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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10 - QSB
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QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934.
333-39208
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(Commission File Number)
For the quarterly period ended December 31, 2004
COL China Online International Inc.
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(Exact name of small business issuer as specified in its charter)
Delaware 52-2224845
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(State or other jurisdiction of (IRS Employer Identification Number)
incorporation)
3176 South Peoria Court, Suite 100
Aurora, Colorado, 80014
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(Address of principal executive offices including zip code)
(303) 695-8530
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(Small Business Issuer telephone number, including area code)
N/A
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(Former Name or Former Address, 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 Exchange Act 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
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As of December 31, 2004, the Registrant had outstanding 50,155,000 shares of its
common stock, par value $.001.
Transitional Small Business Disclosure Format (Check One):
Yes No X
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COL China Online International Inc.
FORM 10-QSB
December 31, 2004
Table of Contents
Page No.
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PART I. FINANCIAL INFORMATION
Item 1 Financial Statements:
Condensed Consolidated Balance Sheets as of December 31, 2004
(unaudited) and June 30, 2004 2
Condensed Consolidated Statements of Operations for the six
months ended December 31, 2004 and 2003 (unaudited) 3
Condensed Consolidated Statements of Cash Flows for the six
months ended December 31, 2004 and 2003 (unaudited) 5
Notes to Condensed Consolidated Financial Statements 6
Item 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations 8
Item 3 Controls and Procedures 13
PART II. OTHER INFORMATION
Item 1 Legal Proceedings 13
Item 2 Unregistered Sales of Equity Securities and Use of Proceeds 13
Item 3 Defaults Upon Senior Securities 13
Item 4 Submissions of Matters to a Vote of Security Holders 13
Item 6 Exhibits 13
Signature Page 15
Exhibit 31 Certifications
Exhibit 32 Certifications
PART I FINANCIAL INFORMATION
Item 1 Financial Statements
COL CHINA ONLINE INTERNATIONAL INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
JUNE 30,
2004 DECEMBER 31, 2004 (unaudited)
----------- --------------------------
(Rmb) (Rmb) (US$)
(Illustrative Only)
Assets
CURRENT ASSETS:
Cash 101,532 250,971 30,283
Accounts receivable, net of an allowance for doubtful
accounts 25,500 17,850 2,155
Prepaid expense and other receivables 396,307 448,231 54,086
Net investment in the lease 988,293 494,147 59,626
----------- ----------- -----------
Total current assets 1,511,632 1,211,199 146,150
PROPERTY, OFFICE SPACE AND EQUIPMENT, net of
accumulated depreciation and impairment of Rmb
10,222,236 (US$1,233,467) and Rmb 1,515,019
(US$ 182,810), respectively 1,728,383 1,413,802 170,597
----------- ----------- -----------
TOTAL ASSETS 3,240,015 2,625,001 316,747
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES:
Accounts payable and accrued expenses 1,202,312 744,704 89,859
Advance deposit received 317,980 317,980 38,369
Due to a minority stockholder 187,155 214,660 25,902
Taxes payable 91,977 205,432 24,788
----------- ----------- -----------
Total current liabilities 1,799,424 1,482,776 178,918
NOTES PAYABLE:
Majority Stockholder 71,059,244 74,727,175 9,016,962
STOCKHOLDERS' DEFICIENCY:
Preferred stock, US$0.001 par value, 5,000,000 shares
authorized, none outstanding
Common stock, US$0.001 par value, 100,000,000 shares
authorized, 50,155,000 shares
issued and outstanding 408,864 408,864 49,336
Additional paid-in capital 1,214,118 1,214,118 146,502
Accumulated deficit (71,207,705) (75,174,002) (9,070,877)
Other comprehensive loss (33,930) (33,930) (4,094)
----------- ----------- -----------
Total stockholders' deficiency (69,618,653) (73,584,950) (8,879,133)
----------- ----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY 3,240,015 2,625,001 316,747
=========== =========== ===========
Page 2
COL CHINA ONLINE INTERNATIONAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE THREE MONTHS ENDED
-----------------------------------------
DECEMBER 31,
2003 DECEMBER 31, 2004
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(Rmb) (Rmb) (US$)
(Illustrative Only)
NET REVENUES:
Marketing fees, minority stockholder 8,353 -- --
Telecommunication -- 202,284 24,409
----------- ----------- -----------
Total revenues 8,353 202,284 24,409
COST OF SALES:
Telecommunication 119,138 141,399 17,062
----------- ----------- -----------
Gross (loss) margin (110,785) 60,885 7,347
OPERATING EXPENSES:
General and administrative 1,897,773 1,415,080 170,749
Amortization and depreciation 166,705 173,286 20,910
----------- ----------- -----------
Total operating expenses 2,064,478 1,588,366 191,659
----------- ----------- -----------
OPERATING LOSS (2,175,263) (1,527,481) (184,312)
Rental income 18,000 -- --
Other income 37,015 35,121 4,238
----------- ----------- -----------
LOSS BEFORE MINORITY INTEREST (2,120,248) (1,492,360) (180,074)
Minority interest -- -- --
----------- ----------- -----------
NET LOSS (2,120,248) (1,492,360) (180,074)
=========== =========== ===========
OTHER COMPREHENSIVE GAIN -- -- --
----------- ----------- -----------
COMPREHENSIVE LOSSES (2,120,248) (1,492,360) (180,074)
=========== =========== ===========
BASIC AND FULLY DILUTED NET LOSS PER SHARE (0.042) (0.030) (0.004)
=========== =========== ===========
WEIGHTED AVERAGE COMMON SHARES 50,155,000 50,155,000 50,155,000
=========== =========== ===========
Page 3
COL CHINA ONLINE INTERNATIONAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED
-----------------------------------------
DECEMBER 31,
2003 DECEMBER 31, 2004
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(Rmb) (Rmb) (US$)
(Illustrative Only)
NET REVENUES:
Marketing fees, minority stockholder 65,639 -- --
Telecommunication -- 362,362 43,725
----------- ----------- -----------
Total revenues 65,639 362,362 43,725
COST OF SALES:
Telecommunication 285,066 224,213 27,055
----------- ----------- -----------
Gross (loss) margin (219,427) 138,149 16,670
OPERATING EXPENSES:
General and administrative 3,843,505 3,828,939 462,018
Amortization and depreciation 343,195 346,571 41,819
----------- ----------- -----------
Total operating expenses 4,186,700 4,175,510 503,837
----------- ----------- -----------
OPERATING LOSS (4,406,127) (4,037,361) (487,167)
Rental income 72,000 -- --
Other income 71,688 71,064 8,575
----------- ----------- -----------
LOSS BEFORE MINORITY INTEREST (4,262,439) (3,966,297) (478,592)
Minority interest -- -- --
----------- ----------- -----------
NET LOSS (4,262,439) (3,966,297) (478,592)
=========== =========== ===========
OTHER COMPREHENSIVE GAIN 29 -- --
----------- ----------- -----------
COMPREHENSIVE LOSSES (4,262,410) (3,966,297) (478,592)
=========== =========== ===========
BASIC AND FULLY DILUTED NET LOSS PER SHARE (0.085) (0.079) (0.010)
=========== =========== ===========
WEIGHTED AVERAGE COMMON SHARES 50,155,000 50,155,000 50,155,000
=========== =========== ===========
Page 4
COL CHINA ONLINE INTERNATIONAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE SIX MONTHS ENDED
--------------------------------------
DECEMBER 31,
2003 DECEMBER 31, 2004
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(Rmb) (Rmb) (US$)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss (4,262,439) (3,966,297) (478,594)
Adjustments to reconcile net loss to net cash used
in operating activities:
Loss on disposal of equipment 205,581 -- --
Amortization and depreciation 343,195 314,581 37,959
Bad debts written off 173,713 -- --
Change in operating assets and liabilities:
Decrease (increase) in:
Accounts receivables (53,295) 7,650 923
Other assets (668,791) (51,924) (6,265)
Increase (decrease) in:
Accounts payable and accrued expenses,
and advance deposit received (983,041) (457,608) (55,217)
Taxes payable (247) 113,455 13,690
---------- ---------- ----------
Net cash used in operating activities (5,401,324) (4,040,143) (487,504)
---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment (408,116) -- --
Sales of equipment and properties 2,027,591 -- --
Lease payments received -- 494,146 59,626
---------- ---------- ----------
Net cash provided by investing activities 1,619,475 494,146 59,626
---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Mortgage loans repayments (860,612) -- --
Advances from Majority Stockholder 4,354,215 3,667,931 442,591
Minority stockholders interest and advance (7,170) 27,505 3,319
---------- ---------- ----------
Net cash provided by financing activities 3,486,433 3,695,436 445,910
---------- ---------- ----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 29 -- --
---------- ---------- ----------
NET (DECREASE) INCREASE IN CASH (295,387) 149,439 18,032
CASH, beginning of period 548,405 101,532 12,251
---------- ---------- ----------
CASH, end of period 253,018 250,971 30,283
========== ========== ==========
CASH PAID FOR INTEREST 3,845 -- --
========== ========== ==========
Page 5
COL CHINA ONLINE INTERNATIONAL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Company Organization and Operations
-----------------------------------
Nature of Operations - COL China Online International Inc. ("COL
International" or the "Company") was incorporated as a Delaware
corporation on February 22, 2000, for the purpose of acquiring and
conducting the engineering services and internet related business of
Migration Developments Limited, a British Virgin Islands Company
("Migration") and raising equity capital to be utilized in the
business of Migration. Prior to the acquisition of Migration, the
Company was considered to be in the development stage, due to its
limited operations and lack of revenues.
In July 2001, the Company completed its initial public offering of
common stock. The Company issued 1,655,000 shares of common stock in
this offering at US$0.05 per share (approximately US$83,000). All net
proceeds from this offering were used to pay costs associated with the
offering.
On December 24, 2001, the Company acquired all the outstanding shares
of common stock of Migration in exchange for 40.2 million shares of
the Company's common stock. As a result of the acquisition, Migration
became a wholly owned subsidiary of the Company.
For financial reporting purposes, the acquisition of Migration by the
Company on December 24, 2001 has been treated as a reverse
acquisition. Migration is the continuing entity for financial
reporting and the acquisition of the Company is considered a
recapitalization and restructuring of Migration. On this basis, the
historical financial statements prior to December 24, 2001 represent
the financial statements of Migration. The historical shareholders'
equity accounts of the Company have been retroactively restated to
reflect the issuance of 40,200,000 shares of common stock since
inception of Migration and the issuance of 9,955,000 shares of stock
upon the merger with the Company.
Migration was formed on May 18, 1998 and has two subsidiaries,
Shenzhen Knowledge & Communications Co., Ltd. (formerly Shenzhen Rayes
Electronic Systems Co., Ltd.) ("Joint Venture") and Shanghai Shangyi
Science and Trade Information Consulting Co., Ltd. ("Shangyi"), in
which it has 90% and 70% equity interests, respectively. The Joint
Venture and Shangyi are Sino-foreign equity joint ventures in the
People's Republic of China (PRC). Most of the operations of Migration
are through the Joint Venture, which did not commence substantive
operations until the spring of 1999. The acquisitions of Joint Venture
and Shangyi had been accounted for as purchases by Migration.
Migration initially provided marketing and technical services for the
Internet Service Provider (ISP) and value-added services generally
related to the installation of computer network systems (i.e., Local
Area Networks or LANs) in the PRC.
The Company is developing two IT business through two divisions. COL
Convergence will focus on the providing of internet and
telecommunication convergence solutions and COL Interactive will focus
on providing customer-specific solutions for the retail industry.
Page 6
2. Basis of Presentation
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The unaudited condensed consolidated financial statements have been
prepared by the Company, pursuant to the rules and regulations of the
Securities and Exchange Commission (SEC). Certain information and
footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles
have been omitted pursuant to such SEC rules and regulations;
nevertheless, the Company believes that the disclosures are adequate
to make the information presented not misleading. These financial
statements have been prepared on the same basis as the annual
financial statements. These financial statements and the notes hereto
should be read in conjunction with the financial statements and notes
thereto included in the Company's Annual Report on Form 10-KSB for the
year ended June 30, 2004 which was filed October 13, 2004. In the
opinion of the Company, all adjustments, including normal recurring
adjustments necessary to present fairly the financial position of the
Company as of December 31, 2004 and the results of its operations and
cash flows for the quarter and six month periods then ended, have been
included. The results of operations for the interim period are not
necessarily indicative of the results for the full year.
The amounts included in the financial statements are presented in
Renminbi ("Rmb") which is COL International's functional currency,
unless otherwise indicated as US dollars, because COL International's
operations are primarily located in the PRC. For illustrative
purposes, the condensed consolidated balance sheet as December 31,
2004 and condensed consolidated statement of operations for the three
months and six months ended December 31, 2004 and condensed
consolidated statement of cash flows for the three months ended
December 31, 2004 have been translated into US dollars at
approximately 8.2870 Rmb to the dollar, which was the exchange rate at
December 31, 2004.
3. Comprehensive Income (Loss)
---------------------------
The Company accounts for comprehensive income (loss) in accordance
with SFAS No. 130, "Reporting Comprehensive Income". SFAS No. 130
establishes standards for reporting comprehensive income and its
components in financial statements. Comprehensive income, as defined
therein, refers to revenues, expenses, gains and losses that are not
included in net income but rather are recorded directly in
stockholders' equity. Accumulated other comprehensive loss for the
quarter and six months ended December 31, 2004, respectively,
represented foreign currency translation adjustments.
4. Net Loss Per Share
------------------
Basic and diluted net loss per share is computed by dividing net loss
by the weighted average number of common shares outstanding.
Pursuant to the Company's 2000 Stock Option Plan, options may be
granted to purchase an aggregate of 4,000,000 shares of common stock
to key employees and other persons who have or are contributing to the
Company's success. As of December 31, 2004, no options had been
granted under the 2000 plan.
Page 7
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This document contains certain forward-looking statements that involve risks and
uncertainties, such as statements of the Company's plans, objectives,
expectations and intentions. When used in this document, the words "expects",
"anticipates", "intends" and "plans" and similar expressions are intended to
identify certain of these forward-looking statements. The cautionary statements
made in this document should be read as being applicable to all related
forward-looking statements wherever they appear in this document. Our actual
results could differ materially from those discussed in this document. Factors
that could cause or contribute to such difference include those discussed below
and in the Company's Annual Report on Form 10-KSB for the year ended June 30,
2004.
Overview
COL China Online International, Inc. (the "Company" or "COL International") was
formed for the purpose of acquiring and conducting the engineering services and
the internet related business of Migration Development Limited, a British Virgin
Islands Company ("Migration") and raising equity capital to be utilized in the
business of Migration. Beginning in approximately January 2004, the Company
focused its business on internet and telecommunication convergence solutions and
customer-specific solutions for the retail industry.
Initial Public Offering - In July 2001, the Company completed its initial public
offering of common stock. The Company issued 1,655,000 shares of common stock in
this offering at US$0.05 per share (approximately US$83,000). All net proceeds
from this offering were used to pay costs associated with the offering.
Gong concern - The ability of COL International to continue operations as a
going concern is dependent upon continued support from Honview International
Limited ("Honview"), a former shareholder of Migration, which is now a major
stockholder of COL International and Migration achieve profitable operations
and/or additional funds are raised in future private and public offerings.
Acquisition - In December 2001, the Company acquired all the outstanding shares
of common stock of Migration in exchange for 40.2 million shares of the
Company's common stock. As a result of the acquisition, Migration became a
wholly owned subsidiary of COL International. However, for accounting purposes,
this transaction is treated a reverse acquisition, whereby Migration is
considered as an acquirer.
Migration was formed on May 18, 1998 and has two subsidiaries, Shenzhen
Knowledge & Communications Co., Ltd. (formerly Shenzhen Rayes Electronic Systems
Co., Ltd.) ("Joint Venture") and Shanghai Shangyi Science and Trade Information
Consulting Co., Ltd. ("Shangyi"), in which it has 90% and 70% equity interests,
respectively. The Joint Venture and Shangyi are Sino-foreign equity joint
ventures in the People's Republic of China (the "PRC"). Most of the operations
of Migration are through the Joint Venture, which did not commence substantive
operations until the Spring of 1999.
Migration initially provided marketing and technical services for Internet
Service Providers ("ISP") and value - added services generally relate to the
installation of computer network systems (i.e., Local Area Networks or LANs) in
the PRC.
Page 8
Plan of Operations - Because the Company's past business model was not
successful the Company has developed a new business model. The Company is
developing two IT business ("COL Convergence" and "COL Interactive"). COL
Convergence will focus on the provision of internet and telecommunication
convergence solutions and COL Interactive will focus on providing
customer-specific solutions for the retail industry.
As of January 1, 2004, all assets and operations unrelated to the business
of COL Convergence and COL Interactive have been disposed of.
COL Convergence Business Overview
- ---------------------------------
COL Convergence (COLc) intends to develop as a leading provider of communication
services offering tailored solutions to multinational companies in China.
The mission of COLc is to help its customers obtain the communication
environment they need to be able to compete on the highest levels. After a
custom- made plan is developed for each client, COLc plans to deploy and manage
the technology with its experienced staff of engineers and managers.
COLc is currently discussing possible business engagement with a number of
telecommunication network providers.
COL Interactive Business Overview
- ---------------------------------
The aim of COL|Interactive (COLi) is to increase sales for retail groups and
leading Famous Multinational Conglomerates (FMCG) operating in the greater China
area by implementing and integrating various technologies "In-Store".
COLi's philosophy is based around "Customer Specific Services". By linking
consumers and their purchasing history and habits with in-store point of
purchasing advertising devices, COLi believes it can market FMCG's products in
the most effective way and increase sales in all areas.
In-store advertising has the strongest influence over the in-store purchase
decision and impulse buy. COLi plans to take traditional in-store advertisement
to the next stage by implementing and integrating its multimedia and interactive
technologies.
COLi intends to partner with leading retail groups in the region.
Currently negotiating with one of China's largest retail chain stores and a
convenience store chain.
The Company has a negative cash flows from operating activities and is seeking
additional financing in order to satisfy its cash requirements. The Company
anticipates that it will require approximately Rmb6,000,000 (or approximately
US$724,000) in financing during the current year to satisfy its cash
requirements. COL International, through its Migration subsidiary, currently
employs approximately 30 employees in China. The Company may recruit more staff
should its plan of operations prove successful, of which there is no assurance.
Page 9
Results of Operations
Revenues for the three months and six months ended December 31, 2004
represented telecommunication services revenue of Rmb202,284 (US$24,409) and
Rmb362,362 (US$43,725) respectively. The Company generated no revenue from
telecommunication services for the three months and six months ended December
31, 2003. The Company received marketing fees from Shenzhen Rayes Group Co.,
Ltd. of Rmb8,353 and Rmb65,639 for the three months and six months ended
December 31, 2003. No marketing fee revenues were generated by the Company
during the three months ended December 31, 2004.
The Company contracted with a telecommunication services company selling
IDD (IP phone) to end-users and receives telecommunication services commission
income from the agent, which is a percentage of monthly usage end-users.
During last quarter, the Company contracted with Railcomm Internet for the
installation and promotion of inter-call services. The Company received income
from end-users for the installation services provided and commission from
Railcomm, which is a percentage of monthly usage end-users.
The Company also contracted with a supermarket, which allowed COL
International to install projectors in its shops. According to the initial plan,
the In-store advertising income would be derived from projecting advertising
programs from the projectors installed in supermarkets. However, the plan was
eventually unsuccessfully and was abandoned.
The ISP services business was terminated and transferred to a third party
in December 2003. No revenue was derived from advertising upon the termination.
In the past, marketing fees were related to the Joint Venture's share of 50
percent of the revenues generated from ISP services owned by a minority
shareholder, Rayes Group, and computer hosting of web sites for customers.
In connection with these services, the Company has an agreement with Rayes
Group to reimburse Rayes Group for its actual transmission (i.e., telephone
line) costs, provided that Rayes Group will pay all incremental costs related to
expansion of the telecommunications facilities related to the ISP operations.
These amounts totaled Rmb119,138 and Rmb141,399 (US$17,062) for the three
months ended December 31, 2003 and 2004, respectively. The Joint Venture has no
long-term commitments in connection with its telecommunication costs other than
management fees payable to the Rayes Group for providing services. The decrease
in telecommunication costs is primarily due to the ceasing of the Company's
related ISP business.
Other income for the three months and six months ended December 31, 2004
was Rmb35,121 (US$4,238) and Rmb71,064 (US$8,575) as compared to Rmb37,015 and
Rmb71,688 for the three months and six months ended December 31, 2003. "Other
income" primarily represents lease income, interest income and miscellaneous
income.
Starting from 2003, the Company purchased and leased out a system of
computer network and software for generating lease income, the cost of the
system is approximately Rmb1,976,000 (US$238,456) and has been recorded in net
investment in the lease of Rmb494,147 (US$59,626) in the Company's condensed
consolidated balance sheet as of December 31, 2004. The relevant lease income
for the three months period of December 31, 2003 and 2004 was Rmb34,648 and
Rmb34,648 (US$4,181), respectively.
Page 10
General and administrative costs include salaries, rent, travel and other
overhead costs. For the three months ended December 31, 2003 and 2004, general
and administrative costs totaled Rmb1,897,773 and Rmb1,415,080 (US$170,749),
respectively. The decrease in general and administrative costs mainly resulted
from the close of the Company's Wuhan Branch which ceased to operate the
Construction Net site during the fiscal year ended December 31, 2003. For the
six months ended December 31, 2003 and 2004, general and administrative costs
totaled Rmb 3,843,505 and Rmb3,828,939 (US$462,018), respectively. The Company's
research and development costs were Rmb395,248 during the three months ended
December 31, 2004. The Company did not incur any research and development costs
during the three or six months ended December 31, 2003.
Amortization and depreciation expense for the three months ended December
31, 2003 and 2004 was Rmb166,705 and Rmb173,286 (US$20,910), respectively. For
six months ended December 31, 2003 and 2004, amortization and depreciation
expense are Rmb343,195 and Rmb346,571 (US$41,819).
The Company has not recognized any future tax benefits resulting from its
operating losses due to the uncertainty of future realization.
No share of loss has been absorbed by our minority shareholder for the
three months ended December 31, 2004 as its initial capital contribution was
fully absorbed.
The results of operations described above has resulted in total net losses
of Rmb2,120,248 and Rmb1,492,360 (US$180,074) for the three months ended
December 31, 2003 and 2004, respectively, compared to Rmb4,262,439 and
Rmb3,966,297 (US$478,592) for the six months ended December 31, 2003 and 2004.
The Company expects to continue to incur losses until its services are more
fully developed and accepted in China.
Liquidity and Capital Resources
COL's ability to continue operations is currently dependent upon continuing
financial support from its majority stockholder. As of December 31, 2004 and
June 30, 2004, the Company had a negative working capital of Rmb271,577
(US$32,768) and Rmb489,117 respectively. As of December 31, 2004, advances from
the majority stockholder totaled Rmb74,727,175 (US$9,016,962). The Company's
management believes the majority stockholder will continue to provide financial
support to the Company, although the majority stockholder's agreement with the
Company to provide financial support in a maximum amount of US$8 million expired
January 1, 2004.
Cash used in operating activities for the six months ended December 31,
2004 was Rmb4,040,143 (US$487,504) as compared to Rmb5,401,324 for the six
months ended December 31, 2003. The cash used in operations was used to fund
operating losses of Rmb4,262,439 and Rmb3,966,297 (US$478,594), generally offset
by non-cash expenses related to amortization and depreciation of Rmb343,195 and
Rmb314,581 (US$37,959) for the six months ended December 31, 2003 and 2004,
respectively.
Cash provided by investing activities for the six months ended December 31,
2004 was Rmb494,146 (US$59,626) as compared to cash used in investing activities
of Rmb1,619,475 for the six months ended December 31, 2003. During the quarter,
the Company received Rmb247,073 (US$29,813) from the lease of computer equipment
and software.
Cash flows from financing activities have generally come from advances by
the majority stockholder of the Company. During the six months ended December
31, 2003 and 2004, the majority stockholder has advanced Rmb4,354,215 and
Rmb3,667,931 (US$442,591), respectively.
Page 11
Critical Accounting Policies
The Company's significant accounting policies are described in note 2 to
the financial statements for three months ended December 31, 2003 and 2004
included in the Company's Form 10-KSB in the accompanying financial statements
and notes to consolidated financial statements. The Company believes its most
critical accounting policies include accounting for provision for doubtful debts
and impairment loss provision.
No provision for impairment loss on fixed assets and net investment in the
lease is made for the three months and six months ended December 31, 2004,
respectively, because the carrying value of fixed assets, net of accumulated
depreciation and impairment of Rmb10,222,236 (US$1,233,467) and Rmb1,515,019
(US$182,810), respectively, and the carrying value of net investment in the
lease are stated at its recoverable amount at the period-end date estimated by
the management.
Page 12
ITEMS 3 CONTROLS AND PROCEDURES
Within the 90-day period prior to the filing of this report, an evaluation
was carried out under the supervision and with participation of the Company's
management, including our Chief Executive Officer, who is also our Chief
Financial Officer, of the effectiveness of our disclosure controls and
procedures (as defined in Rule 13a-14 (c) under the Securities Exchange Act of
1934). Based on his evaluation, as of December 31, 2004, our Chief Executive
Officer/Chief Financial Officer has concluded that disclosure controls and
procedures are, to the best of his knowledge, effective to ensure that
information required to be disclosed by the Company in reports that it files or
submits under the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in Securities and Exchange Commission rules
and forms. Subsequent to the date of his evaluation, there were not significant
changes in the Company's internal controls or in other factors that could
significantly affect these controls, including any corrective actions with
regard to significant deficiencies and material weaknesses.
PART II - OTHER INFORMATION
Item 1 Legal Proceedings
None
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
Exhibits.
Exhibit No. Description
3.1 Certificate Of Incorporation filed with the
Delaware Secretary Of State effective as of
February 22, 2000 (2)
Page 13
3.2 Certificate Of Amendment To The Certificate Of
Incorporation filed with the Delaware Secretary Of
State effective as of April 3, 2000 (2)
3.3 Amended And Restated Bylaws (3)
3.4 Sino-Foreign Joint Venture Contract (1) (2)
3.5 Articles Of Association of the Sino-Foreign Joint
Venture (1) (2)
31 Certifications of the Chief Executive Officer and
Chief Financial Officer pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002
32 Certifications of Chief Executive Officer and
Chief Financial Officer pursuant to 18 U.S.C.
Section 1350 as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002
-------------------
(1) Translated into English from Chinese.
(2) Incorporated by reference from the Company's Registration Statement on
Form SB-2 on June 13, 2000 (Registration No. 333-39208).
(3) Incorporated by reference from Amendment No. 3 to the Company's
Registration Statement on Form SB-2 on January 17, 2001 (Registration
No. 333-39208).
Page 14
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
COL CHINA ONLINE INTERNATIONAL INC.
Date: February 15, 2005 By: /s/ Chi Keung Wong
-------------------------------
Chi Keung Wong
Chief Executive Officer
and Chief Financial Officer
Page 15