x |
QUARTERLY
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
o |
TRANSITION
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
|
Delaware
|
35-2089848
|
(State
or other jurisdiction of
incorporation
or organization)
|
(I.R.S.
Employer
Identification
No.)
|
Suites
2412-13 Shell Tower, Times Square, 1 Matheson Street, Causeway Bay,
Hong
Kong
(Address
of principal executive offices)
|
(852)2782
0983
Issuer's
telephone number
|
Page
|
||
PART
I. FINANCIAL INFORMATION
|
||
ITEM
1.
|
FINANCIAL
STATEMENTS
|
|
Condensed
Consolidated Balance Sheets as of December 31, 2005.
|
2
|
|
Condensed
Consolidated Statements of Income and Comprehensive Income for
the Three
Months Ended December 31, 2005 and 2004
|
3
|
|
|
||
Condensed
Consolidated Statements of Cash Flows for the Three Months Ended
December
31, 2005 and 2004
|
4
|
|
|
||
Notes
to the Condensed Consolidated Financial Statements
|
5
|
|
ITEM
2.
|
MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF
OPERATIONS
|
21
|
|
||
ITEM
3.
|
CONTROLS
AND PROCEDURES
|
33
|
|
||
PART
II. OTHER INFORMATION
|
||
ITEM
1.
|
LEGAL
PROCEEDINGS
|
33
|
ITEM
2.
|
UNREGISTERED
SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|
33
|
ITEM
3.
|
DEFAULTS
UPON SENIOR SECURITIES
|
33
|
ITEM
4.
|
SUBMISSION
OF MATTERS TO A VOTE OF SECURITY HOLDERS
|
33
|
ITEM
5.
|
OTHER
INFORMATION
|
33
|
ITEM
6.
|
EXHIBITS
|
34
|
SIGNATURES
|
35
|
ASSETS
|
December
31,
|
|||
2005
|
||||
Restated
|
||||
Current
assets:
|
(Unaudited)
|
|||
Cash
and cash equivalents
|
$
|
1,114,593
|
||
Accounts
receivable - affiliate
|
800,000
|
|||
-
others, less allowance for bad debt of $645,000
|
4,538,916
|
|||
Deferred
stock-based compensation - current portion
|
1,354,118
|
|||
Prepaid
expenses
|
1,553,871
|
|||
Other
current assets
|
541,306
|
|||
Total
current assets
|
9,902,804
|
|||
Property,
plant and equipment, net
|
3,933,444
|
|||
Deferred
stock-based compensation -
non-current
portion
|
928,333
|
|||
|
||||
Total
assets
|
$
|
14,764,581
|
||
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
||||
Current
liabilities:
|
||||
Accounts
payable and accrued expenses
|
$
|
1,217,309
|
||
Finance
lease - current portion
|
20,761
|
|||
Due
to related companies
|
90,743
|
|||
Total
Current Liabilities
|
1,328,813
|
|||
Commitments
and contingencies (refer to note 7)
|
||||
Non-current
liabilities:
|
||||
Loan
payable - related party
|
108,205
|
|||
Finance
lease
|
26,849
|
|||
Total
non-current liabilities
|
135,054
|
|||
Total
liabilities
|
1,463,867
|
|||
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
|
||||
82,188,000
shares issued and outstanding)
|
82,188
|
|||
Additional
paid in capital
|
9,990,489
|
|||
Accumulated
other comprehensive income
|
249
|
|||
Retained
earnings
|
3,227,788
|
|||
Total
stockholders' equity
|
13,300,714
|
|||
Total
liabilities and stockholders' equity
|
$
|
14,764,581
|
Three
Months Ended
December
31,
|
|||||||
2005
Restated
|
2004
Restated
|
||||||
(unaudited)
|
(unaudited)
|
||||||
Revenue:
|
|||||||
Net
revenues - affiliate
|
$
|
360,000
|
$
|
360,000
|
|||
-
others
|
3,968,099
|
1,215,338
|
|||||
4,328,099
|
1,575,338
|
||||||
Cost
of sales
|
|||||||
Depreciation
|
467,515
|
309,405
|
|||||
Other
cost of sales
|
683,339
|
786,557
|
|||||
1,150,854
|
1,095,962
|
||||||
|
|||||||
Gross
profit
|
3,177,245
|
479,376
|
|||||
|
|||||||
Operating
expenses:
|
|||||||
Allowance
for bad debt
|
119,160
|
-
|
|||||
Depreciation
|
28,601
|
7,052
|
|||||
Salaries
|
259,747
|
-
|
|||||
Stock-based
compensation expenses
|
831,446
|
146,250
|
|||||
Other
selling and administrative expenses
|
188,741
|
116,511
|
|||||
Total
operating expenses costs
|
1,427,695
|
269,813
|
|||||
Income
from operations
|
1,749,550
|
209,563
|
|||||
Other
income/ (expense):
|
|||||||
Interest
income
|
1,279
|
112
|
|||||
Other
income
|
10,288
|
7,590
|
|||||
Interest
expense
|
(862
|
)
|
(550
|
)
|
|||
|
|||||||
Total
other income
|
10,705
|
7,152
|
|||||
|
|||||||
Net
income
operations
before
minority interest
|
$
|
1,760,255
|
$
|
216,715
|
|||
Other
comprehensive income
|
|||||||
Foreign
currency translation difference
|
3
|
-
|
|||||
|
|||||||
Comprehensive
income
operations
before
minority interest
|
$
|
1,760,258
|
$
|
216,715
|
|||
Earnings
per Common Share:
|
|||||||
Basic
|
$
|
0.02
|
$
|
0.00
|
|||
Fully
diluted
|
$
|
0.02
|
$
|
0.00
|
|||
Weighted
Average Common Share:
|
|||||||
Outstanding
- Basic
|
77,677,000
|
69,529,000
|
|||||
Outstanding
- Fully diluted
|
87,677,000
|
79,529,000
|
Three
Months Ended
December
31,
|
|||||||
2005
Restated
|
2004
Restated
|
||||||
(unaudited)
|
(unaudited)
|
||||||
Cash
flows from operating activities:
|
|||||||
Net
cash (used in) provided by operating activities
|
(788,149
|
)
|
64,851
|
||||
Cash
flows from investing activities:
|
|||||||
Interest
income
|
1,279
|
-
|
|||||
Capital
expenditure
|
(71,875
|
)
|
(67,672
|
)
|
|||
Net
cash (used in) investing activities
|
(70,596
|
)
|
(67,672
|
)
|
|||
Cash
flows from financing activities:
|
|||||||
Due
to related party
|
(22,457
|
)
|
(3,162
|
)
|
|||
Repayment
of finance lease
|
(5,055
|
)
|
(6,137
|
)
|
|||
Net
cash (used in) financing activities
|
(27,512
|
)
|
(9,299
|
)
|
|||
Effect
of exchange rate changes in cash
|
3
|
115
|
|||||
Net
(decrease) in cash and cash equivalents
|
(886,254
|
)
|
(12,005
|
)
|
|||
|
|||||||
Cash
and cash equivalents - beginning of period
|
2,000,847
|
336,707
|
|||||
Cash
and cash equivalents - end of period
|
$
|
1,114,593
|
$
|
324,702
|
|||
Supplemental
disclosure of cash flow information:
|
|||||||
Non
cash investing and financing activities:
|
|||||||
Common
stock issued for acquisition of
software
|
$
|
-
|
$
|
2,000,000
|
|||
Common
stock issued for payment of
|
|||||||
compensation
expenses
|
$
|
2,210,000
|
$
|
-
|
1. |
BUSINESS
DESCRIPTION AND
ORGANIZATION
|
1. |
BUSINESS
DESCRIPTION AND
ORGANIZATION-CON’T
|
2. |
SUMMARY
OF SIGNIFICANT ACCOUNTING
POLICIES
|
2. |
SUMMARY
OF SIGNIFICANT ACCOUNTING
POLICIES-CON’T
|
Description
|
Useful
Lives
|
Computer
hardware
|
3
years
|
|
|
Computer
software
|
3
years
|
|
|
Web
site
|
3
years
|
|
|
Motor
vehicles
|
3
years
|
|
|
Furniture
and fixtures
|
5
years
|
|
|
Leasehold
improvements
|
5
years
|
2. |
SUMMARY
OF SIGNIFICANT ACCOUNTING
POLICIES-CON’T
|
2. |
SUMMARY
OF SIGNIFICANT ACCOUNTING
POLICIES-CON’T
|
2. |
SUMMARY
OF SIGNIFICANT ACCOUNTING
POLICIES-CON’T
|
2. |
SUMMARY
OF SIGNIFICANT ACCOUNTING
POLICIES-CON’T
|
3. |
PROPERTY
AND EQUIPMENT
|
Computer
hardware
|
$
|
167,308
|
||
Computer
software
|
4,897,295
|
|||
Web
site
|
500,000
|
|||
Motor
vehicles
|
232,410
|
|||
Furniture
and fixtures
|
31,130
|
|||
Leasehold
improvements
|
248,779
|
|||
Total
|
6,076,922
|
|||
Less:
accumulated depreciation
|
(2,143,478
|
)
|
||
Property
and Equipment - Net
|
$
|
3,933,444
|
4. |
RELATED
PARTY TRANSACTIONS
|
5. |
STOCK
TRANSACTIONS
|
6. |
INCOME
TAXES
|
7. |
COMMITMENTS
AND CONTINGENCIES
|
Year
ended December 31,
|
||||
2006
|
$
|
237,080
|
||
2007
|
245,863
|
|||
2008
|
190,717
|
|||
$
|
673,660
|
8. |
STOCK
PLAN
|
9. |
STOCK-BASED
COMPENSATION EXPENSES
|
10. |
RESTATEMENT
OF PRIOR INTERIM CONDENSED FINANCIAL STATEMENTS -
DECEMBER 31, 2005 |
1) |
The
Company bought the 20% of IC Star MMS on March 16, 2004. The Company
recorded significant reorganization expenses in the statement of
operations for the year ended September 30, 2004. Pursuant to SEC
comments
received after this filing, we have recorded these reorganization
expenses
as a deemed dividend paid out of additional paid in capital, instead
of
recording this transaction as an expense. This restatement does not
change
our total stockholders’ equity but only increases our retained earnings
and decreases our additional paid in
capital.
|
2) |
Pursuant
to the SEC comments received after the filing, we reallocated the
depreciation of software related to the revenue of the company to
cost of
sales. Other depreciation expenses related to motor vehicles and
office
equipments and are stated in Selling, General and Administration
Expenses.
This had no impact on our prior earnings
reported.
|
3) |
In
March 2005, the SEC staff expressed their views with respect to SFAS
No.
123R in Staff Accounting Bulletin No. 107, “Share-Based Payment,” (SAB
107). SAB 107 provides guidance on valuing options. Now, we
amortize
the cost of employee services received in exchange for an award of
equity
instruments based on the grant date fair value of the award. Also,
that
cost is recognized over the period during which the employee is required
to provide services in exchange for the
award.
|
10. |
RESTATEMENT
OF PRIOR INTERIM CONDENSED FINANCIAL STATEMENTS -
DECEMBER
31, 2005-CON’T
|
Adjustment
no:
|
Increase/(Decrease)
in Current Earnings
|
||||||
Reclassification
of the depreciation expenses on the software that sold to customers
to
cost of sales
|
2
|
$
|
(467,515
|
)
|
|||
Transfer
of the depreciation which included in other selling General and
administrative expenses to cost of sales
|
2
|
467,515
|
|||||
Transfer
to deferred stock-based compensation
|
3
|
1,378,554
|
|||||
Increase
in the current earnings for the quarter ended December 31,
2005
|
1,378,554
|
||||||
Credit
to acquisition cost of the 20% interest of IC Star in 2004 and debit
to
the additional paid in capital
|
1
|
8,126,917
|
|||||
Transfer
to deferred stock-based compensation
|
3
|
903,897
|
|||||
Total
increase in retained earnings as at September 30, 2005
|
9,030,814
|
||||||
Total
increase in retained earnings as at December 31, 2005
|
$
|
10,409,368
|
10. |
RESTATEMENT
OF PRIOR INTERIM CONDENSED FINANCIAL STATEMENTS -
DECEMBER
31, 2005-CON’T
|
As
Previously reported
December
31, 2005
|
Restatement
Adjustment December 31, 2005
|
As
restated December 31, 2005
|
||||||||
ASSETS
|
||||||||||
Current
assets:
|
||||||||||
Cash
and cash equivalents
|
$
|
1,114,593
|
$
|
1,114,593
|
||||||
Accounts
receivable - affiliate
|
800,000
|
800,000
|
||||||||
-
others, less allowance for bad debt of $645,000
|
4,538,916
|
4,538,916
|
||||||||
Deferred
stock-based compensation -
current
portion
|
-
|
1,354,118
|
1,354,118
|
|||||||
Prepaid
expenses
|
1,553,871
|
1,553,871
|
||||||||
Other
current assets
|
541,306
|
541,306
|
||||||||
Total
current assets
|
8,548,686
|
9,902,804
|
||||||||
Property,
plant and equipment, net
|
3,933,444
|
3,933,444
|
||||||||
Deferred
stock-based compensation -
non-current
portion
|
928,333
|
928,333
|
||||||||
|
||||||||||
Total
assets
|
$
|
12,482,130
|
$
|
2,282,451
|
$
|
14,764,581
|
||||
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
||||||||||
Current
liabilities:
|
||||||||||
Accounts
payable and accrued expenses
|
$
|
1,217,309
|
$
|
1,217,309
|
||||||
Finance
lease - current portion
|
20,761
|
20,761
|
||||||||
Due
to related companies
|
90,743
|
90,743
|
||||||||
Total
Current Liabilities
|
1,328,813
|
1,328,813
|
||||||||
Commitments
and contingencies (refer to note 7)
|
||||||||||
Non-current
liabilities:
|
||||||||||
Loan
payable - related party
|
108,205
|
108,205
|
||||||||
Finance
lease
|
26,849
|
26,849
|
||||||||
Total
non-current liabilities
|
135,054
|
135,054
|
||||||||
Total
liabilities
|
1,463,867
|
1,463,867
|
||||||||
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 82,188,000
shares
issued and outstanding)
|
82,188
|
82,188
|
||||||||
Additional
paid in capital
|
18,117,406
|
(8,126,917
|
)
|
9,990,489
|
||||||
Accumulated
other comprehensive income
|
249
|
249
|
||||||||
Retained
earnings
|
(7,181,580
|
)
|
10,409,368
|
3,227,788
|
||||||
Total
stockholders' equity
|
11,018,263
|
13,300,714
|
||||||||
Total
liabilities and stockholders' equity
|
$
|
12,482,130
|
$
|
2,282,451
|
$
|
14,764,581
|
10. |
RESTATEMENT
OF PRIOR INTERIM CONDENSED FINANCIAL STATEMENTS -
DECEMBER
31, 2005-CON’T
|
As
Previously reported
December
31, 2005
|
Restatement
Adjustment December 31, 2005
|
As
restated December 31, 2005
|
||||||||
Revenue:
|
||||||||||
Net
revenues - affiliate
|
360,000
|
360,000
|
||||||||
-
others
|
3,968,099
|
3,968,099
|
||||||||
4,328,099
|
4,328,099
|
|||||||||
Cost
of sales
|
||||||||||
Depreciation
|
-
|
467,515
|
467,515
|
|||||||
Other
cost of sales
|
683,339
|
683,339
|
||||||||
683,339
|
1,150,854
|
|||||||||
|
||||||||||
Gross
profit
|
3,644,760
|
3,177,245
|
||||||||
|
||||||||||
Operating
expenses:
|
||||||||||
Allowance
for bad debt
|
119,160
|
119,160
|
||||||||
Depreciation
|
496,116
|
467,515
|
28,601
|
|||||||
Salaries
|
259,747
|
259,747
|
||||||||
Stock-based
compensation expenses
|
2,210,000
|
(1,378,554
|
)
|
831,446
|
||||||
Other
selling and administrative expenses
|
188,741
|
188,741
|
||||||||
Total
operating expenses costs
|
3,273,764
|
1,427,695
|
||||||||
Income
from operations
|
370,996
|
1,749,550
|
||||||||
Other
income/ (expense):
|
||||||||||
Interest
income
|
1,279
|
1,279
|
||||||||
Other
income
|
10,288
|
10,288
|
||||||||
Interest
expense
|
(862
|
)
|
(862
|
)
|
||||||
|
||||||||||
Total
other income
|
10,705
|
10,705
|
||||||||
|
||||||||||
Net
income
|
381,701
|
1,760,255
|
||||||||
Other
comprehensive income
|
||||||||||
Foreign
currency translation difference
|
3
|
3
|
||||||||
|
||||||||||
Comprehensive
income
|
381,704
|
1,760,258
|
||||||||
Earnings
per Common Share:
|
||||||||||
Basic
|
0.01
|
0.00
|
||||||||
Fully
diluted
|
0.01
|
0.00
|
||||||||
Weighted
Average Common Share:
|
||||||||||
Outstanding
- Basic
|
77,677,000
|
77,677,000
|
||||||||
Outstanding
- Fully diluted
|
87,677,000
|
87,677,000
|
||||||||
11. |
RESTATEMENT
OF PRIOR INTERIM CONDENSED FINANCIAL STATEMENTS -
DECEMBER
31, 2004
|
1) |
The
Company bought the 20% of IC Star MMS on March 16, 2004. The Company
recorded significant reorganization expenses in the statement of
operations for the year ended September 30, 2004. Pursuant to SEC
comments
received after this filing, we have recorded these reorganization
expenses
as a deemed dividend paid out of additional paid in capital, instead
of
recording this transaction as an expense. This restatement does not
change
our total stockholders’ equity but only increases our retained earnings
and decreases our additional paid in
capital.
|
2) |
Pursuant
to the SEC comments received after the filing, we reallocated the
depreciation of software related to the revenue of the company to
cost of
sales. Other depreciation expenses related to motor vehicles and
office
equipments and are stated in Selling, General and Administration
Expenses.
This had no impact on our prior earnings
reported.
|
3) |
In
March 2005, the SEC staff expressed their views with respect to SFAS
No.
123R in Staff Accounting Bulletin No. 107, “Share-Based Payment,” (SAB
107). SAB 107 provides guidance on valuing options. Now, we
amortize
the cost of employee services received in exchange for an award of
equity
instruments based on the grant date fair value of the award. Also,
that
cost is recognized over the period during which the employee is required
to provide services in exchange for the
award.
|
Adjustment
no:
|
Increase/(Decrease)
in Current Earnings
|
||||||
Reclassification
of the depreciation expenses on the software that sold to customers
to
cost of sales
|
2
|
$
|
(309,405
|
)
|
|||
Transfer
of the depreciation which included in other selling General and
administrative expenses to cost of sales
|
2
|
309,405
|
|||||
Stock-based
compensation expenses charged to Statement of Operation
|
3
|
(146,250
|
)
|
||||
Total
decrease in quarter ended December 31, 2004 current
earnings
|
(146,250
|
)
|
|||||
Credit
to acquisition cost of the 20% interest of IC Star in 2004 and debit
to
the additional paid in capital
|
1
|
8,126,917
|
|||||
Transfer
to deferred stock-based compensation
|
3
|
731,250
|
|||||
Total
increase in retained earnings as at September 30, 2004
|
8,858,167
|
||||||
Total
increase in retained earnings as at December 31, 2004
|
$
|
8,711,917
|
|||||
11. |
RESTATEMENT
OF PRIOR INTERIM CONDENSED FINANCIAL STATEMENTS -
DECEMBER
31, 2004-CON’T
|
As
Previously reported
December
31, 2004
|
Restatement
Adjustment December 31, 2004
|
As
restated December 31, 2004
|
||||||||
ASSETS
|
||||||||||
Current
assets:
|
||||||||||
Cash
and cash equivalents
|
$
|
324,702
|
$
|
324,702
|
||||||
Accounts
receivable - affiliate
|
-
|
-
|
||||||||
Accounts
receivable
|
1,311,026
|
1,311,026
|
||||||||
Deferred
stock-based compensation -
current
portion
|
-
|
585,000
|
585,000
|
|||||||
Prepaid
expenses and other current assets
|
34,143
|
34,143
|
||||||||
Total
current assets
|
1,669,871
|
2,254,871
|
||||||||
Property,
plant and equipment, net
|
3,962,810
|
3,962,810
|
||||||||
Deferred
stock based compensation -
non-current
portion
|
-
|
-
|
||||||||
|
||||||||||
Total
assets
|
$
|
5,632,681
|
$
|
585,000
|
$
|
6,217,681
|
||||
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
||||||||||
Current
liabilities:
|
||||||||||
Accounts
payable
|
$
|
385,971
|
$
|
385,971
|
||||||
Due
to related party
|
162,181
|
162,181
|
||||||||
Other
loan
|
60,808
|
60,808
|
||||||||
Total
Current Liabilities
|
608,960
|
608,960
|
||||||||
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
|
70,188
|
||||||||
Additional
paid in capital
|
14,029,406
|
(8,126,917
|
)
|
5,902,489
|
||||||
Accumulated
other comprehensive income
|
248
|
248
|
||||||||
Retained
earnings
|
(9,076,121
|
)
|
8,711,917
|
(364,204
|
)
|
|||||
Total
stockholders' equity
|
5,023,721
|
5,608,721
|
||||||||
Total
liabilities and stockholders' equity
|
$
|
5,632,681
|
$
|
585,000
|
$
|
6,217,681
|
11. |
RESTATEMENT
OF PRIOR INTERIM CONDENSED FINANCIAL STATEMENTS -
DECEMBER
31, 2004-CON’T
|
As
Previously reported
December
31, 2004
|
Restatement
Adjustment December 31, 2004
|
As
restated December 31, 2004
|
||||||||
Revenue:
|
||||||||||
Net
revenues - affiliate
|
$
|
-
|
360,000
|
$
|
360,000
|
|||||
-
others
|
1,575,338
|
(360,000
|
)
|
1,215,338
|
||||||
1,575,338
|
1,575,338
|
|||||||||
Cost
of sales
|
||||||||||
Depreciation
|
-
|
309,405
|
309,405
|
|||||||
Other
cost of sales
|
786,557
|
786,557
|
||||||||
786,557
|
1,095,962
|
|||||||||
Gross
profit
|
788,781
|
479,376
|
||||||||
|
||||||||||
Operating
expenses:
|
||||||||||
Depreciation
|
-
|
7,052
|
7,052
|
|||||||
Stock-based
compensation expenses
|
-
|
146,250
|
146,250
|
|||||||
Other
selling, general and administrative
|
432,968
|
(316,457
|
)
|
116,511
|
||||||
|
||||||||||
Total
operating expenses costs
|
432,968
|
269,813
|
||||||||
Income
from operations
|
355,813
|
209,563
|
||||||||
Other
income/ (expense):
|
||||||||||
Interest
income
|
112
|
112
|
||||||||
Other
Income
|
7,590
|
7,590
|
||||||||
Interest
expense
|
(550
|
)
|
(550
|
)
|
||||||
|
||||||||||
Total
other income
|
7,152
|
7,152
|
||||||||
|
||||||||||
Net
income
|
$
|
362,965
|
$
|
216,715
|
||||||
Other
comprehensive income
|
||||||||||
Foreign
currency translation difference
|
-
|
-
|
||||||||
|
||||||||||
Comprehensive
income
|
$
|
362,965
|
$
|
216,715
|
||||||
Earnings
per Common Share:
|
||||||||||
Basic
|
0.01
|
0.01
|
||||||||
Fully
diluted
|
0.01
|
0.01
|
||||||||
Weighted
Average Common Share:
|
||||||||||
Outstanding
- Basic
|
69,529,000
|
69,529,000
|
||||||||
Outstanding
- Fully diluted
|
79,529,000
|
79,529,000
|
|
·
|
"My
Star Friend", where members upload images of their artist friends,
create
star profiles, and enter them in a ratings system allowing members
to vote
on the my star friend;
|
·
|
Fans
Experiences Sharing, where members rate and review their favorite
movies,
music, and greetings for the community to read;
|
·
|
Customizable
User Homepages, Profiles, where members track their favorite movies,
music, games, stars and greetings as well as their friends' favorites,
upload photos, check music statistics, view event reminders, and
post on
"friends-only" message boards;
|
·
|
User
Music Critics, where members review and rate their choices of music,
add
their ratings to a community score and compare their reviews and
ratings
to those of professional music critics;
|
·
|
Online
& Downloadable Games, where members play single player and multiplayer
games online or download and purchase their favorites; and
|
·
|
User-generated
Content, where developers and creators upload their own music, games
and
photos for the community to enjoy and review.
|
1.
|
Our
New Product Line, SkyeStar.com with Help of ZestV, Inc.
|
2.
|
Many
Internet Users in the PRC use the Internet to search for fun
|
3.
|
The
PRC Targeted as Top Internet TV Market (IPTV)
|
Three
Months Ended
December
31,
|
Increase
(Decrease
)
|
Percentage
Increase
(Decrease
)
|
|||||||||||
2005
Restated
|
2004
Restated
|
||||||||||||
(Unaudited)
|
(Unaudited)
|
||||||||||||
Net
revenues
|
$
|
4,328,099
|
$
|
1,575,338
|
$
|
2,752,761
|
175
|
%
|
|||||
Cost
of sales
|
$
|
(1,150,854
|
)
|
$
|
(1,095,962
|
)
|
$
|
(54,892
|
)
|
(5
|
%)
|
||
Gross
profit
|
$
|
3,177,245
|
$
|
479,376
|
$
|
2,697,869
|
563
|
%
|
|||||
Operating
expenses:
|
|||||||||||||
Allowance
of Bad Debts
|
$
|
119,160
|
-
|
$ | |||||||||
Depreciation
|
$
|
28,601
|
7,052
|
$
|
21,549
|
306
|
%
|
||||||
Salary
|
$
|
259,747
|
-
|
$ | |||||||||
Stock-based
Compensation
Expense
|
$
|
831,446
|
$
|
146,250
|
$
|
685,196
|
469
|
%
|
|||||
Other
Selling, General and
Administrative
expenses
|
$
|
188,741
|
$
|
116,511
|
$
|
72,230
|
62
|
%
|
|||||
Total
Operating expenses
|
$
|
1,427,695
|
$
|
269,813
|
$
|
1,157,882
|
429
|
%
|
|||||
|
|||||||||||||
Income
from operations
|
$
|
1,749,550
|
$
|
209,563
|
$
|
1,539,987
|
735
|
%
|
|||||
Other
income
|
$
|
10,705
|
$
|
7,152
|
$
|
3,553
|
50
|
%
|
|||||
Net
Income
|
$
|
1,760,255
|
$
|
216,715
|
$
|
1,543,540
|
712
|
%
|
|||||
Other
comprehensive income
|
|||||||||||||
Foreign
currency translation difference
|
3
|
-
|
|||||||||||
Comprehensive
income
|
1,760,258
|
216,715
|
1,543,543
|
712
|
%
|
||||||||
Earnings
per common share - Basic
|
$
|
0.02
|
$
|
0.003
|
-
|
||||||||
-
Fully diluted
|
$
|
0.02
|
$
|
0.003
|
-
|
||||||||
Weighted
average common share Outstanding - Basic
|
77,677,000
|
69,529,000
|
|||||||||||
-
Fully diluted
|
87,677,000
|
79,529,000
|
- |
our
subsidiaries are located in the PRC and have specific risks associated
with that; and
|
- |
Intensifying
competition for our products and services and those of our subsidiaries,
which could lead to the failure of some of our
subsidiaries.
|
- |
investors
may have difficulty buying and selling or obtaining market
quotations;
|
- |
market
visibility for our common stock may be limited;
and
|
- |
a
lack of visibility for our common stock may have a depressive effect
on
the market price for our common
stock.
|
- |
new
laws and regulations or new interpretations of those laws and
regulations;
|
- |
the
introduction of measures to control inflation or stimulate
growth;
|
- |
changes
in the rate or method of taxation;
|
- |
the
imposition of additional restrictions on currency conversion and
remittances abroad; and
|
- |
any
actions which limit our ability to conduct lottery operations in
the
PRC.
|
(a) |
Reports
on Form 8-K
|
None |
(b) | Information required by Item 401(g) of Regulation S-B |
None. |
TELECOM COMMUNICATIONS, INC. | ||
|
|
|
Date:
August 10, 2006
|
By: | /s/ Tim T. Chen |
Tim T. Chen |
||
President
and CEO
(Principal
Executive Officer)
|
TELECOM COMMUNICATIONS, INC. | ||
|
|
|
Date:
August 10, 2006
|
By: |
/s/
Victor Z. Li
|
Victor
Z. Li
|
||
Principal
Financial and Accounting Officer
|