China Xin Network Media Corporation (the Company) is a Florida registered company. Until October 29, 2003, the registrant was pursuing its business plan of developing a custom market research firm which would provide business intelligence to Fortune 2000 companies seeking to enter or enhance their market presence in the People’s Republic of China, with its partner, The China Economic Information Network (CEINet), an official government agency of the State Development and Planning Commission.
On October 29, 2003, the registrant announced that it would seek to mutually terminate its joint venture agreement with CEINet. The board had agreed that this decision was necessary due to CXN’s continued inability to meet its obligations under its agreement.
On December 2, 2003, the registrant concluded the acquisition of Montreal (Canada) based Bio-Tracking Security Inc. (Bio-Tracking). Under the terms of the transaction, CXN acquires 100% of the outstanding shares of Bio-Tracking in exchange for 100,000,000 shares of CXN. As a result of this transaction, Bio-Tracking is now a wholly-owned subsidiary of CXN.
Bio-Tracking of Montreal, Quebec, designs and manufactures vehicle and asset tracking and security systems, based on patented, Inertial Navigation, Biometric Fingerprint Identification and Spread Spectrum Communication technologies.
The Company is considered to be a development stage company as of December 31, 2004 since planned principal operations have not yet commenced.
b) Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the Company from October 19, 2000 and its wholly-owned subsidiary, CXN from October 19, 2000 herein after referred to together as the (“Companies”) after elimination of any significant intercompany transaction and accounts.
c) Cash and Cash Equivalent
The Company considers highly liquid investments with maturities of three months or less at the time of purchase to be cash equivalents.
d) Furniture, Fixtures and Equipment
Furniture, fixtures and equipment are recorded at cost less accumulated depreciations which is provided on the straight-line basis over the estimated useful lives of the assets which range between three and seven years. Expenditures for maintenance and repairs are expensed as incurred.
BIO TRACKING SECURITY INC. (FORMERLY CHINA XIN NETWORK MEDIA CORPORATION) AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
INTERIM NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
As At December 31, 2004
Income Taxes
The Company accounts for income taxes in accordance with the “liability method” of accounting for income taxes. Accordingly, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities, using the enacted tax rates in effect for the year in which the differences are expected to reverse. Current income taxes are based on the respective periods’ taxable income for federal, state and foreign income tax reporting purposes. As at December 31, 2004, these amounts were Nil.
f) Earnings Per Share
Earnings per common share is computed pursuant to SFAS No. 128 “Earnings Per Share”. Basic earnings per share is computed as net income (loss) available to common shareholders divided by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur from common shares issuable through stock options, warrants and convertible preferred stock.
g) Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
h) Fair Value Disclosure at December 31, 2004
The carrying value of cash, refundable tax credits, accounts payable and due to officers and employees are a reasonable estimate of their fair value.
i) Effect of New Accounting Standards
The Company does not believe that any recently issued accounting standards, not yet adopted by the Company, will have a material impact on its financial position and results of operations when adopted.
During June 2001, SFAS No. 141, “Business Combinations” was issued. This standard addresses financial accounting and reporting for business combinations. All business combinations within the scope of SFAS 141 are to be accounted for using one method - the purchase method. Use of the pooling-of-interests methods is prohibited. The provisions of SFAS 141 apply to all business combinations initiated after June 30, 2001.
During June 2001, SFAS No. 142, “Goodwill” and Other Intangible Assets” was issued. This standard addresses how intangible assets that are acquired individually or with a group of other assets (but not those acquired in a business combination) should be
BIO TRACKING SECURITY INC. (FORMERLY CHINA XIN NETWORK MEDIA CORPORATION) AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
INTERIM NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
As At December 31, 2004
i) Effect of New Accounting Standards - Cont’d
accounted for in financial statements upon their acquisition. SFAS 142 also addresses how goodwill and other intangible assets should be accounted for after they have been initially recognized in the financial statements. The provision of SFAS 142 is effective for fiscal years beginning after December 15, 2001.
3. GOING CONCERN
The Company’s financial statements are prepared using generally accepted accounting principles to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not established revenues sufficient to cover its operating costs and allow it to continue as a going concern. Until such time the company is raising investments capital to cover its ongoing operating costs.
4. PROVISION FOR INCOME TAX
Income taxes are provided for the tax effects of transactions reported in the financial statements and consist of taxes currently due plus deferred taxes related to differences between the financial statement and income tax bases of assets and liabilities for financial statement and income tax reporting purposes. Deferred tax assets and liabilities represent the future tax return consequences of these temporary differences, which will either be taxable or deductible in the year when the assets or liabilities are recovered or settled. Accordingly, measurement of the deferred tax assets and liabilities attributable to the book-tax basis differentials are computed by the Company at a rate of approximately 34% for federal and 6% for state.
5. COMMITMENTS AND CONTINGENCIES
Insurance
The Company does not maintain any property and general liability insurance. At the date of the Balance Sheet, the Company is not aware of any claims.
Contingencies
On November 7, 2003, the Company entered into an agreement with 3884368 Canada Inc., one of its major shareholders controlled by Jean-Francois Amyot. Under the terms of the agreement, 3884368 Canada Inc., took full responsibility to settle CXN’s total liabilities totaling $974,700 USD. CXN issued 97,470,000 shares to 3884368 Canada Inc. as settlement of debt on its balance sheet. The debt is considered as a contingency to CXN until all outstanding claims are settled.
6. REDUCTION OF LOAN OUTSTANDING
There were 100,000,000 restricted Shares issued on January 4, 2004 to complete the acquisition of Bio-Tracking. At which time a note for $868,569 was cancelled which was issued as collateral until the shares were ready for delivery from the transfer agent. Furthermore, the shares for the Agreement of the settlement of debts of CXN with 3884368 Canada Inc. were issued in January 2004.
BIO TRACKING SECURITY INC. (FORMERLY CHINA XIN NETWORK MEDIA CORPORATION) AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
INTERIM NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
As At December 31, 2004
7. GOODWILL
In July 2001, the FASB issued Statement No. 141, Business Combinations. and No. 142, Goodwill and Other Intangible Assets. Statement No. 141 supercedes the previous accounting standard on business combinations, Accounting Principles Board Opinion No. 16. and requires that all business combinations initiated after June 30, 2001 must be accounted by the purchase method. Statement No. 141 also changes the requirements for recognizing assets as assets apart from goodwill in business combinations accounted for by the purchase method for which the date of the acquisition is July 1, 2001 or later. Under Statement No. 142, goodwill acquired in a business combination for which the acquisition date is after June 30, 2001, should not be amortized, but should be tested for impairment in accordance for the provisions of this accounting standard.
Goodwill is the result of the acquisition of Bio-Tracking Security Inc. by the registrant on December 2, 2003. The closing price of the shares traded on December 2, 2003 was $0.05. The Goodwill is calculated as the excess of the fair value of the acquisition (the purchase method) over its tangible assets.
8. SUBSEQUENT EVENTS
Significant Changes to Key Management and Share Capital Management Changes
On March 10, 2004, a majority action of shareholders of the registrant, was taken by shareholders representing a majority of the outstanding shares of the corporation, in accordance to 607.0704 of the Florida Business Corporations Act, to nominate successor Members of the Board of Directors for the ensuing year, namely; Mr. Michael G. Iafigliola, Mr. Philippe Canning, Mr. Kerry Schacter and Ms. Angela Cabral. A Schedule 14C Information Statement was filed April 5, 2004.
On September 30, 2004, Mr. Jean-Francois Amyot was appointed to the Board of Directors of the Registrants and nominated as Chairman President and CEO following the Special Shareholders meeting held in witness of the Registrant’s auditors where the holder of the majority of the outstanding shares of the common stock of the Registrant voted to remove Michael Tremis, Michael Iafigiola, Philippe Canning, Daniel Bernesi and Kerry Schacter as officers and directors of the Registrant and appoint Mr. Jean-Francois as the sole director.
The decision by the shareholder to remove the current members of the Board of Directors arose due to irresolvable differences and such action was taken in the best interest of all the shareholders of the Registrant.
On September 30, 2004, following the Special Shareholders meeting held in witness of the Registrant’s auditors where the holder of the majority of the outstanding shares of the common stock of the Registrant voted to approve a reverse split 1 for 20. The Board of Directors are currently evaluating the necessity of proceeding to restructure the capital stock of the Company. As at the Statement date, the company has received no claims by the previous board of directors nor officers nor has the company pursued any claims against the previous board of directors and officers.
BIO TRACKING SECURITY INC. (FORMERLY CHINA XIN NETWORK MEDIA CORPORATION) AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
INTERIM NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
As At December 31, 2004
Changes in Share Capital
At the time of this filing there are an estimated 337,865,401 shares outstanding. The registrant also has a commitment to issue 6,666,667 warrants exercisable at $0.03 to subscribers of a private placement of April 2003. Furthermore the original seed investors in CXN are owed 9,373,667 exercisable at $0.30. The warrants expire 2 years following their registration.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Statements included in this Management's Discussion and Analysis of Financial Condition and Results of Operations, and in future filings by the company with the Securities and Exchange Commission, in the company's press releases and in oral statements made with the approval of an authorized executive officer which are not historical nor current facts are "forward-looking statements" and are subject to certain risks and uncertainties that could cause actual results to differ materially from historical earnings and those presently anticipated or projected. Without limiting the generality of the foregoing, words such as "may," "will," "expect," "believe," "anticipate," "intend," "could," "estimate," or "continue" or the negative or other variations thereof or comparable terminology are intended to identify forward-looking statements. The foregoing list should not be construed as exhaustive and the company disclaims any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events. You are cautioned not to place undue reliance on any such forward-looking statements, which speak only as of the date made. The following important factors, among others, in some cases have affected and in the future could affect the our actual results and could cause the our actual financial performance to differ materially from that expressed in any forward-looking statement: (i) the extremely competitive conditions that currently exist in the market for companies similar to us; (ii) lack or resources to maintain the company's good standing status and requisite filings with the Securities and Exchange Commission; (iii) history of operating losses and accumulated deficit; (iv) possible need for additional financing; and (v) other factors discussed in this report and the Company's other filings with the Securities and Exchange Commission. The following discussion should be read in conjunction with our financial statements and their explanatory notes included in the report.
Summary
Bio-Tracking Security Inc. (f/k/a China Xin Network Media Corporation) (the “Company”) is a Florida registered company. Until October 29, 2003, the Company was pursuing its business plan of developing a custom market research firm which would provide business intelligence to Fortune 2000 companies seeking to enter or enhance their market presence in the People’s Republic of China, with its partner, The China Economic Information Network (CEINet), an official government agency of the State Development and Planning Commission.
On October 29, 2003, the Company announced that it would seek to mutually terminate its joint venture agreement with CEINet. The board of directors of the Company had agreed that this decision was necessary due to CXN’s continued inability to meet its obligations under its agreement.
On December 2, 2003, the Company concluded the acquisition of Montreal (Canada) based Bio-Tracking Security Inc. (Bio-Tracking). Under the terms of the transaction, the Company acquired 100% of the outstanding shares of Bio-Tracking in exchange for 100,000,000 shares of the Company.
History and Development of Bio-Tracking Security Systems, Inc.
Bio-Tracking security Inc. of Montreal, Quebec, designs and manufactures vehicle and asset tracking and security systems, based on patent pending, Inertial Navigation, Biometric Fingerprint Identification and Spread Spectrum Communication technologies.
The Bio Tracking Security’s proprietary technology precisely determines if a person is an authorized user of a vehicle or any other piece of equipment protected by Bio-Tracking. Our proprietary Biometric Fingerprint ID is a technology unmatched and amazingly reliable.
The Company has a new product and service offering in the field of vehicle security, which, once installed, becomes a platform for new in-vehicle information, communication and entertainment products. In addition to effective theft prevention, this platform demonstrates measurable value for the vehicle owner, driver, dealership, manufacturer, insurance company and law enforcement agency. The device when combined with a programmable computer and a biometric identification system, wireless interconnection methods and inertial tracking technology, provides such features as driver privilege control, remote shutdown and unlock, and tracking under the most extreme circumstances. The antitheft system, which has already been prototyped and field tested, far exceeds the industry’s current standard features, effectiveness, and overall value. The next generation system can offer two-way messaging and remote diagnostics.
On June 15, 2005, we completed our acquisition of Nord Oil, Inc., a Delaware corporation, pursuant to a Share Exchange Agreement.
Operations
As of December 31, 2005, we operated a very limited operation due to the lack of funding and management was reviewing their viability of their current operations. Subsequently, on June 15, 2005, we completed our acquisition of Nord Oil, Inc., a Delaware corporation, pursuant to a Share Exchange Agreement.
Capital Needs
We anticipate that we will be required to raise additional funds to provide for the current plan of growth and existing operations through June 30, 2005. The principal source of capital has been equity financing from investors and founders. Meeting the future financing requirements is dependent on access to equity capital markets. We may not be able to raise additional equity when required or may have to borrow on terms that may be dilutive to existing shareholders.
Results of Operations
| | FOR THE PERIOD OCT. 1, 2004 DECEMBER 31, 2004 | | FOR THE PERIOD OCT. 1, 2003 DECEMBER 31, 2003 | | FOR THE PERIOD OCT. 19, 2000 DECEMBER 31, 2004 | |
| | | U.S.$ | | U.S.$ | | U.S.$ | |
Sales: | | | | | | | |
| Income | | | -- | | | -- | | | 34,616 | |
| Expenses | | | | | | | | | | |
| | | | | | | | | | | |
| Selling, general and administrative | | | 2,064 | | | 76,892 | | | 2,370,722 | |
| Amortization | | | 1,100 | | | -- | | | 4,822 | |
| | | | | | | | | | | |
| Loss before Provision for Income Taxes | | | (3,164 | ) | | (76,892 | ) | | (2,340,928 | ) |
| | | | | | | | | | | |
| Provision for Income Taxes | | | | | | | | | | |
| Comprehensive Net (Loss) | | | (3,164 | ) | | (76,892 | ) | | (2,340,928 | ) |
RISK FACTORS
The Company and our business continues to be subject to a number of risk factors, including but not limited to the fluctuations in demand for our product line due to economic conditions, a history of operating losses, the need for additional funds, competition, and technological obsolescence. Before deciding to invest in our company or to maintain or increase your investment, you should carefully consider the risks contained in our Annual Report on Form 10-KSB, our other Quarterly Reports on Form 10-QSB; and in our other filings with the Securities and Exchange Commission, including any subsequent reports filed on Forms 10-KSB, 10-QSB and 8-K. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also affect our business and results of operations. If any of these risks actually occur, our business, financial condition or results of operations could be seriously harmed. In that event, the market price for our common stock could decline and you may lose all or part of your investment.
FACTORS THAT COULD AFFECT FUTURE RESULTS
Because of the following factors, as well as other variables affecting our operating results, past financial performance may not be a reliable indicator of future performance, and historical trends should not be used to anticipate results or trends in future periods.
The Company’s independent accountants are including a “going concern” paragraph in their accountants’ report accompanying these financial statements that cautions the users of the Company’s financial statements that these statements do not include any adjustments that might result from the outcome of this uncertainty because the Company is a development stage enterprise that has not commenced its planned principal operations.
Liquidity and Capital Resources
The Company has historically satisfied its operating cash requirements primarily through private placements of restricted stock, the issuance of debt securities, issuance of common stock to satisfy balances currently outstanding, the issuance of convertible debt and warrants, operating cash flow and cash funding from related parties, as required.
ACCOUNTING POLICIES SUBJECT TO ESTIMATION AND JUDGMENT
Management's Discussion and Analysis of Financial Condition and Results of Operations are based upon our consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States. When preparing our financial statements, we make estimates and judgments that affect the reported amounts on our balance sheets and income statements, and our related disclosure about contingent assets and liabilities. We continually evaluate our estimates, including those related to revenue, allowance for doubtful accounts, reserves for income taxes, and litigation. We base our estimates on historical experience and on various other assumptions, which we believe to be reasonable in order to form the basis for making judgments about the carrying values of assets and liabilities that are not readily ascertained from other sources. Actual results may deviate from these estimates if alternative assumptions or condition are used.
ITEM 3. EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
(a) Evaluation of disclosure controls and procedures. Our chief executive officer and principal financial officer, after evaluating the effectiveness of the Company's “disclosure controls and procedures” (as defined in the Securities Exchange Act of 1934 Rules 13a-14(c) and 15-d-14(c)) as of a date (the “Evaluation Date”) within 90 days before the filing date of this quarterly report, has concluded that as of the Evaluation Date, our disclosure controls and procedures were adequate and designed to ensure that material information relating to us would be made known to him by others within those entities.
(b) Changes in internal controls. There were no changes in our internal controls or to our knowledge, in other factors that could significantly affect our disclosure controls and procedures subsequent to the Evaluation Date.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
We are not a party to any pending material legal proceedings and are not aware of any threatened or contemplated proceeding by any governmental authority against us.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
A. Exhibits
31.1 Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act.
31.2 Certification of Principal and Accounting Officer Pursuant to Section 302 of the Sarbanes-Oxley Act.
32.1 Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act.
32.2 Certification of Principal Accounting Officer Pursuant to Section 906 of the Sarbanes-Oxley Act.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934 the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| | | |
| | BIO-TRACKING SECURITY SYSTEMS, INC. |
|
|
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| Date: October 6, 2005 | By: | /s/ Jean-Francois Amyot |
| |
Name: Jean-Francois Amyot |
| | Title: Chief Executive Officer
(Principal Executive Officer) |
| | | |
| Date: October 6, 2005 | By: | /s/ Jean-Francois Amyot |
| |
Name: Jean-Francois Amyot |
| | Title: Chief Accounting Officer
(Principal Accounting Officer) |
