U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: September 30, 2003
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
EXCHANGE ACT
For the transition period from _________________ to _________________
Commission file number: 333-49388
CHINA WIRELESS COMMUNICATIONS, INC.
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(Exact name of small business issuer as specified in its charter)
Nevada 91-1966948
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1746 Cole Boulevard, Suite 225, Golden, Colorado 80401-321
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(Address of principal executive offices)
(303) 277-9968
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(Issuer's telephone number)
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(Former name, former address and former fiscal year, if changed
since last report)
Check whether the issuer: 1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the registrant was required to file such
reports, and (2) has been subject to such filing requirements for the past 90
days. Yes [X] No [ ]
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
23,170,614 shares of Common Stock, $0.001 par value,
as of November 13, 2003
Transitional Small Business Disclosure Format (check one); Yes [ ] No [X]
China Wireless Communications, Inc.
Index
Part I. Financial Information
Item 1. - Financial Statements
- Condensed Consolidated Statements of Operations
(Unaudited) for the Period from August 13, 2002
(inception) to September 30, 2002 and three Months
and Nine Months Ended September 30, 2003....................3
- Condensed Consolidated Balance Sheet (Unaudited)
as of September 30, 2003....................................4
- Condensed Consolidated Statement of Stockholders'
Deficit (Unaudited).........................................5
- Consolidated Condensed Statements of Cash Flows
(Unaudited) for the Period from August 13, 2002
(inception) to September 30, 2002 and three Months
and Nine Months Ended September 30, 2003....................6
- Notes to and Forming Part of the Condensed Financial
Statements (Unaudited)......................................7
Item 2. - Management's Discussion and Analysis or Plan of
Operations.................................................10
Item 3. - Controls and Procedures....................................13
Part II. Other Information
Item 1. - Legal Proceedings .........................................14
Item 2. - Changes in Securities......................................14
Item 3. - Defaults Upon Senior Securities ...........................14
Item 4. - Submission of Matters to a Vote of Security Holders .......14
Item 5. - Other Information .........................................14
Item 6. - Exhibits and Reports on Form 8-K ..........................14
Signatures ...................................................................15
Certifications................................................................16
Page 2 of 19
China Wireless Communications, Inc.
(A Development Stage Company)
Condensed Consolidated Statements of Operations (Unaudited)
As of September 30, 2003
----------------------------------------------------------------------------------------------------
Period from Period from
August 13, August 13,
2000 Three Nine 2002
(inception) months months (inception)
to ended ended to
September September September September
30, 2002 30, 2003 30, 2003 30, 2003
US$ US$ US$ US$
----------- ------------ ------------ ------------
Operating revenue 13,282 17,341 17,341
Cost of Sales 10,180 13,572 13,572
------------ ------------ ------------
Gross profit 3,102 3,769 3,769
------------ ------------ ------------
Operating expenses
General and administrative expenses 39,629 645,422 2,420,558 3,436,040
Depreciation expense 2,741 6,707 6,707
----------- ------------ ------------ ------------
39,629 648,163 2,427,265 3,442,747
----------- ------------ ------------ ------------
Loss from operations (39,629) (645,061) (2,423,496) (3,438,978)
----------- ------------ ------------ ------------
Non-operating (expenses) income
Interest expenses 2,858 (427) (427)
Other income, net 207 207 690
----------- ------------ ------------ ------------
Total non-operating (expenses) income 3,065 (220) 263
----------- ------------ ------------ ------------
Loss before income taxes (39,629) (641,996) (2,423,716) (3,438,715)
Income taxes -- -- -- --
----------- ------------ ------------ ------------
Net loss (39,629) (641,996) (2,423,716) (3,438,715)
=========== ============ ============ ============
Net loss per share of common stock:
Basic (0.0018) (0.0292) (0.1118) (0.1591)
=========== ============ ============ ============
Page 3 of 19
China Wireless Communications, Inc.
(A Development Stage Company)
Condensed Consolidated Balance Sheet (Unaudited)
As of September 30, 2003
--------------------------------------------------------------------------------
ASSETS US$
------------
Current assets
Cash and cash equivalents 56,354
Prepaid expenses 6,052
Due from a related party 60,000
Deposits 34,876
Accounts receivable 108,515
------------
Total current assets 265,797
Property, plant and equipment, net 230,325
------------
Total assets 496,122
============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accrued expenses and other accrued liabilities 825,710
Note payable 189,600
Convertible debt 41,000
------------
Total liabilities 1,056,310
------------
Commitments and contingencies
Stockholders' deficit
Common stock, par value US$0.001 each,
100,000,000 shares of stock authorized,
23,170,614 shares of stock issued and outstanding 23,171
Additional contributed paid-in capital 2,855,356
Accumulated deficit (3,438,715)
------------
Total stockholders' deficit (560,188)
------------
Total liabilities and stockholders' deficit 496,122
============
Page 4 of 19
China Wireless Communications, Inc.
(A Development Stage Company)
Condensed Consolidated Statement of Stockholders' Deficit (Unaudited)
As of September 30, 2003
----------------------------------------------------------------------------------------------------------------
Common stock Additional
--------------------------------- contributed Accumulated
Number Amount paid-in capital deficit Total
US$ US$ US$ US$
--------------- --------------- --------------- --------------- ---------------
As of August 13,
2002 - inception
(Note) 21,500,000 21,500 2,353,850 -- 2,375,350
Net loss for the
period -- -- -- (1,014,999) (1,014,999)
--------------- --------------- --------------- --------------- ---------------
As of December 31,
2002 21,500,000 21,500 2,353,850 (1,014,999) 1,360,351
Net loss for per
period -- -- -- (1,304,115) (1,304,115)
--------------- --------------- --------------- --------------- ---------------
Balance as of
March 31, 2003 21,500,000 21,500 2,353,850 (2,319,114) 56,236
Common stock
issued for services
at US$0.25 per
share 452,000 452 112,548 -- 113,000
Net loss for the
period -- -- -- (477,605) (477,605)
--------------- --------------- --------------- --------------- ---------------
Balance as of June
30, 2003 21,952,000 21,952 2,466,398 (2,796,719) (308,369)
Common stock
issued for services
107,660 at US$0.56
per share,
110,954 at US$0.72
per share
1,000,000 at
US$0.25 per share 1,218,614 1,218.61 388,957.87 390,176
Net loss for the
period (641,996) (641,996)
--------------- --------------- --------------- --------------- ---------------
Balance as of
September 30,
2003 23,170,614 23,171 2,855,356 (3,438,715) (560,188)
=============== =============== =============== =============== ===============
Note: The common stock issued and outstanding at inception represents shares
in issue immediately after the recapitalization of Strategic
Communications Partners, Inc. on March 22, 2003, assuming that the
recapitalization has been in existence since the inception of the
surviving entity. For details of the recapitalization, please refer to
note 1 to these financial statements.
Page 5 of 19
China Wireless Communications, Inc.
(A Development Stage Company)
Condensed Consolidated Statements of Cash Flows
As of September 30, 2003
Period
Period from from
August 13, Nine August 13,
2000 Three months 2002
(inception) months ended (inception)
to ended September to
September September 30, September
30, 2002 30, 2003 2003 30, 2003
US$ US$ US$ US$
----------- ------------ ------------ ------------
Cash flows from operating activities:
Net loss (39,629) (641,996) (2,423,716) (3,438,715)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation 2,742 6,708 6,708
Common stock issued for compensation 12,850 390,176 1,413,076 2,222,426
Changes in working capital:
Accounts Receivable (102,912) (108,515) (108,515)
Deposits (3,705) (34,876) (34,876)
Prepaid expenses (2,552) (6,052) (6,052)
Accrued expenses and other accrued liabilities 47,000 533,487 754,935 825,710
----------- ------------ ------------ ------------
Net cash used in operating activities 20,221 175,240 (398,440) (533,314)
----------- ------------ ------------ ------------
Net cash used in investing activities
Acquisition of property, plant and equipment (500) (136,800) (237,032) (237,032)
i-Track and Strategic Communications Partners, Inc. merger (50,000) (50,000)
Advances to a related party 12,731 (60,000)
----------- ------------ ------------ ------------
Net cash used in investing activities (500) (124,069) (287,032) (347,032)
----------- ------------ ------------ ------------
Net cash provided by financing activities
Proceeds from issuance of common stock 338,150 706,100
Proceeds from issuance of notes payable 235,000 282,000
Proceeds from issuance of convertible debt 41,000 41,000
Repayment of notes payable (69,900) (92,400)
----------- ------------ ------------ ------------
Net cash provided by financing activities 544,250 936,700
----------- ------------ ------------ ------------
Net (decrease) increase in cash and cash equivalents 19,721 51,171 (141,222) 56,354
Cash and cash equivalents, as of beginning of the period 5,183 197,576 --
----------- ------------ ------------ ------------
Cash and cash equivalents, as of end of the period 19,721 56,354 56,354 56,354
=========== ============ ============ ============
Analysis of balances of cash and cash equivalents
Bank balances 19,721 56,354 56,354 56,354
=========== ============ ============ ============
Non-cash operating, investing and financing activities
Common stocks issued for compensation 12,850 390,176 1,413,076 2,222,426
=========== ============ ============ ============
Page 6 of 19
China Wireless Communications, Inc.
(A Development Stage Company)
Notes to and Forming Part of the Condensed Financial Statements (Unaudited)
Three Months and Nine Months Ended September 30, 2003
--------------------------------------------------------------------------------
1. BASIS OF PRESENTATION
The accompanying financial data as of September 30, 2003 and for the
three and nine months then ended have been prepared by China Wireless
Communications, Inc. (the "Company"), without audit. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to the rules and
regulations of the Securities and Exchange Commission. However, the
Company believes that the disclosures are adequate to make the
information presented not misleading. These financial statements should
be read in conjunction with the financial statements and notes thereto
included in the Company's filings on Form 10-KSB dated December 31,
2002.
The preparation of financial statements in conformity with general
accepted accounting principles requires management to make estimates
that affect the reported amounts of assets, liabilities, revenues and
expenses and the disclosure of contingent assets and liabilities.
Actual results could differ from these estimates.
In the opinion of the management, all adjustments (which include only
normal recurring adjustments) necessary to present fairly the financial
position, results of operations and cash flows of the Company have been
made. The results of operations for the nine months ended September 30,
2003 are not necessarily indicative of the operating results for the
full year.
Effective March 22, 2003, pursuant to a Share Exchange Agreement, China
Wireless Communications, Inc., (formerly I-Track, Inc.) acquired
Strategic Communications Partners, Inc., a Wyoming corporation ("SCP"),
resulting in the shareholders and management of SCP having actual and
effective control of the Company, the surviving corporation. For
accounting purposes, the transaction was treated as an acquisition of
the Company by SCP and as a recapitalization of SCP. The historical
financial statements prior to the acquisition became those of SCP even
though they were labeled as those of the Company. In the
recapitalization, historical shareholders' equity of the Company, prior
to the merger, was retroactively restated for the equivalent number of
shares received in the merger with an offset to paid-in capital.
Operations prior to the merger were those of SCP. Basic loss per share
prior to the merger was restated to reflect the number of equivalent
shares received by the shareholders of SCP. The acquisition, although a
purchase, was presented as a reverse acquisition.
2. PREPARATION OF FINANCIAL STATEMENTS
The Company is in the development stage and has incurred losses of
US$3,438,715 since inception, which raise substantial doubt about the
Company's ability to continue as a going concern. The continuation of
the Company as a going concern is dependent upon the successful
implementation of its business plan and ultimately achieving profitable
operations. However, there can be no assurance that the business plan
will be successfully implemented. The inability of the Company to
implement the business plan successfully could adversely impact the
Company's business and prospects.
Page 7 of 19
China Wireless Communications, Inc.
(A Development Stage Company)
Notes to and Forming Part of the Condensed Financial Statements (Unaudited)
Three Months and Nine Months Ended September 30, 2003
--------------------------------------------------------------------------------
3. NEW ACCOUNTING POLICIES
(a) Revenue recognition
The Company recognizes revenue in accordance with SEC Staff
Accounting Bulletin No. 101, "Revenue recognition in financial
statements", when the title and risk of loss have passed to
the customer, there is persuasive evidence of an arrangement,
delivery has occurred or services have been rendered, the
sales price is determinable, and collectability is reasonably
assured. Services revenue is recognized when the services are
provided.
(b) New accounting pronouncements
In January 2003, the FASB issued FASB Interpretation No. 46,
"Consolidation of Variable Interest Entities" ("FIN No. 46").
FIN No. 46 applies to variable interest entities created after
January 31, 2003 and to variable interest entities in which an
enterprise obtains an interest after that date. It applies in
the first fiscal year or interim period beginning after June
15, 2003, to variable interest entities in which an enterprise
holds an interest that it acquired before February 1, 2003.
Management is currently assessing the impact of adoption of
the FIN No. 46 on its consolidated financial statements.
In May 2003, the FASB issued SFAS No. 150, "Accounting for
Certain Financial Instruments with Characteristics of both
Liabilities and Equity". The SFAS No.150 improves the
accounting for certain financial instruments that, under
previous guidance, issuers could account for as equity and
requires that those instruments be classified as liabilities
in statements of financial position. In addition to its
requirements for the classification and measurement of
financial instruments in its scope, SFAS No. 150 also requires
disclosures about alternative ways of settling the instruments
and the capital structure of entities, all of whose shares are
mandatorily redeemable. Most of the guidance in SFAS No. 150
is effective for all financial instruments entered into or
modified after May 31, 2003, and otherwise is effective at the
beginning of the first interim period beginning after June 15,
2003. Management is currently assessing the impact of adoption
of this statement on its consolidated financial statements.
4. LOSS PER COMMON STOCK
Weighted average number of shares of common stock outstanding used in
the calculation of basic loss per share for the three months and nine
months ended September 30, 2003 and for the period from August 13, 2002
(inception) to September 30, 2003 are 22,018,229 shares, 21,681,264
shares and 21,619,529 shares respectively.
The Company had no common equivalent shares with dilutive effect for
all periods presented and, accordingly, the basic and diluted loss per
share are the same.
Page 8 of 19
China Wireless Communications, Inc.
(A Development Stage Company)
Notes to and Forming Part of the Condensed Financial Statements (Unaudited)
Three Months and Nine Months Ended September 30, 2003
--------------------------------------------------------------------------------
5. POST BALANCE SHEET EVENT
The Company's last extension agreement with Goldvision expired on
September 5, 2003. In late October 2003, the Company made the decision not to
ask for a further renewal under this agreement. In March 2003, the Company
signed an agreement with Goldtel, the subsidiary of Goldvision, which holds the
licenses to provide high-speed wireless broadband and ISP services. This
agreement is only cancelable upon the written mutual consent of both parties.
The Company does not expect that any interruption will occur in the business
services that it is providing to its existing and future clients in providing
its high-speed wireless broadband services.
On October 16, 2003, the Company announced the successful trial
installation for a phone cafe project with China Satellite Communication Beijing
Branch. The Company is finalizing negotiations with China Satellite
Communication Corporation to connect 50 phone cafes to their backbone network
across the city of Beijing. This successful installation facilitates completion
of this contract.
On November 6, 2003, the Company signed a strategic alliance agreement
with a large Beijing-based Internet Service Provider - Beijing Fiber Networking
Limited Corporation. The two companies will cooperate in marketing and sales of
broadband access services, making best use of their respective resources.
Page 9 of 19
China Wireless Communications, Inc.
(A Development Stage Company)
Item 2. Management's Discussion and Analysis or Plan of Operation
Forward-looking statements
Included in this report are various forward-looking statements, which can be
identified by the use of forward looking terminology such as "may", "will,"
"expect," "anticipate," "estimate," "continue," "believe," or similar words. We
have made forward-looking statements with respect to the following, among
others: our goals and strategies; our expectations related to growth of our
broadband internet, content and wireless access and transport in China and the
performance under our agreements; Our ability to obtain and operate licenses and
permits to operate in China; our ability to earn sufficient revenues in China;
the importance and expected growth of satellite communications, broadband
internet, content and wireless access and transport in China and the demand for
these services in China; our ability to continue as a going concern; and our
future performance and our results of operations. These statements are forward
looking and reflect our current expectations. We are subject to a number of
risks and uncertainties, including but not limited to, changes in the economic
and political environments in China, economic and political uncertainties
affecting the capital markets, changes in technology, changes in satellite
communications, broadband internet, content and wireless access and transport in
the marketplace in China, competitive factors and other risks described in our
annual report on Form 10-KSB which has been filed with the United States
Securities and Exchange Commission. In light of the many risks and uncertainties
surrounding the Company, China, and the satellite communications, broadband
internet, content and wireless access and the transport marketplace in China,
you should keep in mind that we cannot guarantee that the forward-looking
statements described in this report will transpire and you should not place
undue reliance on forward-looking statements.
Overview
On March 22, 2003, I-Track Inc., a company quoted on the primary exchange of the
US OTC ("Over the Counter Bulletin Board") acquired Strategic Communications
Partners, Inc., a Wyoming corporation ("SCP"), through a Share Exchange
Agreement, resulting in the shareholders and management of SCP having actual and
effective control of I-Track Inc. On March 24, 2003, I-Track Inc. changed its
name to China Wireless Communications, Inc ("CWC") to better reflect the
business activities of the Company.
We are a facilities-based provider of broadband data, video and voice
communications services to customers that are not served by existing fiber
networks. We typically deliver our services over fixed wireless networks that we
design, construct, own and operate. Over this infrastructure, we will offer
ultra high-speed Internet access, and other broadband data services. Our
complete solution offering includes systems integration and other telecom
professional services.
Strategic Communications Partners, Inc.
SCP was incorporated in the State of Wyoming on August 13, 2002 and is a wholly
owned subsidiary of CWC. It provides financial, technical, and marketing
services for its operation in Beijing, People's Republic of China ("PRC").
Strategic Communications Partners Limited ("SCPL") is a subsidiary of SCP. SCPL
was incorporated in Hong Kong on December 9, 2002. SCPL's operation to date
consists solely of supporting the Beijing operations.
Page 10 of 19
China Wireless Communications, Inc.
(A Development Stage Company)
On December 18, 2002, SCP entered into agreements with Goldvision, a company
incorporated in the PRC, which is engaged in the business of providing satellite
communication, broadband internet, content, wireless access and transport in
Beijing, whereby SCP was to earn an initial 18% equity interest in Goldvision by
paying $4,800,000 with the purchase price to be paid prorata over 12 months from
the effective date of the agreement, which is February 18, 2003. SCP was to have
an 18% equity interest in Goldvision after these payments. SCP could have
acquired an additional 6% equity interest in Goldvision by contributing
$2,400,000 over a period of 12 months after the purchase of the initial
interest. Under these agreements, SCP was to have received 49% of all future net
revenues from the sale of all services.
On March 14, 2003, the Company signed an agreement with the subsidiary of
Goldvision, Goldtel, which holds the licenses used to sell its high-speed
wireless broadband services. This agreement allows the Company to market and
sell all services which the licenses held by Goldtel may be used to provide.
This agreement is only cancelable upon the written mutual consent of both
parties.
On August 5, 2003, an extension agreement was entered into between SCP and
Goldvision to extend the due dates of the Investment Contract signed December
18, 2002 through September 5, 2003.
In October 2003, the Company decided not to request an additional extension of
the Investment Contract dated December 18, 2002 after expiration date of
September 5, 2003. The Company anticipates that it will continue to provide
services under the March 14, 2003 Agreement. The Company is no longer liable to
provide any capital to Goldvision under these prior agreements.
On March 4, 2003, SCPL set up a wholly owned foreign enterprise, Beijing
In-Touch Information System Co. Ltd ("In-Touch") in the PRC. In-Touch is a
facilities based provider of broadband data, video and voice communications
services to customers that are not served by existing landline connectivity.
In-Touch has commenced operations in Beijing, through cooperation with local
telecommunications operators. In-Touch currently is involved in the business of
telecommunication system integration-primarily providing wireless local area
networks to complement its broadband wireless, VPN's and other wireless access,
transport and enhanced data services. In-Touch provides the marketing,
technical, and support services for to Beijing Wireless Internet Network (BWIN).
BWIN is the broadband wireless subsidiary of Goldvision. BWIN was chartered by
the PRC to provide a fixed broadband wireless network in Beijing. BWIN has
deployed a 155Mb wireless loop backbone in Beijing's business district. BWIN
also owns over 7 Ghz of additional spectrum scattered over several frequencies,
available for use in Beijing.
As of September 30, 2003, SCP has four employees, all of whom are full-time in
the United States. As of September 30, 2003, In-Touch in Beijing has 48
full-time employees. None of our employees is covered by a collective bargaining
agreement.
Alliances and Partnerships
We are in the midst of developing a technologically advanced wireless network to
serve areas in Beijing. In order to effectively deploy the broadband wireless
network, we need to partner with companies whose business and products are
complimentary to those of the Company.
Page 11 of 19
China Wireless Communications, Inc.
(A Development Stage Company)
On July 8, 2003, the Company concluded a strategic alliance with WPCS
International Incorporated to support the expansion of the Company's broadband
wireless network in Beijing, China. The alliance calls for WPCS to provide
wireless products and design services to the Company on a needed basis.
On August 14, 2003, the Company signed a cooperative agreement with P-Com, Inc.
to develop a broadband wireless network within China. P-Com will provide
equipment and support for their line of wireless products to the Company to
assist in building a wireless broadband network in China. The Company will use
its marketing resources and sales platform to recommend and popularize the
products of P-Com.
On August 15, 2003, the Company signed a contract with MCI. This contract
permits the Company to extend the reach of its Broadband Wireless Access Network
in Beijing, China. The Company will be adding MCI International ATM
[asynchronous transport mode] services to reach North America, South Pacific,
Asian and European markets to its existing suite of broadband network offerings.
Alliances and partnerships with Tier One Telecom Carriers form the Company's
important strategies in China. Current broadband access providers in China are
searching for economically viable ways to connect more end users to their
backbones and to direct more traffic to their underutilized networks. We provide
services meeting this growing demand. Over the last few months we have entered
into an agreement with China Netcom to cooperate in building out network to
serve its customers. We expect this and other such partnerships to help us enter
and develop in China's highly regulated telecom sector successfully as a foreign
invested enterprise.
Over the last few months we have formed strategic alliances and partnerships
with manufacturers of various electronic products associated with networking
business. On August 5, 2003, we signed a distribution agreement with BATM
Advanced Communications. On August 21, 2003, we signed an agreement with Rongji
Enterprise to distribute RJ-iTOP default network scanning system used to protect
wireless broadband networks. On August 31, 2003, the Company signed a
distributor agreement with Tsinghua Unis Bitway Network Co., Ltd. to sell
network security products.
Chinese Tax Holiday
In-Touch is Registered in the Beijing Zhong Guan Cun High Tech Park and also
recognized as a High Tech company. In-Touch will receive a tax holiday for three
full tax years and a further three years where it will pay taxes at half the
normal corporate tax rate, starting from the year that it first achieves a
profit in the PRC.
Critical Accounting Policies and Estimates
The preparation of our financial statements in conformity with accounting
principles generally accepted in the United States requires us to make estimates
and assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amount of revenues and expenses during the reporting
period. In applying our accounting principles, we must often make individual
estimates and assumptions regarding expected outcomes or uncertainties. As you
might expect, the actual results or outcomes are generally different than the
estimated or assumed results or outcomes. These differences are usually minor
(but they could be material) and are included in our consolidated financial
statements as soon as they are known. Our estimates, judgments and assumptions
are continually evaluated based on available information and experience. Because
of the use of estimates inherent in the financial reporting process, actual
results could differ materially from those estimates.
Page 12 of 19
China Wireless Communications, Inc.
(A Development Stage Company)
Foreign Currencies
Balance Sheet transactions in foreign currencies are translated at the rates of
exchange on the date of the Balance Sheet. Income Statement transactions in
foreign currencies are translated at the average rates of exchange for the
reporting period. Exchange gains and losses are recorded in the statement of
operations.
China Wireless Communications, Inc (formerly i-Track, Inc.)
Results of Operations. During the third quarter of 2003, CWC continued its work
of expanding its network in Beijing and reviewing the opportunities in the local
market. CWC has also put a great deal of effort into establishing and testing a
variety of equipment to provide its services from different vendors in Beijing,
China. CWC is in the development stage and has not yet generated significant
revenues from planned principal operations.
Operational expenses totaled $648,163 and $2,427,265 for the three months and
nine months ended September 30, 2003 respectively. Of this amount, $390,176 and
$1,413,076 respectively are costs recorded for common stock issued for
compensation for these same periods. As we are in the development stage, our
focus is three fold: (a) raising capital, (b) providing and establishing
long-term relationships with equipment providers, and (c) finalizing operational
procedures for the Beijing office.
Liquidity and Capital Resources. For the nine-month period ended September 30,
2003, CWC used cash of $398,440 for operating activities. The most significant
adjustment to reconcile the net loss to net cash used in operations was common
stock issued as compensation amounting to $1,413,076. Investing activities also
used cash of $287,032, which was comprised mainly of acquisition cost for
equipment used by the Company to provide its services to its customers and a
cash payment in connection with the closing of the acquisition, made in the
previous calendar quarter. The Company has $56,354 of cash.
At September 30, 2003, the Company had a working capital deficit of $790,513, of
which $56,354 was in the form of cash and cash equivalents, $209,443 in other
current assets, $825,710 in accrued liabilities, $41,000 in convertible debt and
$189,600 in notes payable.
Plan of Operation
The Company will focus its primary marketing efforts on providing broadband
access services to carriers and their clients. The Company is able to cooperate
with major carriers of China as the wholesale provider of high bandwidth
wireless access services. To connect more users to their backbone networks, the
carriers will agree to cooperate with us in providing the high-speed wireless
services to their customers and share in the revenue. Following entering into
the cooperative agreement with China Netcom on September 1, 2003, the Company is
in the process of reviewing a similar arrangement with another Tier One Carrier
- China Satellite Communication Corporation.
The Company expects agreements with fiber network infrastructure constructors,
which allows the Company's customers to use the network for a long period of
time. Such agreements will expand the coverage area for the Company's wireless
broadband network. Meanwhile, the Company intends to continue building on the
Page 13 of 19
China Wireless Communications, Inc.
(A Development Stage Company)
capabilities of its networks to expand its target market and service offerings.
The medium to long term goals of the Company are to successfully develop
Beijing, and using the same business model, expand the wireless broadband
network nationwide over a three to five year period. The expansion plans for
national deployment will be based on the economically feasible areas.
As the Company positions itself as a high quality service provider, it targets
to offer network reliability complemented by quality customer support. As a
practice, the Company plans to set up call centers to accommodate queries and
make quick response to complaints from customers. In the future, our technical
support people will be in position on a 7 day iA 24 hours basis.
The Company will need to raise substantial capital over the next year to fund
its operations and to implement its strategies. The continuation of the Company
as a going concern is dependent upon the successful implementation of its
business plan, raising capital, and ultimately achieving profitable operations.
However there can be no assurance that the business plan will be successfully
implemented. The inability of the Company to implement the business plan or to
successfully raise capital could adversely impact the Company's business and
prospects.
The Company will focus its effort on customer satisfaction by attracting and
retaining a core team of professionals. The Company will continue to implement
its stock and cash combined employee incentive system. We plan to increase our
staffing levels only as required by our operation. We currently have no plans to
significantly increase the number of our employees.
Item 3. Controls and Procedures
Within 90 days prior to the date of this report under the supervision and
participation of certain members of the Company's management, including the
President and the Chief Financial Officer, the Company completed an evaluation
of the effectiveness of the design and operation of its disclosure controls and
procedures (as defined in rules 13a - 14 and 15d - 14c to the Securities
Exchange Act of 1934, as amended). Based on this evaluation, the Company's
President and Chief Financial Officer believe that the disclosure controls and
procedures are effective with respect to timely communicating to them and other
members of management responsible for preparing periodic reports all material
information required to be disclosed in this report as it relates to the
Company.
Page 14 of 19
China Wireless Communications, Inc.
(A Development Stage Company)
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Not Applicable.
Item 2. Changes in Securities
Not Applicable
Item 3. Defaults Upon Senior Securities
Not Applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not Applicable.
Item 5. Other Information
Not Applicable
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
Regulation
S-B Number Exhibit
---------- -------
31.1 Certification of Chief Executive/Financial Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
32.1 Certification of Chief Executive/Financial Officer Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
---------------
b) Reports on Form 8-K:
Form 8-K dated September 29, 2003 reporting Items 5 and 7.
Page 15 of 19
China Wireless Communications, Inc.
(A Development Stage Company)
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 WIRELESS COMMUNICATIONS, INC.
(Registrant)
Date: November 14, 2003 By: /s/ BRAD WOODS
--------------------------------------
Brad Woods,
Interim President (Principal Executive
Officer) and Chief Financial Officer
(Principal Financial and Accounting
Officer)
Page 16 of 19