10QSB 1 v018253_10qsb.txt U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB (Mark One) |X| Quarterly report pursuant to Sections 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended March 31, 2005 |_| Transition report pursuant to Sections 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from _______________ to _______________ Commission File Number:000-32341 TOP Group Holdings, Inc. (Exact Name of Small Business Issuer as Specified in Its Charter) Delaware 84-1485082 -------------------------------- ------------------ (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) 1398 Monterey Pass Road, Monterey Park, CA 91754 ------------------------------------------------ (Address of Principal Executive Offices, Including Zip Code) (323) 261-1888 -------------- (Issuer's Telephone Number, Including Area Code) The number of shares outstanding of our Common Stock, $0.0001 par value per share, as of March 31, 2005, was 5,000,000 shares. Transitional Small Business Disclosure Format (check one): Yes |_| No |X| TOP Group Holdings, Inc. INDEX TO FORM 10-QSB PAGE PART I. Financial Information Item 1. Financial Statements..................................................2 Item 2. Management's Discussion and Analysis or Plan of Operation.............2 Item 3. Controls and Procedures...............................................3 PART II. Other Information Item 4. Submission of Matters to a Vote of Security Holders...................3 Item 6. Exhibits and Reports on Form 8-K .....................................4 SIGNATURES ....................................................................5 CERTIFICATIONS.................................................................6 PART I. FINANCIAL INFORMATION Item 1. Financial Statements For the Company's response to this item, please refer to the Financial Statements annexed pages F-1 to F-6 of this Form 10-QSB. Item 2. Management's Discussion and Analysis or Plan of Operation This Quarterly Report on Form 10-QSB contains statements that may constitute "forward-looking statements" within the meaning, and made pursuant to the Safe Harbor provisions, of the Private Securities Litigation Reform Act of 1995. Such statements are based on management's current expectations and are subject to a number of risks and uncertainties, including, but not limited to, the difficulty inherent in operating an early-stage company in a new and rapidly evolving market, market and economic conditions, the impact of competitive products, product demand and market acceptance risks, changes in product mix, costs and availability of raw materials, fluctuations in operating results, delays in development of highly complex products, risk of customer contract or sales order cancellations and other risks detailed from time to time in our filings with the Securities and Exchange Commission (the "SEC"). These risks and uncertainties could cause our actual results to differ materially from those described in the forward-looking statements. Any forward-looking statement represents our expectations or forecasts only as of the date it was made and should not be relied upon as representing its expectations or forecasts as of any subsequent date. Except as required by law, we undertake no obligation to correct or update any forward-looking statement, whether as a result of new information, future events or otherwise, even if our expectations or forecasts change. The following discussion and analysis should be read in conjunction with the financial statements, related notes and other information included in this Quarterly Report on Form 10-QSB, as well as in conjunction with the consolidated financial statements and the related notes. The financial statements have been prepared in accordance with US Generally Accepted Accounting Principles, or GAAP. Background On January 16, 2003, we engaged in the Change in Control, whereby TOP Group New York purchased 4,400,000 shares of the Company's common stock from H. Daniel Boone, who was then President and Chairman of our board of directors. Because of the purchase, TOP Group New York now owns 88% of our outstanding capital stock. Ninety-five percent of the capital stock of TOP Group New York is held by Song Ru-hua. Mr. Song is the founder and Chairman of TOP Group China, a privately owned, China-based hi-tech conglomerate specializing in computer software, computer hardware, LED display systems, network technology, applied electronics, communications technology and IT education. However, starting in 2004, Mr. Song has been relinquishing his responsibilities as the Chairman of the Board, and now is no longer involved with day-to-day operation of TOP Group China. Furthermore, Chengdu TOP Sci-tech Co. Ltd.(stock code 8135), owned indirectly by TOP Group China , was de-listed from the Growth Enterprise Market of the Hong Kong Stock Exchange in the second quarter of 2004. Prior to the Change in Control, our purpose was to investigate opportunities to be acquired by a company that desired to be registered under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Since the Change in Control, we have no longer pursued this objective. Rather, we anticipate that we will operate as a development stage company in an industry to be determined by the Board. However, there can be no assurances at this time that our anticipated future objectives will be pursued or achieved. At the special meeting in March of 2003, our stockholders approved a change in our state of incorporation from Colorado to Delaware. Later in March, our stockholders approved a change in our name from Quixit, Inc. to TOP Group Holdings, Inc. At a special meeting on January 21, 2005, our stockholders elected Song Ru-hua, Fang Ye and Zhou Tao to serve as our directors, who then proceeded to elect Song Ru-hua as President and Principal Executive Officer, Zhou Zong-zheng as Treasurer and Principal Financial & Accounting Officer, and Wu Hai as Secretary. At that time, the shareholders also adopted and approved a restatement to the company's Certificate of Incorporation to, among other things, reflect prior amendments and re-appointed the Company's independent public accountant, Michael Johnson & Co., LLC of Denver, Colorado. 1 A. PLAN OF OPERATIONS We presently anticipate that we will operate as a development stage company in an industry to be decided by the Board. However, there can be no assurances at this time that the Company's anticipated future objectives will be pursued or achieved. Results of Operations for the Three Months Ended March 31, 2005 Compared to the Three Months Ended March 31, 2004. We had had no operations or revenues during the three months ended March 31, 2004 or 2005. We incurred $ 3,553 in expenses in the three months ended March 31, 2005, compared to none in the three months ended March 31, 2004. We had a net loss in the three months ended March 31, 2005 of $3,553, compared to none in the three months ended March 31, 2004. B. LIQUIDITY AND CAPITAL RESOURCES As of March 31, 2005, we had no operating capital and expect to continue to rely upon advances or loans from shareholders to pay our expenses. We have no commitments from any person for advances or loans. We incurred a loss of $3,553 from operations for the three months ended March 31, 2005, and losses are expected in the future as well. The Company has a working capital deficit for the three months ended March 31, 2005. This raises substantial doubt about our ability to continue as a going concern. Our plans include seeking additional capital and/or debt financing. There is no guarantee that additional capital and/or debt financing will be available when and to the extent required, or that if available, it will be on terms acceptable to us. Our financial statements do not include any adjustments that might result from the outcome of this uncertainty. Item 3. Controls and Procedures Evaluation of Disclosure Controls and Procedures Based on their evaluation as of March 31, 2005, our chief executive officer and chief financial officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-l5(e) and 15d-15(e) under the Securities Exchange Act of I 934, as amended) were effective to ensure the information required to be disclosed by us in reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC' s rules and forms. Management`s Report on Internal Control over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a- 15(f) and l5d-15(f). Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of March 31, 2005. in making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") in Internal Control-Integrated Framework. Our management has concluded that, as of March 31, 2005, our internal control over financial reporting was effective based on these criteria. Changes in Internal Control over Financial Reporting There were no changes in our internal control over financial reporting during the quarter ended March 31, 2005 that have materially affected, or are reasonably likely to materially affect our internal control over financial reporting. Inherent Limitations on Effectiveness of Controls Our management, including our chief executive officer and chief financial officer, does not expect that our procedures or our internal controls will prevent or detect all error and all fraud. An internal control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of our controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders On January 21, 2005, by written consent, our shareholders elected Song Ru-hua, Fang Ye and Zhou Tao to serve as our directors, who then proceeded to elect Song Ru-hua as President and Principal Executive Officer, Zhou Zong-zheng as Treasurer and Principal Financial & Accounting Officer, and Wu Hai as Secretary. At that time, the shareholders also adopted and approved a restatement to the company's Certificate of Incorporation to, among other things, reflect prior amendments and re-appointed the Company's independent public accountant. 2 Item 6. Exhibits and Reports on Form 8-K (a) Exhibits Exhibit Number Description ------- ----------- 3.1 Articles of Amendment to the Articles of Incorporation of the Company (incorporated by reference to the Company's proxy statement on Schedule 14A filed with the Commission on March 5, 2003 (the "Proxy Statement")) 3.2 Agreement and Plan of Merger between Quixit, Inc., a Colorado corporation, and TOP Group Corporation (now known as TOP Group Holdings, Inc.), a Delaware corporation (incorporated by reference to the Proxy Statement) 3.3 Certificate of Incorporation of the Company (incorporated by reference to the Proxy Statement) 3.4 By-Laws of the Company (incorporated by reference to the Proxy Statement) 31 Certification 32 Certification b) Reports on Form 8-K We filed a report on Form 8-k on January 24, 2005 to inform the changes in Directors and Principal Officers. Please refer to Item 4 of Part I, "Submission of Matters to a vote of Security of Holders". 3 SIGNATURES In accordance with the requirements of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. TOP Group Holdings, Inc. Dated: As of May 10, 2005 By: /s/ Zhou Zong-Zheng ------------------------------------ Zhou Zong-Zheng Treasurer (Principal Financial and Accounting Officer) Dated: As of May 10, 2005 By: /s/ Song Ru-Hua ------------------------------------ Song Ru-Hua President (Principal Executive Officer) TOP GROUP HOLDINGS, INC. Balance Sheets
March 31, 2005 March 31, 2004 ------------- ------------- ASSETS Current Assets, Cash $ 0 $ 0 Total Current Assets $ 0 $ 0 --------- --------- Total Other Assets $ 0 $ 0 --------- --------- TOTAL ASSETS $ 0 $ 0 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Accrued expenses $ 3,553 $ 2,560 Advances from shareholders $ 82,788 $ 53,712 --------- --------- Total Current Liabilities $ 86,341 $ 56,272 --------- --------- Stockholders Equity* Commons stock $.0001 par value, 100,000,000 shares 500 50,000 Authorized, 5,000,000 shares issued and outstanding Additional Paid-in Capital $ 135,293 $ 85,793 Accumulated Deficit ($222,134) ($192,065) --------- --------- Total Stockholders' Equity ($ 86,341) ($ 56,272) --------- --------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 0 0 ========= =========
* In the Amended Certificate of Incorporation filed on January 21, 2005, the shares authorized to issue were increased from 5,000,000 to 100,000,000 while the par value was reduced from $0.01 to $0.0001. The accompanying notes are an integral part of these financial statements. F-1 TOP GROUP HOLDINGS, INC. Statement of Operation for the three months ended March 31, 2005 March 31,2004 ------------- ------------- REVENUE Sales $ 0 $ 0 Total Income $ 0 $ 0 Cost and Expense: Legal & Administrative $ 2,000 $ 0 SEC filing expense $ 578 $ 0 State Franchise tax $ 0 $ 0 Interest expense $ 975 $ 0 ---------- ---------- Total expenses $ 3,553 $ 0 ---------- ---------- Net Loss from Operations $ 3,553 $ 0 ========== ========== Per Share information Weighted Average number of Common Shares Outstanding 5,000,000 5,000,000 --------- --------- Net Loss per Common share $ * * ========== ========== * Less than $0.01 The accompanying notes are an integral part of these financial statements. F-2 TOP GROUP HOLDINGS, INC. Stockholder's Equity March 31, 2005
Common stocks Additional Total ------------------------ Paid-In Accumulated shareholders' # Of Shares Amount Capital Deficit Equity ----------- ---------- ---------- ---------- ---------- December 31, 1997 1,000 $ 10 $ 54,578 $ 54,588 Net Loss for Period (16,771) (16,771) ---------- ---------- ---------- ---------- ---------- Balance - December 31, 1997 1,000 10 54,578 (16,771) 37,817 Issuance of stock for cash 4,999,000 49,990 31,215 81,215 Net Loss for Year (49,399) (49,399) ---------- ---------- ---------- ---------- ---------- Balance - December 31, 1998 5,000,000 50,000 85,793 (66,170) 69,623 Net Loss for Year (69,623) (69,623) ---------- ---------- ---------- ---------- ---------- Balance - December 31, 1999 5,000,000 50,000 85,793 (135,793) 0 Net Loss for Year (2,500) (2,500) ---------- ---------- ---------- ---------- ---------- Balance - December 31, 2000 5,000,000 50,000 85,793 (138,293) (2,500) Net Loss for Year 0 0 ---------- ---------- ---------- ---------- ---------- Balance - December 31, 2001 5,000,000 50,000 85,793 (138,293) (2,500) Net Loss for Year (29,000) (29,000) ---------- ---------- ---------- ---------- ---------- Balance - December 31, 2002 5,000,000 50,000 85,793 (167,293) (31,500) Net Loss for Year (24,772) (24,772) ---------- ---------- ---------- ---------- ---------- Balance - December 31, 2003 5,000,000 50,000 85,793 (192,065) (56,272) Net Loss for the Year (26,516) (26,516) ---------- ---------- ---------- ---------- ---------- Balance - December 31, 2004 5,000,000 50,000 85,793 (218,581) (82,788) Net Loss 1/1/05-3/31/05 (3,553) (3,553) --------- ---------- ---------- ---------- ---------- Balance - March 31, 2005 * 5,000,000 $ 500 $ 135,793 $ (222,134) $ (86,341)
* In the Amended Certificate of Incorporation filed on January 21, 2005, the shares authorized to issue were increased from 5,000,000 to 100,000,000 while the par value was reduced from $0.01 to $0.0001. The accompanying notes are an integral part of these financial statements. F-3 TOP GROUP HOLDINGS, INC. Statements of Cash Flows for the three months ended Indirect Method
March 31,2005 March 31,2004 ------------- ------------- Cash Flows from Operating Activities: Net Loss $ (3,553) $ 0 Adjustments to reconcile net loss to net cash used by operating activities Decrease in other assets $ 0 $ 0 Increase in current liabilities $ 3,553 $ 0 Net Cash Used by Operating Activities $ 0 $ 0 Net Increase in Cash & Cash Equivalents Beginning Cash & Cash Equivalents $ 0 $ 0 Beginning Cash & Cash Equivalents $ 0 $ 0 Supplemental disclosure of Cash Flow Information Cash paid for Interest Cash paid for Income Taxes $ 0 $ 0
The accompanying notes are an integral part of these financial statements. F-4 TOP GROUP HOLDINGS, INC. Notes to Financial Statements March 31, 2005 Note 1 - Organization and Summary of Significant Accounting Policies: Organization: The Company was incorporated on May 15, 1997, under the laws of the state of Colorado. On January 16, 2003, TOP Group Corporation, a New York corporation ("TOP Group New York"), purchased 4,400,000 shares of the Company's common stock, which represents 88% of the Company's outstanding capital stock. Immediately prior to the change in control, the Company's purpose was to investigate opportunities to be acquired by a company that desired to be registered under the Securities Exchange Act of 1934, as amended. Since the change in control, the Company has begun to investigate opportunities, first in the computer software industry, now in any industries. Essentially all expenditures and expenses incurred in the first and second quarters of 2003 were attributable to the investigation of such opportunities. In March 2003, the Company changed its state of incorporation from Colorado to Delaware, and changed its name from Quixit, Inc. to TOP Group Holdings, Inc. On January 21, 2005, the company filed an Amended Certificate of Incorporation to increase the shares authorized to issue from 5,000,000 to 100,000,000 and reduced the par value per share from $0.01 to $0.0001. The Company's fiscal year end is December 31. Basis of Accounting: The accompanying financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States. Cash and Cash Equivalents: The Company considers all highly liquid debt instruments, purchased with an original maturity of three months or less, to be cash equivalents. Use of Estimates: The preparation of financial statements, in conformity with accounting principles generally accepted in the United States, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Net Loss Per Share: Net loss per share is based on the weighted average number of common shares and common shares equivalents outstanding during the period. Other Comprehensive Income: The Company has no material components of other comprehensive income (loss), and accordingly, net loss is equal to comprehensive loss in all periods. F-5 TOP GROUP HOLDINGS, INC. Notes to Financial Statements March 31, 2005 Note 2 - Federal Income Taxes: The Company has made no provision for income taxes because there have been no operations to date causing income for financial statements or tax purposes. The Financial Accounting Standards Board (FASB) has issued Statement of Financial Accounting Standards Number 109 ("SFAS 109"). "Accounting for Income Taxes", which requires a change from the deferred method to the asset and liability method of accounting for income taxes. Under the asset and liability method, deferred income taxes are recognized for the tax consequences of "temporary differences" by applying enacted statutory tax rates applicable to future years to differences between the financial statement carrying amounts and the tax basis of existing assets and liabilities. Deferred tax assets Net operating loss carryforwards $ 222,134 Valuation allowance (222,134) ----------- Net deferred tax assets $ 0 =========== As of March 31, 2005, 0he Company had net operating loss carry-forwards of approximately $222,134 for federal income tax purposes. These carry-forwards if not utilized to offset taxable income will begin to expire in 2010. Note 3 - Going Concern The Company's financial statements have been prepared on the basis that it is a going concern, which contemplated the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has not earned any revenue from operations in 2003, 2004 or 2005, and, As of March 31, 2005 current liabilities exceed current assets by $86,341. The Company's ability to continue as a going concern is dependent upon its ability to develop additional sources of capital and ultimately to achieve profitable operations. The accompanying financial statements do not include any adjustments that might result from the outcome of these uncertainties. Management is seeking new capital to revitalize the Company. Note 4 - Capital Stock Transactions: On March 25, 1999, the Company's Board of Directors approved an amendment to the Articles of Incorporation of the Company, declaring a 1 to 10 reverse stock split of outstanding common stock at March 25, 1999. In 2001, the Board of Directors declared a 5 to 1 forward stock split. No shares of common stock were issued in 2003, 2004 or 2005. All shares and per share amounts in the accompanying financial statements of the Company and notes thereto have been retroactively adjusted to reflect the stock splits. Note 5 - Segment Information The Company has no present operations. The Company presently anticipates that, in the future, it will engage in an industry to be determined by the Board. F-6