| [X] | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2001
| [ ] | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ____________________ to ____________________.
Commission File Number 0-7619
Asia SuperNet Corporation
(Exact Name of Registrant as Specified in its Charter)
Colorado 93-0636333
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1888 Sherman Street, Suite 500, Denver, CO 80203
(Address of Principal Executive Offices) (Zip Code)
1700 Lincoln Street, Suite 3100, Denver, CO 80203
(Former address of principal executive offices)
Registrant's telephone number, including area code: (303) 894-7971
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 [ ] No [X]
The number of shares of the registrant’s common stock as of September 30, 2001: 110,494,293 shares.
Transitional Small Business Disclosure Format: Yes [ ] No[X]
PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
(a) Consolidated Balance Sheets 3
(b) Consolidated Statements of Operations 4
(c) Consolidated Statements of Cash Flows 5
(d) Consolidated Statements of Shareholders' Equity 6
(e) Notes to Financial Statements 7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations 15
Item 3. Risks 15
PART II. OTHER INFORMATION 16
Item 1. Legal Proceedings 16
Item 2. Changes in Securities and Use of Proceeds 16
Item 3. Defaults On Senior Securities 16
Item 4. Submission of Items to a Vote 16
Item 5. Other Information 16
Item 6.
(a) Exhibits 16
(b) Reports on Form 8K 16
SIGNATURES 17
ASIA SUPERNET CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 2001 AND DECEMBER 31, 2000
(UNAUDITED)
September 30, December 31,
2001 2000
------------ -----------
ASSETS
Current assets
Cash ................................................... $ 21,964 $ 31,948
Prepayments and deposits ............................... 14,457 21,392
--------- ---------
Total current assets ............................. 36,421 53,340
Property and equipment
Office furniture and equipment ................... 103,225 92,413
Less-Reserve for depreciation .................... 41,014 23,200
--------- ---------
Net office furniture and equipment .............. 62,211 69,213
Investment in related company .......................... 100 --
Intangible assets
Research and development ......................... 126,996 126,996
Less-Amortization ................................ 12,035 --
--------- ---------
Net research and development .................... 114,961 126,996
--------- ---------
Total assets ..................................... $ 213,693 $ 249,549
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable ....................................... $ 121,198 $ 102,107
Accrued expenses ....................................... 95,478 103,525
Deferred income ........................................ 53,217 42,332
Loans from director, shareholders and related parties .. 672,147 557,195
--------- ---------
Total current liabilities ....................... 942,040 805,159
Shareholders' equity
Preferred stock (par value $0.001)
300,000,000 shares authorized, none issued
Common stock (par value $0.001) 900,000,000
shares authorized; 109,494,293 at December
31, 2000 and 110,494,293 at March 31, 2001
issued and outstanding ................................. 110,494 109,494
Paid in capital (Discount from par value) .............. 2,100 (42,530)
Cumulative comprehensive income ........................ 16,652 16,652
Deficit accumulated during development stage ........... (857,593) (639,226)
--------- ---------
Total shareholders' deficit ....................... (728,347) (555,610)
--------- ---------
Total liabilities and shareholders' equity ........ $ 213,693 $ 249,549
========= =========
The accompanying notes to financial statements are an integral part of this statement.
ASIA SUPERNET CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000 AND
THE THREE MONTHS SEPTEMBER 30, 2001 AND 2000 AND
CUMULATIVE FROM INCEPTION TO SEPTEMBER 30, 2001
(UNAUDITED)
Six months Three months Three months From inception
Six months ended ended ended ended May 12, 1999
September 30, September 30, September 30, September 30, to September
2001 2000 2001 2000 30, 2001
---------------- ------------ ------------- ------------ --------------
SALES ............................. $ 120,344 $ -- $ 102,806 $ -- $ 120,344
COST OF SALES ..................... 26,814 -- 15,697 -- 26,814
------------- ------------- ------------- ------------- -------------
93,530 -- 87,109 -- 93,530
EXPENSES
Salaries and related costs ...... 117,477 83,110 42,593 52,829 276,338
Rent ............................ 38,142 16,399 8,890 8,790 63,117
Research and development ........ -- 36,139 -- 175 36,251
Office .......................... 34,602 15,203 13,247 5,631 58,481
Travel and entertainment ........ 36,587 28,829 23,391 11,131 78,821
Depreciation .................... 14,003 11,554 4,576 4,858 31,216
Audit ........................... 17,814 7,500 17,814 -- 34,838
Legal and professional fees ..... 44,687 18,718 27,856 385 70,811
Telephone ....................... 8,585 7,278 3,307 2,825 20,564
------------- ------------- ------------- ------------- -------------
Total expenses .................... 311,897 224,730 141,674 86,624 670,437
------------- ------------- ------------- ------------- -------------
Loss from operations .............. (218,367) (224,730) (54,565) (86,624) (576,907)
Income tax ........................ -- -- -- -- --
------------- ------------- ------------- ------------- -------------
Loss before acquisition ........... (218,367) (224,730) (54,565) (86,624) (576,907)
Loss from acquisition October 13,
2000-net liabilities acquired ..... -- -- -- -- (280,686)
------------- ------------- ------------- ------------- -------------
Net loss .......................... (218,367) (224,730) (54,565) (86,624) (857,593)
Comprehensive income-foreign
currency adjustment .............. -- -- -- -- 16,652
------------- ------------- ------------- ------------- -------------
Comprehensive loss ................ $ (218,367) $ (224,730) $ (54,565) $ (86,624) $ (840,941)
============= ============= ============= ============= =============
Net loss per share-basic
and diluted ...................... $ (0.002) $ (0.002) $ (0.000) $ (0.000) $ (0.008)
============= ============= ============= ============= =============
Weighted average number of common
shares outstanding ................ 110,383,182 106,683,429 110,383,182 106,683,429 110,383,182
============= ============= ============= ============= =============
The accompanying notes to financial statements are an integral part of this statement.
ASIA SUPERNET CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000 AND
CUMULATIVE FROM INCEPTION TO SEPTEMBER 30, 2001
(UNAUDITED)
For the six For the six From inception
months ended months ended May 12, 1999
September September to September
30, 2001 30, 2000 30, 2001
------------ ------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss ................................... $(218,367) $(224,730) $(857,593)
Adjustment to reconcile net
(loss) to net cash
Loss on acquisition October
13, 2000 net liabilities
acquired ................................ -- -- 280,686
Depreciation and amortization ........... 29,849 11,554 47,062
Shares issued for services .............. 35,630 -- 37,725
(Increase) decrease in operating assets
Prepaid and deposits ..................... 6,935 (33,584) (14,457)
Increase (decrease) in operating liabilities
Accounts payable ......................... 29,091 8,739 44,339
Deferred income .......................... 10,885 -- 53,217
Accrued expenses ......................... (8,047) 385 22,109
--------- --------- ---------
Cash flows used in operating activities ......... (114,024) (237,636) (386,912)
CASH FLOWS USED IN INVESTING ACTIVITIES
Purchase of furniture and
equipment ................................ (10,912) (75,219) (95,341)
Purchase of research and
development .............................. -- (114,901) (126,996)
--------- --------- ---------
Cash flows used in investing activities ......... (10,912) (190,120) (222,337)
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in loan from director ............. 114,952 152,892 589,482
Shares issued for cash ..................... -- -- 17
Cash from acquisition ...................... -- -- 25,062
--------- --------- ---------
Cash flows from financing activities ............ 114,952 152,892 614,561
Effect of cumulative translation adjustment ..... -- 15,228 16,652
--------- --------- ---------
Cash flows (used) from all activities ........... (9,984) (259,636) 21,964
Cash balance at beginning of period ............. 31,948 267,702 --
--------- --------- ---------
Cash balance at end of period ................... $ 21,964 $ 8,066 $ 21,964
========= ========= =========
Cash paid for:
Interest expense ............................. -- -- --
Taxes ........................................ -- -- --
Supplemental disclosure of non-cash investing
and financing activities:
Stock issued for reduction of loan from
shareholder ..................................... $ 10,000 $ -- $ 10,000
The accompanying notes to financial statements are an integral part of this statement.
ASIA SUPERNET CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
FROM INCEPTION TO SEPTEMBER 30, 2001
(UNAUDITED)
Common stock (Deficit)
--------------------------------------- accumulated
Discount Compre- during
Number of Par value From par hensive development
shares $(0.001) value income stage
--------- --------- -------- ------- -----------
Common stock issued for
acquisition of Chinanet
Group at par value as
of May 12, 1999 ................ 106,683,429 $ 106,683 $ (106,666) $ 0 $ 0
Translation adjustment ......... -- -- -- 11,164 --
Net (loss) during period ....... -- -- -- -- (1,879)
------------ ------------ ------------ ------------ ------------
Balance at December 31, 1999 ... 106,683,429 106,683 (106,666) 11,164) (1,879)
Effect of exchange
reorganization October
13, 2000 ...................... 2,660,864 2,661 (2,661) -- --
Common stock issued for
services provided and
billed and for future
services in the amount
of $150,000 .................... 150,000 150 149,850 -- --
Deduct deferred
services expense ............... -- -- (83,053) -- --
Translation adjustment ......... -- -- -- 5,488 --
Net (loss) ..................... -- -- -- -- (637,347)
------------ ------------ ------------ ------------ ------------
Balance at
December 31, 2000 .............. 109,494,293 109,494 (42,530) 16,652 (639,226)
Shares issued in payment
of shareholder loan ............ 1,000,000 1,000 9,000 -- --
Services received for
shares issued in prior period .. -- -- 35,630 -- --
Net loss for the period ........ -- -- -- -- (218,367)
------------ ------------ ------------ ------------ ------------
Balance at September 30, 2001
110,494,293 $ 110,494 $ 2,100 $ 16,652 $ (857,593)
============ ============ ============ ============ ============
The accompanying notes to financial statements are an integral part of this statement.
ASIA SUPERNET CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000
(UNAUDITED)
ORGANIZATION AND PRINCIPLE ACTIVITY
Asia SuperNet Corporation (“the Company”), formerly known as Powersoft Technologies Inc. (“Powersoft”) was originally organized in California on March 24, 1958 as Time Save Markets, Inc. From 1958 to 1994, the Company effected numerous name changes and engaged in businesses other than one it is presently engaged. In August 1994, the Company changed its corporate domicile to Delaware. In November 1994, the Company, then known as Alpine International Corp. changed its name to Heng Fai China Industries, Inc. On March 31, 1998, Heng Fai China Industries, Inc. changed its name to Powersoft Technologies Inc.
On November 10, 1999, the shareholders of Powersoft approved the reincorporation of Powersoft by changing the state of incorporation from Delaware to Colorado by adoption of an Agreement and Plan of Merger pursuant to which Powersoft has merged with and into Asia SuperNet Corporation, a Colorado Corporation. The shareholders of the Company approved the Agreement and Plan of Merger on October 1, 1999 (the Reincorporation Merger). The Reincorporation Merger was effective as of December 22, 1999 when 15,559,542 outstanding shares of Powersoft common stock were converted into 522,338 shares of the Company’s common stock. The number of shares converted into the Company’s stock were rounded up to the next whole share.
On January 18, 1999, the Company entered into an agreement with SAR Trading Limited (“SAR”), 100% owned by Fai H. Chan who beneficially owned 79% of the Company, wherein SAR agreed to buy and the Company agreed to sell all of its interests in all of its subsidiaries. In consideration of the assumption of the liabilities by SAR, the Company issued two notes payable to SAR in the amounts of $1,000,000 and $3,838,000. The $1,000,000 note was immediately convertible into 20,000,000 common shares (reduced to 667,000 when the Reincorporation Merger took place) of the Company at a fixed rate of $0.05 per share. The $3,838,000 note was reduced to $2,472,722 with assignment of an amount due from a related party of $1,365,278.
In June 2000 the promissory note payable to SAR in the amount of $2,472,722 was converted into 1,471,859 shares of the Company’s common stock.
Due to the above-mentioned sale of all of the investments, the Company was an inactive shell at December 31, 1999.
On October 13, 2000, the Company acquired all of the issued and outstanding common stock of ChinaNet Communications, Ltd., a British Virgin Island corporation (“ChinaNet”), that owns 100% of Beijing Star Gain Data Communication Systems Co. Limited (“Beijing Star”) a Peoples Republic of China (“PRC”) company, in exchange for 106,683,429 shares of its common stock under the terms of an agreement dated August 1, 2000.
The details of the Company’s holdings and their principal activities at September 30, 2001 are summarized below.
Date of
acquisition or Place of Equity Interest
Name formation incorporation Direct Indirect Activity
- ------------------------------- -------------- ------------- ---------------- --------
Chinanet Communication Limited May 18, 2000 British Virgin 100% Inactive
(Chinanet) Islands
Chinanet Communication Limited May 12, 1999 Hong Kong 26% 74% Inactive
(Chinanet HK)
Chinanet Communication Limited October 12, Western Samoa 100% Inactive
(Chinanet Samoa) 2000
Beijing Star Gain Data December 7, Peoples Republic 100% Communication
Communication System Co. 1999 of China equipment
Limited (Beijing Star)
China-Antiflooding System June 2001 Samoa 50 Inactive
Monitor Limited
China Environment System Monitor June 2001 Samoa 50 Inactive
During the third quarter the Company dissolved Mobilnet Communication Limited organized in Hong Kong, a company that had been inactive. Also during the third quarter the Company sold a 60% interest in Mobilnet Communications Limited (Mobil BVI) organized in the British Virgin Islands for a nominal amount. Beijing Star sold technical know-how to Mobil BVI for $102,800 that has been recognized as revenue in the third quarter. Mobil BVI is operated and controlled by the 60% owners.
Beijing Star, the operating company, has researched, developed and intends to manufacture and market a handheld personal digital assistant (PDA), which has been designed to function through China’s existing paper network infrastructure. Beijing Star’s goal is to convert a market of approximately 80 million traditional pager customers in China to its system. A base station receives messages from the PDA and sends the messages to the Management Control Center (MCC) through a local digital data network. The MCC is interconnected with the base station, paging operators and content providers. The information requested by the PDA owner is broadcast through the paging network. The processing of each command is accomplished through the use of proprietary software, which receives the requests and responds as needed. Beijing Star has developed a unique system to manage and process this data. Patents for the PDA and base station technology in China and a copyright for the MCC software in China have been issued.
The Company’s business is characterized by rapid technological change, new product and service development and evolving industry standards. Inherent in the Company’s business are various risks and uncertainties, including limited operating history, uncertain profitability, history of losses and risks associated with the ability to raise additional capital.
The Company has its only active operation in the Peoples Republic of China (“PRC”) that maybe subject to significant risks not typically associated with companies in North America. The Company’s operations could be adversely affected by changes in the political and social conditions, changes in government policies with respect to laws and regulations, anti-inflationary measures, currency conversion, remittance abroad and rates and methods of taxation.
On October 13, 2000, the Company acquired all of the issued and outstanding common stock of ChinaNet that owns 100% of Beijing Star in exchange for 106,683,429 shares of its common stock under the terms of an agreement dated August 1, 2000. Prior to the issuance of the shares, the Company had 2,660,864 shares of common stock outstanding. As a result of the exchange, the shareholders of ChinaNet own 97.6% of the common stock outstanding of the Company after the issuance of the 106,683,429 shares.
The acquisition of ChinaNet by the Company on October 13, 2000 has been accounted for as a purchase and treated as a reverse acquisition since the former owners of ChinaNet controlled over 97% of the total shares of Common Stock of the company outstanding immediately following the acquisition.
On this basis, the historical financial statements prior to October 13, 2000 have been restated to be those of the accounting acquirer ChinaNet. The historical stockholders’ equity prior to the reverse acquisition has been retroactively restated (a recapitalization) for the equivalent number of shares received in the acquisition after giving effect to any difference in par value of the issuer’s and acquirer’s stock with an offset to “discount from par value”. The original 2,660,864 shares of common stock outstanding prior to the exchange reorganization have been reflected as an addition in the stockholders’ equity account of the Company on October 13, 2000.
The financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America. This basis of accounting differs from that used in the statutory financial statements of the British Virgin Islands and Hong Kong and the PRC, which were prepared in accordance with generally accepted accounting principles in Hong Kong and the accounting principles and the relevant financial regulations applicable to enterprises with foreign investments as established by the Ministry of Finance of China respectively.
The Company prepared its December 31, 2000 financial statements as a company in the development stage. The Company has completed its research and development as of that date. The financial statements for current year (2001)are prepared as a company out of the development stage.
a) BASIS OF CONSOLIDATION
| The consolidated financial statements include the accounts of the Company and its subsidiaries. All material intra-group balances and transactions have been eliminated on consolidation. |
b) PREPARATION OF FINANCIAL STATEMENTS
| The Company has a negative working capital of as of September 30, 2001. These conditions raise doubt about the Company’s ability to continue as a going concern. |
| Continuation of the Company as a going concern is dependent upon obtaining additional working capital and attaining profitable operations in the future. The principal stockholder has undertaken to make available adequate funds to the Company as and when required to maintain the Company as a going concern. As a result, the financial statements have been prepared in conformity with the principles applicable to a going concern. |
| The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates |
c) INVENTORIES
| Inventories will be stated at the lower of cost, on a first-in first-out basis, or market value. |
d) PROPERTY AND EQUIPMENT
| Fixed assets are recorded at cost. Gains or losses on disposals are reflected in current operations. Major expenditures for betterments and renewals are capitalized. All ordinary repair and maintenance costs are expensed as incurred. |
| Depreciation for financial reporting purposes is provided using the straight-line method over the estimated useful lives of the assets as follows: furniture and office equipment – 5 years. |
e) INCOME TAXES
| The Company accounts for income tax under the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 109, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Deferred income taxes are provided using the liability method. Under the liability method, deferred income taxes are recognized for all significant temporary differences between the tax and financial statement bases of assets and liabilities. |
f) OPERATING LEASES
| Operating leases represent those leases under which substantially all the risks and rewards of ownership of the leased assets remain with the leasers. Rental payments under operating leases are charged to expense on the straight-line basis over the period of the relevant leases. |
g) COMPREHENSIVE INCOME
| The Company has adopted SFAS No. 130, which established guidance for the reporting and disclosure of comprehensive income and its components. The purpose of reporting comprehensive income is to report a measure of all changes in equity that resulted from recognized transactions and other economic events of the period other than transactions with shareholders. Adoption of the standard had no economic impact on the Company’s consolidated financial position, results of operations or cash flows. The Company reports comprehensive income in the Consolidated Statements of Operations. |
h) FOREIGN CURRENCY TRANSLATION
| The translation of the financial statements of subsidiaries into United States dollars is performed for balance sheet accounts using the closing exchange rate in effect at the balance sheet dates and for revenue and expense accounts using an average exchange rate during each reporting period. The resulting foreign currency translation gain or loss is included in Stockholders’ Equity as Comprehensive Income. |
i) EARNINGS PER COMMON SHARE
| Basic earnings per common share is computed in accordance with SFAS No. 128 by dividing net income for each year by the weighted average number of shares of common stock outstanding during the year. |
| The computation of diluted earnings per common share is similar to basic earnings per common share, except that the denominator is increased to include the number of additional common shares that would have been outstanding if all dilutive securities outstanding during the years were exercised. |
| The basic and diluted earnings per common share were the same for the periods presented because no dilutive securities were outstanding or exercisable as of September 30, 2001 and 2000. |
j) RESEARCH AND DEVELOPMENT COSTS
| Expenditures related to the research land development of new products and processes are expensed as incurred, unless they are required to be capitalized. Research and development costs are required to be capitalized when a product’s technological feasibility has been established by completion of a detailed program design or working model of the product, and ending when a product is available for release to customers. For the year ended December 31, 2000 the Company capitalized $126,996 of costs related to the purchase of technology from the University of Beijing that provided new functionality for the Company’s existing detailed program design and working model. The Company will amortize capitalized research and development against sales at a rate of ten percent or over a four-year period, which approximates the period to be benefited, whichever is shorter. |
k) RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
| In June 2001, the FASB issued SFSA No. 141, “Business Combinations”, and SFAS No. 142, “Goodwill and Other Intangible Assets”. Under these new standards, all acquisitions subsequent to June 30, 2001 must be accounted for under the purchase method of accounting, and purchased goodwill is no longer amortized over its useful life. Rather, goodwill will be subject to a periodic impairment test based upon it fair value. |
| In August 2001, the FASB issued SFAS No. 143, “Accounting for Asset Retirement Obligations” (“SFAS 143). SFAS 143 establishes accounting standards for recognition and measurement of a liability for the costs of asset retirement obligations. Under SFAS 143, the costs of retiring an asset will be recorded as a liability when the retirement obligation arises, and will be amortized to expense over the life of the assets. |
| In October 2001, the FASB issued SFAS No, 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (SFAS 144”). SFAS 144 addresses financial accounting reporting for the impairment or disposal of long-lived assets and discontinued operations. |
| These pronouncements have no impact on the financial position and results of operations of the Company. The Company has adopted these standards as of this year. |
RELATED PARTY TRANSACTIONS
Loans from directors, shareholders and other related parties of $672,147 and $557,195 at September 30, 2001 and December 31, 2000, respectively, are non-interest bearing, currently payable and not evidenced by any notes.
The Company transferred know-how and patent to a related company for $102,806 which has been included in sales.
COMMON STOCK
Total shares restricted as to trading were 107,833,429 at September 30, 2001.
The stated par value of common stock is $0.001 per share. Since the shares issued in the reverse acquisition of Chinanet were valued at less than par the Company recorded a “discount from par value”. Proceeds in excess of par from stock sales and stocks issued for services were credited to the “discount from par value” account until the total par value was equivalent to $0.001. The “discount from par value” was covered during the third quarter and additional amounts will be credited to “paid in capital”.
The Company issued 150,000 shares of common stock for services in October of 2000, of which, $83,053 at December 31, 2000 was for services to be provided in future periods. During the nine months ended September 30, 2001, $35,630 of such services was provided.
The Company issued 1,000,000 shares of common stock in cancellation of a shareholder’s loan in the amount of $10,000.
LEASES
The Company leased office space on a month-to-month basis.
INCOME TAXES
The Peoples Republic of China (PRC) income tax laws covering Foreign Investment Enterprises and Foreign Enterprises govern the Company. Foreign investment enterprises are generally subject to income tax at a rate of 33% (30% country and 3% local).
Foreign enterprises that are approved as high-tech or new technology enterprises that are established in the Beijing New Technology Industry Development Zone are subject to a reduced tax rate of 15%. New technology enterprises also receive a three-year exemption from taxation and an additional three years at one half the 15% rate (7.5%)
The Company’s operations in the PRC have been approved as a new technology enterprise.
The components of the deferred tax asset is as follows:
September 30, September 30,
2001 2000
------------- ------------
Deferred tax asset net operating
loss carry-forward $ 41,000 $ 16,800
Valuation allowance 41,000 16,800
---------- ----------
Net deferred tax assets $ -- $ --
========== ==========
SFAS No. 109 requires a valuation allowance to be recorded when it is more likely than not that some or all of the deferred tax assets will not be realized.
Reconciliation of the differences between the statutory tax rate and the effective income tax rate is as follows:
September 30, September 30,
2001 2000
------------- ------------
Effective statutory federal tax
(benefit) rate (7.5)% (7.5)%
Variance allowance 7.5% 7.5%
--------- ---------
Effective tax rate 0% 0%
========= =========
Subsidiaries are subject to income taxes on an entity basis on income arising in or derived from the tax jurisdiction in which they are domiciled and operate. Since they are non-operating no income tax expense has been recorded.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THIS ANALYSIS CONTAINS FORWARD-LOOKING COMMENTS, WHICH ARE BASED ON CURRENT INFORMATION. ACTUAL RESULTS IN THE FUTURE MAY DIFFER MATERIALLY.
The following discussion should be read in conjunction with the Consolidated Financial Statements of the Company and related Notes thereto.
The Company has finished it primary research and development and is now concentrating its efforts on developing the handheld personal digital assistant (PDA) product.
The Company will require additional investment to strengthen the financial condition of the Company in order manufacture, market and sell its product. During the interim the Company is being financed by loans from a major stockholder and sale of its know-how and patents in other communications areas unrelated to the PDA.
Sales are for know-how and patents in unrelated communications areas. The expenses of the nine months were primarily salaries and legal and professional fees, as compared to the prior year when most of the expense were for research and development.
Item 3. RISKS
The Company’s business is characterized by rapid technological change, new product and service development and evolving industry standards. Inherent in the Company’s business are various risks and uncertainties, including limited operating history, uncertain profitability, history of losses and risks associated with the ability to raise additional capital.
The Company has its only active operation in the Peoples Republic of China (“PRC”) that maybe subject to significant risks not typically associated with companies in North America. The Company’s operations could be adversely affected by changes in the political and social conditions, changes in government policies with respect to laws and regulations, anti-inflationary measures, currency conversion, remittance abroad and rates and methods of taxation.
Item 1. Legal Proceedings - None
Item 2. Changes in Securities and Use of Proceeds - None
Item 3. Defaults on Senior Securities - None
Item 4. Submission of Items to a Vote - None
Item 5. Other Information - None
Item 6.
(a) Exhibits - None
(b) Reports on Form 8-K
| A Current Report on Form 8-K dated June 21, 2001 was filed on September 24, 2001 to report under Item 4 the appointment of William D. Lindberg as the independent accountant for the Company, as well as, the dismissal of Deloitte Touche Tohmatsu as the independent accountants and to file the letter of Deloite Touche Tohmatsu to the SEC under Item 7. |
| A Current Report on Form 8-K/A dated June 21, 2001 was filed on September 28, 2001 to report under Item 4 the appointment of William D. Lindberg as the independent accountant for the Company, as well as, the dismissal of Deloitte Touche Tohmatsu as the independent accountants and to file the letter of Deloite Touche Tohmatsu to the SEC under Item 7. |
SIGNATURES
In accordance with the requirements of the Securities and Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: March 19, 2002 Asia SuperNet Corporation
By: /s/Lui Ming Hui
Lui Ming Hui
Director