SEC Company Response from FORLINK SOFTWARE CORP INC (CIK 0000866458) — Oct 27, 2005
FORLINK SOFTWARE CORP INC (CIK 0000866458)
Date: Oct. 27, 2005 · CIK: 0000866458 · Accession: 0001144204-05-032902
AI Filing Summary & Sentiment
Referenced dates: July 11, 2005
Letter
VIA EDGAR AND FEDERAL EXPRESS Securities and Exchange Commission Division of Corporation Finance Filed March 31, 2005 Form 10-QSB For Fiscal Quarter Ended March 31, 2005 Filed May 16, 2005 File No. 0-18731
Dear Ms. Bowen, Mr. Thomas and Mr. Skinner:
We enclose marked drafts of the Forlink Software Corp. Inc.’s (the “Company”) proposed Amendment No. 1 to Form-10KSB for the fiscal year ended December 31, 2004 (the “Amended Annual Report”) and proposed Amendment No. 1 to Form 10-QSB for the quarterly period ended March 31, 2005 (the “Amended Quarterly Report”). The Amended Annual Report and the Amended Quarterly Report both contain revisions that have been made in response to the comments received from the staff ("Staff") of the Securities and Exchange Commission in their letter dated July 11, 2005. Set forth below are the Company’s responses to the Staff’s comments. We have reproduced the Staff’s comments and have followed each comment with our response. A marked copy of the Amended Annual Report and Amended Quarterly Report is being provided supplementally with a copy of this letter for the convenience of the Staff.
Form 10-KSB for Fiscal Year Ended December 31, 2004
Description of Business:
SEC: 1.
The discussion of each of your identified business (i.e. FTCL, FTHK, BFHX and FTCD) should address the specific nature of the operations in which each entity is involved. You should identify whether each entity is operating, the revenues and costs which have been contributed by each of these entities during the periods presented and reported upon, why the individual business entity’s operation were discontinued or dissolved and when, as well as addressing management’s plan for each entity going forward. Your discussion of FTHK should address in detail the specific nature of their principal activities which currently appear to be investment holding and the trading of computer products (i.e. what does this mean). Further, your discussion of BFHX does not identify what this entity does other than to identify it as a variable interest entity.
Forlink:
Our amendments are the following:
1). 10KSB, page 2, under “Company history and recent developments”, first paragraph from the top, a sentence is added.
“FTCL is the major operating company of the Group in Beijing.”
2). 10KSB, page 2, under “Company history and recent developments”, second paragraph from the top. (For complete description, please refer to the marked copy of the amended filing.)
“FTHK is an investment holding company. Because of the favorable business environments in Hong Kong, we can simplify and speed up investment transactions through this subsidiary. Through FTHK, on December 18, 2003, we invested $760,870 in a privately held PRC company, All China Logistics Online Co., Ltd. ("All China"), a leading provider of logistic services in China, in exchange for 17.8% equity interests. Through this investment, we have become the second largest shareholder of All China and its sole software solution provider.”
“On June 14, 2004, Forlink Technologies (Chengdu) Limited ("FTCD") was established as a limited liability company in Chengdu, PRC and subsequently it became a wholly owned subsidiary of FTHK in September 2004. FTCD is our software supporting office currently under initial development stage. Upon completion, it will be responsible for software outsourcing projects and software development. The registered capital of FTCD is $5,000,000 and the fully paid up capital was $750,000 as of December 31, 2004. FTCD has not commenced operations since the date of establishment.”
“FTHK is also responsible for importing hardware needed in the integration products from overseas companies directly, thus improve our hardware pass-through profit margin.”
“Except for FTCD, which is currently under development stage, all other major group companies, i.e. FTCL, FTHK and BFHX, are operating companies. During the reporting period, none of the group companies’ operation were discontinued or dissolved.”
3). 10KSB, page 2, under “Company history and recent developments”, fourth paragraph from the top. (For complete description, please refer to the marked copy of the amended filing.)
“In compliance with PRC’s foreign investment restrictions on Telecom value-added services and other laws and regulations, we conduct our Telecom value-added services and application integration services for government organizations in China via Beijing Forlink Hua Xin Technology Co. Ltd. ("BFHX").”
“Through BFHX, on September 28, 2004, we invested $36,232 in Huntington Network Technologies (Beijing) Co., Ltd., which is a privately held PRC company and operates the Gmgame.com, in exchange for 30% equity interests. Gmgame.com is a fast growing online game portal committed to providing Chinese players with the widest variety of online games available. This investment enables us to enter a fast growing market and utilize our IT expertise to further diversify our revenues.”
SEC: 2.
Discuss in detail your business relationships with China Mobile and Beijing Mobile. Address how these relationships have impacted your operating history.
Forlink:
Our amendments are the following: 2004 10KSB, page 7, under “Dependence on major customers”, second paragraph from the top.
“Our largest customer has been Beijing Mobile Communication Company, which is a subsidiary of China Mobile. Since 1998, we have been developing and maintaining BOSS (Business Operation Support System) for the carrier. BOSS is an integrated software platform and it is developed in stages to accommodate the carrier’s increasing subscribers and service offerings. We are currently developing and maintaining phase two of BOSS.”
“Although we are an important strategic IT partner of Beijing Mobile, we do not have long term contracts with the carrier. All of our agreements with the carrier are for short term projects or sales of third-party hardware. While we feel that our significant relationships with Beijing Mobile will likely provide additional sales agreements in the future, Beijing Mobile is not contractually bound to purchase any products or services from us. Loss of this customer could hurt our business by reducing our revenues and profitability.”
“During the fiscal years ended December 31, 2001, 2002, 2003 and 2004, sales to Beijing Mobile Communication Company were $4,097,560, $8,229,159, $8,999,662 and $9,002,191 respectively, accounting for 80%, 88%, 96% and 89%, of our revenue for these periods, respectively.”
Management’s Discussion & Analysis or Plan of Operations, pages 8-10
SEC: 3.
We note that Beijing Mobile accounted for 89% and 96% of Total revenue for 2004 and 2003, respectively. We also note that accounts receivable from this customer were 40% and 91% of total accounts receivable for the same respective periods. Further, we note that the significant decrease in revenue during the first quarter of 2005 was due to several factors including a sharp decrease in revenue recognized from this customer. Discuss and quantify the amount of product and services revenues recognized from this customer during the periods presented. Address the types of services provided, the nature and length of the arrangement with Beijing Mobile as well as any other pertinent factors which will enable an investor to clearly understand the importance of this customer to your operating performance. If you have a long-term agreement with this customer, then summarize the material terms of the agreement such as the specific products purchased, the total amount to be purchased and the period of the agreement. File this contract as an exhibit to your form 10-KSB. Refer to Items 303(b) and 601(10)(i)(B) of Regulation S-B. You should address why revenues decreased significantly during the first quarter of fiscal 2005.
Forlink:
Our amendments are the following:
1). 10KSB, page 9, in “Management's Discussion and Analysis or Plan of Operation”, under subheading “Overview”. The following paragraphs were added. (for complete description, please refer to the marked copy of the amended filing.)
“We have derived, and believe that we will continue to derive, a significant portion of our revenues from Beijing Mobile Communication Company, a subsidiary of China Mobile. Since 1998, we have been developing and maintaining BOSS (Business Operation Support System) for the carrier. BOSS is an integrated software platform and it is developed in stages to accommodate the carrier’s increasing subscribers and service offerings. We are currently developing and maintaining phase two of BOSS.”
“Although we are an important strategic IT partner of Beijing Mobile, we do not have long term contracts with the carrier. All of our agreements with the carrier are for short term projects or sales of third-party hardware. While we feel that our significant relationships with Beijing Mobile will likely provide additional sales agreements in the future, Beijing Mobile is not contractually bound to purchase any products or services from us. Loss of this customer could hurt our business by reducing our revenues and profitability.”
“During the fiscal years ended December 31, 2001, 2002, 2003 and 2004, sales to Beijing Mobile Communication Company
Show Raw Text
CORRESP
1
filename1.htm
Forlink
Software Corporation, Inc.
9/F,
Fang Yuan Tower, Yi No. 56
Zhongguancun
South Street, Haidian District
Beijing
100044, P.R. China
October
27, 2005
VIA
EDGAR AND FEDERAL EXPRESS
Securities
and Exchange Commission
Division
of Corporation Finance
450
Fifth
Street, N.W.
Washington
DC, 20549
Attn:
Sherri
Bowen, Marc Thomas and Brad Skinner
Re:
Forlink
Software Corp. Inc.
Form
10-KSB For Fiscal Year Ended December 31, 2004
Filed
March 31, 2005
Form
10-QSB For Fiscal Quarter Ended March 31, 2005
Filed
May 16, 2005
File
No. 0-18731
Dear
Ms.
Bowen, Mr. Thomas and Mr. Skinner:
We
enclose marked drafts of the Forlink Software Corp. Inc.’s (the “Company”)
proposed Amendment No. 1 to Form-10KSB for the fiscal year ended December
31,
2004 (the “Amended Annual Report”) and proposed Amendment No. 1 to Form 10-QSB
for the quarterly period ended March 31, 2005 (the “Amended Quarterly Report”).
The Amended Annual Report and the Amended Quarterly Report both contain
revisions that have been made in response to the comments received from the
staff ("Staff") of the Securities and Exchange Commission in their letter
dated
July 11, 2005. Set forth below are the Company’s responses to the Staff’s
comments. We have reproduced the Staff’s comments and have followed each comment
with our response. A marked copy of the Amended Annual Report and Amended
Quarterly Report is being provided supplementally with a copy of this letter
for
the convenience of the Staff.
Form
10-KSB for Fiscal Year Ended December 31, 2004
Description
of Business:
SEC:
1.
The
discussion of each of your identified business (i.e. FTCL,
FTHK, BFHX and
FTCD) should address the specific nature of the operations
in which each
entity is involved. You should identify whether each entity
is operating,
the revenues and costs which have been contributed by each
of these
entities during the periods presented and reported upon, why
the
individual business entity’s operation were discontinued or dissolved and
when, as well as addressing management’s plan for each entity going
forward. Your discussion of FTHK should address in detail the
specific
nature of their principal activities which currently appear
to be
investment holding and the trading of computer products (i.e.
what does
this mean). Further, your discussion of BFHX does not identify
what this
entity does other than to identify it as a variable interest
entity.
1
Forlink:
Our
amendments are the following:
1).
2004
10KSB, page 2, under “Company history and recent developments”, first
paragraph from the top, a sentence is added.
“FTCL
is the major
operating company of the Group in Beijing.”
2).
2004
10KSB, page 2, under “Company history and recent developments”, second
paragraph from the top. (For complete description, please refer
to the
marked copy of the amended filing.)
“FTHK
is an investment holding company. Because
of the favorable business environments in Hong Kong, we can
simplify and
speed up investment transactions through this subsidiary. Through
FTHK, on
December 18, 2003, we invested $760,870 in a privately held
PRC company,
All China Logistics Online Co., Ltd. ("All China"), a leading
provider of
logistic services in China, in exchange for 17.8% equity interests.
Through this investment, we have become the second largest
shareholder of
All China and its sole software solution
provider.”
“On
June 14, 2004, Forlink Technologies
(Chengdu) Limited ("FTCD") was established as a limited liability
company
in Chengdu, PRC and subsequently it became a wholly owned subsidiary
of
FTHK in September 2004. FTCD is our software supporting office
currently
under initial development stage. Upon completion, it will be
responsible
for software outsourcing projects and software development.
The registered
capital of FTCD is $5,000,000 and the fully paid up capital
was $750,000
as of December 31, 2004. FTCD has not commenced operations
since the date
of establishment.”
“FTHK
is also
responsible for importing hardware needed in the integration
products from
overseas companies directly, thus improve our hardware pass-through
profit
margin.”
“Except
for FTCD, which is currently under development stage, all other
major
group companies, i.e. FTCL, FTHK and BFHX, are operating companies.
During
the reporting period, none of the group companies’ operation were
discontinued or dissolved.”
3).
2004
10KSB, page 2, under “Company history and recent developments”, fourth
paragraph from the top. (For complete description, please refer
to the
marked copy of the amended
filing.)
2
“In
compliance with PRC’s foreign investment
restrictions on Telecom value-added services and other laws
and
regulations, we conduct our Telecom value-added services
and application
integration services for government organizations in China
via Beijing
Forlink Hua Xin Technology Co. Ltd. ("BFHX").”
“Through
BFHX, on September 28, 2004, we
invested $36,232 in Huntington Network Technologies (Beijing)
Co., Ltd.,
which is a privately held PRC company and operates the Gmgame.com,
in
exchange for 30% equity interests. Gmgame.com is a fast growing
online
game portal committed to providing Chinese players with the
widest variety
of online games available. This investment enables us to
enter a fast
growing market and utilize our IT expertise to further diversify
our
revenues.”
SEC:
2.
Discuss
in detail your business relationships with China Mobile and
Beijing
Mobile. Address how these relationships have impacted your
operating
history.
Forlink:
Our
amendments are the following: 2004
10KSB, page 7, under “Dependence on major customers”, second paragraph
from the top.
“Our
largest customer has been Beijing Mobile
Communication Company, which is a subsidiary of China Mobile.
Since 1998,
we have been developing and maintaining BOSS (Business Operation
Support
System) for the carrier. BOSS is an integrated software platform
and it is
developed in stages to accommodate the carrier’s increasing subscribers
and service offerings. We are currently developing and maintaining
phase
two of BOSS.”
“Although
we are an important strategic IT
partner of Beijing Mobile, we do not have long term contracts
with the
carrier. All of our agreements with the carrier are for short
term
projects or sales of third-party hardware. While we feel
that our
significant relationships with Beijing Mobile will likely
provide
additional sales agreements in the future, Beijing Mobile
is not
contractually bound to purchase any products or services
from us. Loss of
this customer could hurt our business by reducing our revenues
and
profitability.”
“During
the fiscal
years ended December 31, 2001, 2002, 2003 and 2004, sales to
Beijing
Mobile Communication Company were $4,097,560, $8,229,159, $8,999,662
and
$9,002,191 respectively, accounting for 80%, 88%, 96% and 89%,
of our
revenue for these periods, respectively.”
Management’s
Discussion & Analysis or Plan of Operations, pages
8-10
SEC:
3.
We
note that Beijing Mobile accounted for 89% and 96% of Total
revenue for
2004 and 2003, respectively. We also note that accounts receivable
from
this customer were 40% and 91% of total accounts receivable
for the same
respective periods. Further, we note that the significant
decrease in
revenue during the first quarter of 2005 was due to several
factors
including a sharp decrease in revenue recognized from this
customer.
Discuss and quantify the amount of product and services revenues
recognized from this customer during the periods presented.
Address the
types of services provided, the nature and length of the
arrangement with
Beijing Mobile as well as any other pertinent factors which
will enable an
investor to clearly understand the importance of this customer
to your
operating performance. If you have a long-term agreement
with this
customer, then summarize the material terms of the agreement
such as the
specific products purchased, the total amount to be purchased
and the
period of the agreement. File this contract as an exhibit
to your form
10-KSB. Refer to Items 303(b) and 601(10)(i)(B) of Regulation
S-B. You
should address why revenues decreased significantly during
the first
quarter of fiscal 2005.
3
Forlink:
Our
amendments are
the following:
1).
2004
10KSB, page 9, in “Management's Discussion and Analysis or Plan of
Operation”, under subheading “Overview”. The following paragraphs were
added. (for complete description, please refer to the marked
copy of the
amended filing.)
“We
have derived, and believe that we will
continue to derive, a significant portion of our revenues
from Beijing
Mobile Communication Company, a subsidiary of China Mobile.
Since 1998, we
have been developing and maintaining BOSS (Business Operation
Support
System) for the carrier. BOSS is an integrated software platform
and it is
developed in stages to accommodate the carrier’s increasing subscribers
and service offerings. We are currently developing and maintaining
phase
two of BOSS.”
“Although
we are an important strategic IT partner of Beijing Mobile,
we do not have
long term contracts with the carrier. All of our agreements
with the
carrier are for short term projects or sales of third-party
hardware.
While we feel that our significant relationships with Beijing
Mobile will
likely provide additional sales agreements in the future,
Beijing Mobile
is not contractually bound to purchase any products or services
from us.
Loss of this customer could hurt our business by reducing
our revenues and
profitability.”
“During
the fiscal years ended December 31,
2001, 2002, 2003 and 2004, sales to Beijing Mobile Communication
Company