CHMS 10QSB/A 09/30/2005
Washington,
D.C. 20549
FORM
10-QSB/A
Amendment
No. 3
[X]
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF
1934
for the quarterly period ended September 30, 2005
[
] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT
OF
1934 for the transition period from _______ to _______
(Exact
name of small business issuer as specified in its charter)
XIN
NET CORP.
(Former
name of registrant)
Florida
|
330-751560
|
(State
or other jurisdiction of incorporation or
organization)
|
(IRS
Employer Identification No.)
|
#900
- 789 West Pender Street, Vancouver, B.C., Canada V6C 1H2
(Address
of principal executive offices)
(604)
632-9638
(Issuer's
telephone number)
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 [ ]
Number
of
shares of common stock outstanding as of September 30, 2005: 20,011,670
EXPLANATORY
PARAGRAPH
This
Amendment No. 3 to the Form 10-QSB of China Mobility Solutions,
Inc. for
September 30, 2005, is being filed solely to amend Part I, Item
4. Controls and
Procedures.
CHINA
MOBILITY SOLUTIONS, INC.
AND
SUBSIDIARIES
QUARTERLY
REPORT ON FORM 10-QSB/A
AMENDMENT
NO. 3
PERIOD
ENDED SEPTEMBER
30,
2005
The
financial statements have been adjusted with all adjustments, which, in the
opinion of management, are necessary in order to make the financial statements
not misleading.
For
financial information, please see the financial statements and the notes
thereto, attached hereto and incorporated herein by this reference.
The
financial statements have been prepared by China Mobility Solutions, Inc.,
a
Florida corporation (the "Company"), without audit pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information
and
note disclosures normally included in financial statements prepared in
accordance with accounting principles generally accepted in the United States
of
America, have been condensed or omitted as allowed by such rules and
regulations, and management believes that the disclosures are adequate to make
the information presented not misleading. These financial statements include
all
of the adjustments which, in the opinion of management, are necessary to a
fair
presentation of financial position and results of operations. All such
adjustments are of a normal and recurring nature. These financial statements
should be read in conjunction with the audited financial statements at December
31, 2004, included in the Company's Form 10-KSB.
Cautionary
and Forward Looking Statements
In
addition to statements of historical fact, this Form 10-QSB contains
forward-looking statements. The presentation of future aspects of the Company
found in these statements is subject to a number of risks and uncertainties
that
could cause actual results to differ materially from those reflected in such
statements. Readers are cautioned not to place undue reliance on these
forward-looking statements, which reflect management's analysis only as of
the
date hereof. Without limiting the generality of the foregoing, words such as
"may," "will," "expect," "believe," "anticipate," "intend," or "could" or the
negative variations thereof or comparable terminology are intended to identify
forward-looking statements.
These
forward-looking statements are subject to numerous assumptions, risks and
uncertainties that may cause the Company's actual results to be materially
different from any future results expressed or implied in those statements.
Important facts that could prevent the Company from achieving any stated goals
include, but are not limited to, the following:
Some
of
these risks might include, but are not limited to, the following:
(a) volatility
or decline of the Company's stock price;
(b) potential
fluctuation in quarterly results;
(c) failure
of the Company to earn revenues or profits;
(d)
inadequate capital to continue or expand its business, inability to
raise
additional capital or financing to implement its business
plans;
(e) failure
to commercialize its technology or to make sales;
(f) rapid
and significant changes in markets;
(g) litigation
with or legal claims and allegations by outside parties;
(h)
insufficient revenues to cover operating costs.
There
is
no assurance that the Company will be profitable, the Company may not be able
to
successfully develop, manage or market its products and services, the Company
may not be able to attract or retain qualified executives and technology
personnel, the Company's products and services may become obsolete, government
regulation may hinder the Company's business, additional dilution in outstanding
stock ownership may be incurred due to the issuance of more shares, warrants
and
stock options, or the exercise of warrants and stock options, and other risks
inherent in the Company's businesses.
The
Company undertakes no obligation to publicly revise these forward-looking
statements to reflect events or circumstances that arise after the date hereof.
Readers should carefully review the factors described in other documents the
Company files from time to time with the Securities and Exchange Commission,
including the Quarterly Reports on Form 10-QSB and Annual Report on Form 10-KSB
filed by the Company in 2004 and any Current Reports on Form 8-K filed by the
Company.
CHINA
MOBILITY SOLUTIONS, INC. AND SUBSIDIARIES
|
(formerly
Xin Net Corp.)
|
CONSOLIDATED
BALANCE SHEETS
|
September
30, 2005 and December 31, 2004
|
(Unaudited)
|
|
|
|
|
|
|
Stated
in U.S. dollars
|
|
2005
|
|
2004
|
|
|
|
(Unaudited)
|
|
(Audited)
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
Current
Assets
|
|
|
|
|
|
Cash
and Cash Equivalents
|
|
$
|
7,634,523
|
|
$
|
5,380,622
|
|
Accounts
receivable
|
|
|
6,204
|
|
|
34,560
|
|
Prepaid
Expenses and Other Current Assets
|
|
|
348,373
|
|
|
33,070
|
|
Amount
due from related parties
|
|
|
21,531
|
|
|
18,322
|
|
|
|
|
|
|
|
|
|
Total
Current Assets
|
|
|
8,010,631
|
|
|
5,466,574
|
|
|
|
|
|
|
|
|
|
Investment
|
|
|
1
|
|
|
1
|
|
Property
and Equipment, Net
|
|
|
6,988
|
|
|
6,549
|
|
Goodwill
|
|
|
4,802,520
|
|
|
973,906
|
|
|
|
|
|
|
|
|
|
Total
Assets
|
|
$
|
12,820,140
|
|
$
|
6,447,030
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
Liabilities
|
|
|
|
|
|
|
|
Accounts
Payable and Other Accrued Liabilities
|
|
$
|
2,338,873
|
|
$
|
340,824
|
|
Deferred
Revenue
|
|
|
2,474,458
|
|
|
2,111,698
|
|
Convertible
Debentures (Note 4)
|
|
|
3,350,000
|
|
|
-
|
|
Amount
due to related parties
|
|
|
500
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Total
Current Liabilities
|
|
|
8,163,831
|
|
|
2,452,522
|
|
|
|
|
|
|
|
|
|
Minority
Interest
|
|
|
-
|
|
|
32,791
|
|
|
|
|
|
|
|
|
|
Commitments
and Contingencies
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Stockholders'
Equity
|
|
|
|
|
|
|
|
Common
Stock : $0.001 Par Value
|
|
|
|
|
|
|
|
Authorized
:
50,000,000
|
|
|
|
|
|
|
|
Issued
and Outstanding : 20,011,670 (2004: 15,826,670)
|
|
|
20,012
|
|
|
15,827
|
|
Additional
Paid
In Capital
|
|
|
18,442,826
|
|
|
8,770,378
|
|
Subscription
Receivable
|
|
|
(140,000
|
)
|
|
-
|
|
Accumulated
Deficit
|
|
|
(13,469,927
|
)
|
|
(4,640,956
|
)
|
Accumulated
Other Comprehensive Loss
|
|
|
(196,602
|
)
|
|
(183,532
|
)
|
|
|
|
|
|
|
|
|
Total
Stockholders' Equity
|
|
|
4,656,309
|
|
|
3,961,717
|
|
|
|
|
|
|
|
|
|
Total
Liabilities and Stockholders' Equity
|
|
$
|
12,820,140
|
|
$
|
6,447,030
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(The
accompanying notes are an integral part of these consolidated financial
statements)
|
CHINA
MOBILITY SOLUTIONS, INC. AND SUBSIDIARIES
|
(formerly
Xin Net Corp.)
|
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
For
the three months and nine months ended September 30, 2005 AND
2004
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
months ended
|
|
|
|
Nine
months ended
|
|
|
|
|
|
September
30,
|
|
September
30,
|
|
September
30,
|
|
September
30,
|
|
Stated
in U.S. dollars
|
|
2005
|
|
2004
|
|
2005
|
|
2004
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
Mobile
marketing services
|
|
$
|
1,190,328
|
|
$
|
888,082
|
|
$
|
3,376,829
|
|
$
|
888,082
|
|
Tuition
fee
|
|
|
53,100
|
|
|
95,383
|
|
|
160,408
|
|
|
218,298
|
|
|
|
|
1,243,428
|
|
|
983,465
|
|
|
3,537,237
|
|
|
1,106,380
|
|
Cost
of revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mobile
marketing services
|
|
|
368,552
|
|
|
236,229
|
|
|
903,022
|
|
|
236,229
|
|
Tuition
fee
|
|
|
16,596
|
|
|
15,268
|
|
|
43,614
|
|
|
43,641
|
|
|
|
|
385,148
|
|
|
251,497
|
|
|
946,636
|
|
|
279,870
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
|
|
858,280
|
|
|
731,968
|
|
|
2,590,601
|
|
|
826,510
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advertising
and
promotion
|
|
|
253,970
|
|
|
273,696
|
|
|
663,402
|
|
|
280,471
|
|
Commission
|
|
|
359,500
|
|
|
-
|
|
|
359,500
|
|
|
-
|
|
Consulting
and
professional
|
|
|
186,736
|
|
|
17,463
|
|
|
214,421
|
|
|
56,800
|
|
Depreciation
|
|
|
765
|
|
|
2,255
|
|
|
1,933
|
|
|
3,890
|
|
Fair
value of warrants issued
|
|
|
6,891,470
|
|
|
-
|
|
|
6,891,470
|
|
|
-
|
|
Foreign
exchange gain
|
|
|
(97,536
|
)
|
|
(17,219
|
)
|
|
(92,942
|
)
|
|
(8,801
|
)
|
General
and administrative
|
|
|
223,239
|
|
|
1,682
|
|
|
280,132
|
|
|
59,761
|
|
Interest
-
intrinsic value of the conversion feature
|
|
|
1,052,863
|
|
|
-
|
|
|
1,052,863
|
|
|
-
|
|
Investor
relations
|
|
|
87,825
|
|
|
-
|
|
|
175,650
|
|
|
-
|
|
Rent
|
|
|
224,421
|
|
|
124,499
|
|
|
554,370
|
|
|
150,060
|
|
Salaries,
wages
and sub-contract
|
|
|
344,797
|
|
|
307,532
|
|
|
1,034,949
|
|
|
379,198
|
|
Stock-based
compensation
|
|
|
126,000
|
|
|
-
|
|
|
126,000
|
|
|
-
|
|
Website
development
|
|
|
-
|
|
|
-
|
|
|
80,000
|
|
|
-
|
|
|
|
|
9,654,050
|
|
|
709,908
|
|
|
11,341,748
|
|
|
921,379
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Income (Loss)
|
|
|
(8,795,770
|
)
|
|
22,060
|
|
|
(8,751,147
|
)
|
|
(94,869
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
Income and Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
24,211
|
|
|
30,290
|
|
|
60,625
|
|
|
59,846
|
|
Other
income
|
|
|
1
|
|
|
9
|
|
|
20
|
|
|
1,470
|
|
Equity
loss
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(81,273
|
)
|
|
|
|
24,212
|
|
|
30,299
|
|
|
60,645
|
|
|
(19,957
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(Loss) before minority interest and discontinued
operations
|
|
|
(8,771,558
|
)
|
|
52,359
|
|
|
(8,690,502
|
)
|
|
(114,826
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority
interest
|
|
|
(6,141
|
)
|
|
-
|
|
|
(138,469
|
)
|
|
4,634
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(Loss) from Continuing Operations
|
|
|
(8,777,699
|
)
|
|
52,359
|
|
|
(8,828,971
|
)
|
|
(110,192
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued
operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from discontinued business press operations
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(41,654
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Income (Loss) Available to Common Stockholders
|
|
$
|
(8,777,699
|
)
|
$
|
52,359
|
|
$
|
(8,828,971
|
)
|
$
|
(151,846
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
(loss) per share attributable to common
stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
(loss)
from continuing operations
|
|
$
|
(0.49
|
)
|
$
|
0.00
|
|
$
|
(0.52
|
)
|
$
|
(0.01
|
)
|
Earnings
(loss)
from discontinued operations
|
|
|
0.00
|
|
|
0.00
|
|
|
0.00
|
|
|
-0.00
|
|
Total
basic and diluted
|
|
$
|
(0.49
|
)
|
$
|
0.00
|
|
$
|
(0.52
|
)
|
$
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average number of common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and diluted
|
|
|
17,929,279
|
|
|
15,826,670
|
|
|
16,996,285
|
|
|
14,531,196
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(The
accompanying notes are an integral part of these consolidated financial
statements)
|
CHINA
MOBILITY SOLUTIONS, INC. AND SUBSIDIARIES
|
(formerly
Xin Net Corp.)
|
CONSOLIDATED
STATEMENT OF STOCKHOLDERS' EQUITY
|
for
the nine months ended September 30, 2005 and December 31,
2004
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
Stock
|
|
Additional
|
|
|
|
|
|
Other
|
|
|
|
|
|
Common
|
|
Amount
At
|
|
Paid
In
|
|
Subscription
|
|
Accumulated
|
|
Comprehensive
|
|
|
|
Stated
in U.S. dollars
|
|
Shares
|
|
Par
Value
|
|
Capital
|
|
Receivable
|
|
Deficit
|
|
Loss
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2003
|
|
|
41,360,010
|
|
$
|
41,360
|
|
$
|
8,194,045
|
|
$
|
-
|
|
$
|
(7,659,628
|
)
|
$
|
(163,763
|
)
|
$
|
412,014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of common stock for acquisition of Quicknet on June 23,
2004
|
|
|
6,120,000
|
|
|
6,120
|
|
|
544,680
|
|
|
|
|
|
|
|
|
|
|
|
550,800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reverse
stock split 3:1 on June 24, 2004
|
|
|
(31,653,340
|
)
|
|
(31,653
|
)
|
|
31,653
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income for the year ended December 31, 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,018,672
|
|
|
|
|
|
3,018,672
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
currency translation adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(19,769
|
)
|
|
(19,769
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2004
|
|
|
15,826,670
|
|
$
|
15,827
|
|
$
|
8,770,378
|
|
|
|
|
$
|
(4,640,956
|
)
|
$
|
(183,532
|
)
|
$
|
3,961,717
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of common stock for cash on exercise of stock options on February
24, 2005 @$0.30
|
|
|
495,000
|
|
|
495
|
|
|
148,005
|
|
|
|
|
|
|
|
|
|
|
|
148,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of common stock for services rendered
|
|
|
600,000
|
|
|
600
|
|
|
350,700
|
|
|
|
|
|
|
|
|
|
|
|
351,300
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of common stock for cash on exercise of stock options on September
1, 2005 @$0.40
|
|
|
500,000
|
|
|
500
|
|
|
199,500
|
|
|
|
|
|
|
|
|
|
|
|
200,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of common stock for cash on exercise of stock options on September
1, 2005 @$0.35
|
|
|
2,590,000
|
|
|
2,590
|
|
|
903,910
|
|
|
|
|
|
|
|
|
|
|
|
906,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation
|
|
|
|
|
|
|
|
|
126,000
|
|
|
|
|
|
|
|
|
|
|
|
126,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair
value of Series 'C' warrants issued
|
|
|
|
|
|
|
|
|
3,254,305
|
|
|
|
|
|
|
|
|
|
|
|
3,254,305
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair
value of Series 'D' warrants issued
|
|
|
|
|
|
|
|
|
3,637,165
|
|
|
|
|
|
|
|
|
|
|
|
3,637,165
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intrinsic
value of the ocnversion feature of the convertible
debentures
|
|
|
|
|
|
|
|
|
1,052,863
|
|
|
|
|
|
|
|
|
|
|
|
1,052,863
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subscription
receivable upon the exercise of stock options on September 1, 2005
@$0.35
|
|
|
|
|
|
|
|
|
|
|
|
(140,000
|
)
|
|
|
|
|
|
|
|
(140,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss for the nine months ended September 30,
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8,828,971
|
)
|
|
|
|
|
(8,828,971
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
currency translation adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(13,070
|
)
|
|
(13,070
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
September 30, 2005
|
|
|
20,011,670
|
|
$
|
20,012
|
|
|
18442826
|
|
$
|
(140,000
|
)
|
|
-13469927
|
|
$
|
(196,602
|
)
|
$
|
4,656,309
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(The
accompanying notes are an integral part of these consolidated financial
statements)
|
CHINA
MOBILITY SOLUTIONS, INC. AND SUBSIDIARIES
|
(formerly
Xin Net Corp.)
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
For
the nine months ended September 30, 2005 AND
2004
|
(Unaudited)
|
|
|
|
|
|
|
Stated
in U.S. dollars
|
|
2005
|
|
2004
|
|
|
|
|
|
|
|
Cash
flows from operating activities
|
|
|
|
|
|
Net
loss
|
|
$
|
(8,828,971
|
)
|
$
|
(151,846
|
)
|
Less:
loss from discontinued operations
|
|
|
-
|
|
|
41,654
|
|
Adjustments
to
reconcile net loss to net cash
|
|
|
|
|
|
|
|
Provided
by
(Used in) operating activities
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
1,933
|
|
|
3,890
|
|
Stock-based
compensation
|
|
|
126,000
|
|
|
-
|
|
Fair
value of warrants issued
|
|
|
6,891,470
|
|
|
-
|
|
Interest
-
intrinsic value of the conversion feature of the convertible
|
|
|
|
|
|
|
|
debentures
|
|
|
1,052,863
|
|
|
-
|
|
Translation
adjustments
|
|
|
(13,070
|
)
|
|
(5,600
|
)
|
Minority
interest
|
|
|
138,469
|
|
|
(4,634
|
)
|
Non-cash
operating expenses
|
|
|
191,650
|
|
|
-
|
|
Equity
loss
|
|
|
-
|
|
|
81,273
|
|
Changes
in assets and liabilities
|
|
|
|
|
|
|
|
(Increase)Decrease
in accounts receivable
|
|
|
28,356
|
|
|
139,688
|
|
(Increase)Decrease
in prepaid expenses and other current assets
|
|
|
(139,680
|
)
|
|
10,509
|
|
Increase
in
amount due from (to) related parties
|
|
|
(2,709
|
)
|
|
(102,416
|
)
|
Decrease
in
accounts payable
|
|
|
1,982,049
|
|
|
(155,851
|
)
|
Increase
in
deferred revenue
|
|
|
362,760
|
|
|
311,974
|
|
Increase
in
liabilities to be disposed of
|
|
|
-
|
|
|
137,926
|
|
Net
cash provided by (used in) operating activities
|
|
|
1,791,120
|
|
|
306,567
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities
|
|
|
|
|
|
|
|
Cash
transferred in from acquisition of Quicknet
|
|
|
-
|
|
|
1,477,355
|
|
Purchases
of
remaining interest of Quicknet
|
|
|
(4,000,000
|
)
|
|
-
|
|
Purchases
of
property and equipment
|
|
|
(2,346
|
)
|
|
(1,727
|
)
|
Net
cash flows provided by financing activities
|
|
|
(4,002,346
|
)
|
|
1,475,628
|
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities
|
|
|
|
|
|
|
|
Issuance
of
common stock for cash
|
|
|
1,115,000
|
|
|
-
|
|
Issuance
of
convertible debentures for cash
|
|
|
3,350,000
|
|
|
-
|
|
Net
cash flows provided by financing activities
|
|
|
4,465,000
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Effect
of exchange rate changes on cash
|
|
|
127
|
|
|
(1,052
|
)
|
|
|
|
|
|
|
|
|
Net
cash provided by continuing operations
|
|
|
2,253,901
|
|
|
1,781,143
|
|
|
|
|
|
|
|
|
|
Net
cash provided by (used in) discontinued operations
|
|
|
-
|
|
|
(10,656
|
)
|
|
|
|
|
|
|
|
|
Increase
in cash and cash equivalents
|
|
|
2,253,901
|
|
|
1,770,487
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents - beginning of period
|
|
|
5,380,622
|
|
|
3,303,677
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents - end of period
|
|
$
|
7,634,523
|
|
$
|
5,074,164
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
Information :
|
|
|
|
|
|
|
|
Cash
paid for :
|
|
|
|
|
|
|
|
Interest
|
|
$
|
2
|
|
$
|
-
|
|
Income
taxes
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Non-cash
investment :
|
|
|
|
|
|
|
|
Issuance
of
2,040,000 common shares for the acquisition of Quicknet
|
|
$
|
-
|
|
$
|
1,224,000
|
|
Issuance
of
600,000 common shares for services rendered
|
|
|
351,300
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(The
accompanying notes are an integral part of these consolidated
financial
statements)
|
CHINA
MOBILITY SOLUTIONS, INC. AND SUBSIDIARIES
|
(formerly
Xin Net Corp.)
|
CONSOLIDATED
STATEMENTS OF DEFICIT
|
For
the three months and nine months ended September 30, 2005 AND
2004
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
months ended
|
|
|
|
Nine
months ended
|
|
|
|
|
|
September
30,
|
|
September
30,
|
|
September
30,
|
|
September
30,
|
|
Stated
in U.S. dollars
|
|
2005
|
|
2004
|
|
2005
|
|
2004
|
|
|
|
|
|
|
|
|
|
|
|
Deficit,
Beginning of period
|
|
$
|
(4,692,228
|
)
|
$
|
(7,863,833
|
)
|
$
|
(4,640,956
|
)
|
$
|
(7,659,628
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Income (Loss) Available to Common
Stockholders
|
|
|
(8,777,699
|
)
|
|
52,359
|
|
|
(8,828,971
|
)
|
|
(151,846
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deficit,
End of period
|
|
$
|
(13,469,927
|
)
|
$
|
(7,811,474
|
)
|
$
|
(13,469,927
|
)
|
$
|
(7,811,474
|
)
|
(Previously
known as Xin Net Corp.)
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
September
30, 2005
(
Unaudited )
1.
Basis of Presentation
The
accompanying unaudited financial statements have been prepared in conformity
with generally accepted accounting principles in the United States of America.
However, certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been omitted or condensed pursuant to the rules and regulations
of the Securities and Exchange Commission (“SEC”). In the opinion of management,
all adjustments of a normal recurring nature necessary for a fair presentation
have been included. The results for interim periods are not necessarily
indicative of results for the entire year. These condensed consolidated
financial statements and accompanying notes should be read in conjunction with
the Company’s annual consolidated financial statements and the notes thereto for
the fiscal year ended December 31, 2004 included in its Annual Report on Form
10-KSB.
The
unaudited condensed consolidated financial statements include China Mobility
Solutions, Inc. and its subsidiaries. All inter-company transactions and
accounts have been eliminated.
Certain
items have been reclassified to conform to the current period presentation.
There is no effect on total results of operations or stockholders’
equity.
2.
Significant Accounting Policies
(i)
Accounting for convertible securities with beneficial conversion
features
According
to Emerging Issue Task Force (“EITF”) Issue 98-5, the beneficial conversion
features embedded in convertible securities should be valued at the issue date.
Embedded beneficial conversion features should be recognized and measured as
follows:
(a)
Allocate a portion of the proceeds equal to the intrinsic value of the embedded
beneficial conversion feature to additional paid-in-capital. The intrinsic
value
is calculated as the difference between the conversion price and the fair value
of the common stock or other securities into which the security can be converted
at the date when the investors have committed to purchase the convertible
securities based on the terms specified, multiplied by the number of shares
into
which the security can be converted.
(b)
If
the intrinsic value of the beneficial conversion feature is greater than the
proceeds from the sale of the convertible instrument, the discount assigned
to
the beneficial conversion feature should not exceed the amount of the proceeds
allocated to the convertible instruments. A discount, if any, is amortized
beginning on the security’s issuance date to the earliest conversion
date.
3.
Property and Equipment
|
|
September
30, 2005
|
|
December
31, 2004
|
|
|
|
|
|
|
|
Equipment
|
|
$
|
26,964
|
|
$
|
24,832
|
|
Library
|
|
|
9,554
|
|
|
9,554
|
|
Furniture
|
|
|
10,187
|
|
|
9,975
|
|
Total
|
|
|
46,705
|
|
|
44,361
|
|
Less
: Accumlated depreciation
|
|
|
(39,717
|
)
|
|
(37,812
|
)
|
Net
book figures
|
|
$
|
6,988
|
|
$
|
6,549
|
|
The
depreciation expenses charged to continuing operations for the three-month
and
nine-month periods ended September 30, 2005 were $765 and $1,933
respectively.
(Previously
known as Xin Net Corp.)
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
September
30, 2005
(
Unaudited )
4.
Acquisition of the remaining 49% ownership of Beijing Quicknet Telecommunication
Corp. Ltd. (“Quicknet”)
On
June
23, 2004, the Company completed the acquisition of 49% equity interest from
the
shareholders of Beijing Quicknet Technology Development Corp. ("Quicknet"),
located in Beijing, China by signing a Purchase Agreement (the “Quicknet
Purchase Agreement”). Quicknet is engaged in the development of software for
mobile/wireless communication and for Short Message Services ("SMS"). The
Company acquired the 49% equity interest from Quicknet shareholders in exchange
for the Company’s issuance of 6,120,000 shares of common stock of the Company at
a deemed price of $0.50 per share (2,040,000 post-reverse split shares at a
market price of $0.27 per share for a total of $550,800). In June 2004, the
Company signed a Purchase Agreement (the “Chinaco Purchase Agreement”) with
Beijing Shi Ji Rong Chuang Service & Technology Co., Ltd., a local China
company (“Chinaco”), which owned 2% of the equity interest of Quicknet through
purchasing a 1% interest from each of the two unaffiliated shareholders of
Quicknet, Mr. Bo Yu and Mr. Fang Hu. Under the Chinaco Purchase Agreement,
the
Company was granted the right to purchase 100% of the equity of Chinaco for
a
nominal consideration when Chinese law permits such sale. Chinaco is owned
by
two senior officers of the Company who have Chinese citizenship. Due to current
government restrictions on foreign ownership of telecommunication companies
in
China, the Company was not permitted to acquire the additional 2% of the equity
interest of Quicknet that is still held by Chinaco. Therefore, Chinaco has
granted an unconditional, irrevocable proxy, without time limit, to the Company.
Through the above-described proxy, the Company can appoint all directors and
officers of Quicknet and therefore directly and indirectly controls 51% of
the
equity interest of Quicknet through directly owning 49% equity interest and
indirectly owning the remaining 2% equity interest, through the contract
arrangements with Chinaco.
Under
the
Quicknet Purchase Agreement, the Company also had an option to acquire the
remaining 49% equity interest in Quicknet from the Quicknet Shareholders within
the first year for $4,000,000. The Company had an option to acquire this
remaining 49% equity interest in Quicknet within the second year for $5,000,000.
As a general rule, the Company could pay these amounts by 50% in shares of
the
common stock of the Company and 50% in cash. The final percentage of shares
versus cash could be negotiated between both parties. The Company exercised
its
right to purchase the remaining 49% interest in August 2005 (the “Option
Exercise”), by having Chinaco purchase a 24.5% interest from each of the two
unaffiliated shareholders of Quicknet, Mr. Bo Yu and Mr. Fang Hu.
As
previously mentioned, pursuant to the Chinaco Purchase Agreement, the Company
was granted the right to acquire 100% of the equity of Chinaco, if and when
Chinese law permits. The Company directly owns 49% of Quicknet and through
Chinaco, indirectly controls a combined total of 51% equity interest, and thus
controls a total 100% of Quicknet.
Until
such time, if ever, that Chinese law permits the transfer of a controlling
interest in Quicknet, the Company will maintain control of Quicknet under its
Quicknet Purchase Agreement, Chinaco Purchase Agreement, and August 2005 Option
Exercise. However, the Company will be unable to directly own the remaining
51%
interest held by Chinaco.
On
September 30, 2005, the Company acquired the remaining 49% of ownership of
Quicknet through exercising its option under the original acquisition agreement.
The Company has to pay US$2,000,000 (paid) by September 30, 2005 and another
US$2,000,000 by December 31, 2005, which is included as part of the accounts
payable as of September 30, 2005.
The
value
assigned to assets and liabilities acquired can be summarized as follows:
Cash
and short term investments
|
|
$
|
1,356,834
|
|
Accounts
receivables
|
|
|
1,626
|
|
Goodwill
|
|
|
3,973,646
|
|
Accounts
payables and accrued liabilities
|
|
|
(134,452
|
)
|
Unearned
revenue
|
|
|
(1,197,654
|
)
|
Cash
paid and payable
|
|
$
|
4,000,000
|
|
(Previously
known as Xin Net Corp.)
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
September
30, 2005
(
Unaudited )
5.
Convertible debentures
On
August
15, 2005, the Company completed an offering of 134 units ("Units") for
$3,350,000. Each Unit was sold for $25,000, consisting of $25,000 principal
amount of senior convertible debentures (the "Debentures"), and one Series
“C”
Warrant and one Series “D” Warrants. The Debentures are initially convertible at
$0.35 per share for 71,429 shares of common stock of the Company; maturing
on
August 15, 2006 and accruing interest at a rate of not less than 6% per annum
equal to the sum of 2% per annum plus the one-month London Inter-Bank Offer
Rate
(LIBOR). The Debentures are subject to redemption at 125% of the principal
amount plus accrued interest commencing six months after the effective date
(the
"Effective Date") of the registration statement. The registration statement
has
not been approved by the regulatory authority.
Each
Unit
also includes: (i) Series “C” Warrants exercisable at $0.44 per share to
purchase 71,429 shares of Common Stock of the Company for two years from the
Effective Date, but no later than February 15, 2008; and (ii) Series “D”
Warrants exercisable at $0.52 per share to purchase 71,429 shares of Common
Stock for three years from the Effective Date, but no later than February 15,
2009. The Series “C” and Series “D” Warrants are subject to redemption by the
Company at $0.001 per Warrant at any time commencing six months and twelve
months, respectively, from the Effective Date, provided the average closing
bid
price of the common stock of the Company equals or exceeds 175% of the
respective exercise prices for 20 consecutive trading days.
The
Company incurred $335,000 as the 10% sales commission of the aggregate purchase
price, $100,500 as the 3% non-accountable expenses of the agent, $16,750 for
the
agent's out-of-pocket expenses and $120,609 for legal fees. All of them have
been recorded as expenses for the current quarter.
As
of
September 30, 2005, interest payable of $24,416 has been recorded as part of
the
accounts payable.
6.
Basic and Diluted Earnings (Loss) Per Share
Basic
earnings (loss) per share are computed by dividing net earnings (loss) available
to common stockholders by the weighted-average number of common shares
outstanding during the period. Diluted earnings per share is computed by
dividing net earnings available to common stockholders by the weighted-average
number of common shares outstanding during the period increased to include
the
number of additional common shares that would have been outstanding if
potentially dilutive common shares had been issued.
The
following table sets forth the computations of shares and net loss used in
the
calculation of basic and diluted loss per share for the three-month and
nine-month periods ended September 30, 2005 and 2004:
|
|
Three
months ended
|
|
Nine
months ended
|
|
|
|
September
30,
|
|
September
30,
|
|
|
|
2005
|
|
2004
|
|
2005
|
|
2004
|
|
|
|
|
|
|
|
|
|
|
|
Income
(Loss) from continuing operations
|
|
$
|
$
(8,777,699
|
$
)
|
$
|
52,359
|
|
$
|
$
(8,828,971
|
$
)
|
$
|
(110,192
|
)
|
Income
(Loss) from discontinued operations
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(41,654
|
)
|
Net
income (loss) for the period
|
|
|
(8,777,699
|
)
|
|
52,359
|
|
|
(8,828,971
|
)
|
|
(151,846
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average
number of shares outstanding
|
|
|
17,929,279
|
|
|
15,826,670
|
|
|
16,996,285
|
|
|
14,531,196
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective
of dilutive securities :
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dilutive
options - $0.30
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Dilutive
warrants Series "B" - $2.25
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Dilutive
warrants Series "C" - $0.44
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Dilutive
warrants Series "D" - $0.52
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Dilutive
potential common shares
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
weighted-average shares and
|
|
|
17,929,279
|
|
|
15,826,670
|
|
|
16,996,285
|
|
|
14,531,196
|
|
assumed
conversions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
income (loss) per share attributable to common shareholders
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) from continuing operations
|
|
$
|
(0.49
|
)
|
$
|
0.00
|
|
$
|
(0.52
|
)
|
$
|
(0.01
|
)
|
Income
(loss) from discontinued operations
|
|
|
0.00
|
|
|
0.00
|
|
|
0.00
|
|
|
-0.00
|
|
Total
basic income (loss) per share
|
|
$
|
(0.49
|
)
|
$
|
0.00
|
|
$
|
(0.52
|
)
|
$
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
income (loss) per share attributable to common shareholders
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) from continuing operations
|
|
$
|
(0.49
|
)
|
$
|
0.00
|
|
$
|
(0.52
|
)
|
$
|
(0.01
|
)
|
Income
(loss) from discontinued operations
|
|
|
0.00
|
|
|
0.00
|
|
|
0.00
|
|
|
-0.00
|
|
Total
diluted income (loss) per share
|
|
$
|
(0.49
|
)
|
$
|
0.00
|
|
$
|
(0.52
|
)
|
$
|
(0.01
|
)
|
The
effect of outstanding options and warrants was not included as the effect would
be antidilutive.
On
June
24, 2004, the Company carried out a 3-for-1 reverse stock-split. Figures of
prior periods have been retroactively restated to reflect the effect of the
reverse stock-split.
(Previously
known as Xin Net Corp.)
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
September
30, 2005
(
Unaudited )
7.
Share Capital
During
the quarter ended June 30, 2005, the Company issued 600,000 shares of its common
stock at a fair value of $351,300 to a company for one year investor relations
services until March 2006. As of September 30, 2005, $175,650 was recorded
as
prepaid expenses and $175,650 was recorded as investor relations
expense.
During
the quarter ended September 30, 2005, the Company has increased its authorized
share capital from 50,000,000 to 500,000,000 shares of common stock with a
par
value of $0.001 per share.
Conversion
Feature of the convertible debenture
According
to EITF 98-5, the intrinsic value of the conversion feature of the convertible
debenture is $1,052,863. The whole amount has been recorded as interest expenses
in the statement of operations as the debentures are convertible at any time
during the specified periods and an increase in additional paid-in-capital
on
balance sheet.
8.
Share Purchase Warrants
5,884,990
Series “A” Warrants were expired during the nine-month period ended September
30, 2005.
During
the quarter ended September 30, 2005, the Company issued 134 Series “C”
Warrants. Each Series “C” Warrant entitles the holder to purchase 71,429 shares
of common stock of the Company at $0.44 per share for two years from the
Effective Date, but no later than February 15, 2008. The Company also issued
134
Series “D” Warrants. Each Series “D” Warrant entitles the holder to purchase
71,429 shares of common stock of the Company at $0.52 per share for three years
from the Effective Date, but no later than February 15, 2009. The Series “C” and
“D” Warrants are subject to redemption by the Company at $0.001 per Warrant at
any time commencing six months and twelve months, respectively, from the
Effective Date, provided the average closing bid price of the common stock
of
the Company equals or exceeds 175% of the respective exercise prices for 20
consecutive trading days.
As
of
September 30, 2005, 10 Series “B” warrants were outstanding which entitle the
holders to purchase a common share of the Company at $2.25 each on or before
March 31, 2006. 134 Series “C” warrants were outstanding which entitle the
holders to purchase 71,429 common shares of the Company at $0.44 each within
two
years from the Effective Date but no later than February 15, 2008. 134 Series
“D” warrants were outstanding which entitle the holders to purchase 71,429
common shares of the Company at $0.52 each within three years from the Effective
Date but no later than February 15, 2009.
The
fair
value of the Series “C” warrants issued was estimated at $24,286 each by using
the Black-Scholes Option Pricing Model with the following assumptions: dividend
yield of 0%, expected volatility of 141%, risk-free interest rates of 3.14%,
and
expected lives of two years.
The
fair
value of the Series “D” warrants issued was estimated at $27,143 each by using
the Black-Scholes Option Pricing Model with the following assumptions: dividend
yield of 0%, expected volatility of 158%, risk-free interest rates of 3.26%,
and
expected lives of three years.
9.
Stock Options
On
February 24, 2005, 495,000 stock options at $0.30 each were
exercised.
On
September 1, 2005, the Company granted 3,090,000 stock options to consultants
and employees with an exercise price of $0.35 each and $0.40 each for 2,590,000
and 500,000 stock options, respectively, expiring on September 1, 2015. These
stock options were all exercised on the date of grant.
The
Company accounts for stock-based compensation using the intrinsic value method
prescribed by Accounting Principles Board Opinion No. 25, “Accounting for Stock
Issued to Employees,” under which no compensation cost for stock options is
recognized for stock options awards granted at or above fair market value.
Had
compensation expense for the Company’s stock-based compensation plans been
determined under FAS No. 123, based on the fair market value at the grant dates,
the Company’s pro forma net loss and pro forma net loss per share would have
been reflected as follows at September 30:
|
|
2005
|
|
2004
|
|
Net
loss
|
|
|
|
|
|
As
reported
|
|
$
|
(7,776,108
|
)
|
$
|
(151,846
|
)
|
Stock-based
employee compensation cost, net of tax
|
|
|
(301,600
|
)
|
|
-
|
|
Proforma
|
|
$
|
(8,077,708
|
)
|
$
|
(151,846
|
)
|
|
|
|
|
|
|
|
|
Loss
per share
|
|
|
|
|
|
|
|
As
reported
|
|
$
|
(0.46
|
)
|
$
|
(0.01
|
)
|
Proforma
|
|
$
|
(0.48
|
)
|
$
|
(0.01
|
)
|
The
fair
values of the options grant during the nine-month period ended September 30,
2005, were from $0.13 to $0.14 each and were estimated on the date of grant
using the Black-Scholes option pricing model with the following weighted-average
assumption used for those options granted during the nine-month period ended
September 30, 2005: dividend yield of 0%, expected volatility of 132%, risk-free
interest rate of 2.78%, and an expected life of 1 year.
Options
outstanding at September 30, 2005 were 660,000 with option price of $0.30 each.
No options were canceled or forfeited during the nine-month period ended
September 30, 2005. The weighted average remaining contractual life is 1.81
years.
(Previously
known as Xin Net Corp.)
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
September
30, 2005
(
Unaudited )
10.
Related Party Transactions
During
the three-month and nine-month periods ended September 30, 2005, the Company
paid $9,182 and $19,571 to a director and an officer as wages and
benefits.
As
of
September 30, 2005, the Company has an amount of $21,531 due from a company
with a common director without interest or specific terms of
repayment.
As
of
September 30, 2005, the Company has an amount of $500 due to a director of
the
Company for expenses advanced on behalf of the Company. The amount is
non-interest bearing and is repayable on demand.
11.
Segment and Geographic Data
The
Company’s reportable segments are geographic areas and two operating segments,
the latter comprised of mobile communication and ESL education. Summarized
financial information concerning the Company’s reportable segments is shown in
the following table. The “Other” column includes corporate related items, and,
as it relates to segment profit (loss), income and expenses not allocated to
reportable segments.
A.
By geographic areas
|
|
China
|
|
Canada
|
|
Other
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
Three
months ended September 30, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
from continuing operations
|
|
$
|
1,190,328
|
|
$
|
53,100
|
|
$
|
-
|
|
$
|
1,243,428
|
|
Operating
income (loss)
|
|
|
89,897
|
|
|
465
|
|
|
(8,886,132
|
)
|
|
(8,795,770
|
)
|
Total
assets
|
|
|
9,984,876
|
|
|
128,825
|
|
|
2,706,439
|
|
|
12,820,140
|
|
Depreciation
|
|
|
-
|
|
|
765
|
|
|
-
|
|
|
765
|
|
Interest
income
|
|
|
24,202
|
|
|
9
|
|
|
-
|
|
|
24,211
|
|
Income
from discontinued operations
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Investment
in equity method investee
|
|
|
-
|
|
|
-
|
|
|
1
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
months ended September 30, 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
from continuing operations
|
|
$
|
888,082
|
|
$
|
95,383
|
|
$
|
-
|
|
$
|
983,465
|
|
Operating
income (loss)
|
|
|
(35,478
|
)
|
|
68,768
|
|
|
(11,230
|
)
|
|
22,060
|
|
Total
assets
|
|
|
9,214,140
|
|
|
145,885
|
|
|
172,468
|
|
|
9,532,493
|
|
Depreciation
|
|
|
1,419
|
|
|
794
|
|
|
42
|
|
|
2,255
|
|
Interest
income
|
|
|
30,282
|
|
|
8
|
|
|
-
|
|
|
30,290
|
|
Income
from discontinued operations
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Investment
in equity method investee
|
|
|
-
|
|
|
-
|
|
|
172,251
|
|
|
172,251
|
|
A.
By geographic areas
|
|
China
|
|
Canada
|
|
Other
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
Nine
months ended September 30, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
from continuing operations
|
|
$
|
3,376,829
|
|
$
|
160,408
|
|
$
|
-
|
|
$
|
3,537,237
|
|
Operating
income (loss)
|
|
|
351,823
|
|
|
(28,237
|
)
|
|
(9,074,733
|
)
|
|
(8,751,147
|
)
|
Total
assets
|
|
|
9,984,876
|
|
|
128,825
|
|
|
2,706,439
|
|
|
12,820,140
|
|
Depreciation
|
|
|
-
|
|
|
1,925
|
|
|
8
|
|
|
1,933
|
|
Interest
income
|
|
|
60,605
|
|
|
20
|
|
|
-
|
|
|
60,625
|
|
Income
from discontinued operations
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Investment
in equity method investee
|
|
|
-
|
|
|
-
|
|
|
1
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine
months ended September 30, 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
from continuing operations
|
|
$
|
888,082
|
|
$
|
218,298
|
|
$
|
-
|
|
$
|
1,106,380
|
|
Operating
loss
|
|
|
(34,781
|
)
|
|
(17,354
|
)
|
|
(42,734
|
)
|
|
(94,869
|
)
|
Total
assets
|
|
|
9,214,140
|
|
|
145,885
|
|
|
172,468
|
|
|
9,532,493
|
|
Depreciation
|
|
|
1,419
|
|
|
2,347
|
|
|
124
|
|
|
3,890
|
|
Interest
income
|
|
|
59,838
|
|
|
8
|
|
|
-
|
|
|
59,846
|
|
Income
from discontinued operations
|
|
|
-
|
|
|
(41,654
|
)
|
|
-
|
|
|
(41,654
|
)
|
Investment
in equity method investee
|
|
|
-
|
|
|
-
|
|
|
172,251
|
|
|
172,251
|
|
(Previously
known as Xin Net Corp.)
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
September
30, 2005
(
Unaudited )
B.
By operating segments
|
|
Mobile
communications
|
|
ESL
education
|
|
Other
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
For
the three months ended September 30, 2005
|
|
|
|
|
|
|
|
|
|
Revenue
from external customers
|
|
$
|
1,190,328
|
|
$
|
53,100
|
|
$
|
-
|
|
$
|
1,243,428
|
|
Intersegment
revenue
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Interest
revenue
|
|
|
5,310
|
|
|
9
|
|
|
18,892
|
|
|
24,211
|
|
Interest
expense
|
|
|
-
|
|
|
-
|
|
|
24,412
|
|
|
24,412
|
|
Depreciation
|
|
|
-
|
|
|
569
|
|
|
196
|
|
|
765
|
|
Segment
operation profit (loss)
|
|
|
7,221
|
|
|
7,697
|
|
|
(8,810,688
|
)
|
|
(8,795,770
|
)
|
Segment
assets
|
|
|
2,772,366
|
|
|
111,022
|
|
|
9,936,752
|
|
|
12,820,140
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For
the three months ended September 30, 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
from external customers
|
|
$
|
888,082
|
|
$
|
95,383
|
|
$
|
-
|
|
$
|
983,465
|
|
Intersegment
revenue
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Interest
revenue
|
|
|
6,711
|
|
|
4
|
|
|
23,575
|
|
|
30,290
|
|
Interest
expense
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Depreciation
|
|
|
1,419
|
|
|
746
|
|
|
90
|
|
|
2,255
|
|
Segment
operation profit (loss)
|
|
|
(34,078
|
)
|
|
38,032
|
|
|
18,106
|
|
|
22,060
|
|
Segment
assets
|
|
|
1,887,804
|
|
|
124,528
|
|
|
7,520,161
|
|
|
9,532,493
|
|
B.
By operating segments
|
|
Mobile
communications
|
|
ESL
education
|
|
Other
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
For
the nine months ended September 30, 2005
|
|
|
|
|
|
|
|
|
|
Revenue
from external customers
|
|
$
|
3,376,829
|
|
$
|
160,408
|
|
$
|
-
|
|
$
|
3,537,237
|
|
Intersegment
revenue
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Interest
revenue
|
|
|
14,280
|
|
|
20
|
|
|
46,325
|
|
|
60,625
|
|
Interest
expense
|
|
|
-
|
|
|
-
|
|
|
24,414
|
|
|
24,414
|
|
Depreciation
|
|
|
-
|
|
|
1,646
|
|
|
287
|
|
|
1,933
|
|
Segment
operation profit (loss)
|
|
|
268,309
|
|
|
21,288
|
|
|
(9,040,744
|
)
|
|
(8,751,147)
|
)
|
Segment
assets
|
|
|
2,772,366
|
|
|
111,022
|
|
|
9,936,752
|
|
|
12,820,140
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For
the nine months ended September 30, 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
from external customers
|
|
$
|
888,082
|
|
$
|
218,298
|
|
$
|
-
|
|
$
|
1,106,380
|
|
Intersegment
revenue
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Interest
revenue
|
|
|
6,711
|
|
|
8
|
|
|
53,127
|
|
|
59,846
|
|
Interest
expense
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Depreciation
|
|
|
1,419
|
|
|
2,204
|
|
|
267
|
|
|
3,890
|
|
Segment
operation profit (loss)
|
|
|
(34,078
|
)
|
|
(5,268
|
)
|
|
(55,523
|
)
|
|
(94,869
|
)
|
Segment
assets
|
|
|
1,887,804
|
|
|
124,528
|
|
|
7,520,161
|
|
|
9,532,493
|
|
ITEM
2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF
OPERATIONS
The
information presented here should be read in conjunction with China Mobility
Solutions, Inc.'s consolidated financial statements and related notes. In
addition to historical information, the following discussion and other parts
of
this document contain certain forward-looking information. When used in this
discussion, the words "believes," "anticipate," "expects," and similar
expressions are intended to identify forward-looking statements. Such statements
are subject to certain risks and uncertainties, which could cause actual results
to differ materially from those projected due to a number of factors beyond
the
Company's control. The Company does not undertake to publicly update or revise
any of its forward-looking statements even if experience or future changes
show
that the indicated results or events will not be realized. Readers are cautioned
not to place undue reliance on these forward-looking statements, which speak
only as of the date hereof. Readers are also urged to carefully review and
consider the Company's discussions regarding the various factors, which affect
its business, included in this section and elsewhere in this
report.
CRITICAL
ACCOUNTING POLICIES
Our
discussion and analysis is based upon our consolidated financial statements,
which have been prepared in accordance with accounting principles generally
accepted in the United States. The preparation of these financial statements
requires us to make estimates and judgments that affect the reported amounts
of
assets, liabilities, revenues and expenses, and related disclosure of contingent
assets and liabilities. On an on-going basis, we evaluate our estimates,
including those related to revenue recognition, accounts receivable and
allowance for doubtful accounts, intangible and long-lived assets, and income
taxes. We base our estimates on historical experience and on various other
assumptions that are believed to be reasonable under the circumstances, the
results of which form the basis for making judgments about the carrying values
of assets and liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates under different assumptions
or
conditions.
An
accounting policy is deemed to be critical if it requires an accounting estimate
to be made based on assumptions about matters that are highly uncertain at
the
time the estimate is made, and if different estimates that reasonably could
have
been used or changes in the accounting estimate that are reasonably likely
to
occur could materially change the financial statements. We believe the following
critical accounting policies reflect our more significant estimates and
assumptions used in the preparation of our consolidated financial
statements:
RESULTS
OF OPERATIONS FOR THE QUARTER ENDED SEPTEMBER 30, 2005 AS COMPARED TO THE
QUARTER ENDED SEPTEMBER 30, 2004
Revenues.
The Company had revenues of $1,243,428 in the third quarter of 2005 compared
to
$983,465 in the third quarter of 2004 in the form of net sales of Mobile
marketing services (Quicknet) of $1,190,328 and education courses (Windsor)
of
$53,100. The Company incurred operating expenses of $9,654,050 in the third
quarter of 2005 compared to operating expenses of $709,908 in the third quarter
of 2004. The Company had an operating loss of $8,795,770 in the third quarter
of
2005, and a net loss of $8,777,699 compared to an operating income of $22,060
and a net income of $52,359 in the third quarter in 2004. The huge difference
is
mainly caused by the “fair value of warrants issued” totaled at $6,891,470.
Business
Segments
During
the quarter, the Company had revenues in two segments:
|
|
|
|
Mobile
marketing services
|
|
$
|
1,190,328
|
|
Windsor
- ESL Education
|
|
$
|
53,100
|
|
The
cost of revenue in each segment was:
|
|
|
|
|
Mobile
marketing services
|
|
$
|
368,552
|
|
Windsor
|
|
$
|
16,596
|
|
The
gross profit from each of the business segments was:
|
|
|
|
|
Mobile
|
|
$
|
821,776
|
|
Windsor
|
|
$
|
36,504
|
|
|
|
$
|
858,280
|
|
Note:
Quicknet is the operating subsidiary in China which provides mobile solutions
such as mobile marketing services by cell phone advertisement to enterprises
in
China. On September 30, 2005, the Company acquired the remaining 49% of
ownership of Quicknet through exercising its option under the original
acquisition agreement.
Net
Income/Loss per share: The per share loss for the third quarter of 2005 was
$0.49, and the per share earnings for the third quarter of 2004 was
$0.00
RESULTS
OF OPERATIONS FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2005 COMPARED TO
THE
SAME PERIOD ENDED SEPTEMBER 30, 2004
The
Company had revenues of US$3,537,237 in the period ended September 30, 2005,
compared to US$1,106,380 in the same period in 2004. The Company had a cost
of
revenue of $946,636 in the period in 2005 compared to $279,870 in the same
period in 2004. The revenue has been deferred into the 12-month period which
is
the service period according to the US GAAP. The Company incurred expenses
of
$11,341,748 in the nine-month period in 2005 and $921,379 in expenses in the
period in 2004. The expenses in the nine-month period in 2005 includes
US$1,052,863 of intrinsic value of the conversion feature of the convertible
debenture (see Note 7 of the financial statements for details), a 10% sales
commission equal to $359,500, a 3% non-accountable expense allowance of $100,500
which is related to a convertible debenture completed on Aug.15, 2005, a
US$126,000 stock-based compensation and a U$6,891,470 “fair value of warrants
issued”. Net cash provided by operating activities is US$1,791,120 in the
nine-month period in 2005 compared to US$306,567 in the same period in 2004.
The
operating (losses) in the periods in 2005 and 2004 were ($8,751,147) and
($94,869) respectively, after interest income of $60,625 and $59,846 in 2005
and
2004, respectively, and adjustment for minority interests (in QuickNet in 2005),
the Company had a loss from continuing operations in the period in 2005 of
($8,828,971) and in 2004 of (110,192).
The net loss per share was $0.43 in the period in 2005 compared to ($0.01)
in
the period in 2004.
The
Company expects the trend of losses to continue at about the same rate in the
succeeding periods.
Business
Segment Revenue
During
the nine month period in 2005, the Company had revenues in two
segments:
|
|
|
|
Mobile
marketing services
|
|
$
|
3,376,829
|
|
Windsor
- ESL Education
|
|
$
|
160,408
|
|
The
gross profit from each of the business segments was:
|
|
|
|
|
Mobile
marketing services
|
|
$
|
2,473,807
|
|
Windsor
- ESL Education
|
|
$
|
116,794
|
|
Changes
in Financial Condition:
At
the
end of the third quarter of 2005, Company had assets of $12,820,140 compared
to
$6,447,030 at year-end 2004. The current assets totaled $8,010,631 at the end
of
the third quarter of 2005 compared to $5,466,574 at 2004 year-end. Total current
liabilities at the end of the third quarter of 2005 were $8,163,831 compared
to
$2,452,522 at 2004 year-end. At September 30, 2005 the Company had $ 7,634,523
in cash compared to $5,380,622 at year-end 2004.
LIQUIDITY
AND CAPITAL RESOURCES
The
Company had cash capital of $7,634,523 at the quarter ended September 30, 2005.
The Company has no other capital resources other than the ability to use its
common stock to achieve additional capital raising. Other than cash capital,
its
other assets would be illiquid.
At
the
quarter ended September 30, 2005 it had $8,010,631 in current assets and current
liabilities of $8,163,831.
The
cash
capital at the end of the period of $7,634,523 will be used to fund continuing
operations.
Net
cash
flows provided by operating activities increased to $1,791,120 for the quarter
ended September 30, 2005.
On
September 30, 2005, the Company acquired the remaining 49% of Quicknet that
it
did not own, and paid US$2,000,000 on September 30, 2005. Another US$2,000,000
will be paid before December 31, 2005, which is included as part of the accounts
payable as of September 30, 2005. The Company raised US$1,115,000 through
issuing common stock and US$3,350,000 through issuing convertible debentures
during the quarter ended September 30, 2005.
Need
for Additional Financing:
The
Company believes it has sufficient capital to meet its short-term cash needs,
including the costs of compliance with the continuing reporting requirements
of
the Securities Exchange Act of 1934. However, if losses occur it may have to
seek loans or equity placements to cover longer term cash needs to continue
operations and expansion.
No
commitments to provide additional funds have been made by management or other
stockholders. Accordingly, there can be no assurance that any additional funds
will be available to the Company to allow it to cover operations
expenses.
If
future
revenue declines, or operations are unprofitable, it will be forced to develop
another line of business, or to finance its operations through the sale of
assets it has, or enter into the sale of stock for additional capital, none
of
which may be feasible when needed. The Company has no specific management
ability, or financial resources or plans to enter any other business as of
this
date.
From
the
aspect of whether it can continue toward the business goal of maintaining and
expanding the businesses in Canada and grow the new business of mobile marketing
services in China, it may use all of its available capital without generating
a
profit.
The
effects of inflation have not had a material impact on its operation, nor is
it
expected to in the immediate future.
Market
Risk:
The
Company does not hold any derivatives or investments that are subject to market
risk. The carrying values of any financial instruments, approximate fair value
as of those dates because of the relatively short-term maturity of these
instruments which eliminates any potential market risk associated with such
instruments.
Future
Trends:
For
the
Education Services side, we have operated for over two years now, the
competition is very fierce in the market. The Canadian government has tightened
its budget on English training for new immigrants, which lead to a termination
of government funding for Windsor, and this change had negative effects to
the
revenue of Windsor Education Academy.
The
Company has experienced growth in revenues in its Quicknet services, and it
anticipates future growth in revenues although China must always be viewed
as a
highly competitive market where profitability may be difficult to achieve or
sustain.
ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We
do not
have any material risk with respect to changes in foreign commodities prices
or
interest rates. We do not believe that we have any other relevant market risk
with respect to the categories intended to be discussed in this item of this
report.
Concentrations
and Risks
During
2005, about 78 % of the Company's assets were located in China and 22% of the
Company's assets were located in Canada. In addition, 96% of the Company’s
revenues were derived from customers in China and 4% of the Company’s revenues
were derived from customers in Canada.
In
2005
and 2004, the Company did not derive revenue from any one customer for more
than
10% of its total revenue.
ITEM
4. CONTROLS AND PROCEDURES
Quarterly
Evaluation of Controls
As
of the
end of the period covered by this quarterly report on Form 10-QSB, we evaluated
the effectiveness of the design and operation of our disclosure controls
and
procedures ("Disclosure Controls") as defined in Rules 13a -15(e) or 15d-15(e)
under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). This
evaluation ("Evaluation") was performed by our Chief Executive Officer and
Principal Accounting Officer, Angela Du, ("CEO") and Ernest Cheung, our
Principal Financial Officer ("CFO"). In this section, we present the conclusions
of our CEO and CFO based on and as of the date of the Evaluation, with respect
to the effectiveness of our Disclosure Controls and
Procedures.
Based
upon the Evaluation, our CEO and CFO determined that our disclosure controls
and
procedures are effective to ensure that information required to be disclosed
by
the issuer in the reports that it files or submits under the Exchange Act
is
recorded, processed, summarized and reported, within time periods specified
in
the Commission’s rules and forms. Our CEO and CFO have concluded that our
disclosure controls and procedures are effective to ensure that information
required to be disclosed by an issuer in the reports it files or submits
under
the Exchange Act is accumulated and communicated to the issuer’s management
including the CEO and CFO, to allow timely decisions regarding required
disclosure.
As
a
non-accelerated issuer, the Company is not required to provide management’s
assessment and report on the Company’s internal control over financial
reporting. However, in our Form 10-QSB for the period ended March 31, 2005,
we
determined that there were material weaknesses in our internal controls
in our
operations in China, that needed to be addressed by
management.
The
changes which we are in the process of implementing to our internal controls
over financial reporting could materially affect or are reasonably likely
to
materially affect those controls. However, management does not believe
such
material weakness in our internal controls did, in fact, affect our disclosure
controls and procedures.
The
Company has implemented document control procedures for its subsidiary
QuickNet
in its manual. These include:
A. Expenditure
controls/approvals and documentation by Board Committee for the subsidiary
in
China, Beijing QuickNet; and
B. Subscription
accounting and tracking for its subsidiary in China, Beijing
QuickNet.
The
Company is still working on the implementing such changes to our internal
controls and procedures based on the model framework created by the Committee
of
Sponsoring Organizations of the Treadway Commission (or “COSO”) and plans to
finish such revisions by December 31, 2005.
There
were changes in the Company’s document control procedures as stated above, for
its subsidiary QuickNet during the Company’s last fiscal quarter. However, no
other changes in the Company’s internal controls over financial reporting
identified in connection with the Evaluation occurred during the Company’s last
fiscal quarter that has materially affected, or is reasonably likely to
materially affect the Company’s internal controls over our financial
reports.
On
February 7, 2005, we were sued by Sino-I Technology Limited for $88,270 for
breach of warranty and a claim under a guaranty. Our counsel is vigorously
defending this action.
No
director, officer or affiliate of ours, and no owner of record or beneficial
owner of more than 5.0% of our securities, or any associate of any such
director, officer or security holder is a party adverse to us or has a material
interest adverse to us in reference to pending litigation.
We
raised
$3,350,000 in a private placement of our securities, on a "best efforts, all
or
none" basis (the "Offering") of 134 units (the "Units"). The Offering was for
$2
million with an over-subscription of up to $1,350,000. Each Unit was sold for
$25,000, consisting of $25,000 principal amount of senior convertible debentures
(the "Debentures"), and Class A Warrants and Class B Warrants, to purchase
shares of common stock, $0.001 par value (the "Common Stock"). The Debentures
are initially convertible at $0.35 per share for 71,429 shares of Common Stock;
mature on August 15, 2006 and accrue interest at a rate of not less than 6%
per
annum equal to the sum of 2% per annum plus the one-month London Inter-Bank
Offer Rate (LIBOR). The Debentures are subject to redemption at 125% of the
principal amount plus accrued interest commencing six months after the effective
date (the "Effective Date") of the registration statement concerning the
securities sold in the Offering.
In
addition, if for the 12 months ending August 15, 2006, the Company issues or
sells any shares of Common Stock or any equity or equity equivalent securities
(collectively, "Common Stock Equivalents") for a per share consideration less
than the Conversion Price on the date of such issuance or sale (a "Dilutive
Issuance"), then the Conversion Price shall be adjusted so as to equal the
value
of the consideration received or receivable by us (on a per share basis) for
the
additional shares of Common Stock or Common Stock Equivalents so issued. The
same provision applies to the warrants ending on their Expiration
Date.
Each
Unit
also includes: (i) Class A Warrants exercisable at $.44 per share to purchase
71,429 shares of Common Stock for two years from the Effective Date, but no
later than February 15, 2008; and (ii) Class B Warrants exercisable at $.52
per
share to purchase 71,429 shares of Common Stock for three years from the
Effective Date, but no later than February 15, 2009. The Class A and Class
B
Warrants are subject to redemption by the us at any time commencing six months
and twelve months, respectively, from the Effective Date; provided the average
closing bid price of the Common Stock equals or exceeds 175% of the respective
exercise prices for 20 consecutive trading days.
If
any
Event of Default occurs and at any time thereafter, the principal amount, all
accrued but unpaid interest on, and all other amounts payable under this
Debenture may be declared, and upon such declaration shall become, immediately
due and payable without presentment, demand, protest, or other notice of any
kind, all of which are expressly waived. An Event of Default includes: failure
to pay principal or interest when due; dissolution; an act of bankruptcy;
foreclosures; certain judgments; failure to perform any agreement contained
in
the Debenture and related transaction agreements; default on other indebtedness;
breach of any representation or warranty made in this transaction.
If
payment of the outstanding principal amount of the Debenture, together with
accrued unpaid interest thereon at the applicable rate of interest is not made
by such Accelerated Maturity Date (any date prior to the Maturity Date),
interest shall accrue (including from and after the date of the entry of
judgment in favor of the Holder in an action to collect the Debenture) at an
annual rate equal to the lesser of twelve percent (12%) or the maximum rate
of
interest permitted by applicable law.
Upon
an
Event of Default the Holder may (i) sue in equity or at law, or both, (ii)
enforce payment of the Debenture, or (iii) enforce any other legal or equitable
right of the holder of the Debenture.
Pursuant
to the Registration Rights Agreements entered into between the Company and
the
investors, the Company agreed to file the registration statement covering the
resale of all shares underlying the Debentures and Warrants no later than
September 15, 2005. If such registration statement was not filed by September
15, 2005, or declared effective within 90 days following the filing of such
registration statement, and/or certain other events occur, the Company shall
pay
to each investor liquidated damages equal to 2% of the purchase price per month
up to an aggregate of 16% of the purchase price.
The
Closing occurred on August 15, 2005, and we received total gross proceeds of
$3,350,000 and net proceeds of approximately $2,866,000, after deducting fees
payable to the placement agent and expenses of the Offering. These fees included
a 10% sales commission equal to $359,500, a 3% non-accountable expense allowance
of $100,500 (less $25,000 that was already paid as a non-refundable advance),
as
well as other transaction and legal expenses payable by the
Registrant.
The
net
proceeds received in the Offering will be used to support the growth of our
fixed assets and sales support offices, to launch our next four mobile business
solutions: Office Automation Solutions, Mobile Banking, Mobile Tax Services,
and
SMS-based Services for Police, to open approximately 15 small sales support
offices throughout China and to identify, analyze and finalize opportunities
for
the acquisition of other mobile solution companies in China intended to deliver
respective synergistic benefits. Other remaining proceeds from this Offering
will be used for research and development, and for working capital and general
corporate uses. Included in this amount is $250,000 to develop an investor
relations/public relations program.
The
Units
were offered to certain institutional and other accredited investors without
registration under the Securities Act, or state securities laws, in reliance
on
the exemptions provided by Section 4(2) of the Securities Act and Rule 506
of
Regulation D promulgated thereunder and in reliance on similar exemptions under
applicable state laws.
In
addition to the financing described above, on November 3, 2005, we adopted
a
2006 Non-Qualified Employee Stock Compensation Plan and filed a Registration
Statement on Form S-8 with the Commission in connection therewith, which
registered 2,000,000 shares of common stock for awards and 2,000,000 shares
of
common stock for issuance upon exercise of underlying stock options. To date,
none of the shares of common stock have been awarded and issued by the
Compensation Committee.
None.
We
held
our Annual Meeting of Shareholders on July 1, 2005, and the following actions
were passed by a majority vote of our outstanding shareholders entitled to
vote
thereat: (a) We elected two directors to hold office until the next annual
meeting of shareholders and qualification of their respective successors; (b)
the appointment of Moen and Company, as Independent Accountants for the annual
period ending December 31, 2004, was ratified; (c) the number of authorized
shares of common stock was increased to 500 million shares; and (d) the 2005
Stock Option Plan was adopted.
None.
Exhibits:
(a) Exhibits
are incorporated by reference.
Current
Reports on Form 8-K:
(a) |
On
August 26, 2005, we filed a
Form 8-K with the Commission. |
(b)
|
On
August 18, 2005, we filed a Form 8-K with the
Commission.
|
(c) |
On
August 18, 2005, we filed a Form 8-K with the
Commission.
|
(d) |
On
July 7, 2005, we filed a Form 8-K with the
Commission. |
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant
has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
|
|
|
|
CHINA
MOBILITY SOLUTIONS, INC.
(Registrant)
|
|
|
|
Date: July
24, 2006 |
By: |
/s/ Angela
Du |
|
Angela Du
Chief
Executive Officer and Principal Accounting
Officer
|
|
|
|
|
|
|
|
|
Date: July
24, 2006 |
By: |
/s/ Ernest
Cheung |
|
Ernest Cheung
Principal
Financial Officer
|