UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2008 |
OR
[ ] | TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission file number 000-52709
SINO FIBRE COMMUNICATIONS, INC. | |
(Exact name of registrant as specified in its charter) | |
Nevada | 760616470 |
(State or other jurisdiction of incorporation or organization) | (IRS Employer Identification No.) |
The Chrysler Building 405 Lexington Ave, 26th Fl New York NY | 10174 |
(Address of principal executive offices) | (Zip Code) |
+852-3101-7366 | |
(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 past 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 [X] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filed,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ ] | Accelerated filer [ ] |
Non-accelerated filer [ ] (Do not check if a smaller reporting company) | Smaller reporting company [X] |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act. Yes [ ] No [X]
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: As of November 11, 2008, the issuer had 34,855,573 shares of common stock outstanding.
SINO FIBRE COMMUNICATIONS, INC.
Quarterly Report on Form 10-Q
For the Quarterly Period Ended September 30, 2008
FORWARD-LOOKING STATEMENTS
This Form 10-Q for the quarterly period ended September 30, 2008 contains forward-looking statements that involve risks and uncertainties. Forward-looking statements in this document include, among others, statements regarding our capital needs, business plans and expectations. Such forward-looking statements involve assumptions, risks and uncertainties regarding, among others, the success of our business plan, availability of funds, government regulations, operating costs, our ability to achieve significant revenues, our business model and products and other factors. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may”, “should”, “expect”, “plan”, “intend”, “anticipate”, “believe”, “estimate”, “predict”, “potential” or “continue”, the negative of such terms or other comparable terminology. In evaluating these statements, you should consider various factors, including the assumptions, risks and uncertainties set forth in reports and other documents we have filed with or furnished to the SEC. These factors or any of them may cause our actual results to differ materially from any forward-looking statement made in this document. While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding future events, our actual results will likely vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested herein. The forward-looking statements in this document are made as of the date of this document and we do not intend or undertake to update any of the forward-looking statements to conform these statements to actual results, except as required by applicable law, including the securities laws of the United States.
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TABLE OF CONTENTS
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 2008
PART I
FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements (Unaudited) | Page | |
Consolidated Balance Sheets as of September 30, 2008 and December 31, 2007 | 4 | |
Consolidated Statements of Operations for the three and nine month periods ended September 30, 2008 and 2007 and for the period from inception through September 30, 3008 | 5 | |
Consolidated Statements of Stockholders’ Deficit for the period from inception through September 30, 3008 | 7 | |
Consolidated Statements of Cash Flows for the nine month periods ended September 30, 2008 and 2007 and for the period from inception through September 30, 3008 | 9 | |
Selected notes to consolidated financial statements | 10 | |
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations | 14 | |
Item 3. Quantitative and Qualitative Disclosures About Market Risk | 15 | |
Item 4. Controls and Procedures | 16 |
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Sino Fibre Communications, Inc.
(A Development Stage Company)
Consolidated Balance Sheets
(Unaudited)
September 30 2008 | December 31, 2007 | |||||||
Assets Current: | ||||||||
Cash | $ | 708,451 | $ | 378,732 | ||||
Certificate of deposit | - | - | ||||||
Total Current Assets | 708,451 | 378,732 | ||||||
Deposit on fiber optic network | 2,000,000 | 200,000 | ||||||
Total Assets | $ | 2,708,451 | $ | 578,732 | ||||
Liabilities | ||||||||
Current: | ||||||||
Accounts payable and accrued liabilities | $ | 496,879 | $ | 283,662 | ||||
Interest payable | 1,411 | 1,683 | ||||||
Due to related parties | 186,562 | 332,384 | ||||||
Common stock to be issued for subscriptions funds received | - | 50,000 | ||||||
Common stock to be issued for consulting services rendered | - | 87,500 | ||||||
Convertible notes | 22,795 | 224,896 | ||||||
Total Current Liabilities | 707,645 | 980,125 | ||||||
Stockholders’ Equity (Deficit) | ||||||||
Common Share, $0.001 par value; 200,000,000 shares authorized; | ||||||||
Issued and outstanding: | ||||||||
34,848,160and 16,481,000, respectively | 34.848 | 16,481 | ||||||
Additional paid-in capital | 5,647,996 | 1,282,002 | ||||||
Deficit accumulated during the development stage | (3,682,038 | ) | (1,699,876 | ) | ||||
Total Stockholders’ Equity (Deficit) | 2,000,806 | (401,393 | ) | |||||
Total Liabilities and Stockholders’ Equity (Deficit) | $ | 2,708,451 | $ | 578,732 |
See accompanying notes to the unaudited consolidated financial statements.
-4-
Sino Fibre Communications, Inc.
(A Development Stage Company)
Consolidated Statements of Operations
(Unaudited)
For The Three Months Ended September30, 2008 | For The Three Months Ended September30, 2007 | |||||||
Revenue | $ | - | $ | - | ||||
Selling, general and administrative expenses | 264,241 | 107,062 | ||||||
Loss from operations | (257,364 | ) | (107,062 | ) | ||||
Interest and other income (expense), net | (5771 | ) | - | |||||
Net loss | $ | (270,012 | ) | $ | (107,062 | ) | ||
Weighted average number | ||||||||
of shares outstanding | 34,725,117 | 16,481,400 | ||||||
Net loss per share | ||||||||
basic and diluted | $ | (0.01 | ) | $ | (0.01 | ) |
See accompanying notes to the unaudited consolidated financial statements.
-5-
Sino Fibre Communications, Inc.
(A Development Stage Company)
Consolidated Statements of Operations
(Unaudited)
For The Nine Months Ended September30, 2008 | For The NineMonths Ended September30, 2007 | For The Period From August 19, 1999 (Inception ) Through September30, 2008 | ||||||||||
Revenue | $ | - | $ | - | $ | 60 | ||||||
Selling, general & administrative expenses | 1,678,415 | 671,951 | 3,371,110 | |||||||||
Loss from operations | (1,678,415 | ) | (671,951 | ), | (3,371,050 | ) | ||||||
Interest and other income (expense), net | (303,747 | ) | - | (305,413 | ) | |||||||
Gain on settlement of debt | - | - | 4,500 | |||||||||
Loss on asset impairment | - | - | (5,500 | ) | ||||||||
Loss before discontinued operations | (1,982,162 | ) | (671,951 | ) | (3,677,463 | ) | ||||||
Loss from discontinued operations | - | - | (4,575 | ) | ||||||||
Net loss | $ | (1,982,162 | ) | $ | (671,971 | ) | $ | (3,682,038 | ) | |||
Weighted average number | ||||||||||||
of shares outstanding – basic and diluted | 28,126,415 | 16,481,400 | ||||||||||
Net loss per share - | ||||||||||||
basic and diluted | $ | (0.07 | ) | $ | (0.04 | ) |
See accompanying notes to the unaudited consolidated financial statements.
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Sino Fibre Communications, Inc.
(A Development Stage Company)
Consolidated Statements of Stockholders’ Deficit
For the Period From August 19, 1999 (Inception) Through September 30, 2008
(Unaudited)
Deficit | ||||||||||||||||||||||||||||||||||||
Accumulated | ||||||||||||||||||||||||||||||||||||
Common Stock | Common Stock To Be Issued | Additional Paid-in | Stock Subscriptions | Deferred | During the Development | |||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Receivable | Compensation | Stage | Total | ||||||||||||||||||||||||||||
Balance – August 19, 1999 (Inception) | $ | – | $ | – | $ | – | $ | – | $ | – | $ | – | $ | – | $ | – | ||||||||||||||||||||
Stock issued in August 1999 for organizational expenses at $0.001 per share | 2,500,000 | 2,500 | – | – | – | – | – | – | 2,500 | |||||||||||||||||||||||||||
Organizational expenses incurred by a director on behalf of the Company | – | – | – | 75 | – | – | – | 75 | ||||||||||||||||||||||||||||
Stock issued in August 1999 for “The Biocatalyst License” at a fair value of $0.001 per share | 2,000,000 | 2,000 | – | – | – | – | – | – | 2,000 | |||||||||||||||||||||||||||
Net loss | – | – | – | – | – | – | – | (4,575 | ) | (4,575 | ) | |||||||||||||||||||||||||
Balance – December 31, 1999 | 4,500,000 | 4,500 | – | – | 75 | – | – | (4,575 | ) | – | ||||||||||||||||||||||||||
Net loss | – | – | – | – | – | – | – | – | ||||||||||||||||||||||||||||
Balance – December 31, 2000 | 4,500,000 | 4,500 | – | – | 75 | – | – | (4,575 | ) | – | ||||||||||||||||||||||||||
Net loss | – | – | – | – | – | – | (4,610 | ) | (4,610 | ) | ||||||||||||||||||||||||||
Balance – December 31, 2001 | 4,500,000 | 4,500 | – | – | 75 | – | – | (9,185 | ) | (4,610 | ) | |||||||||||||||||||||||||
Stock issued in January 2002 for expenses at $0.001 per Share | 4,610,000 | 4,610 | – | – | – | – | – | – | 4,610 | |||||||||||||||||||||||||||
Stock issued in July 2002 for debt settlement at $0.001 per Share | 500,000 | 500 | – | – | – | – | – | – | 500 | |||||||||||||||||||||||||||
Donated rent | – | – | – | 500 | – | – | – | 500 | ||||||||||||||||||||||||||||
Net loss | – | – | – | – | – | – | (525 | ) | (525 | ) | ||||||||||||||||||||||||||
Balance – December 31, 2002 | 9,610,000 | 9,610 | – | – | 575 | – | – | (9,710 | ) | 475 | ||||||||||||||||||||||||||
Stock issued in January and June 2003 for expenses at $0.001 per share | 3,859,000 | 3,859 | – | – | – | – | – | – | 3,859 | |||||||||||||||||||||||||||
Donated rent | – | – | – | – | 500 | – | – | – | 500 | |||||||||||||||||||||||||||
Net loss | – | – | – | – | – | – | – | (5,644 | ) | (5,644 | ) | |||||||||||||||||||||||||
Balance – December 31, 2003 | 13,469,000 | 13,469 | – | – | 1,075 | – | – | (15,354 | ) | (810 | ) | |||||||||||||||||||||||||
Stock issued in January, July, and August 2004 for expenses at $0.01 per share | 416,000 | 416 | – | – | 3,744 | – | – | – | 4,160 | |||||||||||||||||||||||||||
Stock issued in September 2004 for expenses at $0.10 per Share | 5,000 | 5 | – | – | 495 | – | – | – | 500 | |||||||||||||||||||||||||||
Stock issued in July 2004 for cash at $0.01 per share | 1,000,000 | 1,000 | – | – | 9,000 | – | – | - | 10,000 | |||||||||||||||||||||||||||
Stock issued in September and December 2004 for cash at $0.10 per share | 200,100 | 200 | – | – | 19,810 | – | – | – | 20,010 | |||||||||||||||||||||||||||
Donated rent | – | – | – | – | 500 | – | – | – | 500 | |||||||||||||||||||||||||||
Deferred compensation | – | – | – | – | – | – | (167 | ) | – | (167 | ) | |||||||||||||||||||||||||
Net loss | – | – | – | – | – | – | – | (38,768 | ) | (38,768 | ) | |||||||||||||||||||||||||
Balance – December 31, 2004 | 15,090,100 | 15,090 | – | – | 34,624 | – | (167 | ) | (54,122 | ) | (4,575 | ) |
See accompanying notes to the unaudited consolidated financial statements.
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Sino Fibre Communications, Inc.
(A Development Stage Company)
Consolidated Statements of Stockholders’ Deficiency
For the Period From August 19, 1999 (Inception) Through September 30, 2008
(Unaudited)
Common Stock | Common Stock To Be Issued | Additional Paid-in | Stock Subscriptions | Deferred | Deficit Accumulated During the Development | |||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Receivable | Compensation | Stage | Total | ||||||||||||||||||||||||||||
Stock issued in January and March 2005 for cash at $0.10 per share | 11,300 | $ | 11 | – | $ | – | $ | 1,119 | $ | – | $ | – | $ | – | $ | 1,130 | ||||||||||||||||||||
Stock subscriptions received in cash in November 2004 | – | – | 40,000 | 40 | 9,960 | – | – | – | 10,000 | |||||||||||||||||||||||||||
Stock subscribed in December 2005 | – | – | 1,040,000 | 1,040 | 258,960 | (260,000 | ) | – | – | – | ||||||||||||||||||||||||||
Donated rent | – | – | – | – | 500 | – | – | – | 500 | |||||||||||||||||||||||||||
Deferred compensation | – | – | – | – | – | – | 167 | – | 167 | |||||||||||||||||||||||||||
Net loss | – | – | – | – | – | – | – | (43,889 | ) | (43,889 | ) | |||||||||||||||||||||||||
Balance – December 31, 2005 | 15,101,400 | $ | 15,101 | 1,080,000 | $ | 1,080 | $ | 305,163 | $ | (260,000 | ) | $ | – | $ | (98,011 | ) | $ | (36,667 | ) | |||||||||||||||||
Stock issued in March 2006 for cash at $0.25 per share (net) | 1,380,000 | 1,380 | (1,080,000 | ) | (1,080 | ) | 74,680 | 260,000 | – | – | 334,980 | |||||||||||||||||||||||||
Donated accounting fee | - | – | – | – | 1,000 | – | – | – | 1,000 | |||||||||||||||||||||||||||
Net loss | – | – | – | – | – | – | – | (673,255 | ) | (673,255 | ) | |||||||||||||||||||||||||
Balance – December 31, 2006 | 16,481,400 | $ | 16,481 | – | $ | – | $ | 380,843 | $ | – | $ | – | $ | (771,266 | ) | $ | (373,942 | ) | ||||||||||||||||||
Stock based compensation | - | - | - | - | 526,055 | - | - | - | 526,055 | |||||||||||||||||||||||||||
Discount on benefit conversion factor | - | - | - | - | 375,104 | - | - | - | 375,104 | |||||||||||||||||||||||||||
Net loss | - | - | - | - | - | - | - | (928,610 | ) | (928,610 | ) | |||||||||||||||||||||||||
Balance – December 31, 2007 | 16,481,400 | $ | 16,481 | – | $ | – | $ | 1,282,002 | $ | – | $ | – | $ | (1,699,876 | ) | $ | (401,393 | ) | ||||||||||||||||||
Shares issued | 492,587 | 493 | 137,007 | 137,500 | ||||||||||||||||||||||||||||||||
Common shares for convertible notes | 10,123,690 | 10,124 | - | - | 496,061 | - | - | - | 506,185 | |||||||||||||||||||||||||||
Shares issued for cash | 2,356,844 | 2,356 | - | - | 728,265 | - | - | - | 730,621 | |||||||||||||||||||||||||||
Stock based compensation Shares issued for deposit on fiber optic network | 3,076,000 5,000,000 | 3,076 5,000 | 1,098,284 1,795,000 | 1,101,360 1,800,000 | ||||||||||||||||||||||||||||||||
Shares cancelled | (3,087,361 | ) | (3,087 | ) | 3,087 | - | ||||||||||||||||||||||||||||||
200,000 options granted June 2006 | 26,531 | 26,531 | ||||||||||||||||||||||||||||||||||
Stock issued for expenditure | 405,000 | 405 | 81,759 | 82,164 | ||||||||||||||||||||||||||||||||
Net loss | - | - | - | - | - | - | - | (1,982,162 | ) | (1,982,162 | ) | |||||||||||||||||||||||||
Balance – September 30, 2008 | 34,848,160 | 34,848 | - | $ | - | $ | 5,647,996 | $ | - | $ | - | $ | (3,682,038 | ) | $ | 2,000,806 |
See accompanying notes to the unaudited consolidated financial statements.
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Sino Fibre Communications, Inc.
(A Development Stage Company)
Consolidated Statements of Cash Flows (Unaudited)
For the NineMonths Ended September30, 2008 | For the NineMonths Ended September30, 2007 | For the Period From August 19, 1999 (Inception) Through September30, 2008 | ||||||||||
Cash Flows From Operating Activities | ||||||||||||
Net loss | $ | (1,982,162 | ) | $ | (671,951 | ) | $ | (3,682,038 | ) | |||
Adjustments to reconcile net loss to net cash used in operating activities | ||||||||||||
Discontinued operations | - | - | 4,575 | |||||||||
Gain on settlement of debt | - | - | (4,500 | ) | ||||||||
Bad debts | - | - | 60 | |||||||||
Common stock issued for consulting services | 87,500 | |||||||||||
Loss on asset impairment | - | - | 5,500 | |||||||||
Donated rent and accounting fee | - | - | 3,000 | |||||||||
Expense settled with issuance of common stock | - | - | 11,319 | |||||||||
Stock based compensation | 1,210,055 | 367,838 | 1,736,110 | |||||||||
Common stock issued for interest on convertible debt | 6,185 | - | 6,185 | |||||||||
Amortization of debt discount | 297,899 | 297,899 | ||||||||||
Changes in operating assets and liabilities: | ||||||||||||
Accounts receivable | - | - | (60 | ) | ||||||||
Interest payable | (272 | ) | - | 1,411 | ||||||||
Prepaid expenses | - | 5,100 | - | |||||||||
Accounts payable and accrued liabilities | 246,216 | 130,995 | 529,878 | |||||||||
Net cash used in operating activities | (222,079 | ) | (168,018 | ) | (1,003,161 | ) | ||||||
Cash Flows From Investing Activities | ||||||||||||
Deposit on fiber optic network | - | - | (200,000 | ) | ||||||||
Purchase of certificate of deposit | - | - | - | |||||||||
Net cash used in investing activities | - | - | (200,000 | ) | ||||||||
Cash Flows From Financing Activities | ||||||||||||
Restricted cash | - | - | 10,000 | |||||||||
Borrowing from related parties | 31,792 | |||||||||||
Payments to related parties | (178,823 | ) | 120,022 | 123,079 | ||||||||
Proceeds from convertible notes | - | - | 600,000 | |||||||||
Proceeds from stock subscriptions | - | 50,000 | 50,000 | |||||||||
Common stock issued for cash, net | 730,621 | - | 1,096,742 | |||||||||
Net cash provided by financing activities | 551,798 | 170,022 | 1,911,613 | |||||||||
Net increase/(decrease) in cash | 329,719 | 2,004 | 708,451 | |||||||||
Cash, beginning of year | 378,732 | 5 | - | |||||||||
Cash, end of year | $ | 708,451 | $ | 2,009 | $ | 708,451 | ||||||
Non-cash Investing and Financing Activities: | ||||||||||||
2,000,000 shares were issued for the acquisition of a License | - | - | $ | 2,000 | ||||||||
Debt issued for website domain name | - | - | $ | 5,000 | ||||||||
500,000 shares were issued in settlement of debt | - | - | $ | 500 | ||||||||
136,000 shares were issued to settle prior period expenses | - | - | $ | 1,810 | ||||||||
Restricted cash received for stock subscriptions and held in escrow | - | - | $ | 10,000 | ||||||||
10,123,690 shares were issued when debt was converted | $ | 500,000 | $ | 500,000 | ||||||||
Stock issued for deposit on fiber optic network | 1,800,000 | 1,800,000 |
See accompanying notes to the unaudited consolidated financial statements.
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Sino Fibre Communications, Inc. |
(A Development Stage Company) |
Notes to the Consolidated Financial Statements |
September 30, 2008 |
(Unaudited) |
1. | Basis of Presentation |
The accompanying unaudited interim financial statements of Sino Fibre Communications, Inc., have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission, and should be read in conjunction with the audited financial statements and notes thereto contained in Sino’s Annual Report filed with the SEC on Form 10-KSB. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements which would substantially duplicate the disclosure contained in the audited financial statements for fiscal 2007 as reported in the form 10-KSB have been omitted.
Principles of Consolidation
The consolidated financial statements include the accounts of Sino Fibre and its 85% owned subsidiary, China Business Online, after elimination of all significant inter-company accounts and transactions. Minority interests reflecting the 15% equity interest of outside owners has not been reflected as the only transaction has been an equity investment of $700,000 by Sino Fibre and operations have not commenced.
2. Going Concern
Sino Fibre is a development stage company. In a development stage company, management devotes most of its activities to developing a market for its products and services. Planned principal activities have begun but Sino Fibre has not generated significant revenues to date. Sino Fibre had a net loss of $1,982,162 and negative cash flows from operations of $222,079 for the nine months ended September 30, 2008 and had a working capital deficit of $804, and a stockholders’ equity of $2,000,804 at September 30, 2008. These matters raise substantial doubt about Sino Fibre’s ability to continue as a going concern. Continuation of Sino Fibre's existence is dependent upon its ability to obtain additional capital. Management’s plans in regards to this matter include receiving continued financial support from directors and officers and raising additional equity financing in 2008. These financial statements do not include any adjustments that might result from the outcome of this uncertainty.
3. Deposit on Fiber Optic Network
The deposit on a fiber optic network in the amounts of $2,000,000 and $200,000 as of September 30, 2008 and December 31, 2007, respectively, represents a security deposit made by Sino to Sino-Con Management Company Limited for the exclusive right to sales and leasing of the Sino Con 32,000 km China nationwide fiber optic backbone.
4. Related Party Transactions
a) As of September 30, 2008, Sino Fibre owes $186,562 to related parties.
b) For the nine months ended September 30, 2008, Sino Fibre paid a total of $11,200 as salary to the Company’s former CEOs. As of September 30, 2008, Sino Fibre owed its CEO and former CEOs $ 397,398 as expense reimbursements and unpaid salary.
c) As of September 30, 2008, Sino Fibre owed the former CFO $29,375 as unpaid salary.
5. Shareholders’ Equity
-10-
In September, 80,000 shares of common stock valued at $31,664 were issued to Sino’s legal counsel, Richardson & Patel for legal services rendered. | |
In August 2008, 25,000 shares of common stock valued at $10,000 were issued to a consultant for a 30 day market awareness program | |
In July 2008, 200,000 shares valued at $27,000 were issued to another consultant in lieu of cash for services rendered during 2007 and 100,000 shares valued at $13,500 for services rendered in 2008 | |
In May 2008, Sino cancelled 3,087,361 shares per board minutes. | |
In April and May 2008, Sino compensated 376,000 common shares to previous investors and granted 2,700,000 common shares to officers, directors and consultants for services performed. In May 2008, 3,076,000 shares of common stock were issued in payment of such compensation and services performed. | |
In April and May 2008, Sino sold 2,356,844 units at $0.31 per unit for net proceeds of $730,622. Each unit consists of one common share and one warrant with an exercise price of $0.31. These warrants have a term of two years. Sino used $700,000 of the proceeds as an investment in a joint venture. The shares and warrants have relative fair values of $427,077 and $303,545, respectively. The weighted average grant-date fair values of the warrants are between $0.22 and $0.23 per share. Variables used in the Black-Scholes option-pricing model include (1) risk-free interest rate of between 2.41% and 2.51%, (2) expected remaining life is the actual life of the warrants, (3) expected volatility is between 270% and 261%, and (4) zero expected dividends. Volatility is based on a basket of similar companies that trade in the U.S. | |
In March 2008, Sino issued 10,123,690 common shares for convertible notes of $500,000 and interest accrued of $6,185. | |
In 2007, Sino recognized stock based compensation of $526,005 for options and warrants granted and discount on benefit conversion factor of $375,104 for convertible note issued. | |
On March 28, 2006, Sino sold 1,380,000 common shares at $0.25 per share for $334,980. | |
During 2005 and 2004, Sino sold 11,300 and 100,100 common shares, respectively, at $0.10 per share for cash of $1,130 and $10,100. | |
In December 2005, 1,040,000 shares were sold for $260,000. The cash was collected March 2006. | |
In September 2004, Sino established a stock option plan for issuance of up to 2,000,000 common shares. | |
During September 2004, Sino issued 5,000 common shares for services valued at $0.10 per share to a consultant related to website development and maintenance. | |
During 2004, Sino sold 1,100,000 common shares for $20,000 with a private company whose president became a former director. | |
During August 2004, Sino issued 100,000 common shares at $0.01 per share for consulting services. | |
During June 2003, Sino issued 2,000,000 common shares at $0.001 per share to a consultant in settlement of consulting fees of $2,000. | |
During 2004, 2003, 2002 and prior years, management fees and related expenses of $4,660, $3,859 and $4,610, respectively, were charged to operations pursuant to an executive services agreement with the former president. Sino issued 416,000 at $0.01 and 5,000 at $0.10 per share for 2004, and 3,859,000 and 4,610,000 at $0.001 per share during 2003, and 2002, respectively, for these charges. |
-11-
During July 2002, 500,000 shares were issued at $0.001 per share to settle debt.
SUMMARY OF STOCK OPTIONS
A summary of stock options follows:
· | 1,650,000 options are without a stated exercise price, the exercise price will be a minimum of $0.25 but will be modified both after the filing of the S-8 related to the Employee Stock Option Plan and the first day of public trading after the Company ESOP Plan becomes effective. These options vest from 2006 through 2008. Sino Fibre has not yet recognized related stock based compensation relating to these stock options since the exercise price could not be determined. |
· | 200,000 shares were granted at an exercise price of $0.25 in June 2006, equal to the private placement share price in January 2006. |
· | 1,350,000 of these options to purchase its common shares have a term ranging from six months to three years. The fair value of these options of $367,839 was calculated using the Black-Scholes pricing model and was expensed to compensation in 2007. |
Non-statutory Stock Options | Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term (Years) | |||||||||
Outstanding at December 31, 2007 2006 | 3,200,000 | $ | .25 | 1 | ||||||||
Granted | - | |||||||||||
Outstanding at September 31, 2008 | 3,200,000 | 0.25 | 1 |
Options Expiration Summary | ||||||||||||||||
Options Outstanding | Options Currently Exercisable | Remaining Contractual Term (Years) | Exercise Price ($) | Vesting Date | ||||||||||||
1,650,000 | 1,650,000 | 1 | - | 2006- 2008 | ||||||||||||
200,000 | 200,000 | 1 | .25 | 2006- 2008 | ||||||||||||
1,350,000 | 1,650,000 | 1 | .25 | June 2007- March 2010 |
Sino Fibre used the Black-Scholes option pricing model to value stock options and warrants using the following assumptions: number of options as set forth in the option agreements; no expected dividend yield; expected volatility of 161%; risk-free interest rates of 4.9%; and expected terms based on the period of time expected to elapse until exercise. When applicable, Sino Fibre uses the simplified method of calculating expected term as described in SAB 107.
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SUMMARY OF STOCK WARRANTS
NUMBER OF SHARES UNDER WARRANTS | EXERCISE PRICES ($) | WEIGHTED AVERAGE EXERCISE PRICE ($) | Weighted Average Remaining Contractual Term (Years) | |||||||||||||
Outstanding at December 31, 2007 | - | |||||||||||||||
Granted | 2,356,844 | .31 | .31 | 1.875 | ||||||||||||
Exercised | - | |||||||||||||||
Outstanding and Exercisable at September 30, 2008 | 2,356,844 | .31 | .31 | 1.875 |
Warrant Expiration Summary | ||||||||
NUMBER OF COMMON STOCK EQUIVALENTS | CURRENTLY EXERCISABLE | EXPIRATION DATE | REMAINING CONTACTUAL LIFE (YEARS) | EXERCISE PRICE ($) | ||||
2,356,844 | 2,356,844 | April and June 2010 | 2 | .31 |
6. | Commitments |
In June 2008, Sino signed a month to month lease agreement for its shared service office in New York at a monthly rental of $325. | |
In May 2008, Sino entered into an agreement with consultant for services performed at a monthly compensation of $5,000 for 24 months. | |
In May 2008, Sino entered into an agreement with Shenzhen Unionpay EPS Financial Service Co. Ltd. to develop online ecommerce in China. | |
On April 29, 2008, Sino Fibre entered into an agreement to receive capital raising and financial advisory services free of charge. | |
In April 2008, Sino signed a month to month lease agreement for its shared service office space in Hong Kong at a monthly rental of $231. | |
In March 2008, Sino committed to set up two separate business units to pursuit business development projects with Sino-Con/SCRC and joint venture with CAMSE. | |
7. | Subsequent Events |
. |
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operation.
We are a development stage company and have not yet generated or realized any revenues from our current business operations. We currently do not intend to buy or sell any plant or significant equipment during the next twelve months. We currently do not intend to conduct any product research or development other than as set out below. Further, we do not expect significant changes in the number of employees.
One of our specific goals is to promote Sino-Con Telecomm Group., Ltd., to promote and sell Sino-Con’s fiber optic backbone services to foreign telecommunications carriers and corporate users and to assemble a client database. We intend to do this by completing an exclusive services agreement with Sino Con Telecomm Group as soon as is practicable and to determine the demand for such services by international companies and telecom carriers and to market these services directly to such companies and carriers. Once clients have been secured, we intend to hire at least five full time employees.
Our other specific goal is to devote resources and continue our joint venture with China Association of Small and Medium Enterprises (“CASME”). The joint venture company, China Business Online Company Limited, will explore the Chinese market and introduce e-business and provide barter trade services to Chinese small and medium sized enterprises. CASME is administered by the Chinese National Development and Reform Commission. Sino Fibre intends to invest $6 million dollars to own 85% and will manage the joint venture company business, and CASME intends to bring in Chinese central government sanction, assistance and support, as well as its 4.5 million medium and small private business members to begin the business-to-business and Barter Exchange will own the remaining 15% of the joint venture.
Limited Operating History; Need for Additional Capital
There is no historical financial information about us upon which to base an evaluation of our performance. We have not generated any revenues from operations. We cannot guarantee we will be successful in our business operations. Our business is subject to risks inherent in the establishment of a new business enterprise, including limited capital resources and possible cost overruns due to price and cost increases in services.
To become profitable and competitive, we will have to attract customers who will enter into agreements with Sino-Con Telecomm Group., Ltd. to use Sino-Con’s fiber optic backbone service or we will have to generate revenues from China Business Online Company Limited, our joint venture company with CASME.
We will require additional financing to cover our costs that we expect to incur over the next twelve months. We believe that debt financing will not be an alternative for funding our operations as we do not have tangible assets to secure any debt financing. We anticipate that additional funding will be in the form of equity financing from the sale of our common stock. However, we cannot provide any assurance that we will be able to raise sufficient funding from the sale of our common stock to fund our plan of operations. In the absence of such financing, we will not be able to continue and our business plan will fail.
Results of Operations
Revenues
We have not generated any revenues from our operations during the nine-month period ended September 30, 2008 or during last two years.
Expenses
We incurred selling, general and administrative expenses of $1,678,415 for the nine-month period ended September 30, 2008, as compared to $671,951 for the same period in 2007. This increase of $1,006,464 or 150% for the nine-month period over the same period last year was the result of a increase in consulting fees.
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Our general and administrative expenses increased to $41,368 for the nine months ended September 30, 2008 from $13,827for the nine months ended September 30, 2007. This increase of 199% was due to an increase in business activities.
Our management fees decreased to $71,200 for the nine-month period ended September 30, 2008 from $85,500 for the nine-month period ended September 30, 2007, a decrease of 17%, which was due to a change of management.
Our professional fees increased to $212,093 for the nine months ended September 30, 2008 from $48,317 for the same period in 2007, an increase of 339% due to a joint venture set-up in China.
Our travel expenses increased to $46,200 for the nine-month period ended September 30, 2008 from $169 for the nine-month period ended September 30, 2007 and this increase was due to an increase in business development.
Our consulting expenses increased to $1,307,553 for the nine-month period ended September 30, 2008 from $524,116 for the nine-month period ended September 30, 2007, an increase of 149% due to entering into certain consulting agreements.
Liquidity and Capital Resources
As at September 30, 2008, we had cash of $708,451 and working capital of $804.
Cash Used in Operating Activities
Net cash used in operating activities was $222,079 for the nine-month period ended September 30, 2008. For the same period in 2007, there was net cash used of $168,018. For the period from August 19, 1999 (inception) to September 30, 2008, net cash used in operating activities was $1,003,161. These balances are mainly made up of our net losses as disclosed above.
Cash Used in Investing Activities
Net cash used in investing activities was zero for the nine-month periods ended September 30, 2008 and 2007. Net cash used in investing activities was $200,000 for the period from August 19, 1999 (inception) to September 30, 2008.
Cash from Financing Activities
We have funded our business to date primarily from sales of our common stock. We obtained net cash of $730,621 during the nine months ended September 30, 2008 and $1,096,742 from our incorporation on August 19, 1999 to September 30, 2008 through private offerings of our securities.
There are no assurances that we will be able to achieve further sales of our common stock or any other form of additional financing. If we are unable to achieve the financing necessary to continue our plan of operations, then we will not be able to continue our operations and our business will fail.
Going Concern
We are a development stage company. In a development stage company, management devotes most of its activities to developing a market for its products and services. Planned principal activities have begun, but we have not generated revenues to date. For these reasons, our auditors stated in their report for the period from August 19, 1999 (inception) through December 31, 2007 that they have substantial doubt we will be able to continue as a going concern.
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Future Financing
We anticipate continuing to rely on equity sales of our common stock in order to continue to fund our business operations. Issuances of additional shares will result in dilution to our existing shareholders. There is no assurance that we will achieve any additional sales of our equity securities or arrange for debt or other financing to fund our planned operations.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Not applicable.
Item 4. Controls and Procedures.
Disclosure Controls and Procedures
We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended) that are designed to ensure that information required to be disclosed by us in reports we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to management, including the our Chief Executive Officer (as our chief executive officer and chief financial officer), to allow timely decisions regarding required disclosures. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. As of the end of the period covered by this report, and under the supervision and with the participation of management, including our Chief Executive Officer, who is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act, such persons conducted an evaluation of the effectiveness of the design and operation of these disclosure controls and procedures. Based on this evaluation and subject to the foregoing, our Chief Executive Officer concluded that these controls are not effective because there are material weaknesses in our internal controls over financial reporting. A material weakness is a deficiency, or a combination of control deficiencies, in internal control over reporting such that there is a reasonable possibility that that a material misstatement our annual or interim financial statements will not be prevented or detected on a timely basis.
Changes in Internal Control Over Financial Reporting
During the period covered by this report, there have not been any changes in the our internal controls that have materially affected or are reasonably likely to materially affect, the our internal control over financial reporting. However, please note the discussion above.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
We are not presently a party to any legal proceedings and, to our knowledge, no such proceedings are threatened or pending.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
On September 23, 2008, we issued 80,000 shares of common stock to our legal counsel, Richardson & Patel as compensation for services rendered. |
On August 20, 2008, we issued 25,000 shares of common stock to a consultant for services preparing a 30 day market awareness program. |
On July 23, we issued 200,000 shares of common stock were issued to another consultant for investor relations services in rendered during 2007 and 100,000 shares for the same services rendered in 2008. |
The issuance of these securities was exempt from registration under Section 4(2) of the Securities Act. The service providers had a pre-existing relationship with Sino.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted to our security holders for a vote during the nine months ended September 30, 2008 other than as follows. On December 10, 2007 our Board of Directors unanimously approved the amendment to our articles of incorporation to increase our authorized stock from 25,000,000 shares of common stock with a par value of $0.001 to 200,000,000 shares of common stock with a par value of $0.001 per share. Subsequent to our board of directors’ approval of the amendment, the holders of the majority of the outstanding shares of common stock of our company provided their written consent to the amendments to our articles of incorporation on January 11, 2008. An information statement pursuant to Regulation 14C of the Securities Exchange Act of 1934 in regard to this amendment was sent to all security holders. Following the expiration of the twenty-day period required by Rule 14c and the provisions of Chapter 78 of the Nevada Revised Statutes, our company filed articles of amendment to amend our articles of incorporation to give effect to the amendment.
Item 5. Other Information.
None.
Item 6. Exhibits.
The following exhibits are attached hereto:
Exhibit No. | Description of Exhibit | |
31.1 | Certification of principal executive officer pursuant to Rule 13a-15(e) and 15d-15(e), promulgated under the Securities and Exchange Act of 1934, as amended, filed herewith | |
31.2 | Certification of principal accounting officer pursuant to Rule 13a-15(e) and 15d-15(e), promulgated under the Securities and Exchange Act of 1934, as amended, filed herewith | |
32.1 | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith |
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SINO FIBRE COMMUNICATIONS, INC.
By:
/s/ Daniel Mckinney
Daniel Mckinney
Chief Executive Officer
(Principal Executive Officer and
Principal Financial Officer)
November 14, 2008
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