SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For The Quarterly Period Ended September 30, 2004

Commission File Number 1-10366

WEIDA COMMUNICATIONS, INC.
(Exact Name of Registrant as Specified in Its Charter)

New Jersey		22-2582847
(State or Other Jurisdiction of Incorporation or Organization)		(IRS Employer Identification No.)

515 East Las Olas Boulevard, Suite 1350, Fort Lauderdale, Florida		33301
(Address of Principal Executive Offices)		(Zip Code)

(954) 527-7750
(Registrant’s Telephone Number, Including Area Code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for 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 ý No o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes o No ý

As of November 12, 2004, the registrant had 74,195,497 shares of common stock outstanding.

PART I—FINANCIAL INFORMATION

ITEM 1—Consolidated Financial Statements

Weida Communications, Inc. and Subsidiary

Consolidated Balance Sheets

At September 30, 2004 and June 30, 2004

	September 30 2004			June 30 2004
	(Unaudited)
ASSETS

Current Assets:
Cash & cash equivalent	$	412,390		$	1,617,845
Accounts receivable	108,693			—
Interest receivable	114,987			80,968
Related party receivable	1,340,488			438,640
Inventories	774,732			—
Advances to suppliers	—			—
Prepaid expenses - current	415,958			173,750
Total current assets	3,167,248			2,311,203

Deposit for purchase of property, plant, and equipment	—			—

Property, Plant, & Equipment:	1,908,098			18,121

Other Assets:
Notes receivable	2,200,000			2,200,000
Deferred acquisition costs	6,212,254			5,704,004
Prepaid expense - noncurrent portion	50,000			62,500
Other assets	3,880			3,880
Total Other Assets	8,466,134			7,970,384

Total Assets	$	13,541,480		$	10,299,708

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current Liabilities:
Accounts payable	$	2,295,179		$	1,360,703
Accrued expenses	235,102			158,100
Amounts due to shareholders	238,840			—
Amounts due to related parties	2,132,354			756,386
Short term borrowing	24,165			—
Bank loan	2,416,451			—
Total Current Liabilities	7,342,091			2,275,189

Long term loan	270,000			270,000
Total Liabilities	7,612,091			2,545,189

Common stock, $0 par value, 100,000,000 shares authorized, 72,334,486 issued and outstanding at June 30, 2004 and September 30, 2004, respectively	723,095			9,408,958
Common stock to be issued	1,375,955			1,375,955
Additional paid-in capital	13,638,548			—
Accumulated deficit	(9,808,209		)	(3,030,394		)
Total shareholders’ equity	5,929,389			7,754,519

Total Liabilities and Shareholders’ Equity	$	13,541,480		$	10,299,708

See accompanying notes to unaudited consolidated financial statements.

Weida Communications, Inc. and Subsidiary

Consolidated Statement of Operations

For The Three Months Ended September 30, 2004 and September 30, 2003

	September 30 2004			September 30 2003
	(Unaudited)			(Unaudited)
Revenue
Sales of VSAT equipment	$	19,910		$	—
Transponder utilization revenue	109,542			—
	129,452			—
Costs and expenses
Cost of goods sold	(127,459		)	—
Selling, general, and administrative costs	1,715,678			(53,909		)
	1,588,219			(53,909		)

Operating (loss)	(1,458,767		)	(53,909		)

Other income and (expenses)
Interest Expense	(15,776		)	—
Interest Income	45			12,763
	(15,731		)	12,763

Net (loss) before provision for income taxes	(1,474,498		)	(41,146		)

Provision for income taxes	—			—

Net (loss)	$	(1,474,498	)	$	(41,146	)

Basic and diluted net loss per common share	$	(0.02	)
Weighted average shares outstanding		72,334,486

See accompanying notes to unaudited consolidated financial statements.

Weida Communications, Inc. and Subsidiary

Statement of Cash Flows

For The Three Months Ended September 30, 2004 and September 30, 2003

	September 30 2004			September 30 2003
	(Unaudited)			(Unaudited)
Cash flows from operating activities
Net loss	$	(1,474,498	)	$	(118,325	)
Adjustments to reconcile earnings to net cash provided by operating activities:
(Increase) Decrease in operating assets:
Accounts receivable	(9,635		)	—
Interest receivable	(114,987		)	(31,908		)
Inventories	(17,136		)	—
Advances to suppliers	13,920			—
Prepaid expenses - current	(32,103		)	—
Deferred acquisition costs	(508,250		)	(827,969		)
Prepaid expenses - noncurrent	12,500			—

Increase (Decrease) in operating liabilities:
Accounts payable	(166,585		)	—
Accrued expenses	77,002			—
Net cash provided (used) by operating activities	(2,219,772		)	(978,202		)

Cash flows from investing activities
Property, plant, and equipment deposits	393,950			—
Additions to property, plant, and equipment	(336,312		)	—
Net cash provided (used) in investing activities	57,638			—

Cash flows from financing activities
Stock sales	2,536,234			351,196
Related party receivable	(1,740,488		)	—
Amounts due to shareholders	60,757			—
Amounts due to related parties	127,629			—
Sales of Founders Shares	—			689,630
Net cash provided (used) by financing activities	984,132			1,040,826

Net increase (decrease) in cash	(1,178,002		)	62,624

Cash - beginning of period	1,671,854			—
Cash - end of period	$	439,843		$	—

See accompanying notes to unaudited consolidated financial statements.

WEIDA COMMUNICATIONS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2004 (UNAUDITED)

1. ORGANIZATION AND NATURE OF THE BUSINESS

Weida provides products and services for satellite-based communications networks in the People’s Republic of China (“PRC” or “China”) through a series of contractual arrangements which give us control of and a 51% profit-sharing interest in Guangzhou Weida Communications Technology Co., Ltd. (a/k/a Weida Communications Technology Company Limited), a communications service company organized under the laws of the PRC and wholly-owned by PRC citizens (“Weida PRC”). We conduct our business in China solely through certain contractual arrangements among our affiliates, Weida PRC and the shareholders of Weida PRC. Although we do not have an equity interest in Weida PRC, we control and enjoy the economic benefits of Weida PRC through such contractual arrangements.

Weida PRC is a wholly privately-owned company established in 2001 in response to the Chinese government allowing an individual company to obtain a 100% private, non-governmental and non-military, VSAT satellite license. VSAT (Very Small Aperture Terminal) is a relatively small satellite antenna used by corporations and governments for satellite based point-to-multipoint data communications, such as financial transactions, Internet services, multimedia and television. VSAT offers a number of advantages over terrestrial alternatives for businesses and homes.

The scope of the license permits the offer and sale of a variety of broadband satellite communications services, including audio and video services, Internet connectivity, multimedia services, HDTV, and Voice Over IP. The license granted provides Weida PRC the opportunity to develop and deliver such satellite communications in China. Weida PRC is licensed to provide services in the rapidly growing Voice Over IP telephone service market, and to provide such services as a phone operator.

Our wholly-owned subsidiary, SCL Ventures, Ltd., a company organized under the laws of the British Virgin Islands (“SCL”), was formed in May 2003 for the purpose of engaging in the telecommunications business in China and entered into a master agreement with Weida PRC which was ratified and approved by the board of directors of SCL in May 2003.

Subsequent to September 30, 2004, SCL completed a series of contractual arrangements resulting in its acquisition of effective management control and a 51% profit-sharing interest in Weida PRC.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principle of consolidation - The consolidated financial statements include the financial statements of Weida Communication Inc. and its subsidiary.

Use of estimates - The preparation of financial statements 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 revenues and expenses during the reported period. Actual results could differ from those estimates.

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. They do not include all information and notes required by generally accepted accounting principles for complete consolidated financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals only) considered necessary for a fair presentation have been included.

Property, plant and equipment - These are recorded at cost less accumulated depreciation. Depreciation is provided on a straight-line basis over the estimated useful lives of the assets. Estimated useful lives of property, plant and equipment are as follows:

VSAT and other equipment		5 years
Office equipment		5 years
Computers		3 years
Motor vehicles		5 years

Major improvements of property, plant and equipment are capitalized, while expenditures for repairs, maintenance and minor renewals and betterments are expensed.

Inventories - Inventories, which primarily consist of VSAT equipment, are stated at the lower of cost market value. Cost is determined by the first-in, first-out method.

Long-lived assets - The Company evaluates its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the assets to future undiscounted net cash flows expected to be generated by the assets. If the carrying amounts of long-lived assets are not recoverable, an impairment is recognized for the amount by which the carrying amounts of the assets exceed their fair values. No impairment loss was recorded for the period presented.

Income taxes - Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the carrying amounts of existing assets and liabilities and their respective tax bases as well as operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are established when it is more likely than not that some or all of the deferred tax assets will not be realized.

Revenue recognition - Revenue from the satellite bandwidth provision agreement is recognized on a straight line basis over the period of the agreements. The excess of amounts received or receivable from customers over the revenue recognized is included in accrued expenses and other payables account.

Sales of VSAT equipment are recorded when the equipment is delivered, title has passed to the customers and the Company has no further obligations to provide services related to the operation of such equipment.

Foreign currency translation - The functional currency of the Company is the Renminbi (“RMB”). Transactions in other currencies are recorded in RMB at the rates of exchange prevailing when the transactions occur. Monetary assets and liabilities denominated in other currencies are translated into RMB at rates of exchange in effect at the balance sheet dates. Exchange gains and losses are recorded in the consolidated statements of operations.

Fair value of financial instruments - The carrying amounts of cash and cash equivalents, amounts due to shareholders, amounts due to other related parties, and bank loans approximate their fair values due to the short-term maturity of these instruments.

Recently issued accounting pronouncements - In May 2003, the Financial Accounting Standard Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity”. It establishes standards for how an issuer classifies and measures certain financial instruments. SFAS No. 150 is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of

the first interim period beginning after September 15, 2003. It requires that certain financial instruments that, under previous guidance, could be accounted for as equity be classified as liabilities, or assets in some circumstances. It does not apply to features embedded in a financial instrument that is not a derivative in its entirety. SFAS No. 150 also requires disclosures about alternative ways of settling the instruments and the capital structure of entities whose shares are mandatorily redeemable. The adoption of SFAS No. 150 did not have an impact on the Company’s financial position, results of operations, or cash flows.

In January 2003, the FASB issued Interpretation No. (“FIN”) 46 (revised), “Consolidation of Variable Interest Entities”. FIN 46 (revised) requires that if a business enterprise has a controlling financial interest in a variable interest entity, the assets, liabilities and results of the activities of the variable interest entity should be included in consolidated financial statements of the business enterprise. FIN 46 (revised) applies immediately to variable interest entities created after January 31, 2003. For variable interest entities created or acquired prior to February 1, 2003, the provisions of FIN 46 (revised) are effective beginning January 1, 2004. The adoption of FIN 46 (revised) did not have a material impact on the Company’s financial position, results of operations, or cash flows.

3. NOTE RECEIVABLE WITH RELATED PARTY

On August 1, 2003, SCL signed a promissory note receivable with Glendora, Ltd. (“Glendora”), a British Virgin Islands corporation, in the amount of $2.2 million. Glendora has certain shareholders that are also shareholders of SCL and the Company. Borrowings under the note receivable bear interest at the London Interbank Offered Rate plus 200 basis points (effective rate of 4.17% at September 30, 2004), with interest and principal due five years from the date of the note. Glendora has granted a general security interest in and to all of its tangible and intangible property and assets of any kind as collateral for the note receivable. The carrying amount of this note receivable approximates its fair value.

Additionally, SCL and Glendora signed an assignment agreement whereby SCL has granted Glendora the rights to enter into a transaction with Guangzhou Suntek New Tech R&D Co., Ltd. (“Suntek”) which was previously held by SCL. Management of the Company has not assigned any value to the assignment agreement as the assignment agreement assigns the right to pursue a purchase agreement with Suntek and not a negotiated purchase agreement and, therefore, does not have any measurable value.

4. INCOME TAXES

The income tax rate applicable to enterprises in the PRC is generally 33%. However, preferential tax treatment of the Company’s wholly owned subsidiary has been agreed with the relevant tax authorities. The subsidiary is entitled to a one year exemption from income tax commencing 2003.

5. NET LOSS PER SHARE

Basic and diluted net loss per share is computed by dividing the net loss for the period by the weighted average number of shares of common stock outstanding during the period. For periods in which a net loss has been incurred, the calculation of diluted net loss per share excludes potential common stock equivalents, as their effect is anti-dilutive. Potential common stock includes incremental shares of common stock issuable upon the exercise of 2,370,000 outstanding stock warrants as of September 30, 2004.

6. COMMITMENTS AND CONTINGENCIES

(i) An employee of SCL has asserted claims for unpaid salary in the amount of $0.5 million and 3.3 million shares of Weida’s common stock based on an asserted employment agreement between him and SCL, and has indicated through his counsel that if terminated he will also assert a claim for severance in the additional amount of $0.75 million. The Company’s management believes the Company has meritorious defenses to the claims, including that the employee in question did not perform the services contemplated by the alleged agreement. A portion of the employee’s alleged unpaid salary had been and continues to be included in the Company’s consolidated financial statements as account payable.

SCL has commenced legal proceedings against the employee for breach of contract and declaratory relief and has given him notice of termination of employment. The employee has moved to compel arbitration of the matter. Litigation or arbitration proceedings with respect to the employee’s claims are probable. There can be no assurance as to the outcome of any litigation or arbitration proceedings. Any adverse decision in such proceedings could adversely affect the financial condition of the Company.

(ii) A shareholder and former chief financial officer of Teleflex Technologies, Inc. (“Teleflex”), a currently inactive privately-held company which had attempted to pursue joint venture opportunities in the PRC in late 2001 and in 2002, and of which Mitchell

Sepaniak, the president, chief executive officer and a shareholder of the Company, was also a chief executive officer, commencing early 2003, has recently asserted claims in New York State court against SCL, Teleflex and Mr. Sepaniak. The plaintiff’s petition alleges failure on the part of Mr. Sepaniak and Teleflex to comply with corporate formalities such as holding annual meetings and also alleges corporate waste, and is seeking various relief, including allowing shareholders to inspect the books and records, including balance sheets and profit and loss earnings statements. The former chief financial officer has also asserted claims against SCL, Teleflex and Mr. Sepaniak for unpaid salary and compensation.

Litigation proceedings with respect to the plaintiff’s claims have commenced. The proceedings are at an early stage, and therefore there can be no assurance as to the outcome of such proceedings. Any adverse decision in such proceedings could adversely affect the financial condition of the Company.

(iii) The Company is also subject to various legal proceedings and claims that arise in the ordinary course of business. In the opinion of management, the amount of any ultimate liability with respect to these actions will not materially affect the Company’s financial position, liquidity, or results of operations.

7. RELATED PARTY TRANSACTIONS

(i) On December 3, 2003, the Company entered into a consulting agreement with Carl Lanzisera, the former president and current member of the Company’s board of directors. The agreement provides for Mr. Lanzisera to assist the Company in structuring, operating and growing the Company’s business. The agreement is for a term ending on December 31, 2004 and provides for cash payments aggregating $100,000 and the issuance of 25,000 restricted shares of the Company’s common stock. The shares were issued in June 2004 at the market value of $5.5 per share. The total consideration under the agreement amounted to $237,500, of which $118,750 has been recognized as expense in the consolidated statements of operations during the three months ended September 30, 2004.

(ii) SCL has entered into a consulting agreement with Anthony Giordano, a beneficial holder of the Company’s common stock, effective as of April 1, 2004. The agreement provides for Mr. Giordano to assist SCL as a consultant by evaluating prospective merger, acquisition and financing transactions that are presented to SCL or the Company. The agreement is for a term ending on March 30, 2006, with subsequent one-year extensions unless otherwise terminated. The agreement provides for a one-time initial consulting fee equal to $150,000, which was paid to Mr. Giordano in April 2004. In addition, during the term of the agreement, commencing April 2004, Mr. Giordano will receive a monthly consulting fee, in arrears, in an amount equal to $20,000 plus reimbursement of expenses.

(iii) Certain shareholders contributed capital to fund the Company’s operations through to December 31, 2003. In 2004, a founding shareholder of the Company contributed $600,000 capital and loaned $270,000 to the Company to fund its operations. The shareholder has indicated it will not demand the repayment of $270,000 prior to July 2005.

In addition, on September 3, 2004, Mr. Giordano, together with one of Mr. Giordano’s family limited partnerships, has granted a credit facility amounting to $5 million to fund the Company’s future operations. This credit facility is unsecured, bears interest equal to the London Interbank Offered Rate plus 200 basis points, has no equity component, and terminates on October 31, 2005.

8. RECENT ACQUISITIONS

In August 2004, SCL completed a series of contractual arrangements. As part of the contractual arrangements, SCL acquired 99.99% of the registered capital of Ocean International Holdings Limited (“OIHL”), a company incorporated in Hong Kong. The remaining 0.01% of the registered capital of OIHL is held by one of the Company’s executives as a nominal holder in order to meet local Hong Kong legal requirements. OIHL is the sole owner and holder of all the registered capital of Ocean Tian Di Communication Technology Co., Ltd. (Guangzhou), a wholly owned foreign enterprise (“OTDC”). OTDC has entered into an exclusive service and support agreement with Weida PRC, effective as of September 1, 2004, which provides for OTDC to provide support services to Weida PRC in exchange for receiving service fees.

Pursuant to the terms of the contractual arrangements, SCL has acquired effective majority ownership and control of Weida PRC through trust agreements for 51% of its shares and an effective 51% profit-sharing interest in Weida PRC. Under the contractual arrangements, SCL can designate three of Weida PRC’s five directors.

As part of the contractual arrangements, when the Weida EJV is formed and approved by the PRC authorities, its profit-sharing interest will be reduced to 26% so as to maintain its effective 51% majority interest.

ITEM 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and notes thereto included elsewhere in this report. In addition to historical information contained herein, this discussion and analysis contains forward-looking statements. These statements involve risks and uncertainties and can be identified by the use of forward-looking terminology such as “estimates,” “projects,” “anticipates,” “plans,” “future,” “may,” “should,” “predicts,” “potential,” “continue,” “expects,” “intends,” “believes,” and similar expressions. These statements are based on the current expectations of the management of the Company only, and are subject to a number of risk factors and uncertainties, including but not limited to the need for equity financing in order to consummate the acquisition of a legal ownership interest in Weida PRC, limited operating history, the Company’s historical and likely future losses, uncertain regulatory landscape in the People's Republic of China, fluctuations in quarterly operating results, the Company's reliance on the provision of VSAT-based communications services for the majority of its revenues, changes in technology and market requirements, decline in demand for the Company's products, inability to timely develop and introduce new technologies, products and applications, difficulties or delays in absorbing and integrating acquired operations, products, technologies and personnel, loss of market share, and pressure on pricing resulting from competition, which could cause the actual results or performance of the Company to differ materially from those described therein. We undertake no obligation to update these forward- looking statements. For a more detailed description of the risk factors and uncertainties affecting the Company, refer to the Company's reports filed from time to time with the Securities and Exchange Commission, including the information about risk factors provided in Item 1, "Business," in the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2004.

Overview

We are a United States-managed company that is participating in the fast-growing China telecommunications market through control of and a 51% profit-sharing interest, and our planned 51% combined equity ownership and profit-sharing interest, in the only wholly privately-owned company in China holding licenses for bi-directional VSAT communications (the only other privately-owned company recently holding a license was merged into a joint government venture in January 2004). Weida PRC’s satellite operations in China provide ground-based equipment and related services to support government and corporate applications, including broadband Internet access, remote meter monitoring, and mission-critical data backup systems. We were organized as the successor to several other businesses of our original founder. On May 20, 2003, we and three shareholders owning an aggregate of approximately 67% of our outstanding common stock (prior to giving effect to a one-for-four reverse stock split that took effect on June 11, 2004) entered into a share exchange agreement with SCL and certain of its shareholders. Upon satisfaction of the terms and conditions of the share exchange agreement, as amended, the closing of the share exchange was consummated on June 11, 2004, at which time SCL became our wholly-owned subsidiary and the shareholders of SCL were issued shares representing approximately 96.5% of our outstanding shares. The share exchange with SCL has been accounted for similar to a reverse acquisition in which SCL is the acquirer for accounting purposes. Upon completion of the share exchange, we changed our name from Laser Recording Systems, Inc. to Weida Communications, Inc.

Our principal executive offices are located at 515 East Las Olas Boulevard, Suite 1350, Fort Lauderdale, Florida 33301. Our telephone number is (954) 527-7750. Our Internet address is http://www.weida.com.

Results of Operations

On April 29, 2003, SCL entered into a master agreement with Weida PRC, as more fully described elsewhere in this report. Weida PRC is currently our only source of revenue, and our operations prior to September 2004 have been limited to activities to complete the transaction with Weida PRC. Management does not believe a period to period analysis of change in revenue, costs of goods sold and other expenses is relevant to an understanding of the Company's results of operations at this time. For the three months ended September 30, 2004, we incurred total operating expenses of $1,588,219.00 and deferred acquisition costs of $5,704,004.00.

Professional, General and Administrative Expenses

Operating expenses totaled $1,588,219.00 for the three months ended September 30, 2004. These expenses reflect the expected one time costs of building our infrastructure in order to fulfill certain contracts and prospective contracts. Included in these expenses are legal fees, accounting fees, and consultant fees paid to certain parties in relation to funding activities. These expenses also reflect numerous due diligence trips to China for certain executives of the Company as well as their advisors.

Liquidity and Capital Resources

As shown in the consolidated financial statements, at September 30, 2004 we had additional paid-in capital of approximately $13.63 million and an accumulated deficit of approximately $9.808 million. Since SCL’s formation in May 2003, we have funded all of our operating expenses and deficit from the net proceeds of private placements of our shares and warrants to private investors and, to a lesser extent, from shareholder loans.

At September 30, 2004, we had total consolidated assets of approximately $14.38 million. Included in total assets is a promissory note issued by Glendora Management Ltd. (“Glendora”), a British Virgin Islands corporation, to SCL in the amount of $2.2 million. Certain of Glendora’s shareholders are also shareholders of the Company. Borrowings under the note bear interest at the London Interbank Offered Rate plus 200 basis points (effective rate of 4.17% at September 30, 2004), with interest and principal due five years from the date of the note. Glendora has granted to SCL a security interest in and to certain of its property and assets as collateral for repayment of the note. The carrying amount of this note receivable approximates its fair value.

Additionally, SCL and Glendora signed an assignment agreement whereby SCL has granted Glendora the rights to enter into a transaction with Guangzhou Suntek New Tech R&D Co., Ltd (“Suntek”), which was previously held by SCL. No value has been designated to the assignment agreement as it assigns the right to pursue a purchase agreement with Suntek and not a negotiated purchase agreement.

Our current cash and cash equivalents and funding commitments described below are not sufficient for us to sustain present operations beyond the third calendar quarter of 2005. We will need additional funding to continue operations as an ongoing entity. We are in the process of negotiating to raise additional private funding to satisfy these requirements. We are also in preliminary negotiations with certain banking and financial institutions to secure a corporate credit line.

Effective as of September 3, 2004, a credit facility for up to $5 million has been made available to us by Anthony Giordano, a Company shareholder, together with one of Mr. Giordano’s family limited partnerships, to fund the Company’s future operations. This credit facility is unsecured, bears interest on any funds advanced at a rate equal to the London Interbank Offered Rate plus 200 basis points, has no equity component, and terminates on October 31, 2005. For additional disclosure concerning Mr. Giordano, see Item 12, “Security Ownership of Certain Beneficial Owners and Management–Matters concerning a beneficial shareholder” in our Annual Report on Form 10-K for the fiscal year ended June 30, 2004.

Critical accounting policies

The preparation of our consolidated financial statements and related disclosures in conformity with generally accepted accounting principles in the United States requires management to make estimates and judgments that affect our reported amounts of assets and liabilities, revenues and expenses and related disclosures of contingent assets and liabilities. On an on-going basis, we evaluate our estimates and assumptions based upon experience and various other factors and circumstances. Management believes that our estimates and assumptions are reasonable under the circumstances; however, actual results may vary from these estimates and assumptions under different future circumstances. We have identified the following critical accounting policies that affect the more significant judgments and estimates used in the preparation of the consolidated financial statements of the Company.

Accruals and Provisions for Loss Contingencies

We make provisions for all loss contingencies when information available to us prior to the issuance of the financial statements indicates that it is probable that an asset had been impaired or a liability had been incurred at the date of the consolidated financial statements and the amount of loss can be reasonably estimated.

For provisions or accruals related to litigations, we make provisions based on information from legal counsel and the best estimation of management. As discussed in Note 7 to the consolidated financial statements of the Company, we are involved in various legal proceedings and contingencies, and we have not yet recorded a liability in relation to an asserted claim by a former employee of SCL. In accordance with Statement of Financial Accounting Standards (“SFAS”) No. 5 Accounting for Contingencies, SFAS No. 5 requires a liability to be recorded based on our estimate of the probable costs of the resolution of the contingency. The actual resolution of this contingency may differ from our estimates. If the contingency were settled for an amount greater than our estimate, a future charge to income would result. Likewise, if the contingency were settled for an amount that is less than our estimate, a future credit to income would result.

Recently Issued Accounting Pronouncements

In May 2003, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity, which establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. SFAS No. 150 is effective for financial instruments entered into or modified after May 31, 2003 and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. The adoption of SFAS No. 150 had no impact on the financial statements as the Company did not have any financial instruments with characteristics of both liabilities and equity during the period ended September 30, 2004.

In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging Activities, which amends and clarifies accounting for derivative instruments and for hedging activities under SFAS No. 133. Specifically, SFAS No. 149 requires that contracts with comparable characteristics be accounted for similarly. Additionally, SFAS No. 149 clarifies the circumstances in which a contract with an initial net investment meets the characteristics of a derivative and when a derivative contains a financing component that requires special reporting in the statement of cash flows. This Statement is generally effective for contracts entered into or modified after June 30, 2003 and did not have a significant impact on the Company’s financial position or results of operations.

In January 2003, the FASB issued Interpretation (“FIN”) No. 46, Consolidation of Variable Interest Entities (“FIN 46”) and, in December 2003, issued a revision to that interpretation (“FIN 46R”). FIN 46R replaces FIN 46 and addresses consolidation by business enterprises of variable interest entities that possess certain characteristics. A variable interest entity (“VIE”) is defined as (a)

an ownership, contractual or monetary interest in an entity where the ability to influence financial decisions is not proportional to the investment interest, or (b) an entity lacking the invested capital sufficient to fund future activities without the support of a third party. FIN 46R establishes standards for determining under what circumstances VIEs should be consolidated with their primary beneficiary, including those to which the usual condition for consolidation does not apply. The Company did not have any ownership in any variable interest entities as of June 30, 2004 or September 30, 2004.

Contractual Obligations

As of September 30, 2004, our future contractual cash obligations are as follows:

	Payments due by period
Contractual Obligations (1)	Total	2004	2005 – 2006	2007 – 2008	2009 and thereafter
Long-Term Obligations (2)	270,000	0	0	270,000	0
Total	270,000	0	0	270,000	0

(1) We do not have any purchase obligations other than standard purchase orders in the ordinary course of business. We do not have any capital lease obligations or operating lease obligations.

(2) Our long-term obligations are primarily comprised of a long-term loan from a shareholder. The shareholder has indicated that he will not seek repayment prior to July 2005. Although there is no commitment that the loan will be repaid in 2007-2008, our board of directors believes the loan will be repaid during such time period.

Off-Balance Sheet Arrangements

In connection with our acquisition of control of and a 51% profit-sharing interest in Weida PRC, we will be required to pay approximately $15.8 million as follows:

• $805,153 in cash to the Weida PRC shareholders, which payment shall also be deemed to satisfy our obligation to contribute a capital contribution to the Weida EJV (which payment has been deposited and is reserved for payment); and

• $15,000,000, payable in cash to the former shareholders of OIHL.

These payments are required to be made only if the conditions to the formation of the Weida EJV discussed elsewhere in this report have been completed and the Weida EJV has been formed and has a valid business license showing SCL’s 25% equity ownership.

ITEM 3—Quantitative and Qualitative Disclosures about Market Risk

Market-Rate Sensitive Instruments and Risk Management

We are exposed to certain market risks from transactions that are entered into during the normal course of business. Fluctuating foreign exchange rates for the Renminbi may impact our financial condition and results of operations. Our foreign exchange exposure is presently exclusively related to activities associated with Weida PRC. The Company does not attempt to manage these risks by entering into forward exchange contracts. We do not use derivative financial instruments for speculative or trading purposes. Therefore, no quantitative tabular disclosures are required.

ITEM 4—Controls and Procedures

Disclosure Controls and Procedures

Our management, with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, (the “Exchange Act”)) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on such evaluation, our principal executive officer and principal financial officer have concluded, as of the end of such period, that our disclosure controls and procedures are effective in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by us in our reports that we file or submit under the Exchange Act.

PART II—OTHER INFORMATION

ITEM 1—Legal Proceedings

Information required for Part II, Item 1 is set forth in Note 6 of the Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q and is incorporated herein by reference.

We are subject to various claims that arise in the ordinary course of business. In the opinion of our board, the amount of any ultimate liability with respect to these claims will not materially affect our financial position, liquidity or results of operations.

ITEM 2—Unregistered Sales of Equity Securities and Use of Proceeds

Recent Sales of Unregistered Securities

During the three months ended September 30, 2004, we issued (i) to investors in a private placement transaction 969,424 shares of our common stock at a price of $3.00 per share and warrants to purchase an additional 484,724 shares of our common stock at an exercise price of $2.75 per share and (ii) to advisors 372,322 shares of our common stock in connection with the private placement transaction. The shares and warrant shares were issued under common individual purchase agreements and advisory agreements. The warrants carry a three and one-half year term from the time such warrants are exercisable. Our common stock and warrants issued to investors and advisors were issued pursuant to an exemption from the registration requirements of the Securities Act of 1933, as amended, pursuant to Regulation D promulgated thereunder.

ITEM 3—Defaults upon Senior Securities

Not applicable.

ITEM 4—Submission of Matters to Vote of Security Holders

Not applicable.

ITEM 5—Other Information

Not applicable.

ITEM 6—Exhibits

(a) Exhibits:

31.1 Certification of principal executive officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2 Certification of principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1 Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350 (as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002).

	Weida Communications, Inc.

Dated: November 22, 2004	By:		/s/ Mitchell Sepaniak
		Mitchell Sepaniak
		President and Chief Executive Officer

Dated: November 22, 2004	By:		/s/ Joseph Zumwalt
		Joseph Zumwalt
		Chief Financial Officer

		Page No.
PART I—Financial Information		1

ITEM 1—Consolidated Financial Statements		1

Consolidated Balance Sheets—September 30, 2004 and June 30, 2004		1

Consolidated Statement of Operations—Three months ended September 30, 2004 and September 30, 2003		2

Consolidated Statement of Cash Flows—Three months ended September 30, 2004 and September 30, 2003		3

Notes to Consolidated Financial Statements		4

ITEM 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations		8

ITEM 3—Quantitative and Qualitative Disclosures about Market Risk		10

ITEM 4—Controls and Procedures		10

PART II—Other Information		12

ITEM 1—Legal Proceedings		12

ITEM 2—Unregistered Sales of Equity Securities and Use of Proceeds		12

ITEM 3—Defaults upon Senior Securities		12

ITEM 4—Submission of Matters to a Vote of Security Holders		12

ITEM 5—Other Information		12

ITEM 6—Exhibits		12

SIGNATURES		13

Exhibit No.		Description
31.1		Certification of principal executive officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350 (as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002).