<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 JUNE 30, 2000
Commission File No.
33-24608-LA
ASPAC COMMUNICATIONS, INC.
-----------------------------
(Exact name of registrant as specified in its charter)
Delaware 95-4068292
-------------------------------- -------------------------------------
(State or Other Jurisdiction of I.R.S. Employer Identification Number
Incorporation or Organization)
21221 South Western Ave. Suite 215
Torrance, California 91501
------------------------------------------------------------
(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, $.00001 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 [ ] NO [X]
Number of shares of common stock, $0.00001 par value, outstanding at June 30,
2000: 21,884,969
<PAGE>
<TABLE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ASPAC COMMUNICATIONS, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEET
<CAPTION>
ASSETS
------
June 30, 2000 September 30, 1999
------------- ------------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash $ 3,719,954 $ 7,005
Other receivable - YeeYoo -- 405
JV contribution receivable 350,000 --
Prepaid expenses 18,204 5,820
------------ ------------
TOTAL CURRENT ASSETS 4,088,158 13,230
PROPERTY AND EQUIPMENT 66,856 39,714
OTHER ASSETS
Deferred Offering Cost 12,500
Organization costs 1,350 1,755
Other assets 87,938 10,607
------------ ------------
TOTAL OTHER ASSETS 89,288 24,862
TOTAL ASSETS $ 4,244,302 $ 77,806
============ ============
LIABILITIES AND STOCKHOLDER'S DEFICIENCY
----------------------------------------
CURRENT LIABILITIES
Accrued expenses $ 44,177 61,276
Accrued salaries 112,441 128,798
Advisory service agreement payable 30,000 30,000
Line of credit -- 111,946
Loan payable - employees 3,500 18,120
Other payable 2,078 --
Notes payable - related parties -- 260,000
Notes payable - unrelated parties -- 255,000
------------ ------------
TOTAL CURRENT LIABILITIES 192,196 865,140
MINORITY INTEREST 306,628 --
STOCKHOLDER'S DEFICIENCY
Common stock, $0.00001 par value, 50,000,000 shares
authorized, 21,884,969 shares issued and outstanding 219 2,008
Additional paid-in capital 5,067,011 93,592
Accumulated deficit during development stage (1,165,908) (882,934)
Accumulated other comprehensive income (loss) (922) --
Less: Deferred stock compensation (154,922) --
------------ ------------
TOTAL STOCKHOLDER'S DEFICIENCY 3,745,478 (787,334)
------------ ------------
TOTAL LABILITIES AND
STOCKHOLDER'S DEFICIENCY $ 4,244,302 $ 77,806
============ ============
</TABLE>
<PAGE>
<TABLE>
ASPAC COMMUNICATIONS, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2000 AND 1999,
AND FOR THE PERIOD
FROM SEPTEMBER 26 (INCEPTION) TO JUNE 30, 2000
(UNAUDITED)
-----------
<CAPTION>
Sep.26, 1997
Three Month Ended Nine Month Ended (Inception) to
Jun. 30, 2000 Jun. 30, 1999 Jun. 30, 2000 Jun. 30, 1999 Jun. 30, 2000
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
NET SALES $ -- $ -- $ -- $ -- $ --
------------- ------------- ------------- ------------- -------------
OPERATING EXPENSES
Salaries 101,092 53,570 197,572 130,668 532,981
Lease expenses 27,662 16,268 74,821 30,470 160,421
Legal and professional fees 9,004 1,826 54,233 38,472 130,738
Consulting fees 20,989 17,129 27,807 18,819 58,821
Travel & Entertainment 3,202 10,596 18,615 24,703 59,893
Depreciation 3,150 867 7,915 2,262 14,503
Amortization of organization costs 135 135 405 405 1,350
Research and development 94,924 -- 97,099 -- 97,099
Stock based compensation 18,278 -- 18,278 -- 18,278
General office expense 28,250 20,637 80,086 46,887 197,494
------------- ------------- ------------- ------------- -------------
Total operating expenses 306,686 121,028 578,831 292,686 1,271,578
LOSS FROM OPERATIONS (306,686) (121,028) (578,831) (292,686) (1,411,578)
------------- ------------- ------------- ------------- -------------
OTHER INCOME (EXPENSE)
Registration costs-withdrawn Form S-1 -- -- -- -- (158,650)
Interest expense (4,489) (6,565) (19,014) (15,370) (51,721)
Penalties and Fines -- -- (145) -- (145)
Interest income 25,548 -- 33,777 50 34,683
Loss on Theft of Fixed Assets -- -- (2,418) -- (2,419)
Other income (expense) -- 5 325 919 2,589
------------- ------------- ------------- ------------- -------------
Total other income (expense) 21,059 (6,560) 12,525 (14,401) (175,662)
INCOME (LOSS) BEFORE
EXTRAORDINARY ITEMS (285,627) (127,588) (564,306) (307,087) (1,447,240)
EXTRAORDINARY GAIN ON
EXTINGUISHMENTS OF DEBT -- -- 237,960 -- 237,960
NET INCOME (LOSS) BEFORE
MINORITY INTEREST $ (285,627) $ (127,588) $ (326,346) $ (307,087) $(1,209,280)
============ ============ ============ ============ ============
MINORITY INTEREST IN LOSS 43,368 -- 43,372 -- 43,372
INCOME (LOSS) DURING
DEVELOPMENT STAGE (242,259) (127,588) (282,974) 307,087) (1,165,908)
============ ============ ============ ============ ============
OTHER COMPREHENSIVE INCOME (LOSS)
Foreign Exchange Translation Gain (Loss) (1,013) -- (922) -- (922)
TOTAL COMPREHENSIVE
INCOME (LOSS) (243,272) (127,588) (283,896) (307,087) (1,166,830)
============ ============ ============ ============ ============
NET INCOME (LOSS) PER
COMMON SHARE $ (0.0110) $ (0.0064) $ (0.0136) $ (0.0153) $ (0.0604)
============ ============ ============ ============ ============
WEIGHTED AVERAGE
NUMBER OF SHARES 22,064,484 20,075,000 20,823,747 20,039,542 19,326,141
============ ============ ============ ============ ============
</TABLE>
<PAGE>
<TABLE>
ASPAC COMMUNICATIONS, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2000 AND 1999,
AND FOR THE PERIOD
FROM SEPTEMBER 26 (INCEPTION) TO JUNE 30, 2000
(UNAUDITED)
-----------
<CAPTION>
Sep.26, 1997
Three Month Ended Nine Month Ended (Inception) to
Jun. 30, 2000 Jun. 30, 1999 Jun. 30, 2000 Jun. 30, 1999 Jun. 30, 2000
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (loss) $ (242,259) $ (127,588) $ (282,974) $ (307,087) $ (1,165,908)
Adjustment to reconcile net income (loss)
to net cash used in operating activities:
Minority interest in losses of
consolidated subsidiary (43,368) -- (43,372) -- (43,372)
Depreciation & Amortization 3,285 1,002 8,321 2,667 16,338
Interest expense on extinguished debt -- -- 7,821 -- 7,821
Gain on extinguishment of debt -- -- (237,961) -- (237,961)
Loss on theft of fixed assets -- -- 2,418 -- 2,418
Equipment impairment loss 642 -- 642 -- 642
Stock based compensation 18,278 -- 18,278 -- 18,278
Write off registration costs -- -- -- -- 120,000
Issuance of common stock for services -- -- -- -- 5,500
Changes in assets and liabilities
(increase) decrease in:
Account receivable -- -- 405 -- 405
Prepaid expenses 2,647 -- (12,384) (96) (18,204)
Advances (5,540) -- (6,042) -- (6,042)
Other receivable 14,985 -- -- -- (405)
Deferred offering cost 9,722 (12,500) 12,500 (12,500) --
Other assets (20,558) -- (71,304) (7,343) (81,911)
Increase (decrease) in:
Account payable & accrued expenses (41,998) 19,986 (2,314) 74,977 187,760
------------- ------------- ------------- ------------- -------------
Net cash used in operating activities (304,164) (119,100) (605,966) (249,382) (1,194,641)
CASH FLOWS FROM INVESTING ACTIVITES:
Purchase of property and equipment (18,328) (4,046) (38,117) (5,857) (84,903)
Organizational costs -- -- -- -- (2,700)
Payments under advisory service agreement -- -- -- (30,000) (90,000)
------------- ------------- ------------- ------------- -------------
Net cash used in investing activities (18,328) (4,046) (38,117) (35,857) (177,603)
CASH FLOWS FROM FINANCING ACTIVITIES:
Notes and Loans payable -- 125,046 (6,126) 287,392 539,149
Loan payable - employees 3,500 -- 3,500 -- 3,500
Line of Credit (214,526) -- (111,982) -- (36)
Proceeds from sale of common stock 3,472,500 -- 4,472,500 -- 4,562,600
Repayment of advances -- -- -- -- (12,155)
------------- ------------- ------------- ------------- -------------
Net cash provided by financing activities 3,261,474 125,046 4,357,892 287,392 5,093,058
FOREIGN EXCHANGE TRANSLATION LOSS (922) -- (860) -- (20,188)
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 2,938,060 1,900 3,712,949 2,153 3,700,626
============= ============= ============= ============= =============
CASH AND CASH EQUIVALENTS -
BEGINNING OF PERIOD 781,894 4,901 7,005 4,648 0
CASH AND CASH EQUIVALENTS -
END OF PERIOD 3,700,626 6,801 3,719,954 6,801 3,700,626
============= ============= ============= ============= =============
</TABLE>
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 June 30, 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. On April 10, 2000, the Company issued
260,000 shares of common stock pursuant to a Private Placement Offering
Memorandum dated December 31, 1999.
<PAGE>
ASPAC COMMUNICATIONS, INC. AND SUBSIDIARY
(A DEVELOPMEN STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 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 to develop
interactive broadband communication and online services in the Far East
including the People's Republic of China.
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 joint
venture subsidiary, YeeYoo Network Information Technology, Ltd. All
significant inter-company balances and transactions have been
eliminated in consolidation.
All balances and transactions of the Company overseas subsidiaries as
of and for the three-month period ended June 30, 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 - JOINT VENTURE CONTRIBUTION RECEIVABLE
----------------------------------------------
On June 1, 2000, the Company's joint venture subsidiary, YeeYoo Network
Information Technology, Ltd. ("YeeYoo") started operation. The
registered capital of YeeYoo is $1,000,000, towards which the Company
contributed $650,000 in exchange for 65% of YeeYoo's equity and the
other joint venture partners will contribute $350,000 for the remaining
35% of YeeYoo's equity.
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. In June
2000, the Company paid off the entire outstanding balance equivalent of
$234,418. As of June 30, 2000, there is no outstanding balance on this
line of credit.
<PAGE>
NOTE 5 - RELATED PARTIES
------------------------
Certain salaries are owed to related parties at June 30, 2000. On June
30, 2000, the YeeYoo subsidiary has $350,000 joint venture contribution
receivable from related parties (see Note 3). YeeYoo subsidiary started
an office lease and an automobile lease with a related party in June,
2000 (see Note 6 (A)).
NOTE 6 - COMMITMENTS AND CONTINGENCIES
--------------------------------------
(A) Operating Lease Agreement
-----------------------------
The Company and its subsidiaries lease two corporate office spaces and
two automobiles under operating leases. The Company terminated its
lease with Barrister Executive Suite on June 30, 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 Company's Beijing
Representative Office terminated its office lease with Beijing New
Century Hotel Office Building on May 31, 2000. On June 1, 2000, the
Company's YeeYoo subsidiary started an office lease with Beijing
Sino-Tech Technology Development Center ("Sino-Tech"), a related party.
The office lease with Sino-Tech is for one year term at approximate
$1,900 per month. On June 10, 2000, YeeYoo leased two automobiles from
Sino-Tech and an unrelated party for approximate $300 and $1200 per
month, respectively. Both car leases are for one year term.
Lease expense for the three-months ended June 30, 2000 and 1999
aggregated $27,662 and $16,268, respectively.
NOTE 7 - COMMON STOCK
---------------------
On April 6, 2000, the Company reached a Cooperation Agreement with
Beijing Tianxing Chinsi Electronic Technology, Ltd. ("Chinsi") , a
communication technology development company in the PRC. The Company
agreed to issue 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. The stock
issuance was authorized by the Board of Directors of the Company on
July 18, 2000 and the shares were subsequently issued on July 21, 2000.
On January 7, 2000 and April 10, 2000, the Company issued 237,014 and
2,762,986 shares of its common stock, respectively, to private
placement investors for $4,472,500, net of cash offering cost of
$27500. On April 10, 2000, the Company also approved the issuance of
260,000 shares of its common stock to certain finders pursuant to the
Private Placement Offering Memorandum dated December 31, 1999. The
260,000 shares were subsequently issued on July 27, 2000. The shares
were recorded as outstanding at June 30, 2000 at par value with an
offsetting charge to additional paid-in capital.
On May 2, 2000, the Company reduced its outstanding common stock and
credited its Additional Paid in Capital $300 as a result of canceling
3,000,000 shares of its common stock issued to Finhorn Enterprises,
Ltd., the Company's principal and majority shareholder. The
cancellation was based on mutual agreement between the parties.
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, all outstanding common stocks of the Company were
exchanged into USXC's common stock on one-for-one basis. As a result of
this Reorganization, the Company's total number of common shares
outstanding was increased by 1,498,705 to 21,884,969. 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 amended the Articles and Bylaws of USXC and changed
its name to ASPAC Communications, Inc. on June 20, 2000. The
Reorganization was accounted for by the Company as a re-capitalization.
<PAGE>
NOTE 8 - 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 were accounted for
under APB 25 and accordingly, no compensation expense has been
recorded. Stock options to consultants were issued in accordance with
SFAS 123. As a result, $154,922 deferred compensation expense and
$18,278 stock based compensation expense were recognized in the three
months ended June 30, 2000.
NOTE 9 - WARRANT ISSUANCE
-------------------------
On April 7, 2000, the Company issued warrants to its private placement
offering investors and certain finders to purchase an aggregate 201,000
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 10 - Agreement with CERNET
-------------------------------
On April 18,2000, the Company reached an Agreement with CERNET. In this
Agreement, the Company agreed to issue 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. As of June 30, 2000, the transaction has
not been closed.
NOTE 11 - SUBSEQUENT EVENTS
---------------------------
(A) Engagement Agreement
------------------------
On July 5, 2000, the Company reached an Engagement Agreement with its
corporate attorney and agreed to issue 20,000 shares of common stock
for services at discounted rate.
<PAGE>
PART II - MANAGEMENT'S DISCUSION AND ANALYSIS OR PLAN OF OPERATION
OVERVIEW
--------
ASPAC Communications, Inc. ("ASPAC") is currently actively engaged in the
development of wireless broadband interactive communication and online services
in the People's Republic of China ("PRC") through its joint venture subsidiary
YeeYoo Network Information Technology, Ltd. ("YeeYoo"). The joint venture
agreement was reached with China Education and Research Network ("CERNET") and
Beijing Sino-Tech Science and Technology Development Center ("SINOTECH"). The
combination of CERNET and SINOTECH will provide the joint venture with access to
over 20,000 kilometers of nationwide fiber backbone and operation services,
reaching 35 major cities or over hundreds of million potential clients in the
PRC. Using the state-of-art point-to-multipoint wireless cable technology as the
"last-mile" solution, YeeYoo plans to offer high-speed Internet connections to
schools and business customers throughout the PRC.
RESULTS OF OPERATION FOR THE THREE MONTHS ENDED JUNE 30, 2000 AS COMPARED TO THE
--------------------------------------------------------------------------------
THREE MONTHS ENDED JUNE 30, 1999:
---------------------------------
Revenues
The Company is a development stage company and has not generated revenue to
date.
Operating Expense
Operating expenses increased 153% from $121,028 during the three months ended
June 30, 1999 to $306,686 during the three months ended June 30, 2000. The
increase primarily consists of increases from the following expenses:
(1) Salary. Salary expense increased 89% from $53,570 for the three months
ended June 30, 1999 to $101,092 for the three months ended June 30,
2000, resulted from the beginning of operation of the YeeYoo joint
venture and the Company's increased number of staff.
(2) Lease expense. Lease expense increased 70% from $16,268 for the three
months ended June 30, 1999 to $27,662 for the three months ended June
30, 2000, resulted from the beginning of operation of the YeeYoo joint
venture and the Company's relocation in April, 2000.
(3) Research and development. We incurred $94,924 of research and
development expense in the three months ended June 30, 2000. Research
and development expense primarily relates to system design and
engineering cost incurred during our network development for the YeeYoo
joint venture.
(4) Stock based compensation. For the three months ended June 30, 2000, we
recorded $173,200 deferred stock compensation andrecognized $18,278
expense related to amortization of deferred stock compensation.
Interest Income (Expense)
Interest income, net of interest expense, increased from $(6,565) for the three
months ended June 30, 1999 to $21,059 for the three months ended June 30, 2000.
The increase in interest income was primarily due to higher cash and short-term
investment balances as a result of the proceeds from our sale of the private
placement offering in January and April.
LIQUIDITY AND CAPITAL RESOURCES AND CERTAIN EVENTS SUBSEQUENT TO JUNE 30, 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 and sales of common stock.
<PAGE>
Since the Company started its operation on 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 June 30, 2000 and June 30, 1999, the Company
received net cash of $3,261,474 and $125,046 from its financing activities,
respectively. The sources of these amounts were from (i) $3,472,500 proceeds
from sale of common stock for cash, net of cash offering expense of $27,500,
during the three months ended June 30, 2000; (ii) cash payment of $214,526 on
the line of credit during the three months ended June 30, 2000; (iii) the
receipt of $3,500 advance from officers and directors during the three months
ended June 30, 2000; and (iv) the receipt of notes and loans of $125,046 during
the three months ended June 30, 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 offering was closed on March 31, 2000. 3,000 units were
subscribed and fully paid for by March 31, 2000. The Company's net proceeds,
after cash offering expenses of $27,500, were $4,472,500. On January 7, 2000,
$1,000,000 before offering expense and related commissions was released to the
Company by the escrow pursuant to the escrow condition. On April 7, 2000, the
balance of the fund, $3,500,000 before offering expenses and related commission
was released to the Company.
Our principal commitments consist of obligations outstanding under various
operating leases for our facilities and capital investment commitments to the
YeeYoo joint venture. Since the beginning of operation of our YeeYoo joint
venture during the three months ended June 30, 2000, we have experienced an
increase in our capital expenditures and operating lease arrangements,
consistent with the growth in our operations and staffing. We anticipate that
this will continue for the foreseeable future. The Company has invested $650,000
pursuant to the Joint Venture Contract, in exchange of 65% of the equity in the
Joint Venture. The Company has committed to invest up to $3.25 million for the
joint venture's capital expansion.
We expect to experience significant growth in our operating expenses for the
foreseeable future. We anticipate operating expense, sales and marketing
expense, and purchase of equipment will constitute the majority of the future
use of our cash resources. In addition, we may use our cash resources to acquire
or make investments in complementary products, technologies or businesses. We
believe that the net proceeds from our private placement offering will be
sufficient to meet our anticipated cash needs for working capital and capital
expenditures for the next twenty four months. Beyond this period, we may seek
additional equity or debt financing. 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. We can not assure
you that financing will be available in amounts or on terms acceptable to us, if
at all.
<PAGE>
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 July 5, 2000, the Company reached an Engagement Agreement with its corporate
attorney and agreed to issue 20,000 shares of common stock for services at
discounted rate.
<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: August 14, 2000 ASPAC COMMUNICATIONS, INC.
By: /S/ Jeffrey G. Sun
--------------------------
Jeffrey G. Sun
Chief Executive Officer
By: /S/ Marc F. Mayeres
--------------------------
Marc F. Mayeres
Chief Financial Officer
