700
  
 
8

The amounts due to related parties as of September 30, 2006 represented unsecured advances which were interest-free and repayable on demand.

(e) Due to a shareholder

   
As of September 30, 2006
  
   
US $
  
       
Mr. William Tsang
    
1,258,062
  

The amount due to a shareholder represents unsecured advances which are interest-free and repayable on demand.

4.  DISPOSAL OF A SUBSIDIARY

On September 29, 2006, the Company through its wholly owned subsidiary, China Chance Enterprises Limited, sold 100% outstanding capital stock of Rejoice Success Limited (“Rejoice”) to Wisdom Plus Limited (“Wisdom Plus”) at a consideration of $4,000,000. Rejoice owns 60% of the outstanding capital stock of General Business Network (Holdings) Limited (“GBN”), which indirectly owns 51% of the outstanding capital stock of New Generation Commercial Management Limited (“New Generation”). 

New Generation engages in the travel agency business by operating ten subsidiaries in Southern China. To date, New Generation has accumulated a substantial market share in ticketing sales for international and domestic flights as well as inbound business travel. In addition, Guangzhou Huahao Insurance Agency Limited, one of the New Generation group of companies, is also a licensed insurance agent in China, providing accidental and life insurance to individual policy holders in the Guangzhou Province of China.

The purchase price will be paid by 4 instalments from September 30, 2006 to July 29, 2007 in cash or shares of common stock issued by any Pink Sheet companies or OTCBB companies in lieu of the consideration. The amount of share certificates shall be agreed by both parties in a separate agreement. To date, cash of $100,000 had been received pursuant to the Agreement. with the following schedule: US$100,000 to be paid on September 30, 2006; US$900,000 to be paid on January 29, 2007; US$1,000,000 to be paid on April 29, 2007; and US$2,000,000 to be paid on July 29, 2007. 
 
Loss on disposal of GBN is determined as follows:

   
Nine months ended September 30, 2006
  
   
US$
  
       
Net Assets disposed
      
Property, plant and equipment
    
1,488,347
  
Goodwill
    
11,409,514
  
Rental use rights
    
1,543,413
  
Cash and cash equivalents
    
1,353,749
  
Pledged bank deposit
    
246,996
  
Account receivables
    
4,386,375
  
Available-for-sale securities
    
159,375
  
Due from a related company
    
1,157,343
  
Due from related parties
    
614,255
  
Due from a director
    
8,265
  
Rental and other deposits
    
1,992,209
  
Prepayments
    
918,818
  
Loan receivable
    
4,116
  
Other current assets
    
515,215
  
Lines of credit
    
(3,859,311
)
Due to related parties
    
(30,116
)
Accounts payable
    
(3,957,938
)
Accruals
    
(181,952
)
Tax payables
    
(1,472,141
)
Tax penalty
    
(1,026,680
)
Hire purchase creditor
    
(121,032
)
Other current liabilities
    
(1,440,673
)
Minority interest
    
(1,690,583
)
         
Net asset value
    
12,017,564
  
60% thereof
    
7,210,538
  
Consideration
    
4,000,000
  
Loss on disposal of a subsidiary
    
3,210,538
  
 
9
 
5. IMPAIRMENT LOSS ON AFFILIATE
 
Upon disposal of 60% of General Business Network (Holdings) Limited (“GBN”) common shares per note 4 above, the Company holds 40% of its outstanding capital stock. GBN becomes an affiliate subsequent to the disposal. With reference to the consideration relating to 60% of equity of GBN which has been disposed, the impairment loss is determined as follows:

   
Nine months ended September 30, 2006
  
   
US$
  
       
Cost of investment of GBN (40% of net asset value $12,017,564 immediately before disposal)
    
4,807,026
  
Carrying value of GBN with reference to consideration for 60% equity disposed of ($4,000,000 x 40%/60%)
    
2,666,667
  
         
Impairment loss
    
2,140,359
  
 
6.  INVESTMENT IN AFFILIATES

The Company accounts for its 25% interest in CWT International Excursion Investment Limited (“CWT Excursion”), a company organized and existing under the laws of the British Virgin Islands, and 40% interest in General Business Network (Holdings) Limited (“GBN”), a company organized and existing under the laws of Hong Kong SAR, under the equity method of accounting. Under the equity method of accounting, the Company’s share of income or loss of CWT Excursion and GBN are recorded as “Equity in earnings of affiliates” in the consolidated statement of operation. As both CWT Excursion and GBN became affiliates of the Company at period end, no equity in earnings of affiliates has been accounted for in the unaudited condensed statement of operation for three months ended September 30, 2006.

Carrying value of affiliates consists of the following:

   
As of September 30, 2006
  
   
US $
  
       
General Business Network (Holdings) Limited.
      
Carrying value with reference to consideration for 60% equity disposed ($4,000,000 x 40%/60%)
    
2,666,667
  
Equity in earnings of GBN
    
--
  
Cash dividend received from GBN
    
--
  
     
2,666,667
  
CWT International Excursion Investment Limited
       
Carrying value with reference to closing bid price for the 9,000,000 common stock of the Company issued as consideration in the last five trading days preceding the date of the Agreement of $0.712 ($0.712 x 9,000,000 shares)
    
6,408,000
  
Equity in earnings of CWT Excursion
    
--
  
Cash dividend received from CWT Excursion
    
--
  
     
6,408,000
  
         
Carrying value in affiliates
    
9,074,667
  
 
10

(a)  
Acquisition of affiliate

On September 25, 2006, the Company together with its wholly owned subsidiary, Rainbow Wish Limited (“Rainbow Wish”), entered into a Share Exchange Agreement (the “Agreement”) with CWT International Excursion Investment Limited, a company organized and existing under the laws of the British Virgin Islands (“CWT Excursion”), and Chi Hung Tsang, the Chairman of the Company and holder of sixty percent (60%) of the capital stock of CWT Excursion, and also a citizen and resident of the People’s Republic of China. Pursuant to the terms of the Agreement, the Company will issue 9,000,000 shares of its common stock (the “CWTD Shares”) to Mr. Tsang in exchange for 25 common shares of CWT Excursion owned by him (the “CWT Excursion Shares”) to Rainbow Wish, presenting a 25% equity interest in CWT Excursion.
 
CWT Excursion was incorporated in March, 2006, and is the owner of 51% of the equity interest in a joint venture company known as Suzhou Tongli (International) Excursion Development Limited, which is a company organized and existing under the laws of the People’s Republic of China (“Suzhou Tongli”). Suzhou Tongli is in the business of operating tourist concessions in Tongli Town, Suzhou City, Jiangsu Province, People’s Republic of China.

Pursuant to the Agreement, Mr. Tsang has also agreed to grant Rainbow Wish the option to purchase an additional 35% of the capital stock of CWT Excursion within twelve months of the date hereof, at a price that will be agreed upon by both parties at the time of exercise of said option in a separate agreement.

The acquisition consideration of CWT Excursion amounts to $6,408,000. It is the fair market value of the CWTD Shares to be issued to Mr. Tsang, based on the closing bid price for the common stock of CWTD in the last five trading days preceding the date of the Agreement of $0.712.

The investment in CWT Excusion is categorized as an affiliate because the Company owns 25% of its equity, which is 20% or more and is 50% or less of its outstanding capital stock. It is included in the consolidated income statement using the equity method of accounting and is included in balance sheet at cost plus equity accounting adjustments. As the acquisition was consummated after the end of the period, no share of CWT Excursion profit or loss has been included in three months ended September 30, 2006.

(b)  
Addition of affiliate

Upon disposal of 60% of General Business Network (Holdings) Limited (“GBN”) common shares per note 4 above, the Company holds 40% of its outstanding capital stock. GBN becomes an affiliate subsequent to the disposal.

11

7. RELATED PARTY TRANSACTIONS

(a) Names and relationship of related parties

 
   
Beijing Wanlong Economic Consultancy Corporation Ltd.
PRC partner of a subsidiary
   
Bernard Chan
An ex-officer and an ex-shareholder of the Company
   
Chan Chi Ming
A director, shareholder and officer of the Company
   
Chen De Xiong
A shareholder and director of a subsidiary
   
Chen Zeliang
A shareholder and director of the Company
   
Chinamax International Ltd.
An ex-shareholder of a former subsidiary
   
Glory River Corporation
A company which an officer of the Company is a director
   
Goldlion Holding Ltd.
A company controlled by close family members of a director
   
Guangdong Huahao Industries Group Co. Ltd.
A shareholder of a subsidiary
   
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
   
Guangzhou Goldlion Environmental Technology Co., Ltd.
A company controlled by close family members of a director
   
Guangzhou Sanranxin Travel Ltd
A company in which a director of the Company has beneficial interest
   
HK (Xian) Trade Association Ltd.
A non-profit making organization in which a director of the Company is a director
   
Ho Chi Kin
A former independent director of the Company
   
Huang Ze Hua
A shareholder and director of a subsidiary
   
John Hui
A director, shareholder and ex-officer of the Company
   
Luo Chao Ming
A director and shareholder of the Company
   
Ringo Leung
A former director of the Company
   
Suo Hong Xia
A shareholder and director of a subsidiary
   
William Tsang
A director, shareholder and officer of the Company

(b) Summary of related party transactions
 
12

   
Three Months Ended September 30,
  
Nine Months Ended September 30,
  
   
2006
  
Restated 2005
  
2006
  
Restated 2005
  
   
US$
  
US$
  
US$
  
US$
  
   
(Unaudited)
  
(Unaudited)
  
(Unaudited)
  
(Unaudited)
  
                   
Consultancy fee expenses to
                  
Beijing Wanlong Economic Consultancy Corporation Ltd.
   
4,631
    
4,631
    
13,893
    
13,692
  
Bernard Chan
   
--
    
19,231
    
12,821
    
63,009
  
Chen Dexiong
    
1,482
    
2,931
    
4,446
    
2,931
  
Guangzhou City International Exhibition Co.
   
4,631
    
4,631
    
13,893
    
13,692
  
Glory River Corporation
   
17,308
    
--
    
48,077
    
--
  
Huang Zehua
    
926
    
3,429
    
2,778
    
5,005
  
Suo Hongxia
    
463
    
1,382
    
1,389
    
1,836
  
                           
Director salary to
                          
Ho Chi Kin
    
--
    
1,500
    
1,000
    
4,500
  
William Tsang
    
37,500
    
48,417
    
112,500
    
112,500
  
Chan Chi Ming
    
19,266
    
19,266
    
57,797
    
66,521
  
John Hui
    
--
    
37,500
    
--
    
112,500
  
Luo Chao Ming
    
1,111
    
4,833
    
10,850
    
14,273
  
Chen Zeliang
    
3,705
    
8,620
    
7,410
    
16,268
  
                           
Rent and related expenses to
                          
Guangzhou Goldlion City Properties Co., Ltd.
   
59,767
    
53,172
    
168,888
    
203,143
  
Guangzhou Goldlion Environmental Technology Co., Ltd.
    
44,940
    
42,340
    
131,353
    
96,239
  
                           
Sale of leasehold land and buildings to
                          
Guangzhou Goldlion Environmental Technology Co., Ltd.
    
--
    
--
    
--
    
2,457,382
  
                           
Personal guarantee granted from
                          
Mr. William Tsang
   
19,231
    
19,231
    
19,231
    
19,231
 
                           
Intangible asset sold to
                          
Mr. William Tsang
    
--
    
--
    
--
    
1,320,000
  
                           
Traveling expenses to
                          
Guangzhou Sanranxin Travel Ltd.
   
16,177
    
-
    
16,177
    
4,139
 
                           
Sponsorship donation/ expenses to
                          
HK (Xian) Trade Association Ltd.
    
--
    
-
    
38,482
    
--
  
Goldlion Holdings Ltd.
    
--
    
--
    
-
    
4,463
  
                           
Acquisition of an affiliate from
                          
Mr. William Tsang
    
6,408,000
    
--
    
6,408,000
    
--
  
                           
Rental compensation income from
                          
Guangzhou Goldlion City Properties Co., Ltd.
    
--
    
--
    
--
    
3,854
  

13

8.  STOCK-BASED COMPENSATION

The Company records compensation expense for stock-based employee compensation plans using the intrinsic value method in which the 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 granted 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. On February 20, 2004, the Company cancelled 95,000 options due to resignation and job reposting; accordingly there are no options outstanding at September 30, 2006.

Pursuant to a registration statement filed as of June 8, 2006, the 2006 Non-qualified Stock Compensation Plan has become effective. It is intended to advance the best interests of the Company by providing those persons who have a substantial responsibility for its management and growth with additional incentive and by increasing their proprietary interest in the success of the Company, thereby encouraging them to maintain their relationships with the Company. Further, the availability and offering of stock options and common stock under the Plan supports and increases the Company's ability to attract and retain individuals of exceptional talent upon whom, in large measure, the sustained progress, growth and profitability of the Company depends. The total number of shares of the Company available for grants of Stock Options and Common Stock under the Plan shall be 1,500,000, which are not subject to any restriction on transferability and are to be granted to certain employees, officers, directors and consultants.

As of September 30, 2006, 800,000 shares of the 1,500,000 shares under the 2006 Non-qualified Stock Compensation Plan has been issued to Greentree Financial Group, Inc. pursuant to a consultancy contract dated March 23, 2006. Based on vested date market price of $1.37 as of March, 23, 2006 (the contract date) multiplied by 800,000 shares and by time apportionment, $297,747 and $274,000 had been accrued for the three months ended June 30, 2006 and September 30, 2006 respectively.

9. BUSINESS SEGMENT INFORMATION

   
Three Months Ended September 30,
  
Nine Months Ended September 30,
  
   
2006
  
Restated 2005
  
2006
  
Restated 2005
  
   
US$
  
US$
  
US$
  
US$
  
   
(Unaudited)
  
(Unaudited)
  
(Unaudited)
  
(Unaudited)
  
Operating revenues
                 
Club and business centre
    
184,903
    
159,805
    
511,999
    
710,666
  
Business traveling services
    
870,531
    
1,473,498
    
2,689,140
    
3,579,565
  
Business value-added services
    
--
    
254,644
    
927,368
    
871,413
  
Rental
    
3,461
    
3,462
    
10,383
    
218,161
  
Trading and others
    
--
    
236
    
--
    
122,109
  
     
1,058,895
    
1,891,645
    
4,138,890
    
5,501,914
  
                           
Profit (Loss) from operations
                          
Club and business centre
    
(59,924
)
  
(82,628
)
  
(245,538
)
  
(281,127
)
Business traveling services
    
(200,390
)
  
244,306
    
(756,643
)
  
853,633
  
Business value-added services
    
(107,428
)
  
(2,757,082
)
  
526,440
    
(3,427,815
)
Rental
    
(116,209
)
  
(137,637
)
  
(476,827
)
  
(237,273
)
Trading and others
    
--
    
(1,043
)
  
--
    
(66,095
)
                           
     
(483,951
)
  
(2,734,084
)
  
(952,569
)
  
(3,158,677
)
Corporate expenses
    
(843,659
)
  
(406,044
)
  
(2,551,315
)
  
(1,317,084
)
                           
Consolidated operating loss
    
(1,327,610
)
  
(3,140,128
)
  
(3,503,884
)
  
(4,475,761
)
                           
Realized gain on marketable securities - available-for-sale
   
--
    
4,260,761
    
46,000
    
6,079,960
  
Other income
    
820
    
3,862
    
43,817
    
44,170
  
Impairment loss on investment in an affiliate
    
(2,140,359
)
  
--
    
(2,140,359
)
  
--
  
Loss on disposal of interest in a subsidiary
    
(3,210,538
)
  
--
    
(3,210,538
)
  
--
  
Loss on disposal of property, plant and equipment
    
(9,387
)
  
--
    
(9,387
)
  
--
  
Loss on disposal of leasehold land and buildings
    
--
    
--
    
--
    
(254,740
)
Interest income
    
13,688
    
--
    
34,625
    
--
  
Interest expense
    
(79,649
)
  
(25,775
)
  
(210,418
)
  
(90,397
)
Other expense
    
--
    
(32
)
  
--
    
(1,177
)
                           
Net loss before income taxes and minority interest
    
(6,753,035
)
  
1,098,688
    
(8,950,144
)
  
1,302,055
  
 
14
 
10. ISSUANCE OF SHARES

The following capital stock transactions, which were all recorded at fair values as of their respective date of agreements, occurred during the three months ended September 30, 2006:

(a)  
On August 15, 2006, the Company issued 800,000 shares to Greentree Financial Group, Inc. for consulting services provided. Of the total amount of consultancy fee $1,096,000, $297,747 and $274,000 had been expensed during the three months ended June 30, 2006 and September 30, 2006 respectively in accordance with terms of the consultancy contract, which is based on the vested date (that is, contract date) share price of $1.37 as of March 23, 2006 multiplied by the 800,000 shares issued. The shares issued were unrestricted, pursuant to an S-8 registration filed with the SEC on June 8, 2006.
 
11.  SUPPLEMENTARY DISCLOSURE OF CASH FLOW INFORMATION
 
(a) Analysis of net outflow of cash and cash equivalents in respect of disposal of a subsidiary during the period

   
Nine months ended September 30, 2006
  
   
US$
  
       
Cash consideration receivable of $4,000,000, none received as of period end
  
Nil
  
Bank balance and cash disposed
    
1,353,749
  
         
Net outflow of cash and cash equivalents
    
1,353,749
  

12. COMMITMENTS AND CONTINGENCIES
 
Prior to the completion of acquisition by the Company of New Generation Commercial Management Limited (“New Generation”), New Generation 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 for in the consolidated financial statements. However, New Generation 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 New Generation has undertaken to indemnify the Company against such shortfall and additional tax-related liabilities. As of September 30, 2006, the estimated further surcharges and penalties for which New Generation was potentially liable amounted to US$430,364 and US$9,470,714 respectively. The estimated further penalties were based on the highest charge rate of the range from 50% to 500%.
 
15
 
13. PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

The unaudited pro forma consolidated financial information for China World Trade Corporation (“CWTD”) includes an unaudited statement of operations for the year ended December 31, 2005, an unaudited statement of operations for the nine months ended September 30, 2006. The pro forma consolidated statement of operations for the year ended December 31, 2005 and for the nine months ended September 30, 2006 assumes the sale of General Business Network (Holdings) Limited (“GBN”) occurred at the beginning of the respective periods. The unaudited balance sheet as of September 30, 2006 as presented in this unaudited financial statement had been prepared on the basis that GBN had been disposed as of this date and its assets and liabilities had been eliminated. Hence, no pro forma consolidated balance sheet as of September 30, 2006 is presented herewith.
 
    On September 29, 2006, China Chance Enterprises Limited, a wholly owned subsidiary of the CWTD and a limited liability company organized and existing under the laws of the British Virgin Islands (“China Chance”), entered into a Sale and Purchase Agreement (the “Agreement”) with Wisdom Plus Limited, a limited liability company organized and existing under the laws of the British Virgin Islands (“Wisdom Plus”), pursuant to which China Chance agreed to sell and Wisdom Plus agreed to purchase, all of the outstanding registered shares (the “Shares”) of Rejoice Success Limited, a limited liability company organized and existing under the laws of the British Virgin Islands (“Rejoice Success”) and an indirect wholly owned subsidiary of CWTD. The purchase price for the Shares was $4.0 million, payable in installments in accordance with the schedule set forth in the Agreement.
 
    Rejoice Success owns 60% of the outstanding capital stock of GBN, a limited liability company organized under the laws of the Hong Kong SAR of the People’s Republic of China, GBN owns 100% of the outstanding capital stock of General (GZ) Business Network Limited, a limited liability company organized under the laws of the People’s Republic of China (“GZ Business”), and GZ Business owns 51% of the outstanding capital stock of Guangdong New Generation Commercial Management Ltd., a limited liability company organized and existing under the laws of the People’s Republic of China (“New Generation”), which engages in the travel agency business by operating ten subsidiaries in Southern China.
 
    The following unaudited pro forma consolidated financial statements have accounted for effect relating to the sale of GBN by CWTD. These unaudited pro forma consolidated financial statements have been prepared from the historical consolidated financial statements of CWTD and GBN, and should be read in conjunction therewith. The pro forma information is presented for illustrative purposes only and is not necessarily indicative of the operating results or financial position that would have occurred if the sale had been consummated on the respective dates, nor is it indicative of future operating results. The pro forma adjustments are based on information available at the time of this filing.
 
16
 
(a)  
Pro Forma Consolidated Statement of Operations for the nine months ended September 30, 2006 (unaudited)

CHINA WORLD TRADE CORPORATION AND SUBSIDIARIES
Pro Forma Consolidated Statement of Operations and Comprehensive Loss
(Unaudited)
 
  
For the Nine Months Ended September 30, 2006
 
 
CWTD
 
GBN
 
Pro Forma
 
 
 
Pro Forma
 
 
 
 (Historical)
 
(Historical)
 
Adjustments
 
Reference
 
Balances
 
 
 
  
 
 
 
 
 
 
 
 
 
Operating revenues
 
  
 
 
 
 
 
 
 
 
 
Club and business centre
 
$
511,999
  
$
-
  
$
-
        
$
511,999
 
Business traveling services
 
 
2,689,140
  
(
2,689,140
)
  
-
          
-
 
Business value-added services
 
 
927,368
    
(375,000
)
  
-
          
552,368
 
Rental services
 
 
10,383
    
(10,383
)
  
-
          
-
 
Trading and other services
    
-
    
-
    
-
          
-
  
     
4,138,890
  
(
3,074,523
)
  
-
          
1,064,367
  
                                 
Operating costs and expenses
                                
Cost of Club and business centre
    
(26,323
)
  
-
    
-
          
(26,323
)
Cost of Business traveling services
    
(522,955
)
  
522,955
    
-
          
-
  
Cost of Business value-added services
    
(381
)
  
134
    
-
    
-
    
(247
)
Cost of Rental services
    
-
    
-
    
-
          
-
  
Cost of Trading and other services
    
-
    
-
    
-
          
-
  
Bad debts recovered
    
12,730
    
15,525
                
28,255
  
Impairment, depreciation and amortization
    
(336,617
)
  
317,988
    
-
          
(18,629
)
Selling, general and administrative expenses
    
(6,769,228
)
  
3,151,666
    
-
          
(3,617,562
)
     
(7,642,774
)
  
4,008,268
    
-
          
(3,634,506
)
                                 
Loss from operations
    
(3,503,884
)
  
933,745
    
-
          
(2,570,139
)
                                 
Non-operating income(expense)
                                
Realized gains on marketable securities - available-for-sale
    
46,000
    
-
    
-
          
46,000
  
Other income
    
43,817
    
(68
)
              
43,749
  
Interest income
    
34,625
    
(30,923
)
  
-
          
3,702
  
Impairment loss on investment in an affiliate
    
(2,140,359
)
  
-
    
-
          
(2,140,359
)
Loss on disposal of interest in a subsidiary
    
(3,210,538
)
  
(173,947
)
              
(3,384,485
)
Loss on disposal of property, plant and equipment
    
(9,387
)
  
9,387
                
-
  
Interest expense
    
(210,418
)
  
210,418
    
-
          
-
  
Profit (Loss) before income taxes and minority interest
    
(8,950,144
)
  
948,611
    
-
          
(8,001,533
)
Provision for income taxes
    
(103,037
)
  
103,037
    
-
          
-
  
Profit (Loss) before minority interest
    
(9,053,181
)
  
1,051,648
    
-
          
(8,001,533
)
Minority interest
    
545,065
    
(528,145
)
  
-
          
16,920
  
Net profit (loss)
    
(8,508,116
)
  
523,503
    
-
          
(7,984,613
)
                                 
Other comprehensive income (loss)
                                
Unrealized gains (loss) on available-for-sale securities
                                
Unrealized holding gain (loss) arising for the period
    
(1,108,375
)
  
1,009,375
    
-
          
(99,000
)
Less: Reclassification adjustment for gains or losses included in net profit (loss)
    
(46,000
)
  
-
                
(46,000
)
Foreign currencies translation adjustments
                                
Less: Reclassification adjustment for gains or losses included in net profit (loss)
 
 
(15,393
)
  
15,393
    
-
          
-
  
Comprehensive income (loss)
 
$
(9,677,884
)
$
1,548,271
  
$
-
        
$
(8,129,613
)
 
 
 
                          
 
Profit (Loss) per share of common stock-Basic and diluted
 
 $
(0.25
)
                  
$
(0.23
)
Weighted average number of shares of common stock outstanding
 
 
34,030,578
                      
34,030,578
 
 
The accompanying notes are an integral part of these pro forma consolidated financial statements.
 
17
 
(b) Pro Forma Consolidated Statement of Operations for the year ended December 31, 2005 (unaudited)

CHINA WORLD TRADE CORPORATION AND SUBSIDIARIES
Pro Forma Consolidated Statement of Operations and Comprehensive Income (Loss)
(Unaudited)
 
  
For the Year Ended December 31, 2005
 
 
CWTD
 
GBN
 
Pro Forma
 
 
 
Pro Forma
 
 
 
 (Historical)
 
(Historical)
 
Adjustments
 
Reference
 
Balances
 
Operating revenues
 
  
 
 
 
 
 
 
 
 
 
Club and business centre
 
$
894,550
  
$
-
  
$
-
        
$
894,550
 
Business traveling services
 
 
4,983,468
  
 
(5,113,339
)
  
129,871
    
Note 1
    
-
 
Business value-added services
 
 
1,618,413
    
(187,755
)
  
-
          
1,430,658
 
Rental
 
 
221,699
    
(86,179
)
  
15,448
    
Note 1
    
150,968
 
Trading and others
    
121,094
    
(121,094
)
  
-
          
-
  
     
7,839,224
  
 
(5,508,367
)
  
145,319
          
2,476,176
  
                                 
Operating costs and expenses
                                
Club and business centre
    
(159,742
)
  
-
    
(58,038
)
  
Note 1
    
(217,780
)
Business traveling services
    
(727,089
)
  
727,089
    
-
          
-
  
Business value-added services
    
(2,513,523
)
  
1,615
    
-
          
(2,511,908
)
Rental
    
(98,762
)
  
-
    
-
          
(98,762
)
Trading and others
    
(119,767
)
  
119,767
    
-
          
-
  
     
(3,618,883
)
  
848,471
    
(58,038
)
        
(2,828,450
)
                                 
Other expenses
                                
Depreciation and amortization
    
(303,797
)
  
263,170
    
-
          
(40,627
)
Impairment of property, plant and equipment
    
(38,598
)
  
-
    
-
          
(38,598
)
Selling, general and administrative expenses
    
(9,167,728
)
  
4,037,159
    
(87,281
)
  
Note 4
    
(5,217,850
)
     
(9,510,123
)
  
4,300,329
    
(87,281
)
        
(5,297,075
)
Loss from operations
    
(5,289,782
)
  
(359,567
)
  
-
          
(5,649,349
)
                                 
Non-operating income (expense)
                                
Other income
    
42,581
    
(29,414
)
              
13,167
  
Interest income
    
28,171
    
(27,309
)
  
-
          
862
  
Interest expense
    
(136,426
)
  
136,433
    
-
          
7
  
Gain on disposal of a subsidiary
    
85,854
    
-
    
-
          
85,854
  
Realized gains on disposal of available-for-sale securities
    
6,079,960
    
-
    
-
          
6,079,960
  
Loss on disposal of property, plant and equipment
    
(254,740
)
  
254,740
                
-
  
Profit (Loss) before income taxes and minority interest
    
555,618
    
(25,117
)
  
-
          
530,501
  
Income tax expense
    
(254,419
)
  
254,178
    
-
          
(241
)
Profit (Loss) before minority interests
    
301,199
    
229,061
    
-
          
530,260
  
Minority interests
    
(282,975
)
  
307,873
    
-
          
24,898
  
Net profit (loss)
    
18,224
    
536,934
    
-
          
555,158
  
                                 
Other comprehensive income
                                
Unrealized gains on available-for-sale securities
                                
Unrealized holding gain arising during the year
    
751,250
    
(606,250
)
  
-
          
145,000
  
Less: Reclassification adjustment for gains or losses included in net profit (loss)
 
 
-
    
-
    
-
          
-
  
Foreign currency translation adjustments
 
 
23,990
    
(15,393
)
  
-
          
8,597
  
Comprehensive income (loss)
 
$
793,464
  
$
(84,709
)
$
-
        
$
708,755
  
Profit (Loss) per share of common stock-Basic and diluted
 
$
0.00
                    
$
0.02
  
Weighted average number of shares of common stock outstanding
 
 
31,154,526
                      
31,154,526
 
 
The accompanying notes are an integral part of these pro forma consolidated financial statements.
 
18

(c) Notes to Pro Forma Consolidated Financial Statements

Basis of Presentation

The accompanying unaudited pro forma consolidated statements of operations present the pro forma effects of the sale of General Business Network (Holdings) Limited ("GBN"). The unaudited pro forma consolidated statements of operations for the nine months ended Septembert 30, 2006 and for the year ended December 31, 2005 are presented as if the acquisition occurred at the beginning of the respective periods. The unaudited pro forma consolidated statements of operations do not include any pro forma adjustments for any potential operating efficiencies and cost savings that may be achieved as a result of the disposition.

Sale

The total consideration receivable in accordance with the Sale and Purchase Agreement (“the Agreement”) dated September 29, 2006 is $4,000,000. It will be received by 4 instalments from September 30, 2006 to July 29, 2007 in cash or shares of common stock issued by any Pink Sheet companies or OTCBB companies in lieu of the consideration set forth above. The amount of share certificates shall be agreed by both parties in a separate agreement. To date, cash of $100,000 had been received pursuant to the payment schedule of the Agreement. The sale was completed on September 29, 2006.

Pro Forma Adjustments

Note 1 - Being reversal of the effect of elimination entries relating to inter-company sales because the pro forma statement of operation figures are presented as if the sale occurred at the beginning of the respective periods.
 
19

Item 2. Management's discussion and analysis of financial conditions and results of operation
 
PRELIMINARY NOTE REGARDING FORWARD LOOKING STATEMENTS
 
This report contains certain forward-looking statements about our operations. The reader 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. Since June 2002, our business objective has been 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 two clubs, one in Guangzhou and the other in Beijing, PRC. We have grown through acquisitions and internal growth and our business objectives have expanded as set forth in the following paragraphs.

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 ("Virtual Edge") and Main Edge International Limited ("Main Edge"), Main Edge transferred all of the issued and outstanding shares of the capital stock of Virtual Edge to the Company in exchange for 1,961,175 shares of our pre-split common stock, representing approximately 75% of our outstanding shares of the common stock. Accordingly, we controlled the operations of Virtual Edge, and Main Edge became our majority stockholder. We then undertook an 8-for-1 forward split that was effective on the 15th day of September 2000, which resulted in Main Edge owning 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 warrants for the shares of our common stock by Mr. Tsang and Powertronic in March 2004 and in July 2004, and the further exercise additional warrants in December 2004. As a result of these transactions, Mr. Chi Hung Tsang became the new major shareholder and owns over 12,600,000 shares of our common stock and Powertronic owns over 5,500,000 shares. Mr. Chi Hung Tsang is currently President and Chairman of our Board of Directors.
 
20
   
China World Trade Corporation ("China World Trade") has recently established its businesses into three distinct divisions, namely the club and business center; business travel services; and 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. China World Trade 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. The CEO Clubs family, of which each family member operates independently of each other, 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 member of our affiliated CEO Clubs family has $20 million in annual sales.
 
Since the completion of the acquisition of a majority stake of Guangdong New Generation Commercial Management Limited (the “New Generation Group” or “New Generation”) in August 2004, the Business Travel Services division has provided the necessary platform for China World Trade Corporation to focus on the high growth, travel related businesses. New Generation aims to be the pioneer and to become one of the market leaders in the travel agency businesses through the operations of its seven subsidiaries in Southern China in ticketing sales for international and domestic flights as well as inbound business travel. Being a major consolidator 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 and the International Air Transport Association and three 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 is believed to contribute a solid revenue base to the Company.
 
As of September 29, 2006, the Company sold 60% of its ownership of the capital stock of New Generation for $4.0 million, payable in four installments, as described above.

The Business Value-Added Services division concentrates on value-added services of merchant related businesses as well as on consultancy services. WTC Link International Limited and other subsidiaries of China World Trade, leverage the network and database of the Business Clubs and New Generation to provide business related services to its clients. In addition, this division also provides consultancy services to China World Trade'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 unaudited condensed consolidated income statement data of the Company and its subsidiaries for the three months and nine months ended September 30, 2006 and September 30, 2005. The data should be read in conjunction with the unaudited Condensed Consolidated Financial Statements of the Company for the three months and nine months ended September 30, 2006 and September 30, 2005, and related notes thereto.
 
21

(Unaudited)
  
Three months Ended September 30,
  
Nine months Ended September 30,
  
   
2006
  
% of Rev
  
Restated 2005
  
% of Rev
  
2006
  
% of Rev
  
Restated 2005
  
% of Rev
  
(In US$ thousands, except per share data)
                                  
                                   
Operating revenues
                                 
Club and business centre
   
185
   
17.5
   
160
   
8.5
   
512
    
12.4
   
711
   
12.9
 
Business traveling services
   
871
   
82.2
   
1,474
   
77.9
   
2,689
   
65.0
   
3,580
   
65.1
 
Business value-added services
   
-
   
--
   
255
   
13.5
   
927
   
22.4
   
871
   
15.8
 
Rental
    
3
    
0.3
    
3
    
0.1
    
10
    
0.2
    
218
    
4.0
  
Trading and others
             
--
   
--
               
122
   
2.2
 
Total Operating Revenues
   
1,059
    
100.0
   
1,892
    
100.0
    
4,138
    
100.0
    
5,502
    
100.0
  
                                                   
Operating costs and expenses
                                                  
Club and business centre
   
(10
)
  
(0.9
)
  
(8
)
  
(0.4
)
  
(26
)
  
(0.6
)
  
(152
)
  
(2.8
)
Business traveling services
   
(190
)
  
(18.0
)
  
(262
)
  
(13.9
)
  
(523
)
  
(12.6
)
  
(381
)
  
(6.9
)
Business value-added services
   
--
    
--
    
(1,743
)
  
(92.1
)
  
--
    
--
    
(2,510
)
  
(45.6
)
Rental
    
--
    
--
    
--
    
--
    
--
    
--
    
(99
)
  
(1.8
)
Trading and others
    
--
    
--
    
--
    
--
    
--
    
--
    
(121
)
  
(2.2
)
Total Operating costs and expenses
    
(200
)
  
(18.9
)
  
(2,013
)
  
(106.4
)
  
(549
)
  
(13.2
)
  
(3,263
)
  
(59.3
)
                                                   
Gross Profit
                                                 
Club and business centre
   
175
   
16.5
   
152
   
8.0
   
486
   
11.8
   
559
   
10.2
 
Business traveling services
   
681
   
64.3
   
1,212
   
64.0
   
2,166
   
52.4
    
3,199
   
58.1
 
Business value-added services
   
--
   
--
   
(1,488
)
  
(78.6
)
  
927
    
22.4
   
(1,639
)
  
(29.8
)
Rental
    
3
    
0.3
    
3
    
0.2
    
10
    
0.2
    
119
    
2.2
  
Trading and Others
           
--
   
--
   
--
        
1
   
--
 
Total Gross Profit
   
859
   
81.1
   
(121
)
  
(6.4
)
  
3,589
   
86.8
   
2,239
   
40.7
 
                                                   
Bad debts recovered
    
13
    
1.2
    
--
          
13
    
0.3
    
--
        
Impairment, depreciation and amortization
    
(96
)
  
(9.0
)
  
(75
)
  
(4.0
)
  
(337
)
  
(8.2
)
  
(201
)
  
(3.7
)
Selling, general and administrative expenses
    
(2,104
)
  
(198.7
)
  
(2,944
)
  
(155.6
)
  
(6,769
)
  
(163.6
)
  
(6,514
)
  
(118.4
)
                                                   
Loss from operations
   
(1,328
)
  
(125.4
)
  
(3,140
)
  
(166.0
)
  
(3,504
)
  
(84.7
)
  
(4,476
)
  
(81.4
)
                                                   
Non-operating income (expense)
                                                  
Realized gains on marketable securities-for-sale
    
--
    
--
    
4,260
    
225.2
    
46
    
1.1
    
6,080
    
110.5
  
Other income
    
1
    
0.1
    
4
    
0.2
    
44
    
1.1
    
44
    
0.8
  
Interest income
    
14
    
1.3
    
--
    
--
    
34
    
0.8
    
--
    
--
  
Impairment loss on investment in an affiliate
    
(2,140
)
  
(202.1
)
  
--
    
--
    
(2,140
)
  
(51.7
)
  
--
    
--
  
Loss on disposal of interest in a subsidiary
    
(3,211
)
  
(303.2
)
  
--
    
--
    
(3,211
)
  
(77.6
)
  
--
    
--
  
Loss on disposal of property, plant and equipment
    
(9
)
  
(0.8
)
  
--
    
--
    
(9
)
  
(0.2
)
  
--
    
--
  
Loss on disposal of leasehold land and buildings
    
--
    
--
    
--
    
--
    
--
    
--
    
(255
)
  
(4.6
)
Interest expense
    
(80
)
  
(7.6
)
  
(26
)
  
(1.4
)
  
(210
)
  
(5.1
)
  
(90
)
  
(1.6
)
Other
                
--
    
--
    
--
    
--
    
(1
)
  
--
  
                                                   
Profit (loss) before income taxes and minority interest
   
(6,753
)
  
(637.7
)
  
1,098
    
58.0
    
(8,950
)
  
(216.3
)
  
1,302
    
23.7
  
                                                   
Provision for income taxes
   
(29
)
  
(2.7
)
  
(71
)
  
(3.7
)
  
(103
)
  
(2.5
)
  
(184
)
  
(3.4
)
                                                   
Profit (loss) before minority interest
   
(6,782
)
  
(640.4
)
  
1,027
    
54.3
    
(9,053
)
  
(218.8
)
  
1,118
    
20.3
  
                                                   
Minority interest
    
156
    
14.7
    
(92
)
  
(4.9
)
  
545
    
13.2
    
(314
)
  
(5.7
)
                                                   
Net profit (loss)
    
(6,626
)
  
(625.7
)
  
935
    
49.4
    
(8,508
)
  
(205.6
)
  
804
    
14.6
  
                                                   
Other comprehensive income (loss)
                                                  
Unrealized holding gain/loss arising for the period
    
--
    
--
    
(8
)
  
(0.4
)
  
(1,108
)
  
(26.8
)
  
7,043
    
128.0
  
Less: Reclassification adjustment for gains or losses included in net profit (loss)
    
--
    
--
    
(4,261
)
  
(225.2
)
  
(46
)
  
(1.1
)
  
(6,080
)
  
(110.5
)
Foreign currencies translation adjustments
    
--
    
--
    
(20
)
  
(1.1
)
  
--
    
--
    
--
    
--
  
Less: Reclassification adjustment for gains or losses included in net profit (loss)
    
(15
)
  
(1.4
)
  
--
    
--
    
(15
)
  
(0.4
)
  
(20
)
  
(0.3
)
                                                   
                                                   
Comprehensive Income (loss)
    
(6,641
)
  
(627.1
)
  
(3,354
)
  
(177.3
)
  
(9,677
)
  
(233.9
)
  
1,747
    
31.8
  

22

THREE MONTHS ENDED SEPTEMBER 30, 2006 COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 2005

Operating Revenue

We have provided club and business center services through our subsidiary Guangzhou World Trade Center Club located in Guangzhou Province, the PRC since June 2002, and business value-added services and other business (trading) through a subsidiary of General Business Network (Holdings) Limited since March 2003. We have commenced our business travel operations since our acquisition of New Generation in August 2004. Consolidated operating revenue for the three months ended September 30, 2006 was $1,059,000, compared to $1,892,000 for the same corresponding period in year 2005, a decrease of $833,000 or 44.0%. The decrease was mainly the result of a decrease in revenue generated by the business traveling services, with a significant decrease on the commission rate earned from its travel related business; and the decrease in revenue generated from our business value-added services. This was partially offset by the increase in revenue from our club and business centers. Our management has been closely monitoring and evaluating the future profitability of our travel related businesses.

Our mix of operating revenues will continue to shift since our acquisition of the travel business and development of our business value-added services. We will continue to utilize the World Trade Center Clubs in various major cities in China to provide the necessary platform for the growth of our businesses. We will monitor closely the development of each business segment and make adjustments to improve our performance steadily under normal business circumstances.

Of the $1,059,000 revenue in the three months ended September 30, 2006, approximately $185,000 (17.5%) was generated from providing club related services by our Guangzhou World Trade Center Club and Beijing World Trade Center Club; $871,000 (82.2%) was generated from business travel services; and $3,000 (0.3%) was generated from rental.

For the three months ended September 30, 2006, New Generation, our business traveling services arm, sold a total of over 384,000 tickets, which translates to a total value of air-ticket fare of approximately $50.6 million. As compared to the corresponding period in year 2005, tickets sold by New Generation increased by 34,000 tickets (or 9.7%) to approximately 350,000 tickets, with the value of air-ticket fare increasing by $6.8 million (or 15.5%) from $43.8 million.

Consolidated gross profit increased by $980,000 or 809.9% for the three months ended September 30, 2006 over the same corresponding period in year 2005. The increase was predominantly driven by our business value-added services resulting from providing various consultancy services to our members. This increase was offset by the decrease in gross profit of our business traveling services.. As a percentage of total operating revenues, the consolidated gross profit margin of 81.1% for the three months ended September 30, 2006 increased from a negative margin of 6.4% for the same corresponding period in 2005. Our profit margin was driven by a mix shift from lower margin business travel services to higher margin business valued-added services. 

Of the $859,000 total gross profit for the 3-month period ended September 30, 2006, gross profit of approximately $175,000 (or 20.4%) was generated from providing club and business center services, approximately $681,000 (or 79.3%) from business travel services, no gross profit was recorded from providing business value-added services and the remaining $3,000 (or 0.3%) from rental income. As compared to the same corresponding period in year 2005, the club and business center services represented 125.6% (or $152,000) of the total gross profit; 1,001.6% (or $1,212,000) was generated from the business travel business; negative 1,229.8% (or loss of $1,488,000); and the remaining 2.5% (or $3,000) from others (rental and cattle hide trading) businesses. The shift in segmental distribution was primarily due to the increase in business value-added services, resulting from a net loss in gross profit recorded from the last corresponding period. We anticipate that this segment mix will continue to change and balance out in year 2006.
 
23

Selling, General and Administrative Expenses

Selling, general and administrative expense decreased by approximately $840,000 or 28.5% to $2,104,000 for the three months ended September 30, 2006 from $2,944,000 for the same corresponding period in 2005. The decrease was mainly due to the fact that there is no share disposal expense for the three months ended September 30, 2006 and share disposal expenses for the three months ended September 30, 2005 amounts to $887,000 We believe the selling, general and administrative will continue to decrease steadily subsequent to the diposal of a subsidiary company and the acquisition of affiliates. These changes will lead to a further reduction of selling, general and administrative expenses because our share in net loss of affiliates will be accounted for under the equity accounting method.

Impairment Loss and Depreciation

Total impairment loss and depreciation were approximately $96,000 for the three months ended September 30, 2006, as compared to the same corresponding period in year 2005, an increase of $21,000 or 28.0% from $75,000. The increase was mainly due to the increase in depreciation of our fixed assets from the business traveling services in 2006. Under normal circumstances, we will review the impairment of our assets at the year end or at the anniversary of such assets.
 
Other Income and Realized Gain

The other income and realized gain on marketable securities-for sale decreased by approximately $4,263,000 for the three months ended September 30, 2006, as compared to the same corresponding period in 2005. The decrease was primarily the result of no record of realized gain for the 3-month ended September 30, 2006. During the reporting period, we disposed 60% of the outstanding capital stock of General Business Network (Holdings) Limited (“GBN”), which indirectly owns 51% of the outstanding capital stock of New Generation Commercial Management Limited resulting in a realized loss on disposal of interest in a subsidiary of approximately $3,210,000. Upon the disposal of 60% of GBN, an impairment loss of approximately $2,140,000 was recorded subsequent to the change of status of from a subsidiary company to an affiliate and due to the uncertainty of future cash flows produced by the investment with reference to the consideration receivable for 60% of disposed GBN capital stock.
 
Interest Expenses, Net

Net Interest expenses increased approximately in the amount of $40,000 to $66,000 for the three months ended September 30, 2006, as compared to the same corresponding period in year 2005. The majority of the increase was due to the additional interest expenses because of the higher interest rate incurred by the business traveling operations of New Generation in relation to an additional bank loan.

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. Several of our PRC subsidiaries are subject to PRC Enterprise Income Taxes (“EIT”) on an entity basis on income arising in and derived from the PRC. The applicable EIT rate is 33%.
 

24
 
Minority Interest

We recorded a minority income of approximately $156,000 for three months ended September 30, 2006 an increase of $248,000 compared to the same period in 2005.
 
Net Income(Loss) /Comprehensive income

Net loss was approximately $6,626,000 for the three months ended September 30, 2006, as compared to the net profit in the amount of $935,000 for the same corresponding period in year 2005, an increase of approximately $7,561,000. The increase in net loss was the result of the realized loss on disposal of interest in a subsidiary of approximately $3,210,000, impairment loss on investment in an affiliate of approximately $2,140,000 and decrease in the realized gain on marketable securities-for-sale accounted for approximately $4,260,000 which is partially offset by the decrease in operating loss of approximately $1,812,000 comparing to the same corresponding period in year 2005.

In addition, we recorded no unrealized loss on short-term investments (fair value adjustment) which is classified as other comprehensive income (loss) for the three months ended September 30, 2006, as compared to an unrealized loss of $4,269,000 for the same corresponding period in year 2005. This decrease was the result of relatively stable fair market value of the common stocks we received as compensation for our consultancy services rendered during the three months ended September 30, 2006. Management believes that this unrealized gain (or loss) will fluctuate from quarter to quarter if we continue to hold these shares. We intend and plan to offload these shares as soon as possible and within a period of 12 months upon receiving them from our client members.
 
The accounting loss or net comprehensive loss, after taking the unrealized loss on the marketable securities - available-for-sale into consideration, for the three months ended September 30, 2006 amounts to approximately $6,641,000, as compared to $3,354,000 for the same corresponding period in year 2005. Again, this unrealized gain (or loss) will vary from quarter to quarter if we continue to hold on to these shares.
 
NINE MONTHS ENDED SEPTEMBER 30, 2006 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 2005

Operating Revenue

Consolidated operating revenue for the nine months ended September 30, 2006 was $4,138,000, compared to $5,502,000 for the same corresponding period in year 2005, a decrease of $1,364,000 or 24.8%. The decrease was mainly the result of decrease in revenue generated by the business traveling services, and the club and business centre as well as rental income, which is off-set by the increase in revenue generated by business value-added services.

Of the $4,138,000 revenue in the nine months ended September 30, 2006, approximately $512,000 (12.4%) was generated from providing club related services by our Guangzhou World Trade Center Club and Beijing World Trade Center Club; $2,689,000 (65.0%) was generated from business travel services; $927,000 (22.4%) was generated from business value-added services; and $10,000 was generated from our rental income.

For the nine months ended September 30, 2006, New Generation, our business traveling services arm, sold a total of over 1,003,000 tickets, which translates to a total value of air-ticket fare of approximately $131.2 million. As compared to the corresponding period in year 2005, tickets sold by New Generation increased by 57,000 tickets (or 6.0%) from approximately 946,000 tickets, with the value of air-ticket fare increasing by $21.2 million (or 19.3%) from $110.0 million.

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Consolidated gross profit increased by $1,350,000 or 60.3% for the nine months ended September 30, 2006 over the same corresponding period in year 2005. The increase was predominantly driven by our business value-added services resulting from providing various consultancy services to our members. This increase was partially offset by the decrease in gross profit of our club and business center and business traveling services resulting from a lower profit margin. As a percentage of total operating revenues, the consolidated gross profit margin of 86.8% for the nine months ended September 30, 2006, increased from 40.7% for the same corresponding period in 2005. Our profit margin was driven by a mix shift from lower margin business travel services to higher margin business valued-added services. 

Of the $3,589,000 total gross profit for the nine months ended September 30, 2006, gross profit of approximately $486,000 (or 13.5%) was generated from providing club and business center services, approximately $2,166,000 (or 60.4%) from business travel services, gross profit of approximately $927,000 (or 25.8%) from providing business value-added services and the remaining $10,000 (or 0.3%) from rental income. As compared to the same corresponding period in year 2005, the club and business center services represented a 18.2% (or $559,000) of the total gross profit; 142.8% (or $3,199,000) was generated from the business travel business, a negative 73.2% (or loss of $1,639,000) from the business value-added services; and the remaining 5.3% (or $120,000) from other (rental and cattle hide trading) businesses. The shift in segmental distribution was primarily due to the increase in business value-added services, resulting from the corporate consultancy services provided to clients. We foresee that this segment mix will continue to change and balance out in year 2006 upon further development in the business value-added services and the expected opening of other world trade center clubs.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased by approximately $260,000 or 3.9% to $6,770,000 for the nine months ended September 30, 2006 from $6,510,000 for the same corresponding period in 2005. The increase was mainly due to (1) the increase in a new bank loan expense in the amount of approximately $284,000; (2) the increase in liquidated damage expense in the amount of approximately $185,500; and (3) the increase in the financial consultancy fee through the issuance of shares with a market value of approximately $571,000, (4) the increase in an investment feasibility study expenses in the amount of approximately $383,000; (5) the increase of IT consultancy expenses of approximately $145,000, which are mostly offset by the decrease in share disposal expenses amounting to approximately $1,260,000. We believe the selling, general and administrative will continue to decrease steadily subsequent to the disposal of a subsidiary company and the acquisition of affiliates. These changes will lead to a further reduction of selling, general and administrative expenses because our share in net loss of affiliates will be accounted for under equity accounting method.

Impairment Loss and Depreciation

Total impairment loss and depreciation were approximately $337,000 for the nine months ended September 30, 2006, as compared to the same corresponding period in year 2005, an increase of $136,000 or 67.7% from $201,000. The increase was mainly due to the increase in impairment loss in fixed asset in the amount of approximately $8,000 and the increase in depreciation charge as a result of addition to our fixed asset from the business traveling services in 2006.
 
Other Income and Realized Gain

The other income and realized gain decreased by approximately $6,034,000 for the nine months ended September 30, 2006, as compared to the same corresponding period in 2005. The decrease was primarily the result of decrease in income from realized gain on marketable securities-for-sale and other income for the nine months ended September 30, 2006. During the reporting period, we disposed 60% of the outstanding capital stock of General Business Network (Holdings) Limited, which indirectly owns 51% of the outstanding capital stock of New Generation Commercial Management Limited resulting in a realized loss on disposal of interest in a subsidiary accounted for approximately $3,210,000. Upon the disposal of 60% of General Business Network (Holdings) Limited, an impairment loss of approximately $2,140,000 was recorded due to the change of status to affiliate.
 
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Interest Expenses, Net

Net Interest expenses were increased approximately in the amount of $86,000 to $176,000 for the nine months ended September 30, 2006, as compared to the same corresponding period in year 2005. The majority of the increase was due to the additional interest expenses because of the higher interest rate incurred by the business traveling operations of New Generation in relation to additional bank loan.

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. Several of our PRC subsidiaries are subject to PRC Enterprise Income Taxes (“EIT”) on an entity basis on income arising in and derived from the PRC. The applicable EIT rate is 33%.

Income taxes were $103,000 for the nine months ended September 30, 2006, as compared to $184,000 for the same corresponding period in year 2005, a decrease of $81,000 (or 44.0%). The decrease of income taxes was the result of the decrease in our travel business’s operation revenue and net loss during the reporting period.

Prior to the completion of acquisition by the Company of New Generation Commercial Management Limited (“New Generation”), New Generation 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 for in the consolidated financial statements. However, New Generation 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 New Generation has undertaken to indemnify the Company against such shortfall and additional tax-related liabilities. As of September 30, 2006, the estimated further surcharges and penalties for which New Generation was potentially liable amounted to US$430,364 and US$9,470,714 respectively. The estimated further penalties were based on the highest charge rate of the range from 50% to 500%.
 
Minority Interest

We recorded a minority income of approximately $545,000 for nine months ended September 30, 2006 an increase of $859,000 compared to the same period in 2005.
 
Net Income(Loss) /Comprehensive income

Net loss was approximately $8,508,000 for the nine months ended September 30, 2006, as compared to the net income in the amount of $804,000 for the same corresponding period in year 2005, a decrease of approximately $9,312,000. The increase in net loss was the result of the short fall in the realized gain on marketable securities-for-sale accounted for approximately $6,034,000, in which $6,080,000 was recorded for the same period in year 2005; an impairment loss on investment in an affiliate of $2,140,000 and loss on disposal of interest in a subsidiary of $3,211,000 for the nine months ended September 30, 2006 which is partially offset by an increase in minority interest income of $859,000 and decrease in business value-added services expenses. The management will closely monitor each business segment especially on the narrowing profit margin business and the higher fuel price which will affect our income. The higher fuel price has affected the airline business in China which will indirectly reduce the commission paid to its agents. We will also evaluate the additional cost on different segment which may eventually affect our profitability.

In addition, we recorded an unrealized loss on short-term investments (fair value adjustment) which is classified as other comprehensive income (loss) in the amount of approximately $1,154,000 for the nine months ended September 30, 2006, as compared to an unrealized gain of $963,000 for the same corresponding period in year 2005. This decrease was the result of the unrealized decrease in fair market value of the common stocks we received as compensation for our consultancy services rendered. Management believes that this unrealized gain (or loss) will fluctuate from quarter to quarter if we continue to hold these shares. We intend and plan to offload these shares as soon as possible and within a period of 12 months upon receiving them from our client members.
 
The accounting loss or comprehensive loss, after taking the unrealized loss on the marketable securities - available-for-sale into consideration, for the nine months ended September 30, 2006 in the amount of approximately $9,677,000, compares to a comprehensive income of $1,747,000 for the same corresponding period in year 2005. Again, this unrealized gain (or loss) will vary from quarter to quarter if we continue to hold on to these shares.
 
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Liquidity and Capital Resources

As of September 30, 2006, cash and cash equivalents totaled $147,000, as compared to September 30, 2005 of $4,334,000, a decrease of approximately $4.19 million. This decrease in cash position was the result of a combination of net cash provided by financing activities in the amount of approximately $2,679,000, which was mainly contributed by the proceeds from new bank loan., offsetting by net cash used in operating activities of approximately $3,790,000 and net cash provided by investing activities of approximately $1,978,000. The increase in net cash provided by financing activities was mainly due to an inception of new loan of $2,037,000 from a bank. The net cash used in investing activities was mainly used in the disposal of a subsidiary in the amount approximately $1,354,000; acquisition of a subsidiary in the amount approximately $394,000; and the additional equipment in the total amount of $408,000, offset by the proceeds from the disposal of available-for-sale shares amounting to $146,000. Net cash used in operating activities could be explained by the change in net working capital. This change in net working capital was due to the increase in trade and other receivables of approximately $2,154,000. The increase in trade and other receivables was primarily due to the increase in trade receivables resulting from the increase in operating revenues of our business traveling service division.

During the reporting period of the nine months ended September 30, 2006, 280,000 shares of our common stock were issued to Grace Motion Inc. for an investment feasibility study and 117,000 shares were issued for the service consultancy fee. 800,000 shares of our common stock were issued to Greentree Financial Group, Inc. pursuant to a consultancy contract. Our total issued and outstanding shares of our common stock is 34,865,923 as of September 30, 2006

We have not committed to any individual material capital expenditures related projects and we will primarily rely on Cornell Capital’s Standby Equity Distribution Agreement financing, provided that it is declared effective by the Commission, as the external source of liquidity to fund our potential capital related projects. On the other hand, we rely on our internal sources of liquidity generated from our business travel services and business value-added services to fund immaterial capital projects. In the event that we are unable to draw down capital funding from Cornell Capital’s $30.0 million committed source of capital or unable to fund projects from our internally generated sources, we will seek other external sources of opportunities in a combination of debt and/or equity financings from potential investors or existing shareholders of the Company, although we have not committed any other external source besides Cornell Capital.
 
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 private debt or equity financing to strengthen our financial position, facilitate growth and provide us with additional flexibility to take advantage of business opportunities. However, other than the offering contemplated by the Standby Equity Distribution Agreement financing provided by Cornell Capital Partners, LP, we do not have any immediate plan to pursue a public offering of our common stock.
 
OTHER SIGNIFICANT EVENTS

None

CRITICAL ACCOUNTING POLICIES

In presenting our financial statements in conformity with generally accepted accounting principles, we are required to make estimates and assumptions that affect the amounts reported therein. Several of the estimates and assumptions we are required to make relate to matters that are inherently uncertain as they pertain to future events. However, events that are outside of our control cannot be predicted and, as such, they cannot be contemplated in evaluating such estimates and assumptions. If there is a significant unfavorable change to current conditions, it could result in a material adverse impact to our consolidated results of operations, financial position and liquidity. We believe that the estimates and assumptions we used when preparing our financial statements were the most appropriate at that time. Presented below are those accounting policies that we believe require subjective and complex judgments that could potentially affect reported results. However, the majority of our businesses operate in environments where we pay a fee for a service performed, and therefore the results of the majority of our recurring operations are recorded in our financial statements using accounting policies that are not particularly subjective, nor complex.
 
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Valuation of long-lived assets

We review our long-lived assets for impairment, including property, plant and equipment, and identifiable intangibles with definite lives, whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable. To determine recoverability of our long-lived assets, we evaluate the probability that future undiscounted net cash flows will be greater than the carrying amount of our assets. Impairment is measured based on the difference between the carrying amount of our assets and their estimated fair value.

Allowance for Doubtful Accounts

We perform ongoing credit evaluations of our customers and adjust credit limits based upon customer payment history and current creditworthiness. We continuously monitor collections and payments from our customers and maintain a provision for estimated credit losses based upon our historical experience and any specific customer collection issues that have been identified. While such credit losses have historically been within our expectations and the provisions established, we cannot guarantee that we will continue to experience credit loss rates similar to those we have experienced in the past. Measurement of such losses requires consideration of historical loss experience, including the need to adjust for current conditions, and judgments about the probable effects of relevant observable data, including present economic conditions such as delinquency rates and financial health of specific customers.

Goodwill on consolidation

Our long-lived assets include goodwill. SFAS No. 142 “Goodwill and Other Intangible Assets” requires that goodwill be tested for impairment at the reporting unit level (operating segment or one level below an operating segment) on an annual basis and between annual tests in certain circumstances. Application of the goodwill impairment test requires judgment, including the identification of reporting units, assigning assets and liabilities to reporting units, assigning goodwill to reporting units, and determining the fair value of each reporting unit. Significant judgments required to estimate the fair value of reporting units include estimating future cash flows, determining appropriate discount rates and other assumptions. Changes in these estimates and assumptions could materially affect the determination of fair value for each reporting unit.

Item 3. Controls and Procedures.

Quarterly Evaluation of Controls

As of the end of the period covered by this quarterly report on Form 10-QSB, we evaluated the effectiveness of the design and operation of (i) our disclosure controls and procedures ("Disclosure Controls"), and (ii) our internal control over financial reporting ("Internal Controls"). This evaluation ("Evaluation") was performed by our President and Chief Executive Officer, Chi Ming Chan ("CEO") and Man Ha, our Chief Financial Officer ("CFO"). In this section, we present the conclusions of our CEO and CFO based on and as of the date of the Evaluation, (i) with respect to the effectiveness of our Disclosure Controls, and (ii) with respect to any change in our Internal Controls that occurred during the most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect our Internal Controls.

CEO and CFO Certifications

Attached to this annual report, as Exhibits 31.1 and 31.2, are certain certifications of the CEO and CFO, which are required in accordance with the Exchange Act and the Commission's rules implementing such section (the "Rule 13a-14(a)/15d-14(a) Certifications"). This section of the annual report contains the information concerning the Evaluation referred to in the Rule 13a-14(a)/15d-14(a) Certifications. This information should be read in conjunction with the Rule 13a-14(a)/15d-14(a) Certifications for a more complete understanding of the topic presented.
 
29
 
Disclosure Controls and Internal Controls

Disclosure Controls are procedures designed with the objective of ensuring that information required to be disclosed in our reports filed with the Commission under the Exchange Act, such as this annual report, is recorded, processed, summarized and reported within the time period specified in the Commission's rules and forms. Disclosure Controls are also designed with the objective of ensuring that material information relating to the Company is made known to the CEO and the CFO by others, particularly during the period in which the applicable report is being prepared. Internal Controls, on the other hand, are procedures which are designed with the objective of providing reasonable assurance that (i) our transactions are properly authorized, (ii) the Company's assets are safeguarded against unauthorized or improper use, and (iii) our transactions are properly recorded and reported, all to permit the preparation of complete and accurate financial statements in conformity with accounting principals generally accepted in the United States.

Limitations on the Effectiveness of Controls

Our management does not expect that our Disclosure Controls or our Internal Controls will prevent all error and all fraud. A control system, no matter how well developed and operated, can provide only reasonable, but not absolute assurance that the objectives of the control system are met. Further, the design of the control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances so of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of a system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated objectives under all potential future conditions. Over time, control may become inadequate because of changes in conditions, or because the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

Scope of the Evaluation

The CEO and CFO's evaluation of our Disclosure Controls and Internal Controls included a review of the controls' (i) objectives, (ii) design, (iii) implementation, and (iv) the effect of the controls on the information generated for use in this annual report. In the course of the Evaluation, the CEO and CFO sought to identify data errors, control problems, acts of fraud, and they sought to confirm that appropriate corrective action, including process improvements, was being undertaken. This type of evaluation is done on a quarterly basis so that the conclusions concerning the effectiveness of our controls can be reported in our quarterly reports on Form 10-QSB and annual reports on Form 10-KSB. The overall goals of these various evaluation activities are to monitor our Disclosure Controls and our Internal Controls, and to make modifications if and as necessary. Our external auditors also review Internal Controls in connection with their audit and review activities. Our intent in this regard is that the Disclosure Controls and the Internal Controls will be maintained as dynamic systems that change (including improvements and corrections) as conditions warrant.

Among other matters, we sought in our Evaluation to determine whether there were any significant deficiencies or material weaknesses in our Internal Controls, which are reasonably likely to adversely affect our ability to record, process, summarize and report financial information, or whether we had identified any acts of fraud, whether or not material, involving management or other employees who have a significant role in our Internal Controls. This information was important for both the Evaluation, generally, and because the Rule 13a-14(a)/15d-14(a) Certifications, Item 5, require that the CEO and CFO disclose that information to our Board (audit committee), and to our independent auditors, and to report on related matters in this section of the annual report. In the professional auditing literature, "significant deficiencies" are referred to as "reportable conditions". These are control issues that could have significant adverse affect on the ability to record, process, summarize and report financial data in the financial statements. A "material weakness" is defined in the auditing literature as a particularly serious reportable condition where the internal control does not reduce, to a relatively low level, the risk that misstatement cause by error or fraud may occur in amounts that would be material in relation to the financial statements and not be detected within a timely period by employee in the normal course of performing their assigned functions. We also sought to deal with other controls matters in the Evaluation, and in each case, if a problem was identified; we considered what revisions, improvements and/or corrections to make in accordance with our ongoing procedures.
 
30
 
Conclusions

Based upon the Evaluation, our disclosure controls and procedures are designed to provide reasonable assurance of achieving our objectives. Our CEO and CFO have concluded that our disclosure controls and procedures are effective at that reasonable assurance level to ensure that material information relating to we are made known to management, including the CEO and CFO, particularly during the period when our periodic reports are being prepared, and that our Internal Controls are effective at that assurance level to provide reasonable assurance that our financial statements are fairly presented inconformity with accounting principals generally accepted in the United States. Additionally, there has been no change in our Internal Controls that occurred during our most recent fiscal quarter that has materially affected, or is reasonably likely to affect, our Internal Controls.

 
PART II -- OTHER INFORMATION

Item 1. Legal Proceedings.

We are not aware of any pending or threatened legal proceedings, other than as set forth below, in which we are involved. In addition, we are not aware of any pending or threatened legal proceedings in which entities affiliated with our officers, directors or beneficial owners are involved.

On December 10, 2004, Kenneth P. Silverman, Esq., as Trustee for the Estate of Chief Executive Officers Clubs, Inc. (the “Trustee”), filed a Complaint against CEO Clubs China Limited, China World Trade Corporation, Simon Guo and J.P. Li (the “Complaint”), which commenced an Adversary Proceeding relating to a Chapter 7 bankruptcy case pending in the U.S. Bankruptcy Court for the Southern District of New York, captioned as In Re: Chief Executive Officers Clubs, Inc., Debtor. The Complaint alleges, among other things, that certain assets of the Chief Executive Officers Clubs, Inc. bankruptcy estate were transferred to our Company in violation of Section 549 of the Bankruptcy Code. It requests that the Bankruptcy Court order, among other things, a return of such assets by our Company and/or seeks a judgment against us in the amount of not less than $480,000.

As previously disclosed, on May 7, 2004, the Company acquired 51% of the outstanding capital stock of CEO Clubs China Limited, a Hong Kong corporation (“CEO Clubs China”), through one of its wholly-owned subsidiaries, for a total consideration of cash and shares of common stock amounting to US$480,000. CEO Clubs China is an authorized chapter to operate under the “CEO Clubs” trademarks in the Greater China region, including the Peoples’ Republic of China, Hong Kong and Taiwan.

We have engaged counsel who is admitted to practice before the U.S. District Court for the Southern District of New York, and we are vigorously defending the Adversary Proceeding. We filed a Motion To Dismiss which was heard on March 22, 2005, and the judge ruled in favor of the Trustee by refusing to dismiss the case at this preliminary stage of the proceedings. Other than the disposition of our motion, the case is in the proceeding slowly in the discovery phase Notwithstanding the decision on our motion to dismiss, our primary defense is that we purchased the stock of CEO Clubs China, and did not acquire any assets of the Chief Executive Officers Clubs, Inc. bankruptcy estate. We believe that this defense will be meritorious should the matter ever come to trial.
 
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Item 2. Changes in Securities.

(a)  
On April 27, 2006, the Company issued 280,000 shares to Grace Motion Inc. for consulting services provided which included a due diligence on a target project in China; a financial modeling report on the target; and provide advise on any possible change of the structure in order to enhance the profitability of the target project.
(b)  
On April 27, 2006, the Company issued 117,000 shares to Mr. Andy Lau for consulting services related to information technology and technical framework and infrastructure for the provision of information technology in China. .
(c)  
On August 15, 2006, the Company issued 800,000 shares to Greentree Financial Group, Inc. for consulting services.
 
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 and By-Laws are hereby incorporated by reference from our registration statement on Form 10-SB, filed with the Commission on September 9, 1999, SEC File No. 000-26119.
 
31.1
 
 
31.2
 
 
32.1
 
 
32.2
 

(b) Reports on Form 8-K;

(1)            
On September 29, 2006, the Company filed a Form 8-K in order to report a Share Exchange Agreement for the acquisition of a 25% equity interest in CWT International Excursion Investment Limited between the shareholder of the said company and Rainbow Wish Limited, a wholly owned subsidiary of the Company.
(2)            
On October 5, 2006, the Company filed a Form 8-K in order to report a Sale and Purchase Agreement between Wisdom Plus Limited and China Chance Enterprises Limited, a wholly owned subsidiary of the Company
(3)            
On October 24, 2006, the Company filed a Form 8-K in order to report a completion of the acquisition filed on September 29, 2006.
                      (4)
On November 6, 2006, the Company filed a Form 8-K in order to report a completion of the sale filed on October 5, 2006.
  
32
 
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 14, 2006
By:  
/s/ Chi Ming Chan
 
Chi Ming Chan
Chief Executive Officer

 
 
 
 
 
 
 
 
 
 
 
 
Date: November 14, 2006
By:  
/s/ Man Ha
 
Man Ha
Chief Financial Officer
 
 
33
 
EX-31.1 2 ex31_1.htm EXHIBIT 31.1
Exhibit 31.1

RULE 13a-14(a)/15d-14(a) CERTIFICATIONS

I, Chi Ming Chan, certify that:

1.   I have reviewed this Quarterly Report on Form 10-QSB for the quarterly period ended September 30, 2006 of China World Trade Corporation (the "Registrant").

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 statement 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-15d-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 consolidates 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 fourth fiscal quarter 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 functions):

(a)   All significant deficiencies and material weaknesses in the design or operation of internal control 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.

 
 
 
 
China World Trade Corporation
(Registrant)
 
 
 
 
 
 
Date: November 14, 2006
By:  
/s/ Chi Ming Chan
 
Chi Ming Chan
Chief Executive Officer
EX-31.2 3 ex31_2.htm EXHIBIT 31.2
Exhibit 31.2

RULE 13a-14(a)/15d-14(a) CERTIFICATIONS

I, Man Ha, certify that:

1.   I have reviewed this Quarterly Report on Form 10-QSB for the quarterly period ended September 30, 2006 of China World Trade Corporation (the "Registrant").

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 statement 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-15d-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 consolidates 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 fourth fiscal quarter 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 functions):

(a)   All significant deficiencies and material weaknesses in the design or operation of internal control 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.
 

 
 
 
 
China World Trade Corporation
(Registrant)
 
 
 
 
 
 
Date: November 14, 2006
By:  
/s/ Man Ha
 
Man Ha
Chief Financial Officer
EX-32.1 4 ex32_1.htm EXHIBIT 32.1
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 (the "Company") on Form 10-QSB for the period ended September 30, 2006 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Chi Ming Chan, Chief Executive Officer of the Company, certifies, pursuant to 18 U.S.C. 1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that, based on 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.
 


 
 
 
 
China World Trade Corporation
(Registrant)
 
 
 
 
 
 
Date: November 14, 2006
By:  
/s/ Chi Ming Chan
 
Chi Ming Chan
Chief Executive Officer
EX-32.2 5 ex32_2.htm EXHIBIT 32.2
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 (the "Company") on Form 10-QSB for the period ended September 30, 2006 filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Man Ha, Chief Financial Officer of the Company, certifies, pursuant to 18 U.S.C. 1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that, based on 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.



 
 
 
 
China World Trade Corporation
(Registrant)
 
 
 
 
 
 
Date: November 14, 2006
By:  
/s/ Man Ha
 
Man Ha
Chief Financial Officer
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