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
(_) TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For Quarter Ended: Commission File Number:
March 31, 2005 2-98997-NY
CHINA CABLE AND COMMUNICATION, INC.
- --------------------------------------------------------------------------------
(Exact name of Company as specified in its charter)
DELAWARE 11-2717273
-------- ----------
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
No. 22 Bei Xin Cun Hou Street, Xiang Shan, Haidian District
Beijing 100093, the People's Republic of China
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(86) 10-8259 9426
- --------------------------------------------------------------------------------
(Company's telephone number, including area code)
Not applicable
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the Company (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
preceding 12 months (or for such shorter period that the Company was required to
file such reports) and (2) has been subject to filing requirements for the past
90 days.
Yes _X_ No___
The number of shares of Common Stock outstanding as of March 31, 2005 was
76,928,260.
Transitional Small Business Disclosure Format (check one): Yes ___ No _X_
CHINA CABLE AND COMMUNICATION, INC.
FORM 10-QSB
INDEX
Page
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements..............................................2
Item 2. Management's Discussion and Analysis or Plan of Operations.......21
Item 3. Controls and Procedures..........................................28
PART II - OTHER INFORMATION
Item 1. Legal Proceedings................................................29
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds......30
Item 3. Defaults Upon Senior Securities..................................30
Item 4. Submission of Matters to a Vote of Security Holders..............30
Item 5. Other Information................................................30
Item 6. Exhibits ........................................................30
SIGNATURES .................................................................31
Exhibit 31.1......Certification
Exhibit 31.2......Certification
Exhibit 32.1......Certification
Exhibit 32.2......Certification
1
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CHINA CABLE AND COMMUNICATION, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, December 31,
2005 2004
----------- -----------
ASSETS (Unaudited) (Audited)
CURRENT ASSETS
Cash and cash equivalents $ 133,890 $ 117,197
Accounts receivable, net of allowance for doubtful accounts of 186,005 114,644
$393,913 and $219,786 respectively
Prepayments and deposits 451,661 434,837
Inventories 692,239 341,446
Other current assets 4,848 111,450
----------- -----------
Total current assets 1,468,643 1,119,574
----------- -----------
NON-CURRENT ASSETS
Property and equipment, net 15,819,405 15,933,744
Intangible asset 1,800,203 1,830,374
Amount due from the holding company of the joint venture
partner 498,587 498,587
----------- -----------
Total non-current assets 18,118,195 18,262,705
----------- -----------
Total assets $19,586,838 $19,382,279
=========== ===========
LIABILITIES, MINORITY INTERESTS, REDEEMABLE CONVERTIBLE
PREFERRED STOCK, AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 4,274,148 $ 4,143,583
Deferred revenue 627,519 476,814
Amount due to the preferred stockholders 4,864,417 4,784,497
Income tax payable 22,582 63,479
Amounts due to shareholders and directors 468,226 366,300
Amount due to a director of the joint venture 42,857 45,094
----------- -----------
Total current liabilities 10,299,749 9,879,767
----------- -----------
MINORITY INTERESTS, net 6,506,955 6,549,012
----------- -----------
(To be continued)
2
CHINA CABLE AND COMMUNICATION, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Continued)
March 31, December 31,
2005 2004
------------ ------------
(Unaudited) (Audited)
STOCKHOLDERS' EQUITY
Preferred Stock, $0.0001 par value, 20,000,000 shares authorized, nil
shares issued -- --
Common Stock, $0.00001 par value; 100,000,000 shares authorized,
76,928,260 shares issued and outstanding at March 31, 2005
and December 31, 2004 769 769
Additional paid-in capital 22,973,536 22,973,536
Comprehensive Income - Foreign exchange reserve 27,723 27,723
Deferred consulting fees (891,937) (1,245,538)
Accumulated deficit (19,329,957) (18,802,990)
------------ ------------
Total stockholders' equity 2,780,134 2,953,500
------------ ------------
Total liabilities and stockholders' equity $ 19,586,838 $ 19,382,279
============ ============
The accompanying notes are an integral part of these
consolidated financial statements.
3
CHINA CABLE AND COMMUNICATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2005 AND 2004
(UNAUDITED)
2005 2004
------------ ------------
NET SALES $ 1,515,929 $ 933,751
------------ ------------
COST AND EXPENSES
Consulting fees (353,601) (1,306,838)
Directors' compensation (72,047) (224,926)
Professional fees (135,708) (135,485)
Operating expenses (551,940) (249,220)
Administrative expenses (100,266) (130,677)
Depreciation (394,604) (362,589)
Amortization (30,171) (30,171)
------------ ------------
Total cost and expenses (1,638,337) (2,439,906)
------------ ------------
(LOSS) FROM OPERATIONS (122,408) (1,506,155)
------------ ------------
OTHER INCOME (EXPENSES)
Bad debts (174,127) --
Interest income (expenses), net (79,552) 208
Other income (expenses), net 8,410
(21,436)
------------ ------------
Total other income (expenses) (275,115) 8,618
------------ ------------
LOSS BEFORE PROVISION FOR INCOME TAXES (397,523) (1,497,537)
PROVISION FOR INCOME TAXES -- (28,909)
------------ ------------
LOSS BEFORE MINORITY INTEREST (397,523) (1,526,446)
MINORITY INTEREST (129,444) (121,908)
------------ ------------
NET LOSS (526,967) (1,648,354)
DEEMED DIVIDENDS -- (33,028)
------------ ------------
NET LOSS AVAILABLE FOR COMMON STOCKHOLDERS $ (526,967) $ (1,681,382)
============ ============
Net loss per share - basic and diluted $ (0.007) $ (0.023)
Weighted average number of shares outstanding - basic and
diluted 76,928,260 72,412,936
The accompanying notes are an integral part of these
consolidated financial statements.
4
CHINA CABLE AND COMMUNICATION, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Comprehensive
Common Stock at Additional Income-Foreign Deferred Retained Total
0.00001 par value Paid - Exchange Consulting Earnings Stockholders'
No. of Shares Amount In Capital Reserve Fees (Deficit) Equity
------------- --------- ------------ ---------- ------------ ----------- -------------
Balances,
January 1, 2004 72,312,760 $ 723 $ 21,356,799 $ 0 $ (1,934,192) $(11,947,932) $ 7,475,398
Shares issued to
directors as directors'
compensation 600,500 6 347,974 0 0 0 347,980
Shares issued to consultant
for financial advisory
services 4,015,000 40 1,875,660 0 0 0 1,875,700
Foreign exchange difference
arising from consolidation 0 0 0 27,723 0 0 27,723
Adjustment to reflect
preferred stocks becoming
mandatorily redeemable
at fair value 0 0 (606,897) 0 0 0 (606,897)
Deemed dividend arising
from beneficial conversion
feature of redeemable
convertible preferred stock 0 0 0 0 0 (60,249) (60,249)
Deferred consulting fees
- stock compensation 0 0 0 0 688,654 0 688,654
Net loss for the year
ended December 31, 2004 0 0 0 0 0 (6,794,809) (6,794,809)
------------ --------- ------------ --------- ------------ ------------ ------------
Balances,
December 31, 2004 76,928,260 $ 769 $ 22,973,536 $ 27,723 $ (1,245,538) $(18,802,990) $ 2,953,500
Deferred consulting fees
- stock compensation 0 0 0 0 353,601 0 353,601
Net loss for the period
ended March 31, 2005 0 0 0 0 0 (526,967) (526,967)
------------ --------- ------------ --------- ------------ ------------ -----------
Balances,
March 31, 2005 76,928,260 $ 769 $ 22,973,536 $ 27,723 $ (891,937) $(19,329,957) $ 2,780,134
============ ========= ============ ========= ============ ============ ===========
The accompanying notes are an integral part of these
consolidated financial statements.
5
CHINA CABLE AND COMMUNICATION, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 2005 AND 2004
(UNAUDITED)
Cash flows from operating activities: 2005 2004
----------- -----------
Net loss $ (526,967) (1,648,354)
Adjustments to reconcile net loss to net cash generated from (used
in) operating activities:
Common stocks issued for consulting fees -- 700,00
Deferred consulting fees expensed, net 353,601 588,838
Common stocks issued for directors' compensation -- 176,400
Directors' compensation payable by common stocks 30,380 --
Depreciation and amortization 424,775 392,761
Minority interest 129,444 121,908
Bad debts 174,127 --
Interest due to preferred stockholder 79,920 --
Changes in operating assets and liabilities:
Decrease (Increase) in:-
Cash held in trust account -- 117,352
Accounts receivable (245,488) 8,735
Prepayments and deposits (16,824) --
Inventories (350,793) 60,371
Other current assets 106,602 (1,991)
Increase (Decrease) in:-
Accounts payable and accrued liabilities 130,565 246,435
Deferred revenue 150,705 --
Income tax payable (40,897) (71,677)
Amounts due to stockholders and directors 71,546 (63,504)
Amount due to a director of the joint venture (2,237) --
----------- -----------
Net cash generated from operating activities 468,459 627,274
----------- -----------
Cash flows from investing activities:
Increase in cash in connection with the consolidation of
joint venture -- 45,859
Increase in amount due from the joint venture partner (171,501) --
Purchase of property and equipment (280,265) (793,386)
----------- -----------
Net cash used in investing activities (451,766) (747,527)
----------- -----------
Cash flows from financing activities: -- --
----------- -----------
Net increase (decrease) in cash and cash equivalents 16,693 (120,253)
Cash and cash equivalents at beginning of year 117,197 173,967
----------- -----------
Cash and cash equivalents at end of year $ 133,890 53,714
=========== ===========
Supplementary disclosures of cash flow information
Income and value added taxes paid $ 73,560 $ 100,586
=========== ===========
Supplemental Schedule of non-cash financing activities:
Common stock and warrants issued for consulting and directors' fees $ -- $ 876,400
=========== ===========
The accompanying notes are an integral part of these
consolidated financial statements.
6
CHINA CABLE AND COMMUNICATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2005 AND 2004
1. INTERIM CONSOLIDATED FINANCIAL STATEMENTS
The interim consolidated unaudited financial statements have been prepared
by the Company and include all material adjustments which, in the opinion of the
management, are necessary for a fair presentation of financial results for the
three months ended March 31, 2005. All adjustments and provisions included in
these statements are of a normal recurring nature.
Certain information and footnote disclosures made in the most recent
annual consolidated financial statements included in the Form 10-KSB for the
year ended December 31, 2004 have been condensed or omitted for the interim
financial statements; accordingly, the interim financial statements should be
read in conjunction with the December 31, 2004 consolidated financial
statements. The results of operations for the interim period presented are not
necessarily indicative of the results that can be expected for the entire year.
The preparation of financial statements in conformity with generally
accepted accounting principles 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 amount of revenues and expenses during the reporting periods.
Management makes these estimates using the best information available at the
time the estimates are made. However, actual results could differ materially
from those results.
2. GOING CONCERN
The consolidated financial statements have been prepared assuming that the
Company will continue as a going concern, which contemplates the realization of
assets and the satisfaction of liabilities in the normal course of business. The
carrying amounts of assets and liabilities presented in the consolidated
financial statements do not purport to represent the realizable or settlement
values. We incurred a net loss of $526,967 and $1,681,382 for the three months
ended March 31, 2005 and 2004, respectively, and our current liabilities
exceeded our current assets by $8,831,106 at March 31, 2005. These factors
create substantial doubt about our ability to continue as a going concern.
Company management continues to evaluate the Company's cash needs and the
availability of debt and equity financing to fund the Company's operations.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting policies adopted in these interim consolidated unaudited
financial statements are consistent with those set out in the Company's audited
consolidated financial statements for the year ended December 31, 2004.
Basis of Consolidation
The interim consolidated financial statements include the financial
statements of the Company and its wholly owned subsidiary, Broadway Offshore
Limited ("Broadway") and its 49% equity interest in Baoding Pascali Broadcasting
Cable Television Integrated Information Networking Co., Ltd. (the "Joint
Venture"), collectively its subsidiaries. All significant inter-company balances
and transactions, including inter-company profits and unrealized profits and
losses, are eliminated on consolidation.
7
The Joint Venture is a Sino-foreign joint venture established in the
People's Republic of China (the "PRC"), between Broadway and Baoding Pascali
Multimedia Transmission Networking Co., Ltd. ("Baoding Multimedia"), which is a
subsidiary of Baoding Pascali Group Co., Ltd., a Chinese state-owned enterprise.
Prior to December 31, 2003, Baoding's joint venture partners consisted of
the Company and Baoding Multimedia with ownership interests of 49% and 51%,
respectively. In addition, Baoding Multimedia had the majority of the Joint
Venture's board seats of the Board of Directors. Accordingly, the Company
accounted for its investment in the Joint Venture using the equity method of
accounting for the year ended December 31, 2003.
In December 2003, the Joint Venture agreement was amended whereby Baoding
Multimedia granted 3% of its 51% interest in the Joint Venture to Baoding Cable
Television Employees' Shareholding Association ("BCTESA"), as well as one seat
on the Board of Directors.
Effective January 1, 2004, the Joint Venture agreement between the Company
and Baoding Multimedia was further amended whereby the Company assumed effective
control of the board of directors of the Joint Venture by appointing five out of
nine of its directors under the PRC Sino-foreign Joint Venture Law. The other
four directors consist of three directors for Baoding Multimedia and one
director for BCTESA. In addition, the Company filled key management positions at
the Joint Venture, including the position of Chief Financial Officer and General
Manager, with persons affiliated with the Company.
The Board of Directors of the Joint Venture serves a term of four years
with no term limits. Changes in the Board of Director members can only be made
after a unanimous vote of the Board. The Board of Directors is the highest
authority of the Joint Venture and executes policy, operational matters and
passes resolutions of the Joint Venture. As a result, control of the Board of
Directors of the Joint Venture enables the Company to significantly influence
the operations of the Joint Venture. Accordingly, since January 1, 2004 the
Company has accounted for the Joint Venture as a subsidiary and its accounts are
consolidated.
Use of Estimates
The preparation of consolidated financial statements in conformity with
accounting principles generally accepted 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 consolidated financial statements and the amount
of revenues and expenses during the reporting periods. Management makes these
estimates using the best information available at the time the estimates are
made. However, actual results could differ materially from those results.
Cash and cash equivalents
Cash and cash equivalents include cash on hand, demand and time deposits
with banks and liquid investments with an original maturity of three months or
less.
Inventories
Inventories, being consumables and network replacement parts, are stated
at cost. Cost is determined on a first-in, first-out basis, and includes all
costs of purchase, costs of conversion, and other costs incurred in bringing the
inventories to their present location and condition.
8
Property and equipment
Property and equipment are stated at cost, less accumulated depreciation,
amortization and impairment losses, and are depreciated at rates sufficient to
write off their cost, after taking into account their estimated residual value,
over their estimated useful lives on a straight-line basis. The expected useful
lives are as follows:
Leasehold improvements 25 years
Machinery and equipment 7 to 15 years
Furniture, fixtures and equipment 7 to 10 years
Motor vehicles 7 years
The useful lives of assets and depreciation and amortization methods are
reviewed periodically.
Construction in progress includes direct costs of constructing equipment
and new cable and fiber optic networks. Interest incurred during the period of
construction has not been capitalized, as such amounts are not material.
Construction in progress is not depreciated until such time as the assets are
completed and put into operational use.
Intangible assets
The intangible asset is an exclusive right to operate a cable TV network
and is amortized on a straight-line basis over a period of twenty years.
Impairment
The Company applies the provisions of Statement of Financial Accounting
Standard No. 144, "Accounting for the Impairment or Disposal of Long-Lived
Assets" ("SFAS No. 144"), issued by the Financial Accounting Standards Board
("FASB"). SFAS No. 144 requires that long-lived assets be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable through the estimated
undiscounted cash flows expected to result from the use and eventual disposition
of the assets. Whenever any such impairment exists, an impairment loss will be
recognized for the amount by which the carrying value exceeds the fair value.
The Company tests its long-lived assets, including property and equipment
and intangible assets subject to periodic amortization, for recoverability at
least annually or more frequently upon the occurrence of an event or when
circumstances indicate that the net carrying amount is greater than its fair
value. Assets are grouped and evaluated at the lowest level for their
identifiable cash flows that are largely independent of the cash flows of other
groups of assets. The Company has identified this lowest level to be principally
the cable TV network in a specific region of Baoding city. The Company considers
historical performance and future estimated results in its evaluation of
potential impairment and then compares the carrying amount of the asset to the
future estimated cash flows expected to result from the use of the asset. If the
carrying amount of the asset exceeds estimated expected undiscounted future cash
flows, the Company measures the amount of impairment by comparing the carrying
amount of the asset to its fair value. The estimation of fair value is generally
measured by discounting expected future cash flows as the rate the Company
utilizes to evaluate potential investments. The Company estimates fair value
based on the information available in making whatever estimates, judgments and
projections are considered necessary. There was no impairment of long-lived
assets in the quarter ended March 31, 2005 and 2004.
9
Redeemable convertible preferred stock
In connection with the issuance of the redeemable convertible preferred
stock in 2003, the Company recorded deemed dividends of $4,000,000 arising from
the beneficial conversion feature embedded within the preferred stock in
accordance with the provisions of Emerging Issues Task Force Consensus Nos. 98-5
"Accounting for Convertible Securities with Beneficial Conversion Features or
Contingently Adjustable Conversion Ratios", and 00-27 "Application of Issue No.
98-5 to Certain Convertible Instruments" and $33,028 of accretion for the year
ended December 31, 2004. The deemed dividends arise from the allocation of
proceeds raised to the detachable warrants issued to the preferred stockholders,
as well as due to the effective conversion price based on the proceeds allocated
to the preferred stock being below the fair market value of the Company's common
stock on the date of issuance. The beneficial conversion feature is limited to
the total proceeds raised to $4,000,000. There is no deemed dividend for the
quarter ended March 31, 2005.
Income taxes
The Company accounts for income taxes using an asset and liability
approach which allows for the recognition and measurement of deferred tax assets
based upon the likelihood of realization of tax benefits in future years. Under
the asset and liability approach, deferred taxes are provided for the net tax
effects of temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for income tax
purposes. A valuation allowance is provided for deferred tax assets if it is
more likely than not these items will either expire before the Company is able
to realize their benefits, or that future deductibility is uncertain. No
provision for deferred taxation has been made, as there are no temporary
differences at the balance sheet date.
Stock based compensation
The Company has adopted Statement of Financial Accounting Standards
("SFAS") No. 123, which defines a fair-value-based method of accounting for
stock based employee compensation and transactions in which an entity issues its
equity instruments to acquire goods and services from non-employees. Stock
compensation for stock granted to non-employees has been determined in
accordance with SFAS No.123 and the Emerging Issues Task Force consensus in
Issue No. 96-18, "Accounting for Equity Instruments that are issued to Other
than Employees for Acquiring, or in Conjunction with Selling Goods or Services"
("EITF 96-18"), as the fair value of the consideration received or the fair
value of equity instruments issued, whichever is more reliably measured.
Earning per share
The Company has presented a dual presentation of basic and diluted
earnings per share ("EPS") with a reconciliation of the numerator and
denominator of the EPS computations. Basic EPS amounts are based on the weighted
average shares of common stock outstanding. Diluted EPS assumes the conversion,
exercise or issuance of all potential common stock instruments such as options,
warrants and convertible securities, unless the effect is to reduce a loss or
increase earnings per share.
10
Foreign Currency Translations and Transactions
The Renminbi ("RMB"), the national currency of the PRC, is the primary
currency of the economic environment in which the operations of the Joint
Venture are conducted. The Company uses the United States dollar ("U.S.
dollars") for financial reporting purposes.
The Company translates the Joint Venture's assets and liabilities into
U.S. dollars using the applicable unified exchange rates quoted by the People's
Bank of China prevailing at the balance sheet date, and the statement of income
is translated at average unified exchange rates during the reporting period.
Adjustments resulting from the translation of the Joint Venture's financial
statements from RMB into U.S. dollars are recorded in shareholders' equity as
part of accumulated comprehensive income.
Transactions denominated in currencies other than RMB are translated into
RMB at the unified exchange rates prevailing at the transaction dates. Gains or
losses resulting from transactions in currencies other than RMB are reflected in
the statement of income of the Joint Venture for the reporting periods.
Revenue recognition
Revenue from the provision of subscription television services is
recognized at the time when the services are provided. Customers are billed on a
quarterly basis for the analog television services and on an annual basis for
the digital television services. High-speed internet service customers are
billed on a monthly basis. Prepayment from all of the customers is deferred to
the appropriate period of service. Installation fee income is recognized upon
completion of the related installation work.
4. RECENT ACCOUNTING PRONOUNCEMENTS
In March 2004, the FASB issued EITF Issue No. 03-1, "The Meaning of
Other-Than-Temporary Impairment and Its Application to Certain Investments"
("EITF 03-1") which provides new guidance for assessing impairment losses on
debt and equity investments. Additionally, EITF 03-1 includes new disclosure
requirements for investments that are deemed to be temporarily impaired. In
September 2004, the FASB delayed the accounting provisions of EITF 03-1. The
Company will evaluate the effect, if any, of EITF 03-1 when final guidance is
released.
In November 2004, the FASB issued Statement of Financial Accounting
Standards (SFAS) No. 151, Inventory Costs, which clarifies the accounting for
abnormal amounts of idle facility expense, freight, handling costs, and wasted
material. SFAS No. 151 will be effective for inventory costs incurred during
fiscal years beginning after June 15, 2005. We do not believe the adoption of
SFAS No. 151 will have a material impact on our consolidated financial
statements.
In December 2004, the FASB issued SFAS No. 123-R, Share Based Payments,
which requires that the compensation cost relating to share-based payment
transactions (including the cost of all employee stock options) be recognized in
the financial statements. The cost will be measured based on the estimate fair
value of the equity or liability instruments issued. SFAS 123-R covers a wide
range of share-based compensation arrangements including share options,
restricted share plans, performance-based awards, share appreciation rights, and
employee share purchase plans. Management believes the adoption of this
pronouncement will not have a material effect on our consolidated financial
statements.
11
Also, in December 2004, the FASB issued SFAS 153, "Exchanges of
Non-monetary Assets, an amendment of APB Opinion No. 29, Accounting for
Non-monetary Transactions." The amendments made by SFAS No. 153 are based on the
principle that the exchange of non-monetary assets should be measured using the
estimated fair market value of the assets exchanged. SFAS No. 153 eliminates the
narrow exception for non-monetary exchanges of similar productive assets, and
replaces it with a broader exception for exchanges of non-monetary assets that
do not have commercial substance. A non-monetary exchange has "commercial
substance" if the future cash flows of the entity are expected to change
significantly as a result of the transaction. This pronouncement is effective
for monetary exchanges in fiscal periods beginning after June 15, 2005.
Management believes the adoption of this pronouncement will not have a material
effect on our consolidated financial statements.
Other recent accounting pronouncements issued by the FASB (including its
Emerging Issues Task Force), the AICPA, and the SEC did not or are not believed
by management to have a material impact on the Company's present or future
consolidated financial statements.
5. INVENTORIES
As of March 31, 2005 and December 31, 2004, inventories consisted of the
following:-
March 31, December 31,
2005 2004
Raw materials $185,981 $141,152
Finished product 506,258 200,294
-------- --------
Total $692,239 $341,446
======== ========
6. PROPERTY AND EQUIPMENT
March 31, December 31,
2005 2004
Leasehold improvements $ 84,156 $ 84,156
Machinery and equipment 17,754,105 17,718,300
Furniture, fixtures and equipment 129,114 127,073
Motor vehicles 295,659 295,659
------------ ------------
18,263,034 18,225,188
Less: Accumulated depreciation (5,764,482) (5,369,738)
------------ ------------
12,498,552 12,855,450
Construction in progress 3,320,853 3,078,294
------------ ------------
$ 15,819,405 $ 15,933,744
============ ============
12
7. INTANGIBLE ASSETS
March 31, December 31,
2005 2004
Exclusive right to operate cable TV network $ 2,413,687 $ 2,413,687
Less: Accumulated amortization (613,484) (583,312)
----------- -----------
$ 1,800,203 $ 1,830,375
=========== ===========
The amortization expense for the three months ended March 31, 2005
amounted to $30,171.
8. INVESTMENT IN JOINT VENTURE
On and before December 31, 2003, the Company accounted for its 49%
ownership interest in Baoding joint venture using the equity method of
accounting. However, effective on January 1, 2004, the Company assumed control
of the board of directors of Baoding joint venture by appointing five out of
nine of its directors and filled key management positions at the Joint Venture,
including the position of Chief Financial Officer and General Manager, with
persons affiliated with the Company. Accordingly, effective on January 1, 2004,
the Company has accounted for Baoding joint venture as a subsidiary and its
accounts are consolidated.
The condensed balance sheets and statements of operations of Baoding joint
venture were as follows:
Condensed Balance Sheets
As of March 31, December 31,
2005 2004
Current assets $ 1,455,862 $ 1,118,973
Non-current assets 20,349,520 20,322,529
----------- -----------
Total assets $21,805,382 $21,441,502
=========== ===========
Current liabilities $ 4,671,500 $ 4,561,432
Capital 17,133,882 16,880,070
----------- -----------
Total liabilities and equity $21,805,382 $21,441,502
=========== ===========
13
Condensed Statement of Operations
For the period ended March 31 2005 2004
---- ----
Net sales $ 1,515,929 $ 933,751
=========== ===========
Profit from operations $ 449,007 $ 259,535
Other income (expenses), net (195,195) 8,410
----------- -----------
Profit before provision for income taxes 253,812 267,945
Provision for income taxes -- (28,909)
----------- -----------
Net income $ 253,812 $ 239,036
=========== ===========
The Company's equity in earnings (49%) $ 124,368 $ 117,127
=========== ===========
9. AMOUNTS DUE FROM THE PRC JOINT VENTURE PARTNER
The amount due from the PRC joint venture partner was not trade in nature.
The amount was unsecured, interest free and is due for repayment by December 31,
2005.
The Board of directors of Baoding joint venture has proposed the
distribution of a cash dividend to its joint venture partners in the amount of
RMB36 million (equivalent to approximately US $4,337,300). The payment of such
dividend is contingent upon the approval of SAFE (State Administration of
Foreign Exchange) and of the local PRC tax bureau. Baoding joint venture needs
to obtain a tax clearance certificate from the local PRC tax bureau in order to
get the approval for the declaration of dividend. The local PRC tax bureau needs
to review Baoding joint venture's tax filings to ensure all of the enterprise
and value-added taxes have been properly paid up to December 31, 2004.
Under the current PRC foreign joint venture law, Baoding joint venture
cannot formerly declare the dividend until formal approvals from SAFE and local
PRC tax bureau have been obtained.
The Baoding joint venture intends to offset the amount of dividend to be
declared to its PRC joint venture partner with the amount due from the PRC joint
venture partner. Such offset of dividend declared is permitted under the current
PRC laws.
14
10. AMOUNTS DUE TO STOCKHOLDERS AND DIRECTORS
The amounts due to stockholders and directors were unsecured, non-interest
bearing and repayable on demand.
March 31, December 31,
Name 2005 2004
------------ ------------
Stockholder:
Faithful Union Limited $143,400 $263,882
Stockholder and Director:
Raymond Ying-Wai Kwan, CEO 27,053 15,767
Yau-Sing Tang, CFO 292,792 86,651
George Raney, Director 4,340 -
Paul Zee-Ho Tsang, Director 641 -
-------- --------
Total $468,226 $366,300
======== ========
For the period ended March 31, 2005, the Company repaid $120,482 to
Faithful Union Limited, a company wholly owned by Mr. Hong Tao Li, a Director,
Chief Operating Officer and Vice-President of Project Development and as a
result, the Company still owed this shareholder $143,400 as of March 31, 2005.
This advance was unsecured, non-interest bearing and had no fixed repayment
dates.
For the period ended March 31, 2005, Mr. Yau Sing Tang, CFO and Director
of the Company paid various expenses of $3,052 on behalf of the Company. The
Company also owed him total salaries of $25,641 and director's shares valued at
$18,600 for the period ended March 31, 2005. Mr. Tang also advanced $180,098 to
the Company during the period ended March 31, 2005. The Company paid him the
salaries of $21,250 for the period ended March 31, 2005. In total, the Company
owed him the amount of $292,792 as of March 31, 2005. The amount due to him was
unsecured, non-interest bearing and had no fixed repayment dates.
For the period ended March 31, 2005, the Company owed Mr. Raymond Ying Wai
Kwan, CEO and Director of the Company total salaries of $15,384 and director's
shares valued at $7,440. The Company paid him the salaries of $11,538 for the
period ended March 31, 2005. In total, the Company owed him the amount of
$27,053 as of March 31, 2005. The amount due to him was unsecured, non-interest
bearing and had no fixed repayment dates.
For the period ended March 31, 2005, the Company owed Mr. George Raney,
Director of the Company, director's shares valued at $4,340. The amount due to
him was unsecured, non-interest bearing and had no fixed repayment dates.
For the period ended March 31, 2005, the Company owed Mr. Zee-Ho Tsang,
Director of the Company, director's fee of $641. The amount due to him was
unsecured, non-interest bearing and had no fixed repayment dates.
15
11. AMOUNT DUE TO A DIRECTOR OF THE JOINT VENTURE
As of March 31, 2005 and December 31, 2004, the Company's Joint Venture
owed an amount of $42,857 and $45,094 respectively to one of the directors of
the Company's Joint Venture. The amount owed represents the personal bank loan
taken up by such director for an office premises acquired by the Company's Joint
Venture in 2004. The amount was unsecured, non-interest bearing and repayable on
demand.
12. 8% REDEEMABLE CONVERTIBLE PREFERRED STOCK
On September 24, 2003, the Company completed the sale of 2,758,621 shares
of the Company's restricted 8% Redeemable Convertible Preferred Stock, par value
$0.0001 per share (the "Preferred Stock"), to Gryphon Master Fund, L.P., a
Bermuda limited partnership (the "Purchaser"), for $1.45 per share (the
"Purchase Price"), or an aggregate purchase price of $4,000,000. The Purchase
Price per share of the Preferred Stock was calculated based upon 90% of the
moving average closing price of the Company's common stock for the 60 trading
days immediately prior to entering into the agreement. The fair market value of
the Company's common stock as of September 24, 2003 was $2.85 per share. In
connection with this transaction, the Company also issued warrants to the
Purchaser to purchase up to 827,586 shares of the Company's restricted common
stock at an exercise price $2.18 per share until September 24, 2008 (the
"Warrants"). The sale of the Preferred Stock and the Warrants to the Purchaser
was made in a private placement transaction with reliance upon an exemption from
registration under Section 4(2) of the Securities Act of 1933.
The Preferred Stock accrues dividends at the rate of 8% of the Purchase
Price per share per annum, payable when, as and if declared by the Board of
Directors on September 30 and March 31 of each year commencing on March 31,
2004. The Preferred Stock is senior to the common stock with respect to the
payment of dividends, redemption payments and rights upon liquidation,
dissolution or winding up of the affairs of the Company. Upon liquidation, the
Preferred Stock is entitled to receive a liquidation preference equal to the
Purchase Price plus the amount of accrued and unpaid dividends.
The Company was required to redeem all then outstanding shares of
Preferred Stock on September 24, 2008, the fifth anniversary of the date on
which the preferred stock was issued, at a redemption price equal to the
Purchase Price, plus accrued but unpaid dividends. However, if the "Current
Market Price" (defined as the volume weighted average price of the Company's
common stock on the 10 consecutive trading days immediately preceding such date
as reported on the Over-the-Counter Bulletin Board of the Company's Common Stock
is equal to or less than $0.70 for a period of 10 consecutive trading days), the
holders of the Preferred Stock have the right to require the Company to redeem
all or any portion of the Preferred Stock at a redemption price, in cash, equal
to $1.67 per share, plus all accrued but unpaid dividends.
The fair value of the Preferred Stock with the conversion feature and the
warrants, calculated based on available market data using appropriate valuation
models, was determined to be in excess of the net proceeds of $3,642,150
received by the Company from the Purchaser, and the minimum Preferred Stock
redemption amount of $4,000,000. Therefore, the Preferred Stock was recorded at
the minimum redemption amount of $4,000,000, less related transactions costs of
$660,563 to be adjusted in subsequent periods for accretion adjustments and
accrued and unpaid dividends.
16
12. 8% REDEEMABLE CONVERTIBLE PREFERRED STOCK (CONTINUED)
On September 24, 2003, the Company also issued 18,391 shares of restricted
common stock to Trenchant Operating LLC ("Trenchant"), in consideration for
services performed by Trenchant in finding the Purchaser. In addition, the
Company issued warrants to Trenchant to purchase 91,954 shares of common stock,
with an exercise price equal to $2.18 per share until September 25, 2008. The
fair market value of the Company's commons stock as of September 24, 2003 was
$2.85. The fair value of the warrants was determined to be $250,299 as of the
date of grants using the Black-Scholes pricing option valuation model, which
assumed a risk free interest rate of approximately 3.07%, an expected life of 5
years, and a volatility rate of 171%.
On June 14, 2004 the Purchaser requested that the Company redeem the
Preferred Stock, as the market price of the Company's common stock was equal to
or less than $0.70 per share for more than ten consecutive trading days. On July
26, 2004, the Purchaser filed a complaint in the United States District Court
for the Northern District of Texas, Dallas Division alleging that the Company
breached its contract by failing to redeem the Preferred Stock. The Purchaser is
seeking the redemption price of $4,606,897; plus unpaid dividends equal to
$220,226 and interest accruing at $888 per day from June 14, 2004 until the date
of redemption; pre-judgment and post-judgment interest; attorneys' fees; court
costs; and other such relief.
In accordance with Financial Accounting Standards Board SFAS 150,
"Accounting for Certain Financial Instruments with Characteristics of both
Liabilities and Equity", the Company has accounted for interest of $79,920 for
the period ended March 31, 2005 and the redemption price of the Preferred Stock
of $4,606,897 and interest of $257,520 for the period from June 14, 2004 to
March 31, 2005 as a current liability on its consolidated balance sheet. The
Company has accounted for the difference between the minimum Preferred Stock
redemption amount of $ 4,000,000 and the cash redemption price of $ 4,606,897 as
a reduction in Additional Paid-in Capital for the year ended December 31, 2004.
In addition, for the year ended December 31, 2004, the Company has expensed
unamortized transaction costs amounting to $567,286 relating to the original
Preferred Stock issuance. The Company currently believes that the recorded
liability is conservative and reflects the probable maximum amount that the
Company would be required to pay to the Purchaser should the Purchaser be
successful in its lawsuit. The Company does not believe that it would be
required to pay unpaid dividends to the Purchaser because the terms of the
Preferred Stock provide that the holders of Preferred Stock receive dividends
only when, and if, declared by the Board of Directors of the Company. The
Company's Board of Directors has not declared any dividends on the Preferred
Stock as of March 31, 2005.
The Company, through its appointed attorney, is now working with the
Purchaser to settle the complaint by agreeing to the judgment on the Purchaser's
claims against the Company. At the same time, the Company is negotiating with
the Purchaser to extend the repayment period to allow more time for the Company
to seek strategic investors to settle the debt by issuing shares of the
Company's stock.
13. INCOME TAXES
Broadway Offshore is a British Virgin Islands investment holding company
that does not carry on any business and does not maintain any offices in the
United States of America. Therefore, no provision for United States income taxes
or tax benefits for the Company has been made.
17
Baoding is a Sino-foreign joint venture established in the PRC. Baoding
was subject to a 3% local income tax for the year ended December 31, 2002 and
18% (15% federal income tax plus 3% local income tax) for the year ended
December 31, 2003 and 13% (10% federal income tax plus 3% local income tax) for
future years, on the results of its operations after adjusting for items which
are non-assessable or disallowed. Certain items of income and expense are
recognized for PRC income tax purposes in a different accounting period from
that in which they are recognized for financial accounting purposes. Baoding's
operation in PRC for the year ended December 31, 2004 resulted in a profitable
operation, while loss was incurred on the Company level.
14. DIRECTORS' COMPENSATION IN SHARES AND WARRANTS
The Company signed two-year directors' stock compensation agreements (the
"Agreements") with three of its directors, Mr. George Raney, Mr. Raymond
Ying-Wai Kwan, and Mr. Yau-Sing Tang on February 28, 2003. Pursuant to the
Agreements, the Company will issue an aggregate of 49,000 shares of common stock
each month in consideration for their services rendered through February 2005.
As of March 31, 2005, the Company owed them the 49,000 director's shares of
common stock valued at $6,860.
In accordance with Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" ("SFAS 123") and the Emerging Issues
Task Force Consensus Issue No. 96-18, "Accounting for Equity Instruments that
are Issued to Other than Employees for Acquiring, or in Conjunction with
Selling, Goods or Services" ("EITF 96-18"), the Company accrued for the
directors' compensation in shares and warrants based on the fair market value of
the Company's common stock at March 31, 2005. During the period ended March 31,
2005 and year ended December 31, 2004, 98,000 and 600,500 shares of the
Company's common stock under the Company's 2003 Stock Compensation Plan were
issued to the directors, respectively.
15. CONSULTING AGREEMENTS AND DEFERRED CONSULTING FEES
For the period ended March 31, 2005, no shares were issued. For the year
ended December 31, 2004, the Company issued a total of 4,015,000 shares of the
Company's common stock to several consultants as consideration for consultation
and advisory services rendered and to be rendered over a period ranging from one
month to eighteen months.
In accordance with Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" ("SFAS 123") and the Emerging Issues
Task Force Consensus Issue No. 96-18, "Accounting for Equity Instruments that
are Issued to Other than Employees for Acquiring, or in Conjunction with
Selling, Goods or Services" ("EITF 96-18"), the Company has accounted for the
consulting agreements based on the fair market value of the Company's common
stock at the commencement date of the individual consulting agreements. For the
period ended March 31, 2005 and 2004, the Company charged to expense a total of
$353,601 and $1,306,838, respectively associated with consulting agreements and
recorded deferred consulting fees of $891,937 and $1,245,538 respectively at
March 31, 2005 and December 31, 2004. The deferred consulting fees will be
charged to expenses as follows:-
Year ending December 31 Amount
2005 $ 577,515
2006 314,422
-----------
Total $ 891,937
===========
18
15. CONSULTING AGREEMENTS AND DEFERRED CONSULTING FEES (CONTINUTED)
For the period ended March 31, 2005, no warrant was granted. As of March
31, 2005, the following warrants were still outstanding:
- ----------------------------- --------------------- ----------------- ------------------------------------------------
Warrant-holder No. of warrants Exercise Price Exercise Period
- ----------------------------- --------------------- ----------------- ------------------------------------------------
- ----------------------------- --------------------- ----------------- ------------------------------------------------
Patrick Ko 250,000 $0.45 Five years starting from May 3, 2003
- ----------------------------- --------------------- ----------------- ------------------------------------------------
Ni Rong-song 1,000,000 $0.45 Five years starting from May 30, 2003
- ----------------------------- --------------------- ----------------- ------------------------------------------------
Friedland Capital Inc. 100,000 $1.50 Three years starting from August 22, 2003
- ----------------------------- --------------------- ----------------- ------------------------------------------------
No warrant granted to consultants was exercised during the period ended
March 31, 2005.
16. MINORITY INTEREST
For the period ended March 31, 2005 and 2004, the Company recorded a
reduction to income of $129,444 and $121,908 respectively, representing the
other partners' share in the income of the joint venture. The Company also
recorded a minority interest of $6,506,955 as of March 31, 2005, representing
the other partners' share in the net assets of the joint venture. The balance of
the minority interest as of March 31, 2005 and December 31, 2004 was reduced by
receivables due from Baoding's 48% joint venture partner in anticipation of the
proposed dividend on the Baoding joint venture.
17. EARNINGS (LOSS) PER COMMON SHARE
Basic EPS amounts are based on the weighted average shares of common stock
outstanding. Diluted EPS assumes the conversion, exercise or issuance of all
potential common stock instruments such as options, warrants and convertible
securities, unless the effect is to reduce a loss or increase earnings per
share. All potential dilutive financial instruments as of March 31, 2005 had
the effect of reducing the reported net loss per share, and, therefore, were
excluded from the calculation.
18. SEGMENT REPORTING
The Company operates in three principal business segments. Management
believes that the following table presents useful information to the chief
operation decision makers for measuring business performance and financing needs
and preparing the corporate budget, etc. As all the Company's customers are
located in Baoding City, China and the Company's revenues are generated in
Baoding, no geographical segment information is presented.
19
Analog Digital High speed
For the period ended Television Television Internet
March 31, 2005 Services Services Services Corporate Total
- -------------- -------- -------- -------- --------- -----
Net Sales $ 979,363 $ 465,665 $ 70,901 $ -- $ 1,515,929
Consulting fees -- -- -- (353,601) (353,601)
Directors' compensation -- -- -- (72,047) (72,047)
Professional fees -- -- -- (135,708) (135,708)
Operating expenses (197,975) (343,906) -- (10,059) (551,940)
Administrative expenses (100,266) -- -- -- (100,266)
Depreciation (394,604) -- -- -- (394,604)
Amortization (30,171) -- -- -- (30,171)
Profit (Loss) from operation 256,347 121,759 70,901 ( 571,415) (122,408)
Analog Digital High speed
For the period ended Television Television Internet
March 31, 2004 Services Services Services Corporate Total
- -------------- -------- -------- -------- --------- -----
Net Sales $ 899,276 $ -- $ 34,475 $ -- $ 933,751
Consulting fees -- -- -- (1,306,838) (1,306,838)
Directors' compensation -- -- -- (224,926) (224,926)
Professional fees -- -- -- (135,485) (135,485)
Operating expenses (150,779) -- -- (98,441) (249,220)
Administrative expenses (130,677) -- -- -- (130,677)
Depreciation (362,589) -- -- -- (362,589)
Amortization (30,171) -- -- -- (30,171)
Profit (Loss) from operation 225,060 -- 34,475 (1,765,690) (1,506,155)
19. SUBSEQUENT EVENT
On April 20, 2005, the Company announced that, through its newly formed
70% owned subsidiary, Beijing Jin Zhi Cheong Shang Mao Limited, it entered into
a joint venture agreement with Zhong Dian Tong (Beijing) Digital TV Development
Co., Ltd. This joint venture will allow the Company to reach an additional 1.1
million cable TV subscribers, located over four Chinese provinces, by providing
high speed internet access, IP television and IP telephony service to those
subscribers. Under this Agreement, the Company will use these provinces as a
pilot launch and will replicate the services to its own provinces over the
coming three years. The joint venture agreement will be valid for one year.
After a one-year market development trial period, both parties involved will
have the option of executing a 30-year joint venture agreement. There can be no
assurance that the joint venture will extend for another 30 years.
20
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
This quarterly report on Form 10-QSB contains forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, and Section 21E
of the Securities Exchange Act of 1934. These statements relate to future events
or the Company's future financial performance. The Company has attempted to
identity forward-looking statements by terminology including "anticipates,"
"believes," "expects," "can," "continue," "could," estimates," "intends," "may,"
"plans," "potential," "predict," "should" or "will" or the negative of these
terms or other comparable terminology. Although the Company believes that the
expectations reflected in the forward-looking statements are reasonable, the
Company cannot guarantee future results, level of activity, performance or
achievements. The Company expectations are as of the date this Form 10-QSB is
filed, and the Company does not intend to update any of the forward-looking
statements after the date this quarterly report on Form 10-QSB is filed to
confirm these statements to actual results, unless required by law.
Overview
The Company was incorporated in the State of Delaware on November 27,
1984. Prior to February 2003, the Company had no business operations. From
February 2003, as a result of a reverse merger, the Company, through its
wholly-owned subsidiary, Broadway Offshore Limited ("Broadway Offshore"), which
was incorporated under the laws of the British Virgin Islands, has owned 49% of
the issued and outstanding shares of capital stock on a fully diluted basis of
Baoding Pascali Broadcasting Cable Television Integrated Information Networking
Co., Ltd. (the "Joint Venture"). The Joint Venture is a Sino-foreign joint
venture established in the People's Republic of China (the "PRC"), between
Broadway Offshore and Baoding Pascali Multimedia Transmission Networking Co.,
Ltd. ("Baoding Multimedia"), which is a subsidiary of Baoding Pascali Group Co.,
Ltd., a Chinese state-owned enterprise.
The Joint Venture was formed on July 23, 1999, when Baoding Multimedia and
Solar Touch signed a joint venture contract (the "JV Agreement") and the
articles of association of the Joint Venture (the "JV Articles"). The JV
Agreement and JV Articles provide that the total amount of investment of the
Joint Venture was RMB122.425 million (or approximately US$14.8 million); and
that the registered capital stock of the Joint Venture was RMB70 million (or
approximately US$8.46 million). The JV Agreement and JV Articles also provide
that Baoding Multimedia's contribution to the Joint Venture was Baoding
Multimedia's network and related facilities with a value of RMB21.7 million,
plus intangible assets (including licenses and business goodwill) valued at
RMB14 million which was equal to 51% of the registered capital of the Joint
Venture and that Solar Touch's contribution was an investment of US$4.14 million
(or RMB34.3 million) in cash which was equal to 49% of the registered capital.
On July 28, 1999, the Management Commission of the Baoding Hi-Tech Industrial
Development Area approved the JV Agreement and JV Articles as well as the
members of the board of directors of the Joint Venture. On August 5, 1999, a
Certificate of Approval for Establishment of Enterprises with Foreign Investment
in the PRC for the Joint Venture was issued and on August 16, 1999, the Business
License for the operations of the Joint Venture was issued.
On February 23, 2000, Baoding Multimedia and Solar Touch signed another
agreement to increase the Joint Venture's registered capital from RMB70 million
to RMB100 million, provided, however, that the parties' respective percentage of
equity interests in the Joint Venture shall remain the same. On February 24,
2000, the Management Commission of the Development Area approved the increase in
the Joint Venture's registered capital from RMB70 million to RMB100 million. On
September 6, 2000, a revised Business License was issued to reflect the increase
in the Joint Venture's registered capital.
21
On May 6, 2003, Solar Touch transferred its 49% interest in the Joint
Venture to its wholly-owned subsidiary, Broadway Offshore. On December 29, 2003,
Baoding Multimedia transferred a 3% interest in the Joint Venture to the Baoding
Pascali Cable Television Network Workers Stockholding Association. On the same
date, the JV Agreement and JV Articles were amended to reflect the correct
shareholdings of Broadway Offshore, Baoding Multimedia and Baoding Pascali Cable
Television Network Workers Stockholding Association. Also, the total number of
board of directors of the Joint Venture increased to nine pursuant to the
Amended Joint Venture Agreement dated December 29, 2003 (the "Amended JV
Agreement"). In February 2004, the Company sold its intermediate holding
company, Solar Touch, to an independent third party and as a result, the Company
directly owns a 100% interest in Broadway Offshore.
The Joint Venture operates a cable television network in the municipality
of Baoding, near Beijing in the PRC. The Joint Venture has over 200,000
subscribers in a market with a population of over 10 million. The Company
believes that the Joint Venture is at present the only Sino-foreign joint
venture approved by the State Administration of Radio, Film and Television to be
licensed as a cable television network operator in the PRC. The Company believes
that it is the first and only joint venture allowed to have a foreign investor
invest in and to operate the cable television network in the PRC.
The board of directors of the Joint Venture currently has nine members,
five of whom were appointed by the Company. Pursuant to the Amended JV
Agreement, Broadway Offshore has the right to appoint five of the nine members
of the Board of the Joint Venture. Through those five appointed directors, the
Company has obtained control of the board of directors of the Joint Venture and
the Company's Board of Directors has filled key management positions at the
Joint Venture, including Chief Financial Officer and General Manager, with
persons affiliated with the Company. As a foreign investor, the Company, through
its predecessor, has become the single largest interest holder of the Joint
Venture and has actively participated in the management of the Joint Venture.
In view of China's accession to the World Trade Organization, it is
expected that further opening of the cable television market in China will take
place in the near future. Being the first foreign investor to be allowed to own
an interest in a Chinese cable operator and with the experience gained through
the years, the Company believes it is at an advantageous position to increase
its ownership interest in the Joint Venture beyond the current 49% level, should
it be allowed to do so in the future.
According to its business license and the current relevant rules and
regulations, the Joint Venture is allowed to acquire and own networks in areas
other than Baoding. Therefore, when opportunities arise, the Joint Venture may
try to expand its business beyond Baoding, in which case, the Company may assist
the Joint Venture in raising capital for such expansion, although there cannot
be any assurance of such expansion.
On July 1, 2003, the Company changed its name from Nova International
Film, Inc. to China Cable and Communication, Inc.
Critical Accounting Policies and Estimates
The preparation of the Company's financial statements requires it to make
estimates and judgments that affect the reported amounts of assets, liabilities,
revenues and expenses, and related disclosure of contingent assets and
liabilities. The Company bases its estimates on historical experience and on
various other assumptions that it believes to be reasonable under the
circumstances, and which form the basis for making judgments about the carrying
values of assets and liabilities. Actual results may differ from these estimates
under different assumptions or conditions.
22
The Company considers the following accounting policies to be both those
most important to the portrayal of our financial condition and those that
require the most subjective judgment:
Investment in Joint Venture: On and before December 31, 2003, the Company
accounted for its 49% ownership interest in the Joint Venture using the equity
method of accounting. However, effective on January 1, 2004, the Company assumed
control of the board of directors of the Joint Venture by appointing five out of
nine of its directors and filled key management positions at the Joint Venture,
including the position of Chief Financial Officer and General Manager, with
persons affiliated with the Company. Accordingly, effective on January 1, 2004,
the Company has accounted for the Joint Venture as a subsidiary and its accounts
are consolidated.
Revenue recognition: Revenue from the provision of subscription television
services is recognized at the time when the services are provided. Customers are
billed on a quarterly basis for the analog television services and on an annual
basis for the digital television services. High speed internet service customers
are billed on a monthly basis. Prepayment from all of the customers is deferred
to the appropriate period of services. Installation fee income is recognized
upon completion of the related installation work.
Results of operations
Revenue
Our revenue of $1,515,929 for the period ended March 31, 2005 represents
the installation and subscription fees, premium digital service fees and added
value services fees of the Joint Venture received and to be received, net of
service tax whereas our revenue of $933,751 for the period ended March 31, 2004
only includes the installation and subscription fees and added value services
fees of the Joint Venture received and to be received, net of service tax. The
increase in our revenue of $582,178, representing a 62.3% increase, was mainly
attributable to the sales of set-top boxes and cable modems and the provision of
premium digital services to customers for the period ended March 31, 2005 which
amounted to $465,665. No such sales and services were provided for the period
ended March 31, 2004.
Consulting Fees
Total consulting fees decreased by $953,237, representing a 72.9% decrease
to $353,601 for the period ended March 31, 2005 from $1,306,838 for the period
ended March 31, 2004. The decrease was primarily attributable to the decrease in
deferred consulting fees that resulted from the decrease in issuance shares of
the Company's common stock to consultants for their services rendered and the
decrease in the Company's stock price used in determining the fair market value
of those shares of common stock in accordance with the Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-based Compensation".
Directors' compensation
Total directors' compensation decreased by $152,879, representing a 68.0%
decrease to $72,047 for the period ended March 31, 2005 from $224,926 for the
period ended March 31, 2004. The decrease was primarily attributable to the
combined effect of the reduction in directors' compensation in shares and the
fall in the Company's stock price over the year as most of the directors'
compensation was in shares.
23
Operating Expenses
Total operating expenses increased by $302,720 from $249,220 for the
period ended March 31, 2004 to $551,940 for the period ended March 31, 2005.
Total operating expenses represent the operating expenses incurred by both the
Company and the Joint Venture. The increase was mainly because of the combined
effect of an increase in operating expenses of $47,196 for analog television
services, the inclusion of operating expenses of $343,906 for digital television
services and a decrease in operating expenses of the Company itself of $88,382.
The increase in operating expenses for analog television services is in line
with the increase in subscription fees received for analog television services.
There was no digital television service offered by our Baoding Joint Venture for
the period ended March 31, 2004. The decrease in operating expenses of the
Company itself resulted from a decrease in business travel and entertainment
expenses and discontinued employment of one part-time assistant to the Chief
Financial Officer.
Administrative Expenses
Total administrative expenses decreased by $30,411 from $130,677 for the
period ended March 31, 2004 to $100,266 for the period ended March 31, 2005.
Total administrative expenses represent the administrative expenses incurred by
the Joint Venture only. The decrease was mainly attributable to the decrease in
salaries and staff benefits of approximately $21,424 and inclusion of an
advisory fee of approximately $12,145 for the period ended March 31, 2004. There
was no such advisory fee for the period ended March 31, 2005.
Bad debts
Bad debts represent an increase in the doubtful debt provision made for
accounts receivables of our Baoding Joint Venture by $174,127, whereas there was
no such provision made for accounts receivables for the corresponding period in
2004.
Interest income (expenses), net
Interest expenses, net for the period ended March 31, 2005 was $79,552, as
compared to interest income, net of $208 for the period ended March 31, 2004.
The significant change primarily resulted from the inclusion of interest on debt
of $79,920 owing to the preferred stockholders. The interest was accrued at $888
per day for the period from January 1, 2005 to March 31, 2005.
Minority interest
The minority interest represents the profit of the Joint Venture
attributable to the 51% equity interest not owned by the Company. The increase
in minority interest of $7,536, representing 6.2% increase, from $121,908 for
the period ended March 31, 2004 to $129,444 for the period ended March 31, 2005
was in line with the increase in the profit generated by the Joint Venture.
Deemed dividends
For the period ended March 31, 2004, the Company recorded deemed dividends
of $33,028 on its redeemable convertible preferred stock whereas the Company
recorded nil deemed dividends for the period ended March 31, 2005. The
substantial decrease in deemed dividends was caused by the fall in share price
below the fixed redemption price of the Preferred Stock of $0.70 per share. It
resulted in the mandatory redemption of the Preferred Stock after which no
deemed dividends were charged to retained earnings of the Company.
24
Net loss available for common stockholders
Net loss decreased to $526,967 for the period ended March 31, 2005 from
$1,681,382 for the corresponding period of 2004, representing a decrease of
$1,154,415 or 68.7%. This decrease is primarily due to the combined effects of
the increase in net sales of $582,178, operating expenses of $302,720, bad debts
of $174,127 and interest expenses of $79,760, and the decrease in consulting
fees of $953,237, directors' compensation of $152,879, and administrative
expenses of $30,411.
Financial condition, liquidity, capital resources
For the period ended March 31, 2005, we generated cash from operating
activities of $468,459 and we used $280,265 to purchase property and equipment
and further advanced $171,501 to the PRC joint venture partner.
Although the Company incurred operating loss of $526,967 for the period
ended March 31, 2005, the Company generated positive cash flows of $468,459 from
operating activities. The operating loss for the period ended March 31, 2005
included items which are of either non-cash or non-recurrent nature: (i)
expensed common stocks for consulting fees of $353,601; (ii) expensed common
stock for directors' compensation of $30,380 and (ii) allowance for doubtful
debts of $174,127.
As of March 31, 2005, the Company had cash and cash equivalents of
$133,890. Our current assets were $1,468,643 and our current liabilities were
$10,299,749, which resulted in a current ratio of 0.14. We had no capital
expenditure commitment outstanding as of March 31, 2005.
The cash requirements of the Company and its subsidiaries during the next
twelve months include the normal operating expenditures of the Baoding joint
venture, payments for professional fees, and compensation of the Company's
directors. While the Baoding joint venture has been generating positive cash
flow and does not have material commitments for capital expenditures, we
anticipate, based on the scale of the Baoding joint venture's existing
operations, that the Baoding joint venture's projected cash flows from
operations would be sufficient to support its planned operations for the next
twelve months. To make the required payments for professional fees and
directors' compensation, the Company expects to receive a cash dividend from the
Baoding joint venture. The board of directors of the Baoding joint venture has
proposed to distribute a cash dividend in the amount of RMB36 million
(approximately $4,337,300) to its equity holders, although the payment of such
dividend is contingent upon the approval by the State Administration of Foreign
Exchange (SAFE) and by the local PRC tax bureau. In order to fulfill the cash
dividend obligation, the Baoding joint venture plans to borrow money from the
local Chinese bank by using its assets and its right to receive subscription
fees as collateral.
The Company's working capital deficit at March 31, 2005 was primarily
attributable to the liability arising out of the litigation with Gryphon Master
Fund, L.P. ("Gryphon"). The Company is currently involved in litigation with
Gryphon regarding Gryphon's investment in the Company's 8% Redeemable
Convertible Preferred Stock (the "Preferred Stock"). Gryphon has filed a
complaint alleging that the mandatory redemption feature of the Preferred Stock
has been triggered and that the Company is required to redeem the Preferred
Stock at the redemption price of $4,606,987 plus accrued unpaid dividends,
interest and costs. The Company has retained counsel to represent it in this
matter. While we are defending the claim, we are also, through our appointed
attorney, in negotiations with the Purchaser to settle this claim out of court.
25
Although the Company cannot yet assess the probable outcome of the
litigation, it has accounted for the redemption price of the Preferred Stock of
$4,606,897 and interest of $257,520 for the period from June 14, 2004 to March
31, 2005 as a current liability on its consolidated balance sheet. The Company
has accounted for the difference between the minimum Preferred Stock redemption
amount of $4,000,000 and the cash redemption price of $4,606,897 as a reduction
of Additional Paid-in Capital. In addition, for the year ended December 31,
2004, the Company has expensed unamortized transaction costs amounting to
$567,286 relating to the original Preferred Stock issuance. The Company
currently believes that the recorded liability is conservative and reflects the
probable maximum amount that the Company would be required to pay to the
Purchaser should the Purchaser be successful in its lawsuit. The Company does
not believe that it would be required to pay unpaid dividends to the Purchaser
because the terms of the Preferred Stock provide that the holders of Preferred
Stock receive dividends only when, and if, declared by the Board of Directors of
the Company. The Company's Board of Directors has not declared any dividends on
the Preferred Stock as of March 31, 2005.
The Company, through its appointed attorney, is now working with the
Purchaser's attorney to settle the complaint by agreeing to the judgment on the
Purchaser's claims against the Company. To meet this exceptional cash
requirement, the Company is actively seeking strategic investors in the PRC and
intends to raise additional capital through the issuance of debts or equity
securities, although there can be no assurance that we will be successful in
obtaining this financing. Meanwhile, the Company is negotiating with the
Purchaser to extend the repayment period to allow more time for the Company to
seek strategic investors to settle the debt by issuing the shares of the
Company's stock.
The consolidated financial statements have been prepared assuming that the
Company will continue as a going concern, which contemplates the realization of
assets and the satisfaction of liabilities in the normal course of business. The
carrying amounts of assets and liabilities presented in the consolidated
financial statements do not purport to represent the realizable or settlement
values. We incurred a net loss of $526,967 for the period ended March 31, 2005
and our current liabilities exceeded our current assets by $8,831,106 at March
31, 2005. These factors create substantial doubt about our ability to continue
as a going concern.
The Company's management continues to evaluate the Company's cash
requirements and the availability of debt and equity financing to meet the
Company's financial obligations as they fall due.
Plan of Operation
We do not anticipate generating sufficient positive internal operating
cash flow to meet our financial obligations as mentioned above.
As mentioned above, the cash requirements of the Company and its
subsidiaries during the next twelve months include the normal operating
expenditures of the Baoding joint venture, and the payments for professional
fees, and compensation for the Company's directors. While the Baoding joint
venture has been generating positive cash flow and does not have material
commitments for capital expenditures, we anticipate, based on the scale of the
Baoding joint venture's existing operations, that the Baoding joint venture's
projected cash flows from operations would be sufficient to support its planned
operations for the next twelve months. To make the required payments for
professional fees and directors' compensation, the Company expects to receive a
cash dividend from the Baoding joint venture. The board of directors of the
Baoding joint venture has proposed to distribute a cash dividend in the amount
of RMB36 million (approximately $4,337,300), although the payment of such
dividend is contingent upon the approval by SAFE and by the local PRC tax
bureau. In order to fulfill the cash dividend obligation, the Baoding joint
venture plans to borrow money from the local Chinese bank by using its assets
and its right to receive subscription fees as collateral.
26
Although the Company will receive the cash dividend from the Baoding joint
venture, we cannot meet the exceptional cash requirements of Gryphon's claims,
as described above, without seeking strategic investors and raising additional
capital through the issuance of debt or equity securities. Meanwhile, the
Company, through its appointed attorney, is now negotiating with Gryphon to
extend the repayment period to allow more time for the Company to seek strategic
investors to settle the debt by issuing shares of the Company's stock. But,
there can be no assurance that we will be successful in finding the strategic
investor and/or obtaining this financing.
To the extent that we are unable to successfully raise the capital
necessary to meet our financial obligations on a timely basis and under
acceptable terms and conditions, we will not have sufficient cash resources to
settle Gryphon's claims and maintain the Company's normal operations, and may
have to dispose of our interest in the Baoding joint venture and consider a
formal restructuring or reorganization.
Termination of Efforts to Acquire of Macau Media Holdings Ltd.
In November 2003, the Company paid a $3,000,000 refundable deposit to the
owner of Macau Media Holdings Limited ("Macau Media") under a letter of intent
for the Company's proposed acquisition of Macau Media and its subsidiaries. The
completion of the proposed acquisition was subject to due diligence and Chinese
government approval for the renewal of Macau Media's satellite broadcasting
license.
The purchase price for Macau Media was originally to consist of $3,000,000
in cash and 8,500,000 shares of Company common stock. If the proposed
acquisition was not completed, the deposit of $3,000,000 would be refunded.
In early 2005, the Company received notice from Macau Media that the
Chinese government did not approve the renewal of Macau Media's satellite
broadcasting licenses. Management of the Company has determined that the owner
of Macau Media is not financially capable of repaying the $3,000,000 deposit.
Accordingly, the deposit was fully reserved in the statements of operations and
comprehensive income for the year ended December 31, 2004.
Exchange rate
Fluctuations of currency exchange rates between Renminbi and the United
States dollar could adversely affect our business since our sole investment
conducts its business primarily in China, and its revenue from operations is
settled in Renminbi. The Chinese government controls its foreign reserves
through restrictions on imports and conversion of Renminbi into foreign
currency. Although the Renminbi to United States dollar exchange rate has been
stable since January 1, 1994 and the Chinese government has stated its intention
to maintain the stability of the value of the Renminbi, there can be no
assurance that exchange rates will remain stable. The Renminbi could devalue
against the United States dollar. Exchange rate fluctuations may adversely
affect our revenue arising from the sales of products in China and denominated
in Renminbi and our financial performance when measured in United States
dollar.
Recent accounting pronouncements
In March 2004, the FASB issued EITF Issue No. 03-1, "The Meaning of
Other-Than-Temporary Impairment and Its Application to Certain Investments"
("EITF 03-1") which provides new guidance for assessing impairment losses on
debt and equity investments. Additionally, EITF 03-1 includes new disclosure
requirements for investments that are deemed to be temporarily impaired. In
September 2004, the FASB delayed the accounting provisions of EITF 03-1. The
Company will evaluate the effect, if any, of EITF 03-1 when final guidance is
released.
27
In November 2004, the FASB issued Statement of Financial Accounting
Standards (SFAS) No. 151, Inventory Costs, which clarifies the accounting for
abnormal amounts of idle facility expense, freight, handling costs, and wasted
material. SFAS No. 151 will be effective for inventory costs incurred during
fiscal years beginning after June 15, 2005. We do not believe the adoption of
SFAS No. 151 will have a material impact on our consolidated financial
statements.
In December 2004, the FASB issued SFAS No. 123-R, Share Based Payments,
which requires that the compensation cost relating to share-based payment
transactions (including the cost of all employee stock options) be recognized in
the financial statements. The cost will be measured based on the estimated fair
value of the equity or liability instruments issued. SFAS 123-R covers a wide
range of share-based compensation arrangements including share options,
restricted share plans, performance-based awards, share appreciation rights, and
employee share purchase plans. Management believes the adoption of this
pronouncement will not have a material effect on our consolidated financial
statements.
Also, in December 2004, the FASB issued SFAS 153, "Exchanges of
Non-monetary Assets, an amendment of APB Opinion No. 29, Accounting for
Non-monetary Transactions." The amendments made by SFAS No. 153 are based on the
principle that the exchange of non-monetary assets should be measured using the
estimated fair market value of the assets exchanged. SFAS No. 153 eliminates the
narrow exception for non-monetary exchanges of similar productive assets, and
replaces it with a broader exception for exchanges of non-monetary assets that
do not have commercial substance. A non-monetary exchange has "commercial
substance" if the future cash flows of the entity are expected to change
significantly as a result of the transaction. This pronouncement is effective
for monetary exchanges in fiscal periods beginning after June 15, 2005.
Management believes the adoption of this pronouncement will not have a material
effect on our consolidated financial statements.
Other recent accounting pronouncements issued by the FASB (including its
Emerging Issues Task Force), the AICPA, and the SEC did not or are not believed
by management to have a material impact on the Company's present or future
consolidated financial statements.
ITEM 3. CONTROLS AND PROCEDURES
1) Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are designed to ensure that information
required to be disclosed in the reports filed or submitted under the Exchange
Act of 1934 is recorded, processed, summarized and reported, within the time
periods specified in the rules and forms of the Securities and Exchange
Commission. Disclosure controls and procedures include, without limitation,
controls and procedures designed to ensure that information include, without
limitation, controls and procedures designed to ensure that information required
to be disclosed in the reports filed under the Exchange Act of 1934 is
accumulated and communicated to the Company's management, including its
principal executive and financial officers, as appropriate, to allow timely
decisions regarding required disclosure.
Within the 90 days prior to the filing of this report, the Company carried
out an evaluation, under the supervision and with the participation of the
Company's management, including its principal executive and financial officer of
the effectiveness of the design and operation of the Company's disclosure
controls and procedures. Based upon and as of the date of that evaluation, the
Company's principal executive and financial officer concluded that the Company's
disclosure controls and procedures are effective to ensure that information
required to be disclosed in the reports that Company files and submits under the
Exchange Act of 1934 is recorded, processed, summarized and reported as and when
required.
2) Changes in Internal Control
There were no changes in the Company's internal controls or in other
factors that could have significantly affected those controls subsequent to the
date of the Company's most recent evaluation.
28
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Except for the pending litigation with the purchaser of its 8% redeemable
preferred stock described below, we are not a party to any pending or, to the
best of our knowledge, any threatened legal proceedings. No director, officer or
affiliate of the Company, or owner of record or of more than five percent (5%)
of the securities of the Company, or any associate of any such director, officer
or security holder is a party adverse to the Company.
The Company is currently in litigation with the purchaser of its 8%
Redeemable Convertible Preferred Stock.
On September 24, 2003, the Company completed the sale of 2,758,621 shares
of the Company's restricted 8% Redeemable Convertible Preferred Stock, par value
$0.0001 per share (the "Preferred Stock"), to Gryphon Master Fund, L.P., a
Bermuda limited partnership (the "Purchaser"), for $1.45 per share (the
"Purchase Price"), or an aggregate purchase price of $4,000,000. The Company was
required to redeem all then outstanding shares of Preferred Stock on September
24, 2008, the fifth anniversary of the date on which the preferred stock was
issued, at a redemption price equal to the Purchase Price, plus accrued but
unpaid dividends. However, if the "Current Market Price" (defined as the volume
weighted average price of the Company's common stock on the 10 consecutive
trading days immediately preceding such date as reported on the Over-the-Counter
Bulletin Board of the Company's Common Stock) is equal to or less than $0.70,
the holders of the Preferred Stock have the right to require the Company to
redeem all or any portion of the Preferred Stock at a redemption price, in cash,
equal to $1.67 per share, plus all accrued but unpaid dividends.
On June 14, 2004 the Purchaser requested that the Company redeem the
Preferred Stock as the market price of the Company's common stock was equal to
or less the $0.70 per share for more than ten consecutive trading days. On July
26, 2004, the Purchaser filed a complaint in the United States District Court
for the Northern District of Texas, Dallas Division alleging that the Company
breached its contract by failing to redeem the Preferred Stock. The Purchaser is
seeking the redemption price of $4,606,897; accrued unpaid dividends equal to
$220,226; interest of $888 per day from June 14, 2004 until the date of
redemption; pre-judgment and post-judgment interest; attorneys' fees; court
costs; and other such relief. The Company retained counsel to represent it in
this matter and filed its answer to the complaint.
Although the Company cannot yet assess the probable outcome of the
litigation, it has accounted for the redemption price of the Preferred Stock of
$4,606,897 and interest of $257,520 for the period from June 14, 2004 to March
31, 2005 as a current liability on its consolidated balance sheet. The Company
currently believes that this accounting accrual is conservative and reflects the
probable maximum amount that the Company would be required to pay to the
Purchaser should the Purchaser be successful in its lawsuit. The Company does
not believe that it would be required to pay unpaid dividends to the Purchaser
because the terms of the Preferred Stock provide that the holders of Preferred
Stock receive dividends only when and if declared by the Board of Directors of
the Company. The Company's Board of Directors has not declared dividends on the
Preferred Stock to date.
29
The Company, through its appointed attorney, is now working with the
Purchaser to settle the complaint by agreeing to the judgment on the Purchaser's
claims against the Company. At the same time, the Company is negotiating with
the Purchaser to extend the repayment period to allow more time for the Company
to seek strategic investors to settle the debt by issuing shares of the
Company's stock.
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
(a) None.
(b) There were no changes to the procedures by which security holders
may recommend nominees to our board of directors.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS:
Exhibit Index
Exhibit
Number Description
------ -----------
3(i)(a) Certificate of Incorporation of CCCI. (1)
3(i)(b) Certificate of Amendment of Certificate of Incorporation (filed
November 17, 1989). (2)
3(i)(c) Certificate of Amendment of Certificate of Incorporation (filed
July 1, 2003). Filed herewith. (3)
3(ii) Bylaws of CCCI. (1)
31.1 Rule 13a-14(a) Certifications of Chief Executive Officer Section
302 of the Sarbanes-Oxley Act of 2002
31.2 Rule 13a-14(a) Certifications of Chief Financial Officer Section
302 of the Sarbanes-Oxley Act of 2002
32.1 Certification of the Chief Executive Officer pursuant to 18 U.S.C.
Section 1350as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
30
Exhibit
Number Description
------ -----------
32.2 Certification of the Chief Financial Officer pursuant to 18 U.S.C.
Section 1350as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
------------------
(1) Incorporated by reference from CCCI's Registration Statement on Form
S-18, effective November 12, 1985.
(2) Incorporated by reference from CCCI's Annual Report on Form 10-K for
the fiscal year ended October 31, 1989.
(3) Incorporated by reference from CCCI's Form 8-K filed on September
29, 2003.
(b) REPORTS ON FORM 8-K:
During the three months ended March 31, 2005, the Company did not file any
Current Reports on Form 8-K.
SIGNATURES
In accordance with the requirements of the Exchange Act, the Company has
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
CHINA CABLE AND COMMUNICATION, INC.
Date: June 20, 2005 /s/ Raymond Ying-Wai Kwan
-------------------------------------
Name: Raymond Ying-Wai Kwan
Title: Chief Executive Officer
Date: June 20, 2005 /s/ Yau-Sing Tang
-------------------------------------
Name: Yau-Sing Tang
Title: Chief Financial Officer
31