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: March 31, 2004
[ ] 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.
(Exact name of small business issuer as specified in its charter)
NEVADA 91-1966948
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1746 COLE BOULEVARD, SUITE 225, GOLDEN, COLORADO 80401-3210
(Address of principal executive offices)
(303) 277-9968
(Issuer's telephone number)
(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:
28,491,457 SHARES OF COMMON STOCK, $0.001 PAR VALUE,
AS OF MARCH 31, 2004
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)
Three Months Ended March 31, 2004 and 2003, and period from August 13, 2002
(inception) to March 31, 2004.........................................................3
- Condensed Consolidated Balance Sheet (Unaudited)
As of March 31, 2004..................................................................4
- Condensed Consolidated Statements of Cash Flows (Unaudited)
Three Months Ended March 31, 2004 and 2003, and period from August 13, 2002
(inception) to March 31, 2004.........................................................5
- Condensed Consolidated Statements of Stockholders' Equity (Unaudited).................6
- Notes to and Forming Part of the Condensed Financial
Statements (Unaudited)................................................................7
Item 2. - Management's Discussion and Analysis or Plan of Operations ...........................9
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 ....................................................15
SIGNATURES .............................................................................................16
Page 2 of 19
CHINA WIRELESS COMMUNICATIONS, INC.
(A Development Stage Company)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
=======================================================================================================================
PERIOD FROM
AUGUST
13,2002 THREE MONTHS THREE MONTHS
(INCEPTION) TO ENDED MARCH ENDED MARCH
MARCH 31,2004 31,2004 31,2003
NOTE US$ US$ US$
OPERATING REVENUE
Service revenue 60,689 25,317 -
Cost of services (42,162) (17,224) -
--------------- --------------- --------------
GROSS PROFIT 18,527 8,093 -
--------------- --------------- --------------
OPERATING EXPENSES
Depreciation expenses 26,013 6,981 1,315
General and administrative expenses 5,070,526 544,244 1,301,811
--------------- --------------- --------------
Total operating expenses 5,096,539 551,225 1,303,126
--------------- --------------- --------------
LOSS FROM OPERATIONS (5,078,012) (543,132) (1,303,126)
NON-OPERATING INCOME (EXPENSES)
Interest income 851 48 -
Other income 339 - -
Interest expenses (20,145) (2,817) (989)
--------------- --------------- --------------
LOSS BEFORE INCOME TAXES (5,096,967) (545,901) (1,304,115)
Income taxes - - -
--------------- --------------- --------------
NET LOSS (5,096,967) (545,901) (1,304,115)
=============== =============== ==============
NET LOSS PER SHARE OF COMMON STOCK: 3
Basic (0.0198) (0.0607)
=============== ==============
Diluted N/A N/A
=============== ==============
WEIGHTED AVERAGE NUMBER OF SHARES OF COMMON
STOCK OUTSTANDING 27,580,614 21,500,000
=============== ==============
The financial statements should be read in conjunction with the accompanying notes
Page 3 of 19
CHINA WIRELESS COMMUNICATIONS, INC.
(A Development Stage Company)
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
================================================================================
AS OF
MARCH
31, 2004
ASSETS US$
CURRENT ASSETS
Cash and cash equivalents 99,134
Pledged deposits 22,687
Prepayments and other receivables 144,064
---------------
Total current assets 265,885
Property, plant and equipment, net 446,506
---------------
TOTAL ASSETS 712,391
===============
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Trade and other payables 205,494
Loans 338,170
Notes payable 173,600
Convertible debts 30,000
---------------
TOTAL LIABILITIES 747,264
---------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIT
Preferred stock, par value US$0.01 each
1,000,000 shares of stock authorized,
None issued and outstanding
Common stock, par value US$0.001 each
50,000,000 shares of stock authorized,
28,491,457 shares of stock issued and outstanding 28,491
Additional paid-in capital 5,033,603
Accumulated deficit (5,096,967)
---------------
TOTAL STOCKHOLDERS' DEFICIT (34,873)
---------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT 712,391
===============
The financial statements should be read in conjunction with the accompanying
notes
Page 4 of 19
CHINA WIRELESS COMMUNICATIONS, INC.
(A Development Stage Company)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
======================================================================================================================
PERIOD FROM
AUGUST 13,
2002 THREE THREE
(INCEPTION) TO MONTHS MONTHS
MARCH 31, ENDED MARCH ENDED MARCH
2004 31, 2004 31, 2003
US$ US$ US$
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss (5,096,967) (545,901) (1,304,115)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation 26,013 6,981 1,315
Common stocks issued for compensation 3,501,454 366,500 909,900
Changes in working capital:
Prepayments and other receivables (144,064) 57,567 (34,994)
Trade and other payables 205,494 (120,289) 96,477
--------------- -------------- -------------
NET CASH USED IN OPERATING ACTIVITIES (1,508,070) (235,142) (331,417)
--------------- -------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of property, plant and equipment (472,519) (53,248) (95,570)
Increase in pledged deposits (22,687) (490) -
--------------- -------------- -------------
NET CASH USED IN INVESTING ACTIVITIES (495,206) (53,738) (95,570)
--------------- -------------- -------------
NET CASH PROVIDED BY FINANCING ACTIVITIES
Net proceeds from issuance of common stock 1,560,640 437,568 288,150
(Repayment) Inception of loans 338,170 (29,751) -
Proceeds from issuance of notes payable 322,000 - 50,000
Repayment of notes payable (148,400) (6,000) (59,500)
(Repayment of) Proceeds from issuance of convertible debts 30,000 (11,000) -
--------------- -------------- -------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 2,102,410 390,817 278,650
--------------- -------------- -------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 99,134 101,937 (148,337)
CASH AND CASH EQUIVALENTS, AS OF BEGINNING
OF THE PERIOD - (2,803) 197,576
--------------- -------------- -------------
CASH AND CASH EQUIVALENTS, AS OF END OF THE PERIOD 99,134 99,134 49,239
=============== ============== =============
ANALYSIS OF BALANCES OF CASH AND CASH EQUIVALENTS
Bank balances 99,134 99,134 49,239
=============== ============== =============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid 20,145 2,817 989
=============== ============== =============
NON-CASH OPERATING, INVESTING AND FINANCING ACTIVITIES
Common stocks issued for compensation by SCP 1,674,782 - 809,350
Common stocks issued for compensation
by the Company 1,826,672 366,500 100,550
--------------- -------------- -------------
3,501,454 366,500 909,900
=============== ============== =============
The financial statements should be read in conjunction with the accompanying
notes
Page 5 of 19
CHINA WIRELESS COMMUNICATIONS, INC.
(A Development Stage Company)
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED)
======================================================================================================================
COMMON STOCK
---------------------------- ADDITIONAL 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
Common stock issued for services
at prices ranging from $0.25
to $0.72 per share 3,293,751 3,294 1,456,878 - 1,460,172
Common stock issued for cash at
prices ranging from $0.50 to
$0.80 per share, net of
issuance costs of $491,949 1,420,202 1,420 421,084 - 422,504
Net loss for the year - - - (3,536,067) (3,536,067)
------------ ---------- -------------- -------------- --------------
As of December
31, 2003 26,213,953 26,214 4,231,812 (4,551,066) (293,040)
Common stock issued for services
at prices ranging from $0.35 to
$0.65 per share 688,634 688 365,812 - 366,500
Common stock issued for cash
at prices ranging from $0.55 to
$0.74 per share, net of issuance
costs of $559,983 1,588,870 1,589 435,979 - 437,568
Net loss for the period - - - (545,901) (545,901)
------------ ---------- -------------- -------------- --------------
AS OF MARCH
31, 2004 28,491,457 28,491 5,033,603 (5,096,967) (34,873)
============ ========== ============== ============== ==============
Note: The common stock issued and outstanding at inception represents shares
in issue immediately after the reverse acquisition of Strategic
Communications Partners, Inc. ("SCP") on March 22, 2003, assuming that
the capital structure had already been in existence since August 13,
2002.
The financial statements should be read in conjunction with the accompanying
notes
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 Ended March 31, 2004
================================================================================
1. BASIS OF PRESENTATION
The accompanying financial data as of March 31, 2004 and for the three
months ended March 31, 2004 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 the notes
thereto of the Company, included in the Company's filings on form
10-KSB dated April 13, 2004.
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 three months ended March 31,
2004 are not necessarily indicative of the operating results for the
full year.
2. PREPARATION OF FINANCIAL STATEMENTS
The Company is in the development stage and has incurred losses of
US$5,096,967 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. Details of the plans of operations of
the Company are set out in Item 2 of this Form 10-QSB under the heading
"Plan of Operation".
3. 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 ended
March 31, 2004 and 2003, and for the period from August 13, 2002
(inception) to March 31, 2004 are 27,580,614 shares, 21,500,000 and
22,570,375 shares, respectively.
As of March 31, 2004, 2,302,726 shares in total could be issued
pursuant to the convertible debts, stock warrants and stock options of
the Company. No diluted loss per share is presented because their
effects would be anti-dilutive.
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 Ended March 31, 2004
================================================================================
4. STOCK-BASED COMPENSATION
The Company records compensation expense for stock-based employee
compensation plans using the intrinsic value method in which
compensation expense, if any, is measured as the excess of the market
price of the stock over the exercise price of the award on the
measurement date.
On March 22, 2003, the Company granted options to subscribe for shares
of the Company to its directors and officers ("Options I"). The option
period commenced on the effective date of grant and will expire on
October 31, 2004. The options were granted at an exercise price of
US$0.35 per share, which is the market price on the grant date. As of
March 31, 2004, 400,000 options were outstanding and 50,000 options
have been exercised during the 3-month period then ended.
On July 7, 2003, the Company granted options to subscribe for shares of
the Company to its employees ("Options II"). The option period
commenced on October 1, 2004 and will expire three years after such
date. The options were granted at an exercise price of US$0.41 per
share, which approximates the market price on the grant date. As of
March 31, 2004, 100,000 options were outstanding and no option has been
exercised during the 3-month period then ended.
As the exercise prices of the Company's stock options are either the
same as or approximate to the market prices of the underlying stock on
the grant dates, no compensation expense has been recognized for stock
options pursuant to APB Opinion No. 25.
Had compensation expenses for the same stock options been determined
based on their fair values at the dates of grant and been amortized
over the period from the date of grant to the date that the award is
vested, consistent with the provisions of SFAS No. 123, the Company's
net loss and loss per share would have been reported as follows:
PERIOD FROM
AUGUST
13,2002
(INCEPTION) TO THREE MONTHS THREE MONTHS
MARCH 31, ENDED MARCH ENDED MARCH
2004 31,2004 31,2003
US$ US$ US$
Net loss
As reported (5,096,967) (545,901) (1,304,115)
Total stock-based compensation
expenses (59,733) (4,296) -
-------------- -------------- -------------
Pro forma (5,156,700) (550,197) (1,304,115)
============== ============== =============
Basic net loss per share
As reported (0.2259) (0.0198) (0.0607)
============== ============== =============
Pro forma (0.2285) (0.0199) (0.0607)
============== ============== =============
Page 8 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 landline
based fiber networks. We typically deliver our services over fixed wireless
networks that we design, construct, own and operate. Over this infrastructure,
we offer ultra high-speed Internet access, and other broadband data services.
Other value added services being offered by us include systems integration and
other telecom 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. SCP's and SCPL's operations
to date consist solely of supporting the Beijing operations.
Page 9 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. SCP made payments to Goldvision,
totaling $55,000 under the Investment Contract.
On March 14, 2003, SCP signed an agreement with the subsidiary of Goldvision,
Goldtel, which holds the licenses used to sell its high-speed wireless broadband
services. This agreement is for five years and allows us 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, SCP decided not to request an additional extension of the
Investment Contract after the expiration date of September 5, 2003. We
anticipate that they will continue to provide services under the March 14, 2003
Agreement on a case-by-case basis. We are no longer liable to provide any
capital to Goldvision under these prior agreements. We do not believe that the
termination of the Investment Contract will have any material effect on our
business operations.
BEIJING IN-TOUCH INFORMATION SYSTEM COMPANY LTD.
On March 4, 2003, SCP set up a wholly owned foreign enterprise, Beijing In-Touch
Information System Co. Ltd ("In-Touch") in the PRC. In-Touch has commenced
operations in Beijing, through cooperation agreements with local
telecommunications operators.
In-Touch deployed a high speed broadband fiber network as the backbone to
construct its fixed wireless broadband network system in Beijing, starting in
December, 2003. That company is now selling its services over that network..
This network will make available 2.5 Gbps of capacity on a fiber network that
surrounds the 66 kilometer-long fourth ring road in Beijing. The new additional
capacity will support over 100,000 business-class broadband business customers
on its Beijing network.
The first phase of the fixed wireless broadband network system in Beijing was
completed April 2004, at which time In-Touch began full-service operations.
In-Touch will be providing high speed wireless services, Virtual Private
Network's and other wireless access, transport and enhanced data services.
We continue to build innovative partnership and acquisition strategies to
maximize the coverage of our network in Beijing. We plan to replicate our
Beijing model in other strategic cities in China during late 2004 and 2005.
As of March 31, 2004, we have three employees, all of whom are full-time in the
United States. As of March 31, 2004, SCPL has no full-time employees in Hong
Kong and In-Touch has 54 full-time employees all of whom are located in Beijing.
None of our employees is covered by a collective bargaining agreement.
Page 10 of 19
CHINA WIRELESS COMMUNICATIONS, INC.
(A Development Stage Company)
ALLIANCES AND PARTNERSHIPS
We are in the midst of developing a technologically advanced wireless network to
serve areas of business concentration in Beijing, China. 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. However, there
is no guarantee that we can find suitable partner and we will be able to come to
mutually agreeable terms if suitable partner could be found.
On August 14, 2003, we signed a cooperative agreement with P-Com, Inc. ("P-Com")
to develop a broadband wireless network within China. P-Com will provide
equipment and support for their line of wireless products to assist us in
building a wireless broadband network in China. We will use our marketing
resources and sales platform to recommend and popularize the products of P-Com.
On August 15, 2003, we signed a contract with MCI International Ltd. Co.
("MCI"). This contract permits us to extend the reach of our Broadband Wireless
Access Network in Beijing, China. We will be adding MCI International ATM
asynchronous transport mode services to reach North America, South Pacific,
Asian and European markets to our existing suite of broadband product and
service offerings.
Alliances and partnerships with Tier One Telecom Carriers are critical to our
growth strategy. We believe 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 agreement with China Netcom Group Beijing Company to cooperate in building
out a 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. There are however, no guarantees
that these partnerships will be successful.
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 from 2003
to 2005 followed by a 50% reduction for the next three years.
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 11 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 first quarter of 2004, 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. While service revenues of $25,317
were generated for the first quarter of 2004 for wireless broadband access
services, through cooperation agreements with local telecommunications
operators, revenues generated from inception to March 31, 2004 total only
$60,689.
Operational expenses totaled $551,225 for the three months ended March 31, 2004.
Of this amount, $366,500 are costs recorded for common stock issued for
compensation for this period. 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.
In comparison, operational expenses for the three months ended March 31, 2003
were $1,303,126. Of this amount, $909,900 was recorded for common stock issued
for compensation. The reduction in operational expenses is due primarily to high
consulting expenses and commissions.
LIQUIDITY AND CAPITAL RESOURCES. For the three-month period ended March 31,
2004, CWC used cash of $235,142 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 $366,500. Investing activities also
used cash of $53,738, The Company has $99,134 of cash and cash equivalent and
pledged deposits of $22,821 at March 31, 2004.
As reflected in the statement of cash flows, the Company is still dependent upon
issuance of its common stock for cash utilized in its operations. For the three
months ended March 31, 2004, net proceeds from the issuance of common stock
provided cash of $437,568.
At March 31, 2004, the Company had a working capital deficit of $481,379, of
which $121,821 was in the form of cash and cash equivalents and pledged
deposits, $144,064 in prepayments and other receivables, $205,494 in trade and
other payables, 338,170 in loans, $30,000 in convertible debts and $173,600 in
notes payable.
PLAN OF OPERATION
We have been focusing our efforts on finishing the design and construction of
our Fixed Wireless Broadband Network System in Beijing. This system will
commence operations in the second quarter of 2004. We will focus our primary
marketing efforts on providing high-speed Internet access, VOIP, VPN private
circuit, International leased line, and other broadband services to our clients.
We are also in the midst of building partnership(s) with
Page 12 of 19
CHINA WIRELESS COMMUNICATIONS, INC.
(A Development Stage Company)
major telecom carriers of China. To connect more users to their backbone
networks, we believe the carriers have motivation to cooperate with us in
providing the high-speed wireless services to their customers on a revenue
sharing basis. Following entering into the cooperative agreement with China
Netcom Beijing Company on September 1, 2003, we are in the process of reviewing
a similar arrangement with another Tier One Carrier. However, there is no
guarantee that we will enter into such agreement and no guarantee that the terms
will be favorable to us.
During 2004 we will develop Beijing, providing additional infrastructure which
will allow us to expand our geographical coverage in Beijing. Using this same
model, we plan to replicate our wireless broadband network in a dozen selected
major metropolitan areas in the PRC. In each city, we will deploy multi-advanced
technologies, including MSTP, ATM/IP, broadband wireless, soft switch, to
provide high-speed Internet access, VOIP, Virtual Private Network, private
circuit, International leased line and other value added services. We plan to
expand Network Systems beyond Beijing starting in late 2004 and 2005. Our
ability to do this will be primarily limited by our ability to raise capital.
There is no guarantee that we will be successful in raising funds or if we do
raise funds it will be at terms more favorable to us.
We have positioned ourselves as a high quality service provider, offering
network reliability complemented with quality customer support. We are setting
up a call center to accommodate queries and to provide a quick response to any
queries from customers. We will focus our effort on customer satisfaction by
attracting and retaining a core team of professionals.
The continuation of us as a going concern is dependent upon the successful
implementation of our 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 us to implement the business
plan successfully could adversely impact our business and prospects.
We plan currently to increase our staffing levels only as required by our
operations.
ITEM 3. CONTROLS AND PROCEDURES
Under the supervision and with the participation of our management, including
our Chief Executive Officer / Chief Financial Officer, we conducted an
evaluation of the effectiveness of our disclosure controls and procedures as
defined in Rule 13a-14(c) promulgated under the Securities Exchange Act of 1934
as of March 31, 2004. Based on their evaluation, our Chief Executive Officer /
Chief Financial Officer concluded that the design and operation of our
disclosure controls and procedures were effective as of the date of the
evaluation.
There have been no significant changes (including corrective actions with regard
to significant deficiencies or material weaknesses) in our internal controls or
in other factors that could significantly affect these controls subsequent to
the date of the evaluation referenced in the preceding paragraph.
Page 13 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
In the first quarter of 2004, we raised $437,568, selling 1,588,870 shares of
our common stock. The principal underwriter was Bellador Advisory Services Ltd.
("Bellador"), a Malaysian-based international business company and the
securities were sold under Regulation S promulgated under the Securities Act.
The total offering price of these securities was $997,551, less $559,983 in
underwriting discounts and commissions. The Agreement signed with Bellador,
provides that the Company is to receive a price equivalent to 45% of the market
price, that its common stock trades, all as defined in our agreement with
Bellador. Bellador further has an agreement with each investor, that the stock
must be held for one year, before its Regulation S restriction is removed.
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
Page 14 of 19
CHINA WIRELESS COMMUNICATIONS, INC.
(A Development Stage Company)
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
Regulation Exhibit
S-B Number
2.1 Share Exchange Agreement dated as of March 17, 2003 by and
between i-Track, Inc. and Strategic Communications Partners,
Inc. (1)
3.1 Articles of Incorporation (2)
3.2 Bylaws (2)
3.3 Certificate of Amendment to Articles of Incorporation (3)
10.1 Promissory Note, dated June 27, 2003 in the amount of $50,000,
payable to Henry Zaks (4)
10.2 Promissory Note, dated July 31, 2003 in the amount of $30,000,
payable to Henry Zaks (4)
10.3 Investment Contract between Goldvision Technologies Ltd and SCP
dated December 18, 2002 (5)
10.4 Extension Agreement to Investment Contract between Goldvision
Technologies Ltd. and the Company dated August 5, 2003 (4)
10.5 Employment Agreement dated March 25, 2003 with Phillip Allen
(5)
10.6 Employment Agreement dated March 25, 2003 with Brad A. Woods
(5)
10.7 Separation & Voting Trust Agreement with Philip Allen (4).
10.8 Agreement between the Company and Bellador Advisory Services,
Ltd. dated October 22, 2003 (4)
10.9 Agreement between the Company and China Netcom Group Beijing
Company dated September 1, 2003 (4)
16.2 Letter from Edwards, Melton, Ellis, Koshiw & Company, P.C.
dated January 20, 2003 (6)
16.3 Letter from the Rehmann Group, dated February 19, 2003 (7)
16.4 Letter from Moores Rowland, dated May 14, 2003 (8)
21 Subsidiaries of the registrant (4)
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
(1) Incorporated by reference to the exhibits to the registrant's current report
on Form 8-K dated March 17, 2003.
(2) Incorporated by reference from the exhibits to the Registration Statement on
Form SB-1 filed on November 6, 2000, File No. 333-49388.
(3) Incorporated by reference to the exhibits to the registrant's current report
on Form 8-K dated March 22, 2003.
(4) Incorporated by reference to the exhibits to the registrant's annual report
on Form 10-KSB for the year ended December 31, 2003.
(5) Incorporated by reference to the exhibits to the registrant's annual report
on Form 10-KSB for the year ended December 31, 2002.
(6) Incorporated by reference to the exhibits to the registrant's current report
on Form 8-K dated January 20, 2003.
(7) Incorporated by reference to the exhibits to the registrant's current report
on Form 8-K dated February 19, 2003.
(8) Incorporated by reference to the exhibits to the registrant's current report
on Form 8-K dated May 14, 2003.
b) Reports on Form 8-K:
Form 8-K dated February 23, 2004 reporting under Item 5 the appointment
of a director.
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: May 18, 2004 By: /s/ BRAD WOODS
----------------------------------------
Brad Woods,
Interim President (Principal Executive
Officer) and Chief Financial Officer
(Principal Financial and Accounting
Officer)
Page 16 of 19