UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2004
|_| TRANSITION REPORT PURSUANT TO 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE TRANSITION PERIOD TO
COMMISSION FILE NUMBER 000-50005
----------------------
TECHEDGE, INC.
(Exact name of small business issuer as specified in its charter)
DELAWARE 04-3703334
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
33 WOOD AVENUE SOUTH, 7F
ISELIN, NEW JERSEY 07310
(Address of principal executive offices)
(732) 632-9896
(Issuer's telephone number, including area code)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
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 |_|
There were 80,260,000 shares of the Company's common stock outstanding
as of November 12, 2004.
Transitional Small Business Disclosure Format (Check one): Yes |_| No |X|
TABLE OF CONTENTS
-----------------
Page
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PART I - FINANCIAL INFORMATION.........................................................................3
Item 1. Condensed Financial Statements and Notes thereto..............................................3
Item 2. Management's Discussion and Analysis or Plan of Operation....................................11
Item 3. Controls and Procedures......................................................................14
PART II - OTHER INFORMATION............................................................................14
Item 1. Legal Proceedings............................................................................14
Item 2. Changes in Securities and Use of Proceeds....................................................14
Item 3. Defaults Upon Senior Securities..............................................................14
Item 4. Submission of Matters To a Vote of Security Holders..........................................14
Item 5. Other Information............................................................................15
Item 6. Exhibits and Reports on Form 8-K.............................................................15
2
PART I - FINANCIAL INFORMATION
ITEM 1. CONDENSED FINANCIAL STATEMENTS AND NOTES THERETO.
TECHEDGE, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
SEPTEMBER 30, 2004
INDEX
Page
------------
Financial Statements
Consolidated Balance Sheets as of September 30, 2004 (Unaudited) and December 31, 2003 4
Unaudited Consolidated Statements of Operations for the three months ended
September 30, 2004 and 2003 and for the period from September 13, 2000 (date
of inception) through September 30, 2004 5
Unaudited Consolidated Statements of Operations for the nine months ended
September 30, 2004 and 2003 and for the period from September 13, 2000 (date
of inception) through September 30, 2004 6
Unaudited Consolidated Statements of Cash Flows for the nine months ended
September 30, 2004 and 2003 and for the period from September 13, 2000 (date of
inception) through September 30, 2004 7
Notes to Unaudited Consolidated Financial Statements 8 - 10
3
TECHEDGE, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
SEPTEMBER 30, 2004 DECEMBER 31, 2003
------------------ -----------------
ASSETS
Current Assets:
Cash and cash equivalents $ 204,204 $ 710,694
Accounts receivable, net of bad debt reserve of $14,326 in both years 45,573 23,568
Due from related party 50,993 41,582
Prepaid expenses and other current assets 169,855 59,666
----------- -----------
Total Current Assets 470,625 835,510
Property and equipment, net of accumulated depreciation of $319,437 . 250,168 287,989
Investment in unconsolidated subsidiary 359,497 370,493
Other assets 40,984 31,330
----------- -----------
Total Assets 1,121,274 1,525,322
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses 579,476 483,864
Due to officers 583,375 643,989
----------- -----------
Total Current Liabilities 1,162,851 1,127,853
----------- -----------
Commitments and contingencies -- --
Stockholders Equity (Deficit):
Preferred Stock, stated value $.0001, 6,250,000
shares authorized; 5,013,600 shares issued and outstanding, in 2003 -- 501
Common Stock, stated value $.0001, 100,000,000 shares
authorized; 80,000,000 and 51,108,800 shares issued and outstanding
in 2004 and 2003, respectively 8,000 5,111
Additional paid-in capital 4,852,370 4,351,190
Deficit accumulated during development stage (4,905,209) (3,959,069)
Accumulated other comprehensive income 3,262 (264)
----------- -----------
Total stockholders' equity (deficit) (41,577) 397,469
----------- -----------
Total Liabilities and Stockholders' Equity $ 1,121,274 $ 1,525,322
=========== ===========
The accompanying notes are an integral part of these consolidated financial
statements
4
TECHEDGE, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003
AND FOR THE PERIOD FROM
SEPTEMBER 13, 2000 (DATE OF INCEPTION) THROUGH SEPTEMBER 30, 2004
(UNAUDITED)
THREE MONTHS ENDED FOR THE PERIOD FROM
SEPTEMBER 30, SEPTEMBER 13, 2000
----------------------------- (DATE OF INCEPTION)
2004 2003 TO SEPTEMBER 30, 2004
------------ ----------- ---------------------
Revenues $ 94,843 $ 93,898 $ 1,097,412
Cost of Sales 38,154 41,951 546,800
------------ ----------- ------------
Gross Profit 56,689 51,947 550,612
------------ ----------- ------------
Costs and expenses:
Research and development 109,111 70,633 1,503,893
General and administrative (including
stock-based compensation of
$0, $0, and $13,611, respectively 174,629 231,408 3,711,788
Depreciation and Amortization 5,350 24,329 227,940
------------ ----------- ------------
Total costs and expenses 289,090 326,370 5,443,621
------------ ----------- ------------
Loss from operations (232,401) (274,423) (4,893,009)
------------ ----------- ------------
Other income (expense):
Loss from unconsolidated subsidiary -- -- (39,338)
Gain (Loss) on foreign currency -- 62 (6,181)
Interest income 454 646 33,319
------------ ----------- ------------
Total other income (expense) 454 708 (12,200)
------------ ----------- ------------
Net Loss $ (231,947) $ (237,715) $ (4,905,209)
------------ ----------- ------------
Unrealized gain on foreign
currency translation, net of tax -- -- 3,262
------------ ----------- ------------
Comprehensive Loss $ (231,947) $ (273,715) $ (4,901,947)
============ =========== ============
Loss Per Common Share, basic and diluted $ 0.00 $ (0.03) $ (0.28)
============ =========== ============
Weighted Average Common Shares Outstanding, basic
and diluted 80,000,000 8,000,000 17,818,182
============ =========== ============
The accompanying notes are an integral part of these consolidated financial
statements
5
TECHEDGE, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003
AND FOR THE PERIOD FROM
SEPTEMBER 13, 2000 (DATE OF INCEPTION) THROUGH SEPTEMBER 30, 2004
(UNAUDITED)
NINE MONTHS ENDED FOR THE PERIOD FROM
SEPTEMBER 30, SEPTEMBER 13, 2000
----------------------------- (DATE OF INCEPTION)
2004 2003 TO SEPTEMBER 30, 2004
------------ ----------- ------------
Revenues $ 252,872 $ 343,463 $ 1,097,412
Cost of Sales 115,552 139,031 546,800
------------ ----------- ------------
Gross Profit 137,320 204,432 550,612
------------ ----------- ------------
Costs and expenses:
Research and development 296,425 316,143 1,503,893
General and administrative (including
stock-based compensation of
$0, $0, and $13,611, respectively 734,780 630,014 3,711,788
Depreciation and Amortization 53,359 49,673 227,940
------------ ----------- ------------
Total costs and expenses 1,084,564 995,830 5,443,621
------------ ----------- ------------
Loss from operations (947,244) (791,398) (4,893,009)
------------ ----------- ------------
Other income (expense):
Loss from unconsolidated subsidiary -- -- (39,338)
Gain (Loss) on foreign currency (2,031) (2,318) (6,181)
Interest income 3,135 14,289 33,319
------------ ----------- ------------
Total other income (expense) 1,104 11,971 (12,200)
------------ ----------- ------------
Net Loss $ (946,140) $ (779,427) $ (4,905,209)
------------ ----------- ------------
Unrealized gain on foreign
currency translation, net of tax 3,526 -- 3,262
------------ ----------- ------------
Comprehensive Loss $ (942,614) $ (779,427) $ (4,901,947)
============ =========== ============
Loss Per Common Share, basic and diluted $ (0.03) $ (0.10) $ (0.28)
============ =========== ============
Weighted Average Common Shares Outstanding,
basic and diluted 36,923,077 8,000,000 17,818,182
============ =========== ============
The accompanying notes are an integral part of these consolidated financial
statements
6
TECHEDGE, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003
AND FOR THE PERIOD FROM
SEPTEMBER 13, 2000 (DATE OF INCEPTION) THROUGH SEPTEMBER 30, 2004
(UNAUDITED)
NINE MONTHS ENDED FOR THE PERIOD FROM
SEPTEMBER 30, SEPTEMBER 13, 2000
---------------------------- (DATE OF INCEPTION)
2004 2003 TO SEPTEMBER 30, 2004
----------- ----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (946,140) $ (779,427) $(4,905,209)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 76,227 70,961 323,763
Loss on unconsolidated subsidiary -- -- 39,339
Provision for doubtful accounts -- -- 14,326
Loss on foreign currency exchange 3,526 (62) 3,262
Stock-based compensation -- -- 13,611
Changes in operating assets and liabilities:
Accounts receivable (22,005) 4,456 (59,899)
Due from related parties (9,411) 9,640 (50,993)
Prepaid expenses and other current assets (110,189) (46,356) (169,855)
Other assets (9,654) 8,388 (40,984)
Accounts payable and accrued expenses 106,176 368,074 586,624
----------- ----------- -----------
Net cash used in operating activities (911,470) (364,326) (4,246,015)
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in unconsolidated subsidiary -- (137,252) (409,832)
Proceeds from (repayments of) officers' advances (60,614) (35,750) 583,375
Purchase of property and equipment (38,406) (2,589) (231,188)
----------- ----------- -----------
Net cash used in investing activities (99,020) (175,591) (57,645)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from private placement of common stock 504,000 -- 508,800
Net proceeds from private placement of preferred stock -- -- 4,000,000
----------- ----------- -----------
Net cash provided by financing activities 504,000 -- 4,508,800
----------- ----------- -----------
Net increase (decrease) in cash (506,490) (539,917) 205,140
Cash and Cash Equivalents, beginning of period 710,694 1,411,805 --
----------- ----------- -----------
Cash and Cash Equivalents, end of period $ 204,204 $ 871,888 $ 205,140
=========== =========== ===========
Supplemental Disclosures of Cash Flow Information:
Interest paid $ -- $ -- $ --
=========== =========== ===========
Income taxes paid $ 500 $ 750 $ 2,173
=========== =========== ===========
The accompanying notes are an integral part of these consolidated financial
statements
7
TECHEDGE, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
These financial statements should be read in conjunction with a reading of the
Company's Annual Report on Form 10-KSB for the fiscal year ended December 31,
2003, and the Form 8-K/A filed on August 9, 2004.
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles applicable to
interim financial information and with the requirements of Form 10-QSB and Item
310 of Regulation S-B of the Securities and Exchange Commission. Accordingly,
they do not include all of the information and footnotes required by accounting
principles generally accepted in the United States of America for complete
financial statements. Interim results are not necessarily indicative of results
for a full year. In the opinion of management, all adjustments considered
necessary for a fair presentation of the financial position and the results of
operations and cash flows for the interim periods have been included.
On June 9, 2004, Techedge, Inc., a Delaware company (the "Company"), acquired
all of the issued and outstanding stock of China Quantum Communications, Ltd., a
Cayman Islands company ("CQ"), pursuant to a Share Exchange Agreement, dated as
of June 9, 2004 (the "Exchange Agreement"), by and among the Company, the
shareholders of the Company, CQ and the shareholders of CQ.
Pursuant to the Exchange Agreement, CQ became a wholly-owned subsidiary of the
Company, and in exchange for the CQ shares, the Company issued 72,000,000 shares
of its common stock to the shareholders of CQ, representing approximately 90% of
the Company's outstanding stock at the time.
For accounting purposes, because the Company had become a shell company prior to
the merger, the merger was treated as a recapitalization of the Company. As
such, the historical financial information prior to the merger is that of CQ and
subsidiaries.
LOSSES DURING THE DEVELOPMENT STAGE AND MANAGEMENT'S PLANS
Through September 30, 2004 the Company had incurred development stage losses
totaling $4,905,209, and net cash used in operating activities of $4,246,015. At
September 30, 2004, the Company had $204,204 of cash and cash equivalents and
$45,573 of net trade receivables to fund short-term working capital
requirements.
The Company's ability to continue as a going concern is dependent upon its
ability to raise capital in the near term to: (1) satisfy its current
obligations, and (2) continue its wireless VoIP system and solution development
and commercialization efforts. Furthermore, the Company's future success will
depend on its ability to successfully market and sell its IP-PCS products and
solutions. The Company does not have sufficient capital to fund its operations
at the current level for more than the next several months and will need
additional capital to continue our operations either through external
independent or related party funding, revenues from sales, further expense
reductions or some combination thereof.
8
TECHEDGE, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
2. STOCKHOLDERS' EQUITY
On May 17, 2004, the Company filed an Amended Certificate of Incorporation with
the Delaware Secretary of State in order to increase the authorized shares of
the Company's common stock from 25,000,000 to 100,000,000 and authorize up to
1,000,000 shares of a new class of undesignated preferred stock which will allow
the Board of Directors of the Company to issue, without further stockholder
action, one or more series of preferred stock. The par value of both the common
and preferred stock is $.0001.
On May 21, 2004, the Company filed a Schedule 14f-1 with the SEC, indicating in
part, that in accordance with the Exchange Agreement, the membership of the
Company's Board of Directors would change entirely and at the same time, a
change in control of the Company would occur.
On June 4, 2004, prior to the merger with the Company, CQ sold 2,520,000 shares
of common stock in a private placement for proceeds of $504,000.
On June 9, 2004, the Company completed the merger with CQ. Pursuant to the
Exchange agreement, the shareholders of CQ exchanged all of their outstanding
preferred and common shares (5,013,600 and 49,308,800, respectively) for
72,000,000 shares of the Company's common stock, representing approximately 90%
of the Company's common stock at the time.
3. RELATED PARTY TRANSACTIONS
The Company records material related party transactions. The Company incurs
costs for certain administrative expenses from a related party. Those charges
are included in general and administrative expenses. The Company also provides
services to a related party and those amounts are included in revenue. Following
is a summary of transactions and balances with affiliates for the three and nine
months and the period from our inception ended September 30, 2004 and 2003:
THREE MONTHS ENDED NINE MONTHS ENDED FOR THE PERIOD FROM
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 13, 2000
------------------------------ ------------------------------- (DATE OF INCEPTION)
2004 2003 2004 2003 TO SEPTEMBER 30, 2004
------------- ------------- -------------- ------------- ------------------------
General and administrative
expenses to related party $ 3,750 $ 3,621 $11,120 $ 7,863 $28,496
Due from related party $50,993 $ -- $50,993 $ -- $50,993
9
TECHEDGE, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Amounts due to officers consist of advances from the Company's CEO to fund the
Company's operations. It also includes compensation deferred by the Company's
CEO and COO. No written repayment agreements exist with either officer. Amounts
are unsecured, non-interest bearing and due upon demand.
12. SUBSEQUENT EVENTS
In November 2004, the Company completed a series of private placements pursuant
to which it issued a total of 260,000 shares for aggregate gross proceeds of
$260,000.
10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
This Discussion and Analysis or Plan of Operation contains forward-looking
statements within the meaning of Section 27A of the Securities Act and Section
21E of the Exchange Act, including our statements regarding factors increases in
sales and marketing expenditures, commitment of resources, and reduction in
operating costs and the possible further reduction of personnel and suspension
of salary increases and capital expenditures. Any statements contained herein
that are not statements of historical fact may be deemed to be forward-looking
statements. For example, words such as "may," "will," "should," "estimates,"
"predicts," "potential," "continue," "strategy," "believes," "anticipates,"
"plans," "expects," "intends," and similar expressions are intended to identify
forward-looking statements. You should not place undue reliance on these
forward-looking statements. Actual results could differ materially from those
anticipated in these forward-looking statements as a result of a number of
factors, including our good faith assumptions being incorrect, our business
expenses being greater than anticipated due to competitive factors or
unanticipated development or sales costs; revenues not resulting in the manner
anticipated due to a continued slow down in technology spending, particularly in
the telecommunications market; our failure to generate investor interest or to
sell certain of our assets or business segments. The forward-looking statements
may also be impacted by the additional risks faced by us as described in this
Report and in our filings with the Securities and Exchange Commission (the
"SEC"), including those set forth under the section entitled "Factors that May
Affect Future Results" in our Current Report on Form 8-K/A filed with the SEC on
August 9, 2004 (the "8-K/A") All forward-looking statements included in this
Report are based on information available to us on the date hereof, and we
assume no obligation to update any such forward-looking statements.
CRITICAL ACCOUNTING POLICIES
See "Summary of Significant Accounting Policies" in the Notes to Consolidated
Financial Statements December 31, 2003 and 2002 in the 8-K/A for our critical
accounting policies. These policies include revenue recognition, determining our
allowance for doubtful accounts receivable, accounting for cost of revenue and
valuation of long-lived assets. No significant changes in our critical
accounting policies have occurred since December 31, 2003.
BUSINESS OVERVIEW
We are a wireless VoIP system integrator and solution provider to emerging
communications service providers. Unlike our peers in the VoIP space, our IP-PCS
solution emphasizes wireless access and regional mobility, by enabling
connections to our matrix of low-power PCS micro stations to transmit voice/data
over the global IP network to communicate cost effectively with people
anywhere.We are in the development stage, and have not yet initiated sales from
our principal product, IP-PCS systems and solutions. We have substantially
completed development of our initial product offering, commenced beta-testing
and are engaged in efforts to initiate commercialization of this product. We are
headquartered in New Jersey, with research and development and support centers
in both the U.S. & China.
The following discussion should be read in conjunction with our condensed
consolidated financial statements and the notes thereto:
RESULTS OF OPERATIONS FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER
30, 2003 AND 2004
REVENUES
11
Current revenues are from limited sales of VoIP services to business and
residential customers. Such revenues are not significant as we continue to focus
on the commercialization of our initial product and development of additional
IP- PCS systems and solutions.
We generated $94,843 and $252,872 of revenues during the three-month and
nine-month periods ended September 30, 2004, respectively, as compared to
$93,898 and $343,463 of revenues for the comparable periods in 2003,
respectively. The decrease in VoIP service revenues in the nine-month period
this year compared to the same period last year is due to reduced marketing and
sales activities, and significant rate cuts in response to continued price
reductions among competitors.
No customer represented greater than 10% of our total revenues for the quarter
ended September 30, 2004.
NET LOSS
We generated $(231,947) and $(946,140) of net loss during the three-month and
nine-month periods ended September 30, 2004, respectively, as compared to
$(237,715) and $(779,427) of net loss for the comparable periods in 2003,
respectively. The increase in net loss for the nine-month period this year
compared to the same period last year is due to decreased revenues, offset by a
decrease in research and development expenses.
COST OF REVENUES AND GROSS MARGIN
The cost of service revenues consists of costs primarily associated with network
operations and related personnel, telephony origination and termination services
provided by third party carriers, and indirect costs associated with purchasing,
scheduling and quality assurance.
The cost of revenues decreased to $38,154 and $115,552 for the three-month and
nine-month periods ended September 30, 2004, respectively, from $41,951 and
$139,031 for the comparable periods in 2003, respectively, primarily due to
decrease in variable cost as revenues decreased, including telephony origination
and termination cost.
Gross margins were $56,689 and $137,320 for the three-month and nine-month
periods ended September 30, 2004, respectively, as compared to $51,947 and
$204,432 for the comparable periods in 2003, respectively.
RESEARCH AND DEVELOPMENT EXPENSES
Research and development ("R&D") expenses consist primarily of personnel for
system design, implementation, and testing, and equipment costs associated with
IP-PCS systems and solutions development. R&D expenses were $109,111 and
$296,425 for the three-month and nine-month periods ended September 30, 2004,
respectively, as compared to $70,633 and $316,143 for the comparable periods in
2003, respectively. R&D costs, including software development costs, are
expensed as incurred.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative ("SG&A") expenses consist primarily of
personnel and related overhead costs for sales, marketing, finance, legal, human
resources and general management. Such costs also include sales commissions,
trade show, advertising and other marketing and promotional expenses.
12
SG&A expenses were $174,629 and $734,780 for the three-month and nine-month
periods ended September 30, 2004, respectively, as compared to $231,408 and
$630,014 for the comparable periods in 2003, respectively. We experienced a
significant decrease in marketing and sales expense during the period, offset by
a significant increase in legal, accounting, and SEC filing fees associated with
becoming a publicly traded firm through the merger of Techedge Inc. and China
Quantum Communications, Ltd. in June 2004. We anticipate that SG&A expenses will
increase as we seek to commercialize our IP-PCS systems and solutions.
OTHER INCOME (EXPENSE)
Other income decreased to $454 and $1,104 for the three-month and nine-month
periods ended September 30, 2004, respectively, from $708 and $11,971 for the
comparable periods in 2003, respectively. The decrease is primarily due to a
decrease in interest income caused by lower cash on hand.
INCOME TAXES
No tax provision has been recorded for the three-month or nine-month periods
ended September 30, 2004, as a result of the cumulative operating loss we
generated. Interim income tax provisions are based upon management's estimate of
taxable income and the resulting consolidated effective income tax rate for the
full year. As a result, such interim estimates are subject to change as the year
progresses and more information becomes available.
LIQUIDITY AND CAPITAL RESOURCES
CASH AND CASH EQUIVALENTS; WORKING CAPITAL dEFICIT. As of September 30, 2004, we
had cash and cash equivalents of $204,204 and working capital of $(692,226), as
compared to $360,236 and $(479,997), respectively, at June 30, 2004. Our working
capital deficit increased to $(692,226) at September 30, 2004, as compared to
$(479,997) at June 30, 2004. The increase in our working capital deficit
reflects a decrease in current assets and an increase in current liabilities.
Our current liabilities include $583,375 in non-secured loans from and deferred
payrolls due to the officers of the Company which are payable on demand.
NET CASH USED IN OPERATING ACTIVITIES. Net cash used in operating activities was
$911,470 for the nine months ended September 30, 2004, as compared to $364,326
for the nine months ended September 30, 2003.
NET CASH USED IN INVESTING ACTIVITIES. Net cash used in investing activities for
the nine months ended September 30, 2004 was $99,020, as compared to $175,591
for the nine months ended September 30, 2003.
NET CASH PROVIDED BY FINANCING ACTIVITIES. Net cash provided by financing
activities for the nine months ended September 30, 2004 was $504,000 from
issuance of common stock, as compared to $0 for the nine months ended September
30, 2003.
ISSUANCE OF COMMON STOCK. We issued no new stock in the September 30, 2004
quarter. In November 2004, we completed a series of private placements resulting
in gross proceeds of $260,000.
CURRENCY EXCHANGE FLUCTUATIONS. For the purpose of funding operations of our
Chinese subsidiary, we have implemented simple currency hedging against
fluctuations in the Chinese Renminbi to United States dollar exchange rate.
13
NEED FOR CURRENT FINANCING. Our ability to continue as a going concern is
dependent upon our ability to raise capital in the near term to: (1) satisfy our
current obligations, and (2) continue our wireless VoIP system and solution
development and commercialization efforts. Furthermore, our future success will
depend on our ability to successfully market and sell our IP-PCS products and
solutions. We do not have sufficient capital to fund our operations at the
current level for more than the next several months and will need additional
capital to continue our operations either through external independent or
related party funding, revenues from sales, further expense reductions or some
combination thereof.
OFF-BALANCE SHEET ARRANGEMENTS
We do not have any off-balance sheet arrangements.
ITEM 3. CONTROLS AND PROCEDURES.
We maintain "disclosure controls and procedures," as such term is defined under
Exchange Act Rule 13a-15(e), that are designed to ensure that information
required to be disclosed in our Exchange Act reports is recorded, processed,
summarized, and reported within the time periods specified in the SEC's rules
and forms, and that such information is accumulated and communicated to our
management, including our Chief Executive Officer and Chief Financial Officer,
as appropriate, to allow timely decisions regarding required disclosures. In
designing and evaluating the disclosure controls and procedures, our management
recognized that any controls and procedures, no matter how well designed and
operated, can provide only reasonable assurance of achieving the desired control
objectives and in reaching a reasonable level of assurance our management
necessarily was required to apply its judgment in evaluating the cost-benefit
relationship of possible controls and procedures. We have carried out an
evaluation under the supervision and with the participation of our management,
including our Chief Executive Officer and Chief Financial Officer, of the
effectiveness of the design and operation of our disclosure controls and
procedures as of September 30, 2004. Based upon their evaluation and subject to
the foregoing, the Chief Executive Officer and Chief Financial Officer concluded
that as of September 30, 2004 our disclosure controls and procedures were
effective at the reasonable assurance level in ensuring that material
information relating to us, is made known to the Chief Executive Officer and
Chief Financial Officer by others within our company during the period in which
this report was being prepared.
There were no changes in our internal controls or in other factors during the
most recent quarter that has materially affected, or is reasonably likely to
materially affect, our internal controls over financial reporting
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
We are not currently a party to any pending material legal proceeding.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
On May 17, 2004, we filed an Amended Certificate of Incorporation with the
Delaware Secretary of State in order to increase the authorized shares of our
common stock from 25,000,000 to 100,000,000 and authorize up to 1,000,000 shares
of a new class of undesignated preferred stock which would allow the Board of
Directors of the Company to issue, without further stockholder action, one or
more series of preferred stock. The par value of both the common and preferred
stock is $.0001.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
14
ITEM 5. OTHER INFORMATION.
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(A) EXHIBITS
3.1.1 Certificate of Amendment of Certificate of
Incorporation, filed May 17, 2004, of the Company.
31.1 Certification of the Principal Executive Officer
pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
31.2 Certification of the Principal Financial Officer
pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
32.1 Certification of the Principal Executive Officer
pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
32.2 Certification of the Principal Financial Officer
pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
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SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act
of 1934, the Registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
TECHEDGE, INC.
(Registrant)
Date: November 12, 2004 By: /s/ Peter Wang
--------------------
Name: Peter Wang
Title: Chief Executive Officer and Chairman of the
Board
Date: November 12, 2004 By: /s/ Ya Li
--------------------
Name: Ya Li
Title: Chief Financial Officer
16