x
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE
ACT
OF 1934
|
For
the quarter ended June 30,
2008
|
o
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE
ACT
OF 1934
|
For
the transition period
from
to
|
NEVADA
|
|
87-0618756
|
(State
or other jurisdiction of
|
|
(I.R.S.
Employer Identification No.)
|
incorporation
or organization)
|
|
|
Suite
1501, Bank of East Asia Harbour View Centre, 56
Gloucester
Road, Wanchai, Hong Kong, PRC
(Address
of principal executive offices)
|
|
(Zip
code)
|
Page
|
||
PART
I— FINANCIAL INFORMATION
|
||
Item
1
|
Financial
Statements
|
|
Condensed
Consolidated Balance Sheets as of June 30, 2008 (unaudited) and
December 31, 2007 (audited)
|
F-2
|
|
Condensed
Consolidated Statements of Operations and Comprehensive(Loss) Income
for
the Three Months and Six Months Ended June 30, 2008 and 2007
(unaudited)
|
F-3
|
|
Condensed
Consolidated Statements of Cash Flows for the Six
Months Ended June 30, 2008 and 2007 (unaudited)
|
F-4
|
|
Condensed
Consolidated Statements of Stockholders’ Equity for the Six
Months Ended June 30, 2008 (unaudited)
|
F-5
|
|
Notes
to Condensed Consolidated Financial Statements for the Six
Months Ended June 30, 2008 (unaudited)
|
F-6
to F-17
|
|
Item
2
|
Managements
Discussion and Analysis of Financial Condition and Results
of Operation
|
4
|
Item
3
|
Quantitative
and Qualitative Disclosures About Market Risk
|
7
|
Item
4T
|
Controls
and Procedures
|
8
|
PART
II—OTHER INFORMATION
|
||
Item
1
|
Legal
Proceedings
|
8
|
Item
1A
|
Risk
Factors
|
8
|
Item
2
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
18
|
Item
3
|
Defaults
Upon Senior Securities
|
18
|
Item
4
|
Submission
of Matters to a Vote of Security Holders
|
19
|
Item
5
|
Other
Information
|
19
|
Item
6
|
Exhibits
|
19
|
SIGNATURES
|
19
|
Page
|
|
Condensed
Consolidated Balance Sheets as of June 30, 2008 and December
31,
2007
|
F-2
|
Condensed
Consolidated Statements of Operations And Comprehensive Income
for the
three and six months ended June 30, 2008 and 2007
|
F-3
|
Condensed
Consolidated Statements of Cash Flows for the six months ended
June 30,
2008 and 2007
|
F-4
|
Condensed
Consolidated Statement of Stockholders’ Equity for the six months ended
June 30, 2008
|
F-5
|
Notes
to Condensed Consolidated Financial Statements
|
F-6
to F-17
|
June 30, 2008
|
December 31, 2007
|
||||||
(Unaudited)
|
(Audited)
|
||||||
ASSETS
|
|||||||
Current
assets:
|
|||||||
Cash
and cash equivalents
|
$
|
543,064
|
$
|
3,597
|
|||
Inventories
|
106,241
|
-
|
|||||
Prepayments
and other receivables
|
338,298
|
26,636
|
|||||
Total
current assets
|
987,603
|
30,233
|
|||||
Non-current
assets:
|
|||||||
Investment
in an unconsolidated affiliate
|
-
|
8,463,464
|
|||||
Intangible
assets, net
|
5,306,966
|
5,603,129
|
|||||
Land
use right, net
|
2,973,184
|
-
|
|||||
Property,
plant and equipment, net
|
7,090,323
|
2,082
|
|||||
TOTAL
ASSETS
|
$
|
16,358,076
|
$
|
14,098,908
|
|||
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|||||||
Current
liabilities:
|
|||||||
Short-term
bank loans
|
$
|
1,700,686
|
$
|
-
|
|||
Bill
payable
|
496,033
|
-
|
|||||
Accounts
payable
|
74,846
|
-
|
|||||
Amount
due to a related party
|
240,254
|
128
|
|||||
Deferred
revenue
|
149,139
|
400,290
|
|||||
Income
tax payable
|
-
|
1,439,376
|
|||||
Other
payables and accrued liabilities
|
1,852,569
|
197,697
|
|||||
Total
current liabilities
|
4,513,527
|
2,037,491
|
|||||
TOTAL
LIABILITIES
|
$
|
4,513,527
|
$
|
2,037,491
|
|||
Commitments
and contingencies
|
|||||||
Stockholders’
equity:
|
|||||||
Common
stock, $0.001 par value; 50,000,000 shares authorized; 37,898,251
shares
and 37,898,251 shares issued and outstanding as of June 30, 2008
and
December 31, 2007
|
37,898
|
37,898
|
|||||
Additional
paid-in capital
|
6,901,232
|
6,901,232
|
|||||
Accumulated
other comprehensive income
|
601,187
|
171,652
|
|||||
Retained
earnings
|
4,304,232
|
4,950,635
|
|||||
Total
stockholders’ equity
|
11,844,549
|
12,061,417
|
|||||
TOTAL
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
$
|
16,358,076
|
$
|
14,098,908
|
Three months ended June 30,
|
Six months ended June 30,
|
||||||||||||
2008
|
2007
|
2008
|
2007
|
||||||||||
REVENUE,
NET
|
$
|
129,384
|
$
|
358,975
|
$
|
251,412
|
$
|
653,846
|
|||||
OPERATING
EXPENSES:
|
|||||||||||||
Sales
and marketing
|
-
|
16,667
|
-
|
30,128
|
|||||||||
General
and administrative
|
669,122
|
614,031
|
806,188
|
1,168,978
|
|||||||||
Total
operating expenses
|
669,122
|
630,698
|
806,188
|
1,199,106
|
|||||||||
LOSS
FROM OPERATIONS
|
(539,738
|
)
|
(271,723
|
)
|
(554,776
|
)
|
(545,260
|
)
|
|||||
Other
income (expenses):
|
|||||||||||||
Gain
on disposal of subsidiaries
|
-
|
599,737
|
-
|
599,737
|
|||||||||
Interest
expenses
|
(102,704
|
)
|
-
|
(102,704
|
)
|
-
|
|||||||
Interest
income
|
11,077
|
4
|
11,077
|
6
|
|||||||||
(LOSS)
INCOME BEFORE INCOME TAXES
|
(631,365
|
)
|
328,018
|
(646,403
|
)
|
54,483
|
|||||||
Income
tax expenses
|
-
|
(46,055
|
)
|
-
|
(83,431
|
)
|
|||||||
NET
(LOSS) INCOME
|
$
|
(631,365
|
)
|
$
|
281,963
|
$
|
(646,403
|
)
|
$
|
(28,948
|
)
|
||
Other
comprehensive (loss) income:
|
|||||||||||||
-
Foreign currency translation (loss) gain
|
395,077
|
(217,104
|
)
|
429,535
|
(266,193
|
)
|
|||||||
COMPREHENSIVE
(LOSS) INCOME
|
$
|
(236,288
|
)
|
$
|
64,859
|
$
|
(216,868
|
)
|
$
|
(295,141
|
)
|
||
Net
(loss) income per share – Basic and diluted
|
$
|
(0.02
|
)
|
$
|
0.01
|
$
|
(0.02
|
)
|
$
|
(0.00
|
)
|
||
Weighted
average shares outstanding – basic and diluted
|
37,898,251
|
37,898,251
|
37,898,251
|
37,898,251
|
Six
months ended June 30,
|
|
||||||
|
|
2008
|
|
2007
|
|||
Cash
flows from operating activities:
|
|||||||
Net
loss
|
$
|
(646,403
|
)
|
$
|
(28,949
|
)
|
|
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
|||||||
Depreciation
|
1,246
|
500
|
|||||
Amortization
of long-term deferred charges
|
-
|
979,646
|
|||||
Amortization
of intangible assets
|
297,259
|
-
|
|||||
Gain
on disposal of subsidiaries
|
-
|
(599,737
|
)
|
||||
Loss
on disposal of plant and equipment
|
1,667
|
||||||
Change
in operating assets and liabilities:
|
|||||||
Inventories
|
(106,241
|
)
|
-
|
||||
Accounts
receivable, trade
|
-
|
(623,718
|
)
|
||||
Prepaid
expenses and other receivables
|
(311,661
|
)
|
(3,020,236
|
)
|
|||
Accounts
payable, trade
|
74,846
|
-
|
|||||
Deferred
revenue
|
(251,151
|
)
|
-
|
||||
Other
payables and accrued liabilities
|
(78,031
|
)
|
39,480
|
||||
Income
tax payable
|
(1,439,376
|
)
|
83,432
|
||||
Amount
due to a related party
|
99,937
|
3,301,260
|
|||||
Net
cash (used in) provided by operating activities
|
(2,357,908
|
)
|
131,678
|
||||
Cash
flows from investing activities:
|
|||||||
Proceeds
from disposal of subsidiaries (net of cash balance)
|
5,617,101
|
5,811,904
|
|||||
Acquisition
of deferred expenditure
|
-
|
(5,964,519
|
)
|
||||
Payment
for property, plant and equipment
|
(11,315
|
)
|
-
|
||||
Payment
for land use right
|
(129,462
|
)
|
-
|
||||
Net
cash provided by (used in) investing activities
|
5,476,324
|
(152,615
|
)
|
||||
Cash
flows from financing activities:
|
|||||||
Repayment
of amount due to a related party
|
(5,204,104
|
)
|
-
|
||||
Proceeds
from short-term
bank loans
|
1,700,686
|
-
|
|||||
Proceeds
from bill payables
|
496,033
|
-
|
|||||
Net
cash used in financing activities
|
(3,007,385
|
)
|
-
|
||||
Effect
of exchange rate changes on cash and cash equivalents
|
428,436
|
-
|
|||||
NET
CHANGE IN CASH AND CASH EQUIVALENTS
|
539,467
|
(20,937
|
)
|
||||
CASH
AND CASH EQUIVALENTS, BEGINNING OF PERIOD
|
3,597
|
101,288
|
|||||
CASH
AND CASH EQUIVALENTS, END OF PERIOD
|
$
|
543,064
|
$
|
80,351
|
|||
SUPPLEMENTAL
DISCLOSURE OF CASH FLOW INFORMATION:
|
|||||||
Cash
paid for income taxes
|
$
|
-
|
$
|
-
|
|||
Cash
paid for interest expenses
|
$
|
102,704
|
$
|
-
|
Common
stock
|
Accumulated | ||||||||||||||||||
No. of shares
|
Amount
|
Additional
paid-in capital
|
other
comprehensive
income
|
Retained
earnings
|
Total stockholders’
equity
|
||||||||||||||
Balance as of January 1, 2008
|
37,898,251
|
$
|
37,898
|
$
|
6,901,232
|
$
|
171,652
|
$
|
4,950,635
|
$
|
12,061,417
|
||||||||
Foreign
currency translation adjustment
|
-
|
-
|
-
|
429,535
|
-
|
429,535
|
|||||||||||||
Net
loss for the period
|
-
|
-
|
-
|
-
|
(646,403
|
)
|
(646,403
|
)
|
|||||||||||
Balance
as of June 30, 2008
|
37,898,251
|
$
|
37,898
|
$
|
6,901,232
|
$
|
601,187
|
$
|
4,304,232
|
$
|
11,844,549
|
Name
of company
|
Place
and date of
incorporation
|
Issued
and fully
paid
capital
|
Principal
activities
|
|||
Innocom
Technology Holdings Limited (“ITHL”)
(Formerly
Wisechamp Group Limited)
|
British
Virgin Islands
July
12, 2005
|
US$1
ordinary
|
Investment
holding
|
|||
|
|
|
|
|||
Sky
Talent Development Limited (“STDL”)
|
British
Virgin Islands
September
8, 2005
|
US$1
ordinary
|
Investment
holding
|
|||
Innocom
Mobile Technology Limited (“IMTL”)
|
Hong
Kong
June
21, 2006
|
HK$2,000,000
ordinary
|
Inactive
|
|||
|
|
|
|
|||
Pender
Holdings Ltd. (“Pender”)
|
British
Virgin Islands
August
15, 2003
|
US$1
ordinary
|
Trading
of mobile phone handsets and components
|
|||
|
|
|
|
|||
Favor
Will International Ltd. (“FWIL”)
|
British
Virgin Islands
July
11, 2007
|
US$1
ordinary
|
Investment
holding
|
|||
|
|
|
|
|||
Changzhou
Innocom Communication Technology Limited (“CICTL”)
|
The
PRC
January
19, 2007
|
RMB50,000,000
|
Manufacture
of mobile phone handsets and
components
|
l
|
Use
of estimates
|
l
|
Basis
of consolidation
|
Depreciable life
|
Residual value
|
||||||
Plant
and machinery
|
5-10
years
|
5
|
%
|
||||
Furniture,
fixtures and office equipment
|
5
years
|
5
|
%
|
2008
|
2007
|
||||||
Period
end RMB:US$ exchange rate
|
6.8520
|
-
|
|||||
Average
monthly RMB:US$ exchange rate
|
7.0504
|
-
|
|||||
Period
end HK$:US$ exchange rate
|
7.8037
|
7.8000
|
|||||
Average
monthly HK$:US$ exchange rate
|
7.7975
|
7.8000
|
June 30, 2008
|
December 31, 2007
|
||||||
Trademarks
|
$
|
5,960,775
|
$
|
5,960,775
|
|||
Foreign
translation difference
|
916
|
-
|
|||||
5,961,691
|
5,960,775
|
||||||
Less:
accumulated amortization
|
(654,905
|
)
|
(357,754
|
)
|
|||
Less:
foreign translation difference
|
180
|
108
|
|||||
Net
book value
|
$
|
5,306,966
|
$
|
5,603,129
|
June 30, 2008
|
December 31, 2007
|
||||||
Plant
and machinery
|
$
|
7,085,542
|
$
|
3,331
|
|||
Furniture,
fixtures and office equipment
|
4,950
|
-
|
|||||
Leasehold
improvement
|
6,263
|
-
|
|||||
Foreign
translation difference
|
(5,603
|
)
|
-
|
||||
7,091,152
|
3,331
|
||||||
Less:
accumulated depreciation
|
(828
|
)
|
(1,249
|
)
|
|||
Less:
foreign translation difference
|
(1
|
)
|
-
|
||||
Property,
plant and equipment, net
|
$
|
7,090,323
|
$
|
2,082
|
June 30, 2008
|
December 31, 2007
|
||||||
Short-term bank loans:
|
|||||||
The
Company’s wholly-owned subsidiary, CICTL has short-term bank loans, which
are unsecured, payable to a financial institution in the PRC. The
loans
are subject to a renewal provision, as follows:
|
|||||||
Equivalent
to RMB7,000,000 with interest rate at 8.541% per annum payable monthly,
repayable by July 25, 2008
|
$
|
992,067
|
$
|
-
|
|||
Equivalent
to RMB5,000,000 with interest rate at 8.856% per annum payable monthly,
repayable by August 25, 2008
|
708,619
|
-
|
|||||
Total
short-term bank loans
|
$
|
1,700,686
|
$
|
-
|
June 30, 2008
|
December 31, 2007
|
||||||
(Unaudited)
|
(Audited)
|
||||||
Salaries
and welfare payable
|
$
|
67,409
|
$
|
-
|
|||
Temporary
advances
|
23,527
|
-
|
|||||
Accrued
expenses
|
44,979
|
197,697
|
|||||
Purchase
payable to equipment vendors
|
1,716,654
|
-
|
|||||
$
|
1,852,569
|
$
|
197,697
|
Six months ended June 30,
|
|||||||
2008
|
2007
|
||||||
Local
|
$
|
(18,895
|
)
|
$
|
(1,020,198
|
)
|
|
Foreign
|
(627,508
|
)
|
1,074,681
|
||||
(Loss)
income
before income taxes
|
$
|
(646,403
|
)
|
$
|
54,483
|
Six months ended June 30,
|
|||||||
2008
|
2007
|
||||||
Current:
|
|||||||
Local
|
$
|
-
|
$
|
-
|
|||
Foreign
|
-
|
83,431
|
|||||
Deferred:
|
|||||||
Local
|
-
|
-
|
|||||
Foreign
|
-
|
-
|
|||||
Provision
for income taxes
|
$
|
-
|
$
|
83,431
|
Period
ending June 30,
|
||||
2009
|
$
|
130,990
|
||
2010
|
125,532
|
|||
Total
|
$
|
256,522
|
ITEM 2. |
MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF
OPERATION
|
Three Months ended June 30,
|
|
Six Months ended June 30,
|
|
||||||||||
|
|
2008
|
|
2007
|
|
2008
|
|
2007
|
|||||
Total general and administrative
expenses before recovery from over-provided audit fee of $110,000
during
three months March 31, 2008
|
$
|
669,122
|
$
|
614,031
|
$
|
916,188
|
$
|
1,168,978
|
|||||
Less:
Non-cash items
|
149,417
|
491,321
|
298,505
|
980,146
|
|||||||||
$
|
519,705
|
$
|
122,710
|
$
|
617,683
|
$
|
188,832
|
Three Months ended June 30,
|
|
Six Months ended June 30,
|
|
||||||||||
|
|
2008
|
|
2007
|
|
2008
|
|
2007
|
|||||
Depreciation
|
$
|
829
|
$
|
(1,208
|
)
|
$
|
1,246
|
$
|
500
|
||||
Amortization
of intangible assets
|
148,588
|
-
|
297,259
|
-
|
|||||||||
Amortization
of long-term deferred consultancy fee
|
-
|
492,529
|
-
|
979,646
|
|||||||||
$
|
149,417
|
$
|
491,321
|
$
|
298,505
|
$
|
980,146
|
Three Months
ended
June 30, 2008
|
|
Three Months
ended
June 30, 2007
|
|
Six Months
ended
June 30, 2008
|
|
Six Months
ended
June 30, 2007
|
|||||||
Interest income
|
$
|
11,077
|
$
|
4
|
$
|
11,077
|
$
|
6
|
|||||
Interest
expense
|
$
|
102,704
|
$
|
-
|
$
|
102,704
|
$
|
-
|
31.1
|
Rule
13a-14 (a)/15d-14 (a) Certification of Chief Executive
Officer
|
31.2
|
Rule
13a-14 (a)/15d-14 (a) Certification of Chief Financial
Officer
|
32.1
|
Section
1350 Certification of Chief Executive Officer
|
32.2
|
Section
1350 Certification of Chief Financial
Officer
|
INNOCOM TECHNOLOGY HOLDINGS, INC.
|
||
|
||
/s/ William Yan Sui Hui
|
||
Dated: August 19, 2008
|
William Yan Sui Hui, Chief Executive Officer
(Principal executive officer)
|
|
|
|
|
/s/ Cheung Wai Hung, Eddie
|
||
Dated: August 19, 2008
|
Cheung Wai Hung, Eddie, Chief Financial Officer
(Principal financial officer)
|