U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
|X| QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2005
| | TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
For the transition period from ________ to ________
Commission file number 333-62236
TELECOM COMMUNICATIONS, INC.
(Exact name of small business issuer as specified in its charter)
DELAWARE 35-2089848
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
ROOM 1602, 16/F., 5-9 OBSERVATORY COURT, TST, HONG KONG
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(852)2782 0983
ISSUER'S TELEPHONE NUMBER
(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR, IF CHANGED SINCE LAST
REPORT)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes |X| No | |
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 70,188,000 shares of Common Stock,
$.001 Par Value Per Share, outstanding as of March 31, 2005. Transitional Small
Business Disclosure Format (Check One):. Yes |X| No | |
TABLE OF CONTENTS
PAGE
PART I. FINANCIAL INFORMATION.................................................3
ITEM 1. FINANCIAL INFORMATION.............................................3
Condensed Consolidated Balance Sheet as of March 31, 2005............3
Condensed Consolidated Statements Of Operations for the Six
Months and Three Months Ended March 31, 2005 and 2004 ...............4
Condensed Consolidated Statements Of Cash Flows for the Six
Months ended March 31, 2005 and 2004.................................5
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITIONS AND RESULTS OF OPERATIONS.............................13
ITEM 3. CONTROLS AND PROCEDURES..........................................21
PART II. OTHER INFORMATION...................................................21
ITEM 1. LEGAL PROCEEDINGS................................................21
ITEM 2. UNREGISTERED SALES OF EQUITY IN SECURITIES AND USE OF PROCEEDS...21
ITEM 3. EXHIBITS AND REPORTS ON FORM 8-K.................................21
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS..............21
SIGNATURES...................................................................21
2
PART I. FINANCIAL INFORMATION
TELECOM COMMUNICATIONS, INC. AND SUBSIDIARIES
ITEM 1. FINANCIAL INFORMATION
CONDENSED CONSOLIDATED BALANCE SHEET
March 31,
2 0 0 5
-------
(Unaudited)
Assets
Current assets
Cash and cash equivalents $ 42,421
Accounts receivable - Affiliated 400,000
- Others 2,359,043
Prepaid expenses and other current assets 90,641
--------------------
Total current assets 2,892,105
Property, plant and equipment, net 3,589,408
Total assets $ 6,481,513
====================
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable 566,026
Accrued expenses 65,800
Other loan 51,507
Due to a related party 162,181
--------------------
Total current liabilities 845,514
--------------------
Stockholders' equity
Preferred stock ($.001 Par Value: 50,000,000
Shares Authorized; no shares issued and outstanding) -
Common stock ($.001 Par Value: 300,000,000 Shares
Authorized 70,188,000 shares issued and
outstanding) 70,188
Additional paid in capital 14,029,406
Accumulated other comprehensive income 245
Accumulated deficit (8,463,840)
--------------------
Total stockholders' equity 5,635,999
--------------------
Total liabilities and stockholders' equity $ 6,481,513
====================
3
TELECOM COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Six Months Ended Three Months Ended
March 31, March 31,
---------------- ------------------
2 0 0 5 2 0 0 4 2 0 0 5 2 0 0 4
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Net Revenues 3,464,160 632,578 1,888,822 -
------------ ------------ ------------ -----------
Cost of sales (1,595,621) (126,516) (809,064) -
------------ ------------ ------------ -----------
Gross profit 1,868,539 506,062 1,079,758 -
------------ ------------ ------------ -----------
Operating expenses:
Selling, general and administrative (899,802) (205,393) (466,834) (93,951)
------------ ------------ ------------ -----------
Income/ (Expense) from operations 968,737 300,669 612,924 (93,951)
------------ ------------ ------------ -----------
Other Income/ (Expense):
Interest income 145 - 33 -
Other income 7,590 258 - 258
Interest expense (1,226) (544) (676) (486)
Acquisition costs - (8,126,917) - (8,126,917)
------------ ------------ ------------ -----------
Total Other Income/ (Expense) 6,509 (8,127,203) (643) (8,127,145)
------------ ------------ ------------ -----------
Income/ (Expense) from operations 975,246 (7,826,534) 612,281 (8,221,096)
before income taxes
------------ ------------ ------------ -----------
Provision for income taxes - -
------------ ------------ ------------ -----------
Income from continuing operations 975,246 (7,826,534) 612,281 (8,221,096)
------------ ------------ ------------ -----------
Income from discontinued operations, - 703,287 - 600,257
------------ ------------ ------------ -----------
Profit before minority interest 975,246 (7,123,247) - (7,620,839)
------------ ------------ ------------ -----------
Minority interest in income of subsidiary - (35,798) - 43,114
------------ ------------ ------------ -----------
Net Income/ (Loss) 975,246 $(7,159,045) $ 612,281 (7,577,725)
------------ ------------ ------------ -----------
Earnings per Common Share -
Discontinued Operations
Basic & diluted $ - $ 0.02 $ - $ 0.02
------------ ------------ ------------ -----------
Earnings per Common Share-
Continuing Operations
Basic & diluted $ 0.01 $ (0.19) $ 0.01 $ (0.19)
------------ ------------ ------------ -----------
Weighted Average Common Share
outstanding - Basic & diluted 69,857,000 38,114,000 70,188,000 38,947,000
------------ ------------ ------------ -----------
The accompanying notes are an integral part of the condensed consolidated
financial statements
4
TELECOM COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended
March 31,
---------
2 0 0 5 2 0 0 4
------- -------
(Unaudited) (Unaudited)
---------------------------------------
Net cash (used in) operating activities (208,126) (27,702)
---------------------------------------
Cash flows from investing activities
Long term investment - 200,000
Purchase of property and equipment (2,067,672) (653,664)
---------------------------------------
Net cash flows (used in) investing activities (2,067,672) (453,664)
---------------------------------------
Cash flows from financing activities
Due to related party (3,162) 47,545
Repayment of finance lease (15,438) -
Proceeds from loan payable - 304,063
Proceeds from new issuance of common stock 2,000,000 401,075
Due to stockholder - 48,834
---------------------------------------
Net cash flows provided by financing activities: 1,981,400 801,517
---------------------------------------
Effect of exchange rate changes in cash 112 (18,403)
---------------------------------------
Net (decrease)/ increase in cash and cash equivalents (294,286) 301,748
Cash and cash equivalents - beginning of period 336,707 1,155,435
Cash and cash equivalents - end of period 42,421 1,457,183
=======================================
Supplemental disclosure of cash flow information:
Non cash investing and financing activities:
Common stock issued for recapitalization - 217,597
=======================================
Acquisition details:
Fair value of assets acquired - 9,743,773
=======================================
Liabilities assumed - 9,743,773
=======================================
The accompanying notes are an integral part of the condensed consolidated
financial statements
5
TELECOM COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED STATEMENTS
(UNAUDITED)
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States of America for interim financial information and with the
instructions to Form 10-QSB and Item 310 of Regulation S-B. Accordingly, they do
not include all of the information and footnotes required by accounting
principles generally accepted in the United States of America for annual
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. The accounts of the Company and all of its subsidiaries are
included in the condensed consolidated financial statements. All significant
intercompany accounts and transactions are eliminated in consolidation.
Operating results for the interim periods are not necessarily indicative of the
results that may be expected for the year ending September 30, 2005. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Company's form 10-KSB for the year ended September 30,
2004.
1. BUSINESS DESCRIPTION AND ORGANIZATION
THE COMPANY
Telecom Communications, Inc. (the "Company" or "TCOM") was incorporated on
January 6, 1997 in the State of Indiana. The Company has changed its state of
incorporation from Indiana to Delaware, effected by a merger into a Delaware
Corporation with the same name on February 28, 2005. The surviving Delaware
company, succeeds to all the rights, properties and assets and assumes all of
the liabilities.
On September 30, 2003, TCOM consummated a Stock Purchase Agreement with Arran
Services Limited ("Arran") and its sole shareholder (the "majority
shareholder"), for the acquisition of all of the capital stock of Arran, a
British Virgin Island corporation. In exchange for the capital interest, the
majority shareholder and his designate received a total of 23.8 million shares
of TCOM's common stock, representing approximately 64% of the outstanding shares
of TCOM. On the closing of the Stock Purchase Agreement, the majority
shareholder was elected chairman and CEO of the Company.
TCOM conducts all of its business in China through Arran's subsidiary IC Star
MMS Limited ("IC Star"). IC Star (formerly known as Sino Super Limited) was an
80% owned China-based local information and services affiliate network.
Established in December 1991, IC Star links entertainment and lifestyle
information to local communities across China.
On March 16, 2004, the Company acquired from Auto Treasure Holdings Limited, an
entity 100% owned by the majority shareholder, the remaining 20% interest of IC
Star together with 100% interest of Huiri Electric (Panyu) Limited ("Huiri") for
a consideration of 9,889,000 shares of TCOM common stock and 10,000,000 warrants
to purchase 10,000,000 shares of TCOM common stock at $2 per share. As a result,
as of March 16, 2004, TCOM owned 100% of IC Star and Huiri. This transfer was
6
deemed to be a transfer between entities under common control and was therefore
recorded on the Company's records at its historical cost basis. In connection to
the new issuance of 9,889,000 shares of TCOM common stock and 10,000,000
warrants (expire March 15, 2006), the excess of the purchase consideration of
$8,322,295 over the book value of the net assets of $195,378 acquired amounted
to $8,126,917 and was recorded in the consolidated statement of operations as
acquisition expense.
On December 15, 2003, the Company formed Alpha Century Holdings Limited
("Alpha") which is a wholly owned subsidiary registered in British Virgin
Islands and was formed for investment holdings. On March 31, 2004, Arran sold
its interest in Huiri to Alpha for approximately $13,000.
On July 1, 2004, TCOM started to conduct its business through Alpha and its
principal activity of Alpha was provision of total solution software with
entertainment and lifestyle information and provision of mobile message service
platform.
7
TELECOM COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED STATEMENTS
(UNAUDITED)
Panyu No.6 Construction Company ("Panyu"), was a 60% owned subsidiary located in
Guangzhou, China, and its business was an integrated construction company. The
Company sold all its interests in Panyu on April 16, 2004. Panyu's operating
results for the six months and three months ended March 31, 2004 are shown as
Discontinued Operations in the consolidated statements of income and there was
no income from any discontinued operations for the same periods ended March 31,
2005.
On February 21, 2005, the Company formed 3G Dynasty Inc. ("3G Dynasty") which is
a wholly owned subsidiary registered in British Virgin Islands and 3G Dynasty
offers intermediary services to entertainment, game developers and wireless
telecom carriers and serves as the union of its internet content service
operations of TCOM.
CONTROL BY PRINCIPAL STOCKHOLDERS
The directors, executive officers and their affiliates or related parties, own
beneficially and in the aggregate, the majority of the voting power of the
outstanding shares of the common stock of the Company. Accordingly, the
directors, executive officers and their affiliates, if they voted their shares
uniformly, would have the ability to control the approval of most corporate
actions, including increasing the authorized capital stock of the Company and
the dissolution, merger or sale of the Company's assets or business.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION
The condensed consolidated financial statements of the Company, include the
accounts of TCOM and its subsidiaries, namely Arran, Alpha, IC Star, Huiri and
3G Dynasty, together with the accounts of Panyu under Income from discontinued
operations in 2004. The consolidated statements have been prepared in accordance
with accounting principles generally accepted in the United States of America.
All significant intercompany transactions have been eliminated.
The Company has determined Hong Kong dollars to be the functional currency of
Arran, Alpha, IC Star and 3G Dynasty, and the People's Republic of China Chinese
Yuan Renminbi to be the functional currency of Huiri and Panyu. There were no
material gains or losses or effect of exchange rate changes on cash recognized
as a result of translating foreign currencies to the U.S. dollars due to the
stability of the currency. No assurance however, can be given as to the future
valuation of the foreign currencies and how further movements in the foreign
currencies could affect future earnings of the Company.
The balance sheets of all foreign subsidiaries were translated at period end
exchange rates. All of the Company's material long-lived assets are located in
the People's Republic of China at March 31, 2005. Expenses were translated at
8
exchange rates in effect during the year, substantially the same as the period
end rates.
RELATED PARTY AND STOCKHOLDERS' LOANS
The caption "Due to related party" are loans that are unsecured, non-interest
bearing and have no fixed terms of repayment, and therefore, are deemed payable
on demand.
9
TELECOM COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED STATEMENTS
(UNAUDITED)
USE OF ESTIMATES
The preparation of 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 financial statements and reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
SIGNIFICANT ESTIMATES
Several areas require management's estimates relating to uncertainties for which
it is reasonably possible that there will be a material change in the near term.
The more significant areas requiring the use of management estimates related to
valuation of the useful lives of the Company's equipment and valuation of tax
and other contingent liabilities and the valuation of the stock warrants and
options issued and outstanding
EARNINGS PER SHARE
Basic earnings per common share ("EPS") is calculated by dividing net earnings
by the weighted average number of common shares outstanding during the period.
Diluted earnings per common share are calculated by adjusting the weighted
average outstanding shares, assuming conversion of all potentially dilutive
instruments.
REVENUE RECOGNITION
The Company recognizes revenue when there is persuasive evidence of an
arrangement, delivery has occurred, the fee is fixed or determinable,
collectibility is reasonably assured, and there are no substantive performance
obligations remaining.
3. RELATED PARTY TRANSACTIONS
An officer of the Company or companies owned by this officer advanced funds to
the Company for working capital purposes. At March 31, 2005, the Company owed
this officer or his companies $162,181. The advances are non-interest bearing
and are payable on demand and is shown as a current liability.
Grace Motion, Inc. a company in which a director of the Company has a beneficial
interest, was paid a consulting fee amounting to $23,077.
A personal guarantee was granted from Mr. Gary Lam for the lease of an
automobile for $76,923.
10
The Company received the income from Taikang Capital Managements Corporation, an
affiliate of the Company amounting to $720,000 for the provision of total
solution software. The amount due from this affiliated company at March 31, 2005
of $400,000 was classified as Accounts receivable under Current Assets.
11
TELECOM COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED STATEMENTS
(UNAUDITED)
4. STOCK TRANSACTIONS
On February 28, 2005, at the Company's Annual meeting it was resolved that the
proposed reverse split of the outstanding shares of common stock of the Company
on a 2 to 1 basis was not approved by the shareholders.
On February 28, 2005, as a result of the merger and reincorporation as a
Delaware company, the authorized shares of Common Stock and par value of the
Company was increased from 80,000,000 at $0.001 to 300,000,000 at $0.001 while
the authorized shares of Preferred Stock and par value of the Company was
increased from 20,000,000 at $0.001 to 50,000,000 at $0.001.
5. INCOME TAXES
The Company accounts for income taxes in accordance with the provisions of SFAS
No. 109, "Accounting for Income Taxes."
Income tax expense is based on reported income before income taxes. Deferred
income taxes reflect the effect of temporary differences between assets and
liabilities that are recognized for financial reporting purposes and the amounts
that are recognized for income tax purposes. In accordance with SFAS No. 109,
"Accounting for Income Taxes", these deferred income taxes are measured by
applying currently enacted tax laws.
There are net operating loss carryforwards allowed China's governments' tax
systems. In China, the previous five years net operating losses are allowed to
be carried forward five years to offset future taxable income. The Company has
available approximately $ 363,604 of unused operating loss carryforwards and
based on a 33% tax rate has a deferred tax asset of approximately $119,989. The
Company recorded a valuation allowance for the same amount at March 31, 2005.
No provision for Hong Kong profits tax is made as the Company's income is
sourced outside Hong Kong.
The company will withhold and pay income taxes on its employees' wages, which
funds the Chinese government's sponsored health and retirement programs of all
the employees.
6. CAPITAL COMMITMENT
At of the balance sheet date, the Company had commitment on a payment for a ASP
master license of IBS v4.1 Enterprise suite with World-East Corporation Limited,
an affiliate of the Company, for an aggregate amount of $500,000. The license is
a two-year term and is paid by 2 installments of $250,000 per year. The Company
paid a deposit of $50,000 and will pay the remaining part of the first
installment when the specification of IBS v4.1 is satisfied by the Company.
12
The Company had another commitment on a payment for database of movie stars and
singers content with a company for an aggregate amount of $550,000
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS
OF OPERATIONS
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This periodic report contains certain forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995 with respect to
the financial condition, results of operations, business strategies, operating
efficiencies or synergies, competitive positions, growth opportunities for
existing products, plans and objectives of management. Statements in this
periodic report that are not historical facts are hereby identified as
"forward-looking statements" for the purpose of the safe harbor provided by
Section 21E of the Exchange Act and Section 27A of the Securities Act.
Prospective shareholders should understand that several factors govern whether
any forward-looking statement contained herein will be or can be achieved. Any
one of those factors could cause actual results to differ materially from those
projected herein. These forward-looking statements include plans and objectives
of management for future operations, including plans and objectives relating to
the products and the future economic performance of the Company. Assumptions
relating to the foregoing involve judgments with respect to, among other things,
future economic, competitive and market conditions, future business decisions,
and the time and money required to successfully complete development projects,
all of which are difficult or impossible to predict accurately and many of which
are beyond the control of the Company. Although we believe that the assumptions
underlying the forward-looking statements contained herein are reasonable, any
of those assumptions could prove inaccurate and, therefore, there can be no
assurance that the results contemplated in any of the forward-looking statements
contained herein will be realized. Based on actual experience and business
development, the Company may alter its marketing, capital expenditure plans or
other budgets, which may in turn affect the results of operations. In light of
the significant uncertainties inherent in the forward-looking statements
included herein, the inclusion of any such statement should not be regarded as a
representation by the Company or any other person that the objectives or plans
of the Company will be achieved.
The following discussion of the results of operations and financial condition of
the Company should be read in conjunction with the financial statements of
Telecom Communications, Inc. ("TCOM") for the year ended September 30, 2004 and
notes thereto contained in the report on Form 10-KSB as filed with the
Securities and Exchange Commission.
OVERVIEW
We conducted our business in Asia via our wholly owned subsidiaries, Alpha
Century Holdings Limited, Huiri Electric (PY) Limited, Arran Services Limited,
IC Star MMS, Limited (http://www.ICStarMMS.com) and 3G Dynasty Inc. We have an
opportunity to become the leading value-added information service provider for
China and the global Chinese community. Our products include Total Solutions
System, CRM System, SEO4Mobile and AdMaxB2Search.
13
About Total Solutions System - SMS/MMS Call Center & CRM System
Our specialized product Total Solutions System offers integrated communications
network solutions and Internet content service in universal voice, video, data,
web and mobile communication for interactive media applications, technology and
content leaders in interactive multimedia communications. TCOM develops markets
and sells a universal media software solution for enterprise-wide deployment of
integrated voice, video, data, web, and mobile communication for media
applications. Designed around TCOM's Internet content and database and
integrated into the Information Manager System and SMS/MMS Call Center CRM
System core software, the Total Solutions application facilitates the
collaboration of key business processes such as, corporate and marketing
communications, membership distance interactive program, product development,
customer relationship management and content management by allowing dispersed
enterprise users to collaborate in real time with multimedia message services.
Our business model is built on the integration of strong entertainment &
lifestyle content, network database and the application of technology. Network
database was established by signing contracts with strategic partners and
collected all of their Internet and mobile phone users to be the online/offline
members in China. We also established the network database from the construction
company that we previously owned, Panyu No. 6 Construction Company Limited
("Panyu") that provided network construction and general construction to the
region. Our content was built through our business alliance in which IC Star MMS
Limited (formerly known as Sino Super Ltd.) (http://www.ICSTARMMS.com), one of
our subsidiaries and a network services provider based in Hong Kong, links
entertainment and lifestyle information to local communities across China. IC
Star, which was originally created as the Star SMS /MMS called "My Star Friends"
community, was first invented as a SMS/MMS interactive between IC Star and fans
of local artists in the world. By integrating the network database and contents
into a software that TCOM sources from the market, we can leverage the functions
of the software and target it to various industries.
We believe that we are one of the leading Internet and value-added
telecommunications services providers specialized on entertainment and lifestyle
contents in China. Since the launch of our Total Solutions - Information System
and the SMS/MMS CRM in July 2004, we have signed various contracts with clients
which showed customer acceptance. It proved that our expectation on the
reception of the integrated Internet and value-added telecommunication service
is on the right track. For instance, the CRM virtual call center through ASP
licensees and business customers which is part of our product namely Total
Solutions has added 114 stations to bring a total business customer and virtual
call center stations to 217 as at March 31, 2005. We will target the enterprise
multimedia communications market in China which we believe there is a
significant growth potential.
ABOUT SEO4MOBILE
SEO4Mobile (Search Engine Optimization for mobile phones)
(http://www.seo4mobile.com) is the original unique new service solution creation
by Alpha Century Holdings Limited, a wholly-owned subsidiary of Telecom
Communications, Inc. (OTC Bulletin Board: TCOM). SEO4Mobile -- Search Engine
Optimizer for mobile phones via text messages (SMS) and multimedia message
services (MMS), offers wireless mobile phone value-added service providers the
14
ability to use a short message service (SMS) search implementation for their
users. Mobile phone users who enter a relevant keyword or keyword phrase, along
with a geographic identifier, can send searches in via an SMS to a service code.
The search results will be received by a multimedia message service (MMS) and
within 5 minutes Search Engine Optimization processes the search through the
Internet. Many searchers don't realize that within an SMS search query they can
add in a geographic identifier. By specifically laying out a separate search SMS
for the geographic portion, SEO4Mobile helps structure the search in a simple
and efficient way for the searcher. Now, SEO4Mobile has selected by such service
providers (SP) of China Mobile and China Unicom.
Both SEO4Mobile and AdMaxB2Search has proved our strength in innovative and
creative value-added service that three contracts have been signed with business
partners since October 2004. For the quarter ended March 31, 2005, SEO4Mobile
has added 621 digital publishers (web and wireless communications) to bring a
total of 739 SEO4Mobile advertising in service.
We will derive our revenues from the offering of our products Total Solutions
System - Information Manager System, SMS/MMS CRM System, SEO4Mobile and
AdMaxB2Search. Revenues are derived principally from providing integrated
solutions and AdMaxB2Search platform by entering into business contract with
enterprises for a fixed monthly fee. The management of TCOM is especially
confident that SEO4Mobile and AdMaxB2Search platform will provide excellent
revenue when these two products gain popularity within the mobile phone users.
In fact, SEO4Mobile is a cutting edge technology designed to integrate the
Internet with mobile phones using search engine technology and a pay per click
business model. We will target the 300 million mobile phone users as well as the
111 million Internet users in China. According to the Ministry of Information,
China's Internet users are about 8.5% of its population, which is way behind the
60% Internet users in the U.S.
3G DYNASTY INC.
On February 2005, we established 3G Dynasty Inc. for the preparation of the
Third Generation mobile system. 3G Dynasty will be responsible for sales of IC
Star MMS products, and will focus on entertainment content for 3G mobile and
Internet use. This new company will also benefit from an affiliation with Macau
Duplicate Plays Limited (a travel entertainment company), and Animation Studio
(a developing stage CGI motion producer in China). 3G Dynasty emulates IC Star
MMS's very successful business model of a comprehensive services platform and
co-sourcing approach that seeks to redefine the intermediary role.
TCOM has continually worked to establish a system that can quickly and
accurately respond to the market, as well as raise shareholder value by
strengthening the development and competitiveness of each business. As part of
this strategy, TCOM has been implementing the integration of development,
production and sales of each business within the Company.
TCOM has determined that a huge positive impact will be realized from
integrating the functions of the various contracted operations lines of business
and that as a result, 3G Dynasty Inc. will become more competitive and synergies
will be realized between its marketing, product development and sales
organizations. It is also projected that as more resources of the Company are
15
built up, the strategic alliance structured, the overall efficiency of Group
management will improve, providing even greater shareholder value.
In a country with enormous mobile phone usage already, the growth opportunities
remain tremendous. China has more than 1 billion people and mobile services will
remain a strong area of growth. Entertainment content for these mobile devices
is in high demand and 3G Dynasty hopes to become the dominant player within this
space.
IMPACT OF INFLATION
We believe that inflation has had a negligible effect on operations during the
period. We believe that we can offset inflationary increases in the cost of
sales by increasing sales and improving operating efficiencies.
TRENDS, EVENTS, AND UNCERTAINTIES
Demand for the Company's products will be dependent on, among other things,
market acceptance of the Company's concept, the quality of its products and
general economic conditions, which are cyclical in nature. Inasmuch as a major
portion of the Company's activities is the receipt of revenues from the sales of
its products, the Company's business operations may be adversely affected by the
Company's competitors and prolonged recessionary periods.
RESULTS OF OPERATIONS
The following table shows the financial data of the unaudited condensed
consolidated statements of operations of the Company and its subsidiaries for
the six-month period and three-month period ended March 31, 2005 and 2004. The
data should be read in conjunction with the audited and unaudited condensed
consolidated financial statements of the Company and related notes thereto.
16
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Six Months Ended Three Months Ended
March 31, March 31,
2 0 0 5 2 0 0 4 2 0 0 5 2 0 0 4
------- ------- ------- -------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Net Revenues 3,464,160 632,578 1,888,822 -
Cost of sales (1,595,621) (126,516) (809,064) -
------------- ------------- ------------- -------------
Gross profit 1,868,539 506,062 1,079,758 -
------------- ------------- ------------- -------------
Operating expenses:
Selling, general and administrative (899,802) (205,393) (466,834) (93,951)
------------- ------------- ------------- -------------
Income/ (Expense) from operations 968,737 300,669 12,924 (93,951)
------------- ------------- ------------- -------------
Other Income/ (Expense):
Interest income 145 - 33 -
Other income 7,590 258 - 258
Interest expense (1,226) (544) (676) (486)
Acquisition costs - (8,126,917) - (8,126,917)
------------- ------------- ------------- -------------
Total Other Income/ (Expense) 6,509 (8,127,203) (643) (8,127,145)
------------- ------------- ------------- -------------
Income/ (Expense) from operations 975,246 (7,826,534) 612,281 (8,221,096)
before income taxes
Provision for income taxes - -
------------- ------------- ------------- -------------
Income from continuing operations 975,246 (7,826,534) 612,281 (8,221,096)
------------- ------------- ------------- -------------
Income from discontinued operations, - 703,287 - 600,257
------------- ------------- ------------- -------------
Profit before minority interest 975,246 (7,123,247) - (7,620,839)
------------- ------------- ------------- -------------
Minority interest in income of
subsidiary - (35,798) - 43,114
------------- ------------- ------------- -------------
Net Income/ (Loss) $ 975,246 $ (7,159,045) $ 612,281 $ (7,577,725)
------------- ------------- ------------- -------------
Earnings per Common Share -
Discontinued Operations
Basic & diluted $ - $ 0.02 $ - $ 0.02
------------- ------------- ------------- -------------
Earnings per Common Share-
Continuing Operations
Basic & diluted $ 0.01 $ (0.19) $ 0.01 $ (0.19)
------------- ------------- ------------- -------------
Weighted Average Common Share
outstanding - Basic & diluted 69,857,000 38,114,000 70,188,000 38,947,000
------------- ------------- ------------- -------------
17
SIX-MONTH PERIOD ENDED MARCH 31, 2005 COMPARED TO SIX-MONTH ENDED MARCH 31, 2004
REVENUES
Revenues recorded at $3,464,160 for the six months period ended March 31, 2005
compared to $632,578 for the same period ended March 31, 2004, an increase of
$2,831,582 reflecting the change of our income business model from profit
sharing to fixed monthly fee income by contracting with clients. Revenues by
different products for the six months ended March 31, 2005 and 2004 are as
follows:
Six Months Ended
March 31,
2 0 0 5 2 0 0 4
------- -------
By Products: (Unaudited) (Unaudited)
----------- -----------
Total Solution Software 1,591,860 -
CRM System -
280,800
SEO4Mobile 1,580,000 -
Others 11,500 632,578
------------------ ------------------
Total Revenue 3,464,160 632,578
------------------ ------------------
During the six months ended March 31, 2005, sales of the Total Solution System
to Taikang Capital Managements Corporation, an affiliate of the Company,
amounting to $720,000 were classified as Related Party Transactions and the
amount due from this affiliated company at March 31, 2005 of $400,000 was
classified as Accounts receivable under Current Assets.
COSTS AND EXPENSES
Cost of sales was $1,595,621 for the six months period ended March 31, 2005 or
46% of net revenue compared to $126,516 for the same corresponding period ended
March 31, 2004. Cost of sales consists of purchase of various contents and other
later stage production from raw contents and costs associated with the
performance of our communication services. Cost of sales by different products
for the six months ended March 31, 2005 and 2004 are as follows:
18
Six Months Ended
March 31,
2 0 0 5 2 0 0 4
------- -------
By Products: (Unaudited) (Unaudited)
----------- -----------
Total Solution Software 799,260 -
CRM System 126,000 -
SEO4Mobile 544,750 -
Others 125,610 126,516
------------------ ------------------
Total Cost of Sales 1,595,620 126,516
------------------ ------------------
For the six months ended March 31, 2005, we incurred operating expenses of
$899,802 as compared to $205,393 for the same period at March 31, 2004. The
$899,802 of 2005 included general operating expenses of $209,944 or 6.1% of net
revenue and a depreciation expense of $689,858 or 19.9% of net revenue.
Interest expense was recorded at $1,226 and interest income was $145 for the six
months ended March 31 2005 representing 0.04% and 0.01% of net revenue
respectively.
Other income of $7,590 was recorded as the collection of loan receivable that
was originally owed to the Company by the sold subsidiary in November 2003.
DISCONTINUED OPERATIONS
The Company sold it operations in Panyu on April 16, 2004. Under the provisions
of SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets,
the financial results of these operations were classified as discontinued
operations in the accompanying condensed consolidated statements of operations,
net of tax, in 2004. The net income from discontinued operations was $703,287.
THREE-MONTH PERIOD ENDED MARCH 31, 2005 COMPARED TO THREE-MONTH ENDED MARCH 31,
2004
REVENUES
Revenues recorded at $1,888,822 for the three months period ended March 31, 2005
while no revenue was recorded for the same period ended March 31, 2004. The
unavailable telecommunication related revenue for the three months ended March
31, 2004 was mainly because of our shift of business model which took time to
re-negotiate and to resource appropriate software to fit into our fixed monthly
income business model. Revenues by different products for the three months ended
March 31, 2005 and 2004 are as follows:
19
Three Months Ended
March 31,
2 0 0 5 2 0 0 4
------- -------
By Products: (Unaudited) (Unaudited)
----------- -----------
Total Solution Software 795,930 -
CRM System -
140,400
SEO4Mobile 948,000 -
Others 4,492 -
------------------ ------------------
Total Cost of sales 1,888,822 -
------------------ ------------------
During the three months ended March 31, 2005, sales of the Total Solution System
to Taikang Capital Managements Corporation, an affiliate of the Company
amounting to $360,000 were classified as Related Party Transactions.
COSTS AND EXPENSES
Cost of sales was $809,064 for the three months period ended March 31, 2005 or
43% of net revenue Cost of sales consists of purchase of various contents and
other later stage production from raw contents and costs associated with the
performance of our communication services.
Revenues by different products for the three months ended March 31, 2005 and
2004 are as follows:
Three Months Ended
March 31,
2 0 0 5 2 0 0 4
------- -------
By Products: (Unaudited) (Unaudited)
----------- -----------
Total Solution Software 399,630 -
CRM System 63,000 -
SEO4Mobile 219,000 -
Others 127,434 -
------------------ ------------------
Total cost of sales 809,064 -
------------------ ------------------
For the three months ended March 31, 2005, we incurred operating expenses of
$466,834 as compared to $93,951 for the same period at March 31, 2004. The
$466,834 of 2005 included general operating expenses of $93,433 or 5% of net
revenue and a depreciation expense of $373,401 or 19.8% of net revenue.
20
Interest expense was recorded at $676 and interest income was $33 for the three
months ended March 31, 2005 representing 0.04% and 0.01% of net revenue
respectively.
DISCONTINUED OPERATIONS
Income from discontinued operations for the three months ended March 31, 2004 of
$600,257 was the net income of Panyu which was sold on April 16, 2004 and there
was no income from discontinued operations for the same period ended March 31,
2005.
OVERALL
We reported net income for the six months ended March 31, 2005 of $975,246. This
translates to overall per-share profit of $.01 for the six months ended March
31, 2005.
LIQUIDITY AND CAPITAL RESOURCES
We believe that our currently-available working capital, after receiving the
aggregate proceeds of our capital raising activities in the first quarter of
fiscal 2005, should be adequate to sustain our operations through the end of
fiscal year 2005,
As of March 31, 2005, we had a cash balance of $42,421 held in The People's
Republic of China ("PRC"), Hong Kong. We currently have no cash positions in the
United States. We have been funding our operations from the receipts from
customers.
As of March 31, 2005, the Company owed one officer or his companies $162,181.
The advances are non-interest bearing and are payable on demand.
Management has invested substantial time evaluating and considering numerous
proposals for possible acquisitions or combinations developed by management or
presented by investment professionals, the Company's advisors and others. We
continue to consider acquisitions, business combinations, or start up proposals,
which could be advantageous to shareholders. No assurance can be given that any
such project, acquisition or combination will be concluded.
Our Company's future operations and growth will likely be dependent on our
ability to raise capital for expansion and to implement our strategic plan.
Net cash used in operations for the six months ended March 31, 2005 was
$208,126. During the period, accounts receivable increased by $2,190,749, which
is due to the increase in sales and the terms for accounts receivable are 90
days and therefore, the Company does not have a lot of cash at March 31, 2005.
In the future, we may use cash in our operations due to the continuing
implementation of our business model and increased expenses from costs
associated with being a public company.
Net cash used in investing activities for the six months ended March 31, 2005
was $2,067,672 which was used for capital expenditure on acquisition of software
of SEO4Mobile.
Net cash used in financing activities for the six months ended March 31, 2005
was $1,981,399. It represented an repayment to a related party of $3,162,
repayment of finance lease of $15,439 and the issuance of 10,000,000 shares of
21
the Company's common stock, par value $.001 per share for an aggregate purchase
price of $2,000,000, which was used for acquisition of the capital expenditure
during the period.
Our future growth is dependent on our ability to raise capital for expansion,
and to seek additional revenue sources. If we decide to pursue any acquisition
opportunities or other expansion opportunities, we may need to raise additional
capital, although there can be no assurance such capital-raising activities
would be successful.
CRITICAL ACCOUNTING POLICIES
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires our management to make
assumptions, estimates and judgments that affect the amounts reported in the
financial statements, including the notes thereto, and related disclosures of
commitments and contingencies, if any. We consider our critical accounting
policies to be those that require the more significant judgments and estimates
in the preparation of financial statements, including the following:
o valuation of accounts receivable and contingent liabilities
Management relies on historical experience, legal advice and on assumptions
believed to be reasonable under the circumstances in making its judgment and
estimates. Actual results could differ materially from those estimates.
OFF-BALANCE SHEET ARRANGEMENTS
We have an off-balance sheet arrangement or commitment that will have a current
effect on our financial condition and changes in financial condition in 2005.
At the balance sheet date, the Company had commitment on a payment for a ASP
master license of IBS v4.1 Enterprise suite with World-East Corporation Limited,
an affiliate of the Company, for an aggregate amount of $500,000. The license is
a two-year term and is paid by 2 installments of $250,000 per year. The Company
paid a deposit of $50,000 and will pay the remaining part of the first
installment when the specification of IBS v4.1 is satisfied by the Company.
The Company had another commitment on a payment for database of movie stars and
singers content with a company for an aggregate amount of $550,000
RISK FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS
You should carefully consider the risks described below before making an
investment decision. The risks and uncertainties described below are the
material risks that apply to our business, operations, financial condition and
prospects.
22
OPERATING RISK
Currently, the Company's revenues are primarily derived from the reselling of
software to enterprises, large corporations, and the academic sector, as well as
telecom-related services to customers in the Peoples Republic of China. The
Company hopes to expand its operations to countries outside the PRC, however,
such expansion has not been commenced and there are no assurances that the
Company will be able to achieve such an expansion successfully. Therefore, a
downturn or stagnation in the economic environment of the PRC could have a
material adverse effect on the Company's financial condition.
PRODUCTS RISK
Our revenue-producing operations are limited and the information available about
us makes an evaluation of us difficult. We have conducted limited operations and
we have little operating history that permits you to evaluate our business and
our prospects based on prior performance. You must consider your investment in
light of the risks, uncertainties, expenses and difficulties that are usually
encountered by companies in their early stages of development, particularly
those engaged in international commerce. In addition to competing with other
telecommunication and web companies, the Company could have to compete with
larger US companies who have greater funds available for expansion, marketing,
research and development and the ability to attract more qualified personnel if
access is allowed into the PRC market. If US companies do gain access to the PRC
markets in general, it may be able to offer products at a lower price. There can
be no assurance that the Company will remain competitive should this occur.
EXCHANGE RISK
The Company generates revenue and incurs expenses and liabilities in Chinese
renminbi, Hong Kong dollars and U.S. dollars. As a result, the Company is
subject to the effects of exchange rate fluctuations with respect to any of
these currencies. Since 1994, the official exchange rate for the conversion of
renminbi to U.S. dollars has generally been stable and the renminbi has
appreciated slightly against the U.S. dollar. However, given recent economic
instability and currency fluctuations in the world, the Company can offer no
assurance that the renminbi will continue to remain stable against the U.S.
dollar or any other foreign currency. The Company's results of operations and
financial condition may be affected by changes in the value of renminbi and
other currencies in which its earnings and obligations are denominated. The
Company has not entered into agreements or purchased instruments to hedge its
exchange rate risks, although the Company may do so in the future.
OUR FUTURE PERFORMANCE IS DEPENDENT ON OUR ABILITY TO RETAIN KEY PERSONNEL
Our future success depends on the continued services of executive management in
China. The loss of any of their services would be detrimental to us and could
have an adverse effect on our business development. We do not currently maintain
key-man insurance on their lives. Our future success is also dependent on our
ability to identify, hire, train and retain other qualified managerial and other
employees. Competition for these individuals is intense and increasing.
23
OUR BUSINESS DEPENDS SIGNIFICANTLY UPON THE PERFORMANCE OF OUR SUBSIDIARIES,
WHICH IS UNCERTAIN.
Currently, a majority of our revenues are derived via the operations of our
subsidiaries. Economic, governmental, political, industry and internal company
factors outside our control affect each of our subsidiaries. If our subsidiaries
do not succeed, the value of our assets and the price of our common stock could
decline. Some of the material risks relating to our partner companies include:
o our subsidiaries are located in China and have specific risks associated
with that;
o Intensifying competition for our products and services and those of our
subsidiaries, which could lead to the failure of some of our subsidiaries
A VISIBLE TRADING MARKET FOR OUR COMMON STOCK MAY NOT DEVELOP
Our common stock is currently traded on the Over-the-Counter Bulletin Board
under the symbol "TCOM". The quotation of our common stock on the OTCBB does not
assure that a meaningful, consistent and liquid trading market currently exists.
We cannot predict whether a more active market for our common stock will develop
in the future. In the absence of an active trading market:
o investors may have difficulty buying and selling or obtaining market
quotations;
o market visibility for our common stock may be limited; and
o a lack of visibility for our common stock may have a depressive effect on
the market price for our common stock.
Our stock is a penny stock and there are significant risks related to buying and
owning penny stocks.
Rule 15g-9 under the Securities Exchange Act of 1934 imposes additional sales
practice requirements on broker-dealers that sell non-Nasdaq listed securities
except in transactions exempted by the rule, including transactions meeting the
requirements of Rule 506 of Regulation D under the Securities Act and
transactions in which the purchaser is an institutional accredited investor (as
defined) or an established customer (as defined) of the broker or dealer. For
transactions covered by this rule, a broker-dealer must make a special
suitability determination for the purchaser and have received the purchaser's
written consent to the transaction prior to sale. Consequently, this rule may
adversely affect the ability of broker-dealers to sell our securities and may
adversely affect your ability to sell any of the securities you own.
The Securities and Exchange Commission regulations define a "penny stock" to be
any non-Nasdaq equity security that has a market price (as defined in the
regulations) of less than $5.00 per share or with an exercise price of less than
$5.00 per share, subject to some exceptions. For any transaction by a
broker-dealer involving a penny stock, unless exempt, the rules require
delivery, prior to any transaction in a penny stock, of a disclosure schedule
prepared by the SEC relating to the penny stock market. Disclosure is also
required to be made about commissions payable to both the broker-dealer and the
24
registered representative and current quotations for the securities. Finally,
monthly statements are required to be sent disclosing recent price information
for the penny stock held in the account and information on the limited market in
penny stocks. Our market liquidity could be severely adversely affected by these
rules on penny stocks.
Our largest target market is in China and there are several significant risks
relating to conducting operations in China.
Our largest target market is in China. Therefore, our business, financial
condition and results of operations are to a significant degree subject to
economic, political and social events in China.
Governmental policies in China could impact our business.
Since 1978, China's government has been and is expected to continue reforming
its economic and political systems. These reforms have resulted in and are
expected to continue to result in significant economic and social development in
China. Many of the reforms are unprecedented or experimental and may be subject
to change or readjustment due to a number of political, economic and social
factors. We believe that the basic principles underlying the political and
economic reforms will continue to be implemented and provide the framework for
China's political and economic system. New reforms or the readjustment of
previously implemented reforms could have a significant negative effect on our
operations. Changes in China's political, economic and social conditions and
governmental policies which could have a substantial impact on our business
include:
o new laws and regulations or new interpretations of those laws and
regulations;
o the introduction of measures to control inflation or stimulate growth;
o changes in the rate or method of taxation;
o the imposition of additional restrictions on currency conversion and
remittances abroad; and
o any actions which limit our ability to conduct lottery operations in China.
Economic policies in China could negatively impact our business.
The economy of China differs from the economies of most countries belonging to
the Organization for Economic Cooperation and Development in various respects,
such as structure, government involvement, level of development, growth rate,
capital reinvestment, allocation of resources, self-sufficiency, rate of
inflation and balance of payments position. In the past, the economy of China
has been primarily a planned economy subject to one- and five-year state plans
adopted by central government authorities and largely implemented by provincial
and local authorities. These plans set production and development targets.
Since 1978, increasing emphasis had been placed on decentralization and the
utilization of market forces in the development of China's economy. Economic
25
reform measures adopted by China's government may be inconsistent or
ineffectual, and we may not in all cases be able to capitalize on any reforms.
Further, these measures may be adjusted or modified in ways that could result in
economic liberalization measures that are inconsistent from time to time, from
industry to industry or across different regions of the country. China's economy
has experienced significant growth in the past decade. This growth, however, has
been accompanied by imbalances in China's economy and has resulted in
significant fluctuations in general price levels, including periods of
inflation. China's government has implemented policies from time to time to
increase or restrain the rate of economic growth, control periods of inflation
or otherwise regulate economic expansion. While we may be able to benefit from
the effects of some of these policies, these policies and other measures taken
by China's government to regulate the economy could also have a significant
negative impact on economic conditions in China with a resulting negative impact
on our business.
China's entry into the WTO creates uncertainty.
China formally became the 143rd member of the World Trade Organization (WTO),
the multilateral trade body, on December 11, 2001. Entry into the WTO will
require China to further reduce tariffs and eliminate other trade restrictions.
While China's entry into the WTO and the related relaxation of trade
restrictions may lead to increased foreign investment, it may also lead to
increased competition in China's markets from international companies. The
impact of China's entry into the WTO on China's economy and our business is
uncertain.
Uncertainty relating to China's legal system could negatively affect us.
China has a civil law legal system. Decided court cases do not have binding
legal effect on future decisions. Since 1979, many new laws and regulations
covering general economic matters have been promulgated in China. Despite this
activity to develop the legal system, China's system of laws is not yet
complete. Even where adequate law exists in China, enforcement of contracts
based on existing law may be uncertain and sporadic and it may be difficult to
obtain swift and equitable enforcement, or to obtain enforcement of a judgment
by a court of another jurisdiction. The relative inexperience of China's
judiciary in many cases creates additional uncertainty as to the outcome of any
litigation. Further, interpretation of statutes and regulations may be subject
to government policies reflecting domestic political changes.
ITEM 3. CONTROLS AND PROCEDURES
Our Chief Executive Officer and Chief Financial Officer (collectively, the
"Certifying Officers") are responsible for establishing and maintaining
disclosure controls and procedures for us. Based upon such officers' evaluation
of these controls and procedures as of a date within 45 days of the filing of
this Quarterly Report, and subject to the limitations noted hereinafter, the
Certifying Officers have concluded that our disclosure controls and procedures
are effective to ensure that information required to be disclosed by us in this
Quarterly Report is accumulated and communicated to management, including our
principal executive officers as appropriate, to allow timely decisions regarding
required disclosure.
The Certifying Officers have also indicated that there were no significant
changes in our internal controls or other factors that could significantly
26
affect such controls subsequent to the date of their evaluation, and there were
no corrective actions with regard to significant deficiencies and material
weaknesses.
Our management, including each of the Certifying Officers, does not expect that
our disclosure controls or our internal controls will prevent all error and
fraud. A control system, no matter how well conceived and operated, can provide
only reasonable, not absolute, assurance that the objectives of the control
system are met. In addition, the design of a control system must reflect the
fact that there are resource constraints, and the benefits of controls must be
considered relative to their costs. Because of the inherent limitations in all
control systems, no evaluation of controls can provide absolute assurance that
all control issues and instances of fraud, if any, within a Company have been
detected. These inherent limitations include the realities that judgments in
decision-making can be faulty, and that breakdowns can occur because of simple
error or mistake. Additionally, controls can be circumvented by the individual
acts of some persons, by collusion of two or more people or by management
override of the control. The design of any systems of controls also is based in
part upon certain assumptions about the likelihood of future events, and their
can be no assurance that any design will succeed in achieving its stated goals
under all potential future conditions. Over time, control may become inadequate
because of changes in conditions, or the degree of compliance with the policies
or procedures may deteriorate. Because of these inherent limitations in a
cost-effective control system, misstatements due to error or fraud may occur and
not be detected.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
NONE
ITEM 2. UNREGISTRED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
On October 7, 2004, TCOM entered into a stock purchase agreement with Taikang
Capital Managements Company ("Taikang"), an affiliate of the Company, for the
purchase of 10,000,000 shares of the Company's common stock, par value $.001 per
share for an aggregate purchase price of $2,000,000. The proceeds were used to
purchase an asset in relation to our latest products SEO4Mobile.
ITEM 3. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
EXHIBIT NUMBER
31.1 Rule 13a-14(a)/15d-14(a) Certification (CEO)*
31.2 Rule 13a-14(a)/15d-14(a) Certification (CFO)*
32.1 Section 1350 Certification (CEO)*
32.2 Section 1350 Certification (CFO)*
*Filed herewith.
(B) REPORTS ON FORM 8-K
o Form 8-K dated July 22, 2004;
o Form 8-K dated July 22, 2004;
o Form 8-K dated August 16, 2004;
o Form 8-K dated September 17, 2004;
o Form 8-K dated October 7, 2004.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On February 28, 2005, a proposal on the adoption of "2005 Stock Award Plan" for
the company was raised and was approved by the majority shareholders at the
Annual Meeting of Shareholders.
On February 28, 2005, at the Company's Annual meeting it was resolved that the
proposed reverse split of the outstanding shares of common stock of the Company
on a 2 to 1 basis was not approved by the shareholders.
On April 15, 2005, Mr. Shanhe Yang resigned as President and CEO of the Company
and Mr. Tim T. Chen was appointed as President and CEO of the Company.
On April 27, the Company appointed Mr. Junting Lu as Senior Vice President of
Corporate Development.
27
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
has caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
Date: May 3, 2005 TELECOM COMMUNICATIONS, INC.
By: /s/Tim T. Chen
---------------------------------
Tim T. Chen
Director and CEO
(Principal Executive Officer)
Date: May 3, 2005 By: /s/Gary Lam
---------------------------------
Gary Lam
Principal Financial and
Accounting Officer