<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 MARCH 31, 2000.
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
Incorporation or Organization) Identification Number
21221 S. Western Avenue, Suite 215
Torrance, California 90501
-----------------------------------------------------------
(Address of Principal Executive Offices including Zip Code)
Registrant's telephone number, including Area Code: 310/328-7666
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 10-QSB for the quarterly period ended December 31, 1999.
Aggregate market value of voting stock held by non-affiliates of the registrant
at March 31, 2000: There is no public market for these securities as of March
31, 2000.
Number of shares of common stock outstanding at March 31, 2000: Common Stock -
20,363,078
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ASPAC COMMUNICATIONS, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
ASSETS
------
March 31, 2000 September 30, 1999
-------------- ------------------
(USD) (USD)
(Unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash 781,894 7,005
Prepaid expenses 20,851 5,820
Other receivable - YeeYoo 14,985 405
--------- --------
TOTAL CURRENT ASSETS 817,730 13,230
PROPERTY AND EQUIPMENT 52,315 39,714
OTHER ASSETS
Deferred offering cost 9,722 12,500
Organization costs 1,485 1,755
Other assets 61,830 10,607
--------- --------
TOTAL OTHER ASSETS 73,037 24,862
TOTAL ASSETS 943,082 77,806
========= ========
LIABILITIES AND STOCKHOLDER'S DEFICIENCY
----------------------------------------
CURRENT LIABILITIES
Accrued expenses 89,581 61,276
Accrued salaries 111,103 128,798
Advisory service agreement payable 30,000 30,000
Line of credit 214,488 111,946
Bank loan payable -- --
Notes payable - related parties -- 260,000
Notes payable - unrelated parties -- 255,000
Loan payable - employees -- 18,120
--------- --------
TOTAL CURRENT LIABILITIES 445,172 865,140
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,
20,126,264 shares issued and outstanding 2,037 2,008
Additional paid-in capital 1,419,492 93,592
Accumulated deficit during development stage (923,644) (882,934)
Accumulated other comprehensive income (loss) 25 --
--------- --------
TOTAL STOCKHOLDER'S DEFICIENCY 497,910 (787,334)
TOTAL LABILITIES AND
STOCKHOLDER'S DEFICIENCY 943,082 77,806
========= ========
</TABLE>
<PAGE>
ASPAC COMMUNICATIONS, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIENCY
FOR THE PERIOD FROM SEPTEMBER 26,1997
(INCEPTION) TO March 31,2000
----------------------------
(UNAUDITED)
-----------
<TABLE>
<CAPTION>
DEFICIT
ACCUMULATED ACCUMULATED
COMMOM ADDITIONAL DURING OTHER
STOCK PAID-IN DEVELOPMENT COMPREHENSIVE
SHARES AMOUNT CAPITAL STAGE INCOME TOTAL
---------- ------ ---------- ----------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Common stock issuance 40,000 $ 4 $ 96 $ - $ - $ 200
Net loss from September 26,
1997 (Inception) to
September 30, 1997 - - - (161,697) (161,697)
---------- ------ ---------- --------- ------------- ----------
Balance at
September 30, 1997 40,000 4 196 (161,697) - (161,497)
Common stock issuance 17,980,000 1,798 88,102 - - 89,900
Common stock issuance to
consultants for future
services to be rendered 2,000,000 200 (200) - - -
Net loss for the year ended
September 30, 1998 - - - (234,599) - (234,599)
---------- ------ ---------- --------- ------------- ----------
Balance at
September 30, 1998 20,020,000 2,002 88,098 (396,296) - (306,196)
Common stock issuance to 55,000 6 5,494 - - 5,500
officers
Net loss for the year ended
September 30, 1999 - - - (486,638) - (486,638)
---------- ------ ---------- --------- ------------- ----------
Balance at
September 30, 1999 20,075,000 2,008 93,592 (882,934) - (787,334)
Common stock issuance in
exchange for loan conversion 51,264 5 325,924 - - 325,929
Common stock issuance for
Cash 237,014 24 999,976 - - 1,000,000
Net income for the six-months
Ended March 31, 2000 (40,710) (40,710)
Foreign Exchange
Transaction Gain 25
---------- ------ ---------- --------- ------------- ----------
Balance at
March 31, 2000 20,363,078 2,037 1,419,492 (923,644) 25 497,910
========== ====== ========== ========= ============= ==========
</TABLE>
<PAGE>
ASPAC COMMUNICATIONS, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS AND SIX MONTHS ENDED MARCH 31, 2000 AND 1999,
AND FOR THE PERIOD
FROM SEPTEMBER 26 (INCEPTION) TO MARCH 31, 2000
(UNAUDITED)
-----------
<TABLE>
<CAPTION>
Sep.26, 1997
Three Month Ended Six Month Ended Six Month Ended (Inception) to
Mar.31, 2000 Mar. 31, 1999 Mar.31, 2000 Mar 31, 1999 Mar. 31 2000
------------ ------------- --------------- --------------- --------------
<S> <C> <C> <C> <C> <C>
NET SALES $ - $ - $ - $ - $ -
----------- ----------- ----------- ----------- -----------
OPERATING EXPENSES
Salaries 29,376 44,024 96,472 77,098 431,881
Lease expenses 21,731 8,937 47,159 14,201 132,759
Legal and professional fees 33,271 12,538 45,229 36,646 121,734
Consulting fees 2,416 1,690 6,817 1,690 37,831
Travel & Entertainment 9,989 5,552 15,413 14,107 56,691
Depreciation 2,382 720 4,765 1,395 11,352
Amortization of
organization costs 135 135 270 270 2,176
General office expense 24,607 13,181 51,836 26,251 169,245
----------- ----------- ----------- ----------- -----------
Total operating expenses 123,907 86,777 270,137 171,658 964,884
LOSS FROM OPERATIONS (123,907) (86,777) (270,137) (171,658) (964,884)
----------- ----------- ----------- ----------- -----------
OTHER INCOME (EXPENSE)
Registration
costs-withdrawn Form S-1 - - - - (158,650)
Interest expense (3,852) (5,322) (14,524) (8,805) (47,231)
Interest income 8,229 - 8,229 50 9,135
Other income (expense) (2564) 16 (2,239) 914 25
----------- ----------- ----------- ----------- -----------
Total other income (expense) (1,813) (5,306) (8,534) (7,841) (196,721)
INCOME (LOSS) BEFORE
EXTRAORDINARY ITEMS (122,094) (92,083) (278,671) (179,499) (1,161,605)
EXTRAORDINARY GAIN ON
EXTINGUISHMENTS OF DEBT - - 237,961 - 237,961
NET INCOME (LOSS) DURING
DEVELOPMENT STAGE $ (122,094) $ (92,083) $ (40,710) $ (179,499) $ (923,644)
=========== =========== =========== =========== ===========
OTHER COMPREHENSIVE INCOME
(LOSS)
Foreign Exchange
Translation Gain (Loss) (57) - 25 - 25
TOTAL COMPREHENSIVE INCOME
(LOSS) (122,151) (92,083) (40,685) (179,499) (923,619)
NET INCOME (LOSS) PER COMMON
SHARE $ (0.0060) $ (0.0046) $ (0.0424) $ (0.0090) $ (0.0459)
=========== =========== =========== =========== ===========
WEIGHTED AVERAGE NUMBER OF
SHARES 20,347,651 20,023,667 20,840,673 20,021,813 20,126,264
=========== =========== =========== =========== ===========
</TABLE>
<PAGE>
ASPAC COMMUNICATIONS, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS AND SIX MONTHS ENDED MARCH 31, 2000 AND 1999,
AND FOR THE PERIOD
FROM SEPTEMBER 26 (INCEPTION) TO MARCH 31, 2000
(UNAUDITED)
-----------
<TABLE>
<CAPTION>
Sep.26, 1997
Three Month Ended Six Month Ended Six Month Ended (Inception) to
Mar.31, 2000 Mar. 31, 1999 Mar.31, 2000 Mar 31, 1999 Mar. 31 2000
------------ ------------- --------------- --------------- --------------
<S> <C> <C> <C> <C> <C>
NET SALES $ - $ - $ - $ - $ -
---------- -------- ---------- --------- ----------
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net Income (loss) (122,094) (92,083) (40,710) (179,499) (923,644)
Adjustment to reconcile
net income (loss) to net
cash used in operating
activities:
Depreciation 2,382 720 4,765 1395 11,837
Amortization 135 135 270 270 1,215
Interest expense on
extinguished debt -- -- 7,821 -- 7,821
Gain on extinguishment
of debt -- -- (237,961) -- (237,961)
Loss on theft of fixed
assets 2,419 -- 2,419 -- 2,419
Write off registration
costs -- -- -- -- 120,000
Issuance of common stock
for services -- -- -- -- 5,500
Changes in assets and
liabilities (increase)
decrease in:
Prepaid expenses (16,333) 2,889 (15,032) (96) (20,852)
Other receivable (14,985) -- (14,581) -- (14,986)
Deferred offering cost 2,778 -- 2,778 -- (9,722)
Other assets (50,728) (7,343) (51,248) (7,343) (61,855)
Increase (decrease) in:
Account payable &
accrued expenses (37,415) 25,333 39,681 54,991 229,755
---------- -------- ---------- --------- ----------
Net cash used in
operating activities (233,841) (70,349) (301,798) (130,281) (890,473)
CASH FLOWS FROM INVESTING
ACTIVITES:
Purchase of property and
equipment (19,656) (1,812) (19,789) (1,812) (66,575)
Organizational costs -- -- -- -- (2,700)
Payments under advisory
service agreement -- (30,000) -- (30,000) (90,000)
---------- -------- ---------- --------- ----------
Net cash used in
investing activities (19,656) (31,812) (19,789) (31,812) (159,275)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Notes and Loans payable (5,500) 102,346 (6,129) 162,346 539,146
Line of Credit 40,943 -- 102,629 -- 214,575
Proceeds from sale of
common stock 1,000,000 -- 1,000,000 -- 1,090,100
Repayment of advances -- -- -- -- (12,155)
---------- -------- ---------- --------- ----------
Net cash provided by
financing activities 1,035,443 102,346 1,096,500 162,346 1,831,666
FOREIGN EXCHANGE TRANSLATION
LOSS (52) -- (71) -- (71)
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 781,894 185 774,842 253 781,847
========== ======== ========== ========= ==========
CASH AND CASH EQUIVALENTS -
BEGINNING OF PERIOD 0 4,716 7,005 4,648 0
CASH AND CASH EQUIVALENTS -
END OF PERIOD 781,894 4,901 781,847 4,901 781,847
========== ======== ========== ========= ==========
</TABLE>
<PAGE>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION - NONCASH TRANSACTION:
- -----------------------------------------------------------------------
The company incurred debt in the total amount of $162,500 under a securities
advisory service agreement and related stock subscription agreement and a legal
advisory service agreement. At March 31, 2000, the unpaid portion of this debt
amounted to $30,000. The company converted its notes payable of $527,000 and
accrued interests of these notes in the amount of $36,890 into 51,264 shares of
its common stock on December 31, 1999.
<PAGE>
ASPAC COMMUNICATIONS, INC. AND SUBSIDIARY
(A DEVELOPMEN STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF MARCH 31, 2000
--------------------
(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 interactive broadband Internet access and related value added
services 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 10-KSB for the year ended
September 30, 1999.
NOTE 2 - PRINCIPLE OF CONSOLIDATION
- -----------------------------------
The consolidated financial statements include the accounts of ASPAC
Communications, Inc., its Beijing Representative Office and its inactive
subsidiary, ASPAC Holdings, Inc. All significant inter-company balances
and transactions have been eliminated in consolidation
The Company maintains a Beijing Representative Office. All balances and
transactions as of and for the three-month period ended March 31, 2000 are
translated at the exchange rate in effect at the balance sheet date and at
the average exchange rate for the period presented, respectively.
NOTE 3 - NOTES PAYABLE
- ----------------------
On December 31, 1999, the holders of the notes payable agreed to surrender
the notes for conversion of the principal aggregated to $527,000 and the
accrued interest aggregated to $36,870, into 51,264 shares of the Company's
common stock at an exchange rate of $11 for one share of common stock. The
conversion of the related party notes is an extinguishment of related party
debt, accounted for as a credit to equity while the conversion of the
unrelated party notes is accounted for as a gain on extinguishment of debt
computed as the difference between the $11 conversion price and the
concurrent $1.50 private placement offering price (See Note 8) which gain
aggregated $237,961 at the conversion date.
NOTE 4 - LOAN PAYABLE - LINE OF CREDIT
- --------------------------------------
On March 31, 1999 the Company obtained a line of credit for up to
approximately $362,000 with an unrelated party. The term is two years and
outstanding balances under the line of credit accrued interest at a rate of
8% per annum with principal and accrued interest due upon demand. The
Company may repay all outstanding amounts at anytime without penalty, in
cash or common stock of the Company, at a conversion rate to be determined
and agreed by both parties. The outstanding balance as of March 31, 2000
totaled $214,488. In substance, this line of credit is not a convertible
debt since there is no fixed or indexed conversion rate. Therefore there
is no consideration of this debt in the computation of earnings per share.
<PAGE>
NOTE 5 - RELATED PARTIES
- ------------------------
Certain salaries are owed to related parties at March 31, 2000.
As discussed in the supplemental disclosure to the consolidated cash flow
statements and Note 6 and Note 10 (C), certain issuance of common stock in
connection with debt conversion to related parties occurred on December 31,
1999.
NOTE 6 - COMMITMENTS AND CONTINGENCIES
- --------------------------------------
(A) Employment Agreements
--------------------------
On August 3, 1998, the Company extended a previously existing employment
agreement (the "Agreement") with the Chairman of the Company. Under the
Agreement (i) the term of the Agreement is for the three years commencing
August 6, 1998, (ii) the executive shall be paid an annual salary of
$100,000 with participation in future stock options programs at amounts to
be determined by the Company's Board of Directors, (iii) $4,833 of the
total monthly salary is to be deferred until a date to be determined and
agreed by both parties. As of September 30, 1999 the salary was still being
deferred. (iv) the Agreement may be terminated by the Company for "good
cause" as defined in the Agreement, and (v) employment and all benefits
under the Agreement shall terminate upon the President's death or total
disability as defined in the Agreement.
On January 31, 2000, the Company and the Chairman executed an Amendment to
the Agreement in which the Chairman agreed to a reduction of his current
salary to $60,000 starting on February 1, 2000 in an effort to maintain the
operating expense of the Company during its development stage to a minimum.
All other points and commitments of the original Agreement remain intact
under the same terms and conditions.
(B) Operating Lease Agreement
-----------------------------
The Company leases two corporate office spaces and one automobile under
operating leases. The company terminated its lease with Barrister
Executive Suite on March 31, 2000 and started a three-year lease agreement
with Starwood/SVP L.L.C. ("Starwood") on April 1, 2000. The lease with
Starwood is for an office space in Torrance, California at $4,023.25 per
month. The lease can be extended for another three years after its
expiration. The car lease has a remaining term through the year 2000.
Lease expense for the six-months ended March 31, 2000 and 1999 aggregated
$47,159 and $14,201, respectively.
NOTE 7 - COMMON STOCK
- ---------------------
On December 31, 1999, the Company and all holders of the Company's
promissory notes entered into Debt Conversion Agreement to convert all note
principal and accrued interests into shares of common stock of the Company
at an exchange rate of $11.00 per share of common stock. At the date of
conversion, the amount of principal of the promissory notes was $527,000
and the accrued interest was $36,890 (See Note 4). As a result, the
principal and accrued interest were converted into 51,264 shares of the
Company's common stock. The shares were subsequently issued to note
holders on March 28, 2000.
On January 19, 2000, the Company issued 237,014 shares of its common stock
to private placement investors after the release of $1,000,000 from the
escrow of the private placement offering to the Company following the
accomplishment of the first escrow milestone, the signing of the Sino-
Foreign Joint Venture Contract.
<PAGE>
NOTE 8 - PRIVATE PLACEMENT
- --------------------------
During November 1999, and updated in December 1999, the Company issued a
private placement memorandum, pursuant to Rule 506 of Regulation D of the
Securities Act of 1933, as amended, to offer a minimum of 3,000 units and a
maximum of 4,000 units of common stock to accredited investors. Each unit
consists of 1,000 shares of the Company's common stock. The purchase price
for each unit is $1,500 or $1.50 per share. The Company's net proceeds
after placement discount and commissions but before offering expenses are
estimated to be 90% of the amount raised. As of the date of this report,
subscriptions for 3000 units or $4,500,000 have been received and fully
paid. The funds received have been deposited to an escrow account for the
benefit of the investors and distributed subject to stipulated milestones.
On January 7, 2000, $1,000,000 before offering expense and related
commissions was released to the Company based on the first milestone of
executing the Joint Venture Contract and on April 7, 2000, $3,500,000
before offering expenses and related commission was released to the Company
based on the second milestone of obtaining certain wireless frequency usage
rights in the People's Republic of China (see Note 12 (B)). The offering
was closed on March 31, 2000.
NOTE 9 - 2000 STOCK OPTION PLAN
- -------------------------------
On January 31, 2000, the Board of Directors adopted the 2000 Stock Option
Plan (the "Plan"). The Plan is for a period of five years and is
authorized to grant options for up to one million shares of the Company's
common stock. As of the date of this report, 475,000 shares of options
have been granted to its officers, directors, consultants and employees.
Stock options issued to employees for the quarter ended March 31, 2000 were
accounted for under APB 25 and accordingly, no compensation expense has
been recorded. Stock options to consultants were issued on March 31, 2000
and in accordance with SFAS 123 , the resulting consulting expense will be
recognized in future periods.
NOTE 10 - STOCK OPTIONS AGREEMENT
- ---------------------------------
On January 31, 2000, the Company executed Incentive Stock Option Agreements
with Jeffrey G. Sun, the Chief Executive Officer of the Company, and Steve
Li Chen, the Vice Chairman of the Company, granting each the option to
purchase one million shares of the Company's common stock at the purchase
price of $1.50 per share. The options are subjected to a 5-year vesting
provision with 20% vested on each anniversary of the date of grant until
fully vested. Pursuant to APB 25, no compensation expense has been
recognized for the quarter ended March 31, 2000.
NOTE 11 - WARRANT ISSUANCE
- --------------------------
On April 7, 2000, the Company issued warrants to its private placement
offering investors to purchase an aggregate 180,000 shares of the Company's
common stock at the price of $1.275 per share. The warrants are
immediately exercisable and will expire on April 7, 2003.
NOTE 12 - SUBSEQUENT EVENTS
- ---------------------------
(A) Reorganization with USA International Chemical, Inc.
--------------------------------------------------------
On May 4, 2000, the Company completed the reorganization ("Reorganization")
with USA International Chemical, Inc., a Delaware corporation publicly
traded on the OTC Bulletin Board ("USXC"). Under the Reorganization, USXC
acquired from ASPAC shareholders all outstanding common stocks of the
Company and issued one share of USXC's common stock for each one share of
ASPAC common stock acquired. As a result, the current shareholders of the
Company own approximately 93% of the outstanding common stock of USXC. At
the closing of the Reorganization, all officers and directors of USXC
resigned and the current officers and directors of ASPAC took their
respective office in USXC. The Company is in a process of amending the
Articles and Bylaws of USXC and changing its name to ASPAC Communications,
Inc. The reorganization was accounted for by the Company as a re-
capitalization.
<PAGE>
(B) Cooperation Agreement with Beijing Tianxin Chinsi Electronic
----------------------------------------------------------------
Technology, Ltd.
----------------
On April 6, 2000, the Company reached a Cooperation Agreement with Beijing
Tianxin Chinsi Electronic Technology, Ltd. ("Chinsi") , a communication
technology development company in the PRC. The Company agrees to issued
30,000 shares of its common stock to Chinsi in exchange for certain
wireless frequency usage rights to conduct initial trials of the Company's
broadband Internet services in Beijing.
(C) Agreement with CERNET
-------------------------
On April 18,2000, the Company reached an Agreement with CERNET. In this
Agreement, the Company agrees to issued 1,000,000 shares of its common
stock and transfer 5% of its equities in the Joint Venture to CERNET in
exchange for technical support, joint marketing efforts, and network
infrastructure development.
<PAGE>
PART II - MANAGEMENT'S DISCUSION AND ANALYSIS OR PLAN OF OPERATION
Results of Operation for the Three Months Ended March 31, 2000 as Compared to
- -----------------------------------------------------------------------------
the Three Months Ended March 31, 1999:
- --------------------------------------
Operating expenses increased 43% from $86,777 during the three months ended
March 31, 1999 to $123,907 during the three months ended March 31, 2000. The
increase primarily due to the increase in salaries, rent, travel &entertainment,
and general office expenses relating to the establishment of the Company's
Beijing Representative Office on March 1, 1999 and the increased legal fees in
connection with the Company's reorganization activities with USA International
Chemical, Inc.
The Company's net loss increased from $92,083 during the three months ended
March 31, 1999 to $122,094 during the three months ended March 31, 2000. The
increase in net loss primarily relates to the Company's continuing development
activities in line with the joint venture projects, establishment of the
Company's Beijing Representative Office, and the recent reorganization
activities with USA International Chemical, Inc.
Liquidity and Capital Resources and Certain Events Subsequent to March 31, 2000
- -------------------------------------------------------------------------------
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 and Internet networks and organizational
activities. To date, no revenues were generated from operation, and there is no
guarantee the Company will ever achieve profitable operations.
During the three months ended March 31, 2000 and March 31, 1999, the Company
received net cash of $1,035,443 and $102,346 from its financing activities,
respectively. The sources of these amounts were from (i) proceeds from sale of
common stock for cash through a private placement during the three months ended
March 31, 2000; (ii) withdrawal of $40,943 from a line of credit during the
three months ended March 31, 2000; (iii) repayment of shareholder and officer
advances in the amount of $5,500 during the three months ended March 31, 2000;
and (iv) the receipt of shareholder and officer loans and advances of $102,346
during the three months ended March 31, 1999.
During November 1999, and updated in December 1999, the Company issued a private
placement memorandum, pursuant to Rule 506 of Regulation D of the Securities Act
of 1933, as amended, to offer a minimum of 3,000 units and a maximum of 4,000
units of common stock to accredited investors. Each unit consists of 1,000
shares of the Company's common stock. The purchase price for each unit is
$1,500 or $1.50 per share. The Company's net proceeds after placement discount
and commissions but before offering expenses are estimated to be 90% of the
amount raised. As of the date of this report, subscriptions for 3000 units or
$4,500,000 have been received and fully paid. The funds received have been
deposited to an escrow account for the benefit of the investors and distributed
subject to stipulated milestones. On January 7, 2000, $1,000,000 before offering
expense and related commissions was released to the Company based on the first
milestone of executing the Joint Venture Contract and on April 7, 2000,
$3,500,000 before offering expenses and related commission was released to the
Company based on the second milestone of obtaining certain wireless frequency
channel usage rights in the People's Republic of China. The offering was closed
on March 31, 2000.
During the three months ended December 31, 1999, the Company and all holders of
the Company's promissory notes entered into Debt Conversion Agreement to convert
all note principal and accrued interests into shares of common stock of the
Company at an exchange rate of $11.00 per share of common stock. At the date of
conversion, the amount of principal of the promissory notes was $527,000 and the
accrued interest was $36,890. As a result, the
<PAGE>
principal and accrued interest were converted into 51,264 shares of the
Company's common stock. The shares were subsequently issued to note holders on
March 28, 2000.
The Company currently has a commitment to invest $3.25 million pursuant to the
Joint Venture Contract it entered with CERNET and Sino-Tech, dated December 31,
1999, and the Agreement with CERNET dated April 18, 2000, in exchange of 65% of
the equity in the Joint Venture. The Company will continue to evaluate possible
acquisitions of or investments in businesses, products, and technologies that
are complimentary to those of the Company, which may require the use of cash.
The Company believes that existing cash, investments and borrowings available
under its credit facilities will be sufficient for at least the next 9 months;
however, the Company may sell additional equity or debt securities or seek
additional credit facilities if it believes such actions would be a better way
to fund acquisition-related or other costs. Sales of additional equity or
convertible debt securities would result in additional dilution to the Company's
stockholders. The Company may need to raise additional funds sooner in order to
support more rapid expansion, develop new or enhanced services or products,
respond to competitive pressures, acquire complementary businesses or
technologies or take advantage of unanticipated opportunities. The Company's
future liquidity and capital requirements will depend upon numerous factors,
including the success of the service offered by the Company and its Joint
venture and competing technological and market developments.
The Company's proposed business operations in China are subject to significant
risks. These risks include, but are not limited to, the limited precedent for
the establishment of Sino-foreign cooperative joint ventures for the purpose of
engaging in the telecommunication and Internet industry in China, government
restrictions on foreign business ventures in China, government regulation of
foreign currency exchange and the general political environment in China.
The Company's successful transition from a development stage company to
profitable operations is dependent upon obtaining adequate financing to fund
current operations and the development of proposed joint ventures. The Company
will continue to seek funds in the form of line of credit and/or equity and debt
securities from third party sources as well as from its existing stockholders.
Subsequent Events
- -----------------
On April 6, 2000, the Company reached a Cooperation Agreement with Beijing
Tianxin Chinsi Electronic Technology, Ltd. ("Chinsi") , a communication
technology development company in the PRC. The Company agrees to issued 30,000
shares of its common stock to Chinsi in exchange for the certain wireless
frequency usage rights to conduct initial trials of the Company's Internet
services in Beijing.
On May 4, 2000, the Company completed the reorganization ("Reorganization") with
USA International Chemical, Inc., a Delaware corporation publicly traded on the
OTC Bulletin Board ("USXC"). Under the Reorganization, USXC acquired from
ASPAC shareholders all outstanding common stocks of the Company and issued one
share of USXC's common stock for each one share of ASPAC common stock acquired.
As a result, the current shareholders of the Company own approximately 93% of
the outstanding common stock of USXC. At the closing of the Reorganization, all
officers and directors of USXC resigned and the current officers and directors
of ASPAC took their respective office in USXC. The Company is in a process of
amending the Articles and Bylaws of USXC and changing its name to ASPAC
Communications, Inc.
On April 18,2000, the Company reached an Agreement with CERNET. In this
Agreement, the Company agrees to issued 1,000,000 shares of its common stock and
transfer 5% of its equities in the Joint Venture to CERNET in exchange for
technical support, joint marketing efforts, and network infrastructure
development.
<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: May 19, 2000 ASPAC COMMUNICATIONS, INC.
By: /s/ Jeffrey G. Sun
------------------
Jeffrey G. Sun
Chief Executive Officer
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<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
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<PERIOD-END> MAR-31-2000 MAR-31-1999
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