<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(_) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE FISCAL YEAR ENDED
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1998
Commission File No.
0-24441
ASPAC COMMUNICATIONS , INC.
-----------------------------
(Exact name of registrant as specified in its charter)
Delaware 95-4652797
-------------------------------- ------------------------
(State or Other Jurisdiction of I.R.S. Employer Identification
Incorporation or Organization) Number
2049 Century Park East, Suite 1200
Los Angeles, California 90067
------------------------------------------------------------
(Address of Principal Executive Offices including Zip Code)
Registrant's telephone number, including Area Code: 310/712-3288
Securities to be Registered Under Section 12(b) of the Act: None
Securities to be Registered Under Section 12(g) of the Act: Common Stock,
$.0001 Par Value
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or 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
Aggregate market value of voting stock held by non-affiliates of the registrant
at February 19, 1999: Currently there is no public market for these securities.
Number of shares of common stock outstanding at September 30, 1998: Common
Stock - 20,020,000
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ASPAC COMMUNICATIONS, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1998
(UNAUDITED)
ASSETS
------
<TABLE>
<S> <C>
CURRENT ASSETS
Cash $ 4,716
Prepaid expenses 6,389
--------
TOTAL CURRENT ASSETS 11,105
PROPERTY AND EQUIPMENT
Furniture and equipment 11,603
Less: accumulated depreciation 3,303
--------
TOTAL PROPERTY AND EQUIPMENT 8,300
OTHER ASSETS
Organization costs 2,160
Other assets 2,632
--------
TOTAL OTHER ASSETS 4,792
--------
TOTAL ASSETS $24,197
========
LIABILITIES AND STOCKHOLDER'S DEFICIENCY
----------------------------------------
CURRENT LIABILITES
Accrues expenses $ 77,808
Advisory service agreementpayable 60,000
Notes payable 280,000
---------
TOTAL CURRENT LIABILITES $ 417,808
STOCKHOLDER'S DEFICIENCY
Preferred stock, $0.0001 par value
20,000,000 shares authorized
Common stock, $0.0001 par value --
100,000,000 shares authorized
20,020,000 shares issued and 2,002
Additional paid-in capital 88,098
Accumulated deficit during development stage (483,711)
---------
TOTAL STOCKHOLDER'S DEFICIENCY (393,611)
---------
TOTAL LIABILITIES AND
STOCKHOLDER'S DEFICIENCY $ 24,197
=========
</TABLE>
<PAGE>
ASPAC COMMUNICATIONS, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDER'S DEFICIENCY
FOR THE PERIOD FROM SEPTEMBER 26, 1997
(INCEPTION) TO DECEMBER 31, 1998
--------------------------------
(UNAUDITED)
-----------
<TABLE>
<CAPTION> ACCUMULATED
DEFICIT
ADDITIONAL DURING
COMMON PAID-IN DEVELOPMENT
STOCK CAPITAL STAGE TOTAL
------ ------- --------- ---------
<S> <C> <C> <C> <C>
Common stock issuance $ 4 $ 196 $ - $ 200
Net loss from September 26,
1997 (Inception) to
September 30, 1997 - - (161,697) (161,697)
------ ------- --------- ---------
Balance at
September 30, 1997 4 196 (161,697) (161,497)
Common stock issuance 1,798 88,102 - 89,900
Common stock issued to
consultants for
future services to be
rendered 200 (200) - -
Net loss for
the year ended
September 30, 1998 - - (234,599) (234,599)
------ ------- --------- ---------
Balance at
September 30, 1998 $2,002 $88,098 $(396,296) $(306,196)
====== ======= ========= =========
Net loss from
October 1, 1998 to
to December 31, 1998 - - (87,415) (87,415)
Balance at
December 31, 1998 $2,002 $88,098 $(483,711) $(393,611)
====== ======= ========= =========
</TABLE>
<PAGE>
ASPAC COMMUNICATIONS, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
FOT THE PERIODS FROM OCTOBER 1, 1998 TO DECEMBER 31, 1998 AND
SEPTEMBER 26, 1997 (INCEPTION) TO DECEMBER 31, 1998
---------------------------------------------------
(UNAUDITED)
-----------
<TABLE>
<CAPTION>
October 1, 1998 October 1, 1997 Sept. 26,1997
to to (Inception) to
December 31, 1998 December 31, 1997 December 31, 1998
----------------- ----------------- -----------------
<S> <C> <C> <C>
NET SALES $ - $ - $ -
OPERATION EXPENSES
Salaries $ 35,500 $ 21,800 155,874
Rent 5,265 4,800 26,835
Office supplies & expenses 2,883 2,099 9,103
Payroll taxes 1,607 1,670 9,385
Payroll process 114 - 712
Telephone expenses 177 1,069 5,720
Parking fees 1,615 1,100 7,485
Insurance 2,159 1,032 7,843
Other taxes - 939 8,628
Legal and professional fees 24,107 640 55,316
Consulting fees - - 2,000
Travel expenses 8,555 - 13,078
Depreciation 675 485 3,303
Amortization of organization costs 135 - 540
Bank charges 25 195 270
Other expenses 2,064 160 9,064
----------- ----------- -----------
Total operating expenses 84,881 35,989 315,156
----------- ----------- -----------
FROM OPERATIONS (84,881) (35,989) (315,156)
----------- ----------- -----------
OTHER INCOME (EXPENSE)
Registration costs-withdrawn Form - (3,650) (158,650)
S-1
Interest income 50 432 906
Other income 899 - 907
Interest expense (3,483) (1,653) (11,718)
----------- ----------- -----------
Total other income (expense) (2,534) (4,871) (168,555)
----------- ----------- -----------
NET LOSS DURING
DEVELOPMENT STAGE $ (87,415) $ (40,860) $ (483,711)
=========== =========== ===========
NET LOSS PER COMMON SHARE $ (0.004) $ (0.003) $ (0.027)
=========== ============ ============
WEIGHTED AVERAGE NUMBER
OF SHARES 20,020,000 13,053,478 17,978,600
=========== ============ ============
</TABLE>
<PAGE>
ASPAC COMMUNICATIONS, INC. AND SUBSIIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE PERIODS FROM OCTOBER 1, 1998 TO DECEMBER 31, 1998 AND
SEPTEMBER 26, 1997 (INCEPTION) TO DECEMBER 31, 1998
---------------------------------------------------
(UNAUDITED)
-----------
<TABLE>
<CAPTION>
Oct. 1, 1998 Oct. 1, 1997 Sept. 26,1997
to to (Inception) to
Dec. 31,1998 Dec. 31,1997 Dec. 31,1998
------------ ------------ --------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVIES:
Net (loss) $(87,415) $(40,860) $(483,711)
Adjustment to reconcile net loss to net cash
used in operating activities:
Depreciation 675 485 3,788
Amortization 135 - 540
Write off registration Costs - - 120,000
Changes in assets and liabilities
(Increase) decrease in:
Prepaid expenses (2,985) (2,110) (6,389)
Other assets - (140) (232)
Increase (decrease) in:
Accrued expenses 29,658 (5,155) 77,808
-------- -------- ---------
Net cash used in investing activities (59,932) (47,780) (288,196)
-------- -------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchasing of property and equipment - (6,358) (12,088)
Organizational costs - (2,700) (2,700)
Payments under advisory service agreement - - (60,000)
Increase in other assets - - (2,400)
-------- -------- ---------
Net cash used in investing activities 0 (9,058) (77,188)
-------- -------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings 60,000 130,000 292,155
Proceeds from sale of common stocks 89,900 90,100
Repayment of advances - (12,155) (12,155)
Reduction of advisory services agreement payable - (60,000) -
-------- -------- ---------
Net cash provided by financing activities 60,000 147,745 370,100
-------- -------- ---------
INCREASED IN CASH AND CASH
EQUIVALENTS 68 90,907 4,716
CASH AND CASH EQUIVALENTS-
BEGINNING OF PERIOD 4,648 200 -
-------- -------- ---------
CASH AND CASH EQUIVALENTS-
END OF PERIOD $ 4,716 $ 91,107 $ 4,716
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION-NONCASH TRANSACTION:
The company incurred debt in the total amount of $150,000 under a securities
advisory service agreement and related stock subscription agreement. At December
30, 1998, the unpaid portion of this debt amounted to $60,000.
<PAGE>
ASPAC COMMUNICATIONS, INC. AND SUBSIDIARY
(A DEVELOPMEN STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1998
-----------------------
(UNAUDTED)
----------
NOTE 1 - BASIS OF PRESENTATION
- -------------------------------
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles and
the rules and regulations of the Securities and Exchange Commission for
interim financial information. Accordingly, they do not include all the
information and footnotes necessary for a comprehensive presentation of
financial position and results of operations.
It is management's opinion, however that all material adjustments
(consisting of normal recurring adjustments) have been made which are
necessary for a fair financial statements presentation. The results for
the interim period are not necessarily indicative of the results to be
expected for the year.
The Company is operating as a Development Stage Company and intends to
develop and/or construct telecommunication and internet networks in the Far
East including the People's Republic of China. The Company is also
considering operating in other parts of the world, including the United
States.
For further information, refer to the consolidated financial statements and
footnotes included in the company's Form 10KSB for the year ended September
30, 1998.
NOTE 2 - NOTES PAYABLE
- ----------------------
On November 1, 1998 and November 12, 1998, a current shareholder
of the Company executed two promissory notes for $30,000 each. The $60,000
note proceeds were deposited in their entirety into the Company's bank
accounts. Both notes are for a one-year period, can be prepaid or
extended, and bear interest at 5% per annum. If the notes are extended
past the maturity date, the interest rate will increase to 7% per annum.
On October 2, 1997 and October 27, 1997, June 1, 1998, August 1, 1998,
September 15, and September 30, 1998, current shareholders of the Company
had also executed five promissory notes for $60,000, $100,000, $10,000,
$21,000, $9,000 and $20,000, respectively, having the same terms and
conditions as the new notes. Therefore, as December 31, 1998, notes
payable aggregated $280,000.
NOTE 3 - AGREEMENT AND PLAN OF REORGANIZATION
- ---------------------------------------------
On November 9, 1998, the Company executed a Agreement and Plan of
Reorganization (the "Agreement") with IDN Telecom, Inc. ("IDN"), a
California corporation. The effective date of the Agreement is November
12, 1998 and the closing date of the Agreement is March 31, 1998, which can
be accelerated or extended with both parties' consents. If due diligence
was completed to the Company's satisfaction, the Company agreed to issue,
upon closing of the Agreement, 20,030,000 shares of common stock of the
Company to IDN's current shareholders in exchange for 100 percent of IDN's
common stocks outstanding.
After a careful due diligence review and analysis of IDN's representations
and financial information, the Company decided on February 11, 1999 to
rescind the Agreement, effective immediately.
<PAGE>
NOTE 4 - SUBSEQUENT EVENT
- -------------------------
On January 20, 1999, the Company entered into a Letter of Intent
to form a joint venture with two companies incorporated in the People's
Republic of China to provide satellite long distance backbone connections
and develop and provide fiber optic long distance backbone connections to
the China Education and Research Network ("CERNET"), and to cooperate in
developing network technology and its enhancement and network applications.
Under the terms of the Letter of Intent, the Company has agreed to make an
initial investment of $600,000 in the joint venture. The Company will
enter into a cooperation agreement which may require an additional
investment to obtain a 70% interest in the joint venture. If necessary,
the Company intends to borrow the funds to make such investment from its
current shareholders or through a offering or a private placement.
<PAGE>
PART II - MANAGEMENT'S DISCUSION AND ANALYSIS OR PLAN OF OPERATION
Results of Operation for the Three Months Ended December 31, 1998 as Compared to
- --------------------------------------------------------------------------------
the Three Months Ended December 31, 1997:
- -----------------------------------------
Operating expenses increased 236% from $35,989 during the three months ended
December 31, 1997 to $84,881 during the three months ended December 31, 1998.
The increase primarily related to an increase in legal and professional fees of
$24,107 relating to accounting matters and additional expenses incurred,
including travel expenses, in line with the Company's merger and proposed joint
venture projects.
The Company's net loss increased from $40,860 during the three months ended
December 31, 1997 to $87,415 during the three months ended December 31, 1998.
The increase in net loss primarily relates to the Company's continuing
development stage activities in line with the proposed merger and joint venture
projects and increased legal and professional fees.
Liquidity and Capital Resources and Certain Events Subsequent to September 30,
- ------------------------------------------------------------------------------
1998
- ----
The Company has not generated cash flow from operations to date. The Company's
current cash flow from operations is not capable of supporting existing business
operations in its present form. Since the beginning of its operation, the
Company has financed its development stage activities primarily through equity
investments and loans from its founding stockholders.
Since the Company started its operation of September 26, 1997, the Company
devotes substantially all of its efforts to developing joint ventures to
establish telecommunications networks and organizational activities. To date,
no revenues were generated from operation, and there is no guarantee the Company
will ever achieve profitable operation.
During the three months ended December 31, 1998, the Company received net cash
of $60,000 from its financing activities. The sources of this amount are two
promissory notes executed by one of the Company's current shareholders on
November 1, 1998 and November 12, 1998 for $30,000 each. As of December 31,
1998, the Company has eight promissory notes from its current shareholders and
one of its officers aggregate to $280,000.
The Company has obtained a verbal agreement and understanding from one of its
shareholders, Finhorn Enterprises Limited, that such shareholder will
financially assist the Company through loans or stock purchases or securing
third-party financing for the Company. At the same time, the Company will also
seek funds in the form of lines of credit and/or equity and debt offerings to
third parties as well as its existing shareholders to finance its operations and
capital requirement for its prospective joint ventures. There can be no
assurances that any sources of financing will be available from existing
shareholders or external sources on terms favorable to the Company or at all or
that the business of the Company will ever achieve profitable operations. In
the event the Company does not receive any such financing or generate profitable
operations, management's options will be to suspend or discontinue its business
activity in its present form.
Subsequent Event
- ----------------
On January 20, 1999, the Company entered into a Letter of Intent to form a joint
venture with two companies incorporated in the People's Republic of China to
provide satellite long distance backbone connections and develop and provide
fiber optic long distance backbone connections to the China Education and
Research Network ("CERNET"), and to cooperate in developing network technology
and its enhancement and network applications. Under the terms of the Letter of
Intent, the Company has agreed to make an initial investment of $600,000 in the
joint venture. The Company will enter into a cooperation agreement which may
require an additional investment to obtain a 70% interest in the joint venture.
If necessary, the Company intends to borrow the funds to make such investment
from its current shareholders or through a offering or a private placement.
<PAGE>
This Letter of Intent is preliminary in nature and is subject to the execution
of more definitive agreements and to the receipt of significant approvals and
permits from various governmental agencies in the PRC. There can be no
assurances that such definitive agreements will ever be consummated or that such
approvals or permits will be obtained for the benefit of the Company.
On November 9, 1998, the Company executed a Agreement and Plan of Reorganization
(the "Agreement") with IDN Telecom, Inc. ("IDN"), a California corporation. The
effective date of the Agreement is November 12, 1998 and the closing date of the
Agreement is March 31, 1998, which can be accelerated or extended with both
parties' consents. If due diligence was completed to the Company's
satisfaction, the Company agreed to issue, upon closing of the Agreement,
20,030,000 shares of common stock of the Company to IDN's current shareholders
in exchange of 100 percent of IDN's common stocks outstanding.
After a careful due diligence review and analysis of IDN's representations and
financial information, the Company decided on February 11, 1999 to rescind the
Agreement, effective immediately.
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities and Exchange Act of 1934,
the registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Dated: February 19, 1999 ASPAC COMMUNICATIONS, INC.
By: /s/ Marc F. Mayeres
--------------------
Marc F. Mayeres
President
Pursuant to the requirements of the Securities Act of 1934, as amended, this
Form has been signed below by the following persons in the capacities and on the
dates indicated.
Signature Title Date
- --------- ----- ----
/s/ Liancheng Ji Director February 19, 1999
- ----------------
Liancheng Ji
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS FOR THE THREE MONTHS ENDED DECEMBER 31, 1998 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> SEP-30-1999 SEP-30-1998
<PERIOD-START> OCT-01-1998 OCT-01-1997
<PERIOD-END> DEC-31-1998 DEC-31-1997
<CASH> 4,716 91,107
<SECURITIES> 0 0
<RECEIVABLES> 0 0
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 11,105 93,217
<PP&E> 11,603 11,603
<DEPRECIATION> 3,803 603
<TOTAL-ASSETS> 24,197 109,457
<CURRENT-LIABILITIES> 417,808 221,914
<BONDS> 0 0
0 0
0 0
<COMMON> 2,002 1,802
<OTHER-SE> 0 0
<TOTAL-LIABILITY-AND-EQUITY> 24,197 109,457
<SALES> 0 0
<TOTAL-REVENUES> 0 0
<CGS> 0 0
<TOTAL-COSTS> 84,881 35,989
<OTHER-EXPENSES> (899) 3,650
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 3,433 1,221
<INCOME-PRETAX> 0 0
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (87,415) (40,860)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (87,415) (40,860)
<EPS-PRIMARY> (0.004) (0.003)
<EPS-DILUTED> (0.004) (0.003)
</TABLE>
