Bio Tracking Security (NWOL) 10QSB 2005 Q1 Quarterly report (small business)

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-QSB

Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2004

Commission File No. 000-29915

BIO TRACKING SECURITY INC

(Exact name of small business issuer as specified in its charter)

Florida	65-0786722
(State or other jurisdiction of incorporation)	(I.R.S. Employer Identification No.)

1000 de la Gauchetiere West, Suite 2400 Montreal Quebec, CANADA H3B 4W5

(Address of principal executive offices)

Tel: (514) 448-7490 Fax: (514) 448-5101

(Issuer’s telephone number)

Check whether the Issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the Issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days:    YES  x    NO  ¨

The number of shares of CHINA XIN NETWORK MEDIA CORPORATION Common Stock (Par Value $0.001) outstanding at September 30, 2004 was 337,865,401.

Transitional Small Business Disclosure Format    YES  ¨    NO  x

TABLE OF CONTENTS

		PAGE NO.
	PART I
Item 1.	Financial Statements	2
Item 2.	Plan of Operation	10
Item 3.	Controls and Procedures	13
	PART II
Item 1.	Legal Proceedings	13
Item 2.	Changes in Securities and Small Business Issuer Purchases of Equity Securities	13
Item 6.	Exhibits and Reports on Form 8-K	14
Signatures		15
Exhibit Index and Certifications

1

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

REVIEW ENGAGEMENT REPORT

To the Shareholders of

Bio Tracking Security Inc. formerly China Xin Network Media Corporation and Subsidiary

(A Development Stage Company)

I have reviewed the consolidated interim balance sheet of Bio Tracking Security Inc. and Subsidiary (a development stage company) as at September 30, 2004 and the consolidated interim statements of operations and comprehensive income(loss) and cash flows for the period then ended from October 19, 2000 (date of inception) to September 30, 2004. My review was made in accordance with generally accepted standards in the Unites States of America for review engagements and accordingly consisted primarily of enquiry, analytical procedures and discussion related to information supplied to me by the Company.

A review does not constitute an audit and consequently I do not express an audit opinion on these interim consolidated financial statements.

Based on my review, nothing has come to my attention that causes me to believe that these interim consolidated financial statements are not, in all material respects, in accordance with generally accepted accounting principles in the United States of America.

By:	/s/ FRANCO LAPOSTA
	Franco LaPosta, CA
	Chartered Accountants
	Montreal, Quebec May 14, 2004

2

CHINA XIN NETWORK MEDIA CORPORATION AND SUBSIDIARY

(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED BALANCE SHEETS

Unaudited

	March 31, 2004
ASSETS
Current Assets:
Cash	$	410
Sales Tax Receivable
R&D Refundable Tax Credits		212,308
Total current assets		212,718
Fixed Assets		21,950
Goodwill (Note 7)		4,762,020
Total assets	$	4,996,688
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	85,000
Due to officers and employees		96,349
Total current liabilities		181,349
Stockholders’ Equity:
Common stock, $.001 par value; authorized 500,000,000 shares; 30,000,000 preferred issued and outstanding 337,865,401 shares and 0 preferred shares, respectively		337,866
Paid-in capital deficiency		6,815,147
Accumulated deficit during development stage		(2,337,674	)
Total stockholders’ equity		4,815,339
Total liabilities and stockholders’ equity	$	4,996,688

See notes to consolidated financial statements.

3

CHINA XIN NETWORK MEDIA CORPORATION AND SUBSIDIARY

(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED INTERIM STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

Unaudited

	For the Period July 1, 2004 Spetember 30, 2004			For the Period July 1, 2003 September 30, 2003			Cumulative Oct. 19, 2000 September 30, 2004
Sales:
Income	$				451		$	34,616
Expenses:
Selling, general and administrative	$	53,544		$	105,856		$	2,368,658
Amortization	$	1,155		$	—		$	3,722
Loss Before Provision for Income Taxes		(54,699	)		(105,405	)		(2,337,674	)
Provision for Income Taxes
Comprehensive Net ( Loss)		(54,699	)		(105,405	)		(2,337,674	)
Net Loss Per Common Share	$	(0.00	)		(0.00	)		(0.01	)
Fully Diluted	$	(0.00	)		(0.00	)		(0.01	)
Weighted Average Common Shares Outstanding		337,865,401
Fully Weighted Average Common Shares Outstanding		337,865,401			76,552,155

See notes to consolidated financial statements.

4

CHINA XIN NETWORK MEDIA CORPORATION AND SUBSIDIARY

(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED INTERIM STATEMENTS OF STOCKHOLDERS’ DEFICIENCY

FOR THE PERIOD FROM OCTOBER 19, 2000 TO SEPTEMBER 30, 2004

Unaudited

	SHARES	COMMON STOCK AMOUNT	US$ ADDITIONAL US$ PAID-N CAPITAL	US$ ACCUMULATED DEFICIT DURING DEVELOPMENT STATE		US$ TOTAL STOCKHOLDERS DEFICIENCIES
Balance June 30, 2004	337,865,401	337,866	6,815,147	(2,282,975	)	4,870,038
Loss for the Period July 1, 2004 to September 30, 2004	—	—	—	(54,699	)	(54,699	)
	337,865,401	337,866	6,815,147	(2,337,674	)	4,815,339

See notes to consolidated financial statements.

5

CHINA XIN NETWORK MEDIA CORPORATION AND SUBSIDIARY

(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS

Unaudited

	For the Period July 1, 2004			For the Period July 1, 2003			For the Period Oct. 19, 2000
	September 30, 2004			September 30, 2003			September 30, 2004
Cash Flows from Operating Activities:
Net loss	$	(54,699	)	$			$	(2,337,674	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:		1,155						36,482
Depreciation and amortization
(Increase) decrease in:
R&D refundable tax credit								(212,308	)
Sales tax receivable
Accrued expenses
Accrued expenses to related parties
Accounts payable		30,000						85,000
Prepaid and deposits
Amounts due to officers		135,505						96,349
Amounts due to officers and Employees
Loss on disposal of assets								121,563
Net cash and cash equivalents provided by (used in) operating activities		(10,009	)					(2,210,588	)
Cash Flows from Investing Activities:
Purchase of Goodwill	$			$			$	(4,762,020	)
Purchase of Capital Assets								(211,070	)
Net Cash Used For Investing Activities	$						$	(4,973,090	)
Cash Flows from Financing Activities:
Write-off deficit to Paid-in-Capital	$			$			$	139,877
Write-off comprehensive income to Paid Capital								10,807
Write-off stock subscription receivable								196,349
Decrease in short term loans
(Decrease) in loans-related party
(Decrease) Increase in loans payable (Note 6)		(868,579	)		(643,892	)
Increase in capital stock		197,480			35,483			221,963
Increase in paid-in capital					608,409			6,615,092
Net Cash from Financing Activities								7,184,088
Net (Decrease) Increase in Cash		(10,009	)		(299	)		410
Cash - Beginning of Period		10,419			469
Cash - End of Period		410			170			410
Supplemental Disclosure of Non-Cash Flow Information:
Cash paid during the year for::
Interest
Income Taxes

See notes to consolidated financial statements.

6

CHINA XIN NETWORK MEDIA CORPORATION AND SUBSIDIARY

(A DEVELOPMENT STAGE COMPANY)

Notes to Consolidated Financial Statements

September 30, 2004

Unaudited

1. Background and organization

CHINA XIN NETWORK MEDIA CORPORATION is a Florida-registered corporation. 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 be seeking 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 the 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.

2. Accounting Policies

a) Basis of Presentation The Company is considered to be a development stage company as of September 30, 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.

e) 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 March 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 issueable 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 March 31, 2004 The carrying value of recoverable use tax, accrued expenses related party, and loans from related party is 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.

7

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 SFAS141 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 accounted for in financial statements upon their acquisition. SFAS No. 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 No. 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. Provisions 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 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. 3884368 Canada Inc. has settled all direct liabilities including the loan outstanding made by Hugues Benoit and Peter Wood in the amount of $250,000 CND. As settlement for their claim, 3884368 Canada Inc. has transferred 4,000,000 shares to Hugues Benoit has part of the total settlement for the claim. 3884368 Canada Inc. has transferred shares to other creditors to settle any potential legal actions before they occur. Additional shares may be transferred or issued to other creditors that existed as at November 7, 2003. The debt was previously considered a contigent liability to the Company.

8

6 . 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 fairvalue of the acquisition (the purchase method) over its tangible assets.

7 . 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.

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.

9

ITEM 2. PLAN OF OPERATION

The following discussion should be read in conjunction with the financial statements and notes thereto included elsewhere in this Form 10-QSB and our Form 10-KSB for the year ended June 30, 2003. Historical results and percentage relationships set forth in the statement of operations, including trends that might appear, are not necessarily indicative of future operations.

Forward-Looking Statements

Except for historical and factual information, this document contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements that address activities, events or developments that we expect, believe or anticipate will or may occur in the future, such as predictions of future financial performance. All forward-looking statements are based on assumptions made by us based on our experience and perception of historical trends, current conditions, expected future developments and other factors we believe are appropriate under the circumstances. These statements are subject to numerous risks and uncertainties, many of which are beyond our control, including our ability to maintain key products’ sales or effectively react to other risks described from time to time in our SEC filings. No forward-looking statement can be guaranteed, and actual results may differ materially from those projected. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future events or otherwise.

The Company

CHINA XIN NETWORK MEDIA CORPORATION is a Florida-registered corporation. As previously reported in press releases dated November 26, 2003 and December 2, 2003, the registrant, has 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 the Bio-Tracking, in exchange for 100,000,000 shares of CXN. The closing of the transaction occurred December 2, 2003, as a result of which Bio-Tracking is now a wholly-owned subsidiary of CXN.

Bio-Tracking designs and manufactures Vehicle/Asset Tracking and Security Technology, based on a Patent Pending, Wireless Interconnection Methods, Real-time Tracking, Driver Privledge Control, Remote Shutdown, Lock/Unlock, GPS / Inertial Navigation, Biometric Fingerprint Identification, Voice Communication and Spread Spectrum Communication.

The company is currently reviewing the viability of its current operations and is exploring the opportunity to merge with a viable business in the field of Voice Over IP and or with one company in the field of pharmaceuticals.

10

Operations

The registrant operates a very limited operation due to the lack of funding and the company is currently reviewing the viability of its current operations and is exploring the opportunity to merge with a viable business in the field of Voice Over IP and or with one company in the field of pharmaceuticals.

Capital Needs

Bio Tracking anticipates that it will be required to raise an additional $4 million to fund 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. Bio Tracking 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

	Three Months Ended September 30, 2004
	2004		2003	% Change
Sales General & Administrative	$	53,544
Total	$		$

	Three Months Ended
	March 31, 2004		December 31, 2003		% Change
Total Liabilities	$	181,349	$	1,345,419

Contingencies

On November 7, 2003, The Company entered into an agreement with 3884368 Canada Inc 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. 3884368 Canada Inc. has settled all direct liabilities including the loan outstanding made by Hugues Benoit and Peter Wood in the amount of $250,000 CND. As settlement for their claim, 3884368 Canada Inc. has transferred 4,000,000 shares to Hugues Benoit has part of the total settlement for the claim. 3884368 Canada Inc. has transferred shares to other creditors to settle any potential legal actions before they occur. Additional shares may be transferred or issued to other creditors that existed as at November 7, 2003. The debt was previously considered a contigent liability to the Company.

11

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.

12

ITEM 3. CONTROLS AND PROCEDURES

(a) Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-14(c) promulgated under the Securities Exchange Act of 1934, as amended (the“Exchange Act”), as of September 30, 2004. Based on their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective.

(b) 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 paragraph (a) above.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

None

ITEM 2. CHANGES IN SECURITIES

None

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

ITEM 5. OTHER INFORMATION

Not applicable

13

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 Financial 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 Financial and Accounting Officer Pursuant to Section 906 of the Sarbanes-Oxley Act.

B. Reports of Form 8-K.

No reports on Form 8-K were filed during the quarter ended September 30, 2004, for which this report is filed.

14

BIO TRACKING SECURITY INC.

In accordance with the requirements of the Exchange Act of 1934, the Registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

SIGNATURE

November 22, 2004	/s/ Jean-Francois Amyot
	Chief Executive Officer (PRINCIPAL EXECUTIVE OFFICER)

November 22, 2004	/s/ Jean-Francois Amyot
	Chief Accounting Officer (PRINCIPAL ACCOUNTING OFFICER)

15

Exhibit Index

Exhibit No.	Description
31.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act.
31.2	Certification of Principal Financial 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 Financial and Accounting Officer Pursuant to Section 906 of the Sarbanes-Oxley Act.