ASIA SUPERNET CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 2002 (un-audited) AND DECEMBER 31, 2001
March 31, 2002 December 31,
(un-audited) 2001
---------------- -----------------
ASSETS
Current assets
Cash $ $
6,294 8,567
Prepayments and deposits 4,984 18,311
---------------- -----------------
Total current assets 11,278 26,878
Investment in related company 201 201
Property and equipment
Office furniture and equipment 98,417 98,417
Less-Reserve for depreciation 47,332 41,958
---------------- -----------------
Net office furniture and equipment 51,085 56,459
Intangible assets
Research and development 126,996 126,996
Amortization of research and development 18,082 18,082
---------------- -----------------
Net research and development 108,914 108,914
---------------- -----------------
Total assets $ 171,478 $ 192,452
================ =================
LIABILITIES AND SHAREHOLDERS EQUITY
Current liabilities
Accounts payable $ 58,530 $ 74,890
Accrued expenses 27,344 58,770
Note payable 27,176 -
Deferred income - 10,885
Loans from director, shareholders and related parties 729,725 720,827
---------------- -----------------
Total current liabilities 842,775 865,372
Shareholders' equity (deficit)
Preferred stock (par value $0.001) 300,000,000 shares
authorized, none issued
Common stock (par value $0.001) 900,000,000 shares
authorized; 110,494,293 at March 31, 2002 and
December 31, 2001, issued and outstanding 110,494 110,494
Paid in Capital 2,104 2,104
Cumulative comprehensive income 12,893 12,893
Deficit accumulated during development stage (796,788) (798,411)
---------------- -----------------
Total shareholders' equity (deficit) (671,297) (672,920)
---------------- -----------------
Total liabilities and shareholders' equity
(deficit) $ 171,478 192,452
================ =================
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 THREE MONTHS ENDED MARCH 31, 2002 AND 2001 AND
FROM INCEPTION MAY 12, 1999 TO DECEMBER 31, 2002
(un-audited)
For the three For the three From inception
months ended months ended May 12, 1999 to
March 31, 2002 March 31, 2001 March 31, 2002
------------------- ------------------ ------------------
------------------- ------------------ ------------------
REVENUES $ - $ 6,047 $ 162,675
COST OF REVENUES - 2,562 76,863
------------------- ------------------ ------------------
- 3,485 85,812
EXPENSES
Salaries and related costs (25,429) 32,717 233,474
Rent 2,722 9,471 67,263
Research and development 5,140 - 41,087
Office 2,133 3,964 56,706
Travel and entertainment 1,884 2,236 89,468
Audit 2,820 - 26,254
Depreciation 5,374 4,625 41,345
Legal and professional fees 860 12,149 99,766
Telephone 2,487 3,271 24,080
------------------- ------------------ ------------------
Total expenses (2,009) 68,433 679,443
------------------- ------------------ ------------------
Income (loss) from operations before interest and
income taxes 2,009 (64,948) (593,631)
Interest expense 386 - 386
Income taxes - - -
------------------- ------------------ ------------------
Income (loss) before acquisition 1,623 (64,948) (594,017)
Loss on acquisition October 13, 2000-net
liabilities acquired. - - (202,771)
------------------- ------------------ ------------------
Net income (loss) 1,623 (64,948) (796,788)
Comprehensive income-foreign currency translation
adjustment - - 12,893
------------------- ------------------ ------------------
Comprehensive income (loss) $ 1,623 $ (64,948) $ (783,895)
=================== ================== ==================
Net income (loss) per share-basic and diluted $ 0.000 $ (0.000) $ (0.007)
=================== ================== ==================
Weighted average number of common shares
outstanding 110,494,293 109,994,293 110,494,293
=================== ================== ==================
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 THREE MONTHS ENDED MARCH 31, 2002 AND 2001 AND
FOR THE PERIOD FROM INCEPTION MAY 12 TO DECEMBER 31, 2002
(un-audited)
For the three For the three From inception
months ended months ended May 12 to March
March 31, 2002 March 31, 2001 31, 2002
--------------- ---------------- ------------------
---------------- ------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 1,623 $ (64,948) $ (796,788)
Adjustment to reconcile net (loss) to net cash used
in operating activities:
Loss on acquisition October 13, 2000
net-liabilities acquired. Adjustment
for liabilities not required to be
paid as of 2001 202,771
Depreciation 5,374 4,625 41,345
Amortization - 665 18,082
Shares issued for services - 4,472 37,729
(Increase) decrease in operating assets:
Prepaid and deposits 13,327 9,470 (4,984)
Increase (decrease) in operating liabilities:
Accounts payable 10,816 5,149 11,580
Accrued expenses (31,426) (5,811) 19,157
Deferred income (10,885) - -
--------------- ---------------- ------------------
Cash flows used in operating activities (11,171) (46,438) (471,108)
CASH FLOWS USED IN INVESTING ACTIVITIES:
Purchase of furniture and equipment - - (90,433)
Investment in related company - - (201)
Purchase of research and development - - (126,996)
--------------- ---------------- ------------------
Cash flow used in investing activities - - (217,630)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in loan from shareholders 8,898 38,130 657,060
Cash acquired in acquisition October 13,
2000 - - 25,062
Shares issued for cash - - 17
--------------- ---------------- ------------------
Cash flows from financing activities 8,898 38,130 682,139
Effect of cumulative translation adjustment - - 12,893
--------------- ---------------- ------------------
Cash flows (used for) from all activities (2,273) (8,308) 6,264
Cash balance at beginning of period 8,567 31,948 -
--------------- ---------------- ------------------
Cash balance at end of period $ 6,294 $ 23,640 $ 6,264
=============== ================ ==================
Cash paid for:
Interest expense $ 386 $ - $ 386
Taxes - - -
Supplemental disclosure of non-cash activities:
Shares issued in payment of loan - 10,000 10,000
Shares issued in payment of services - 4,472 150,000
The accompanying notes to financial statements are an integral part of this statement
ASIA SUPERNET CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE PERIOD FROM INCEPTION MAY 12 TO MARCH 31, 2002
Common stock Compre- Deficit Total
hensive accumulated Shareholders
income during equity
development
stage
--------------------------------------------- ---------- -----------------
----------------- ------------
Number of shares Par value Discount
$(0.001) from par
----------------- ------------ -------------- ---------- ----------------- -----------------
----------------- ---------- ----------------- -----------------
Common stock issued for
acquisition of Chinanet Group
at par value as of May 12,
1999 106,683,429 $106,683 $(106,666) $ - $ - $
17
Translation adjustment 11,164 11,164
Net loss from inception May
12, 1999 to December 31, 1999
(1,879) (1,879)
----------------- ------------ -------------- ---------- ----------------- -----------------
Balance at December 31, 1999
106,683,429 106,683 (106,666) 11,164 (1,879) 9,302
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
150,000 150 149,850 150,000
Deduction for deferred
services (83,053) (83,053)
Translation adjustment 5,488 5,488
Net loss (637,347) (637,347)
----------------- ------------ -------------- ---------- ----------------- -----------------
Balance at December 31, 2000 16,652 (639,226)
109,494,293 109,494 (42,530) (555,610)
Shares issued in payment of
shareholder's loan
1,000,000 1,000 9,000 10,000
Services received for shares
issued in prior period
35,634 35,634
Translation adjustment (3,759) (3,759)
Net loss (159,185) (159,185)
----------------- ------------ -------------- ---------- ----------------- -----------------
Balance at December 31, 2001
110,494,293 110,494 2,104 12,893 (798,411) (672,920)
Net income (un-audited) 1,623 1,623
----------------- ------------ -------------- ---------- ----------------- -----------------
Balance at March 31, 2002
110,494,293 $110,494 $ 2,104 $12,893 $ (796,788) $ (671,297)
================= ============ ============== ========== ================= =================
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 THREE MONTHS ENDED MARCH 31, 2002 AND 2001
(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.
Name Date of Place of Equity interest Activity
acquisition or incorporation Direct Indirect
formation
- --------------------------------- ---------------- ----------------- -------------------- -------------------
Chinanet Communication Limited May 18, 2000 British Virgin 100% Inactive
(Chinanet BVI) 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 100% Communication
Communication System Co. 1999 Republic of equipment
Limited (Beijing Star) China
China-Antiflooding System June 2001 Samoa 50% Investment holding
Monitor Limited
China Environment System Monitor June 2001 Samoa 50% Investment holding
Beijing Stargain Data November 2001 Peoples 50% Inactive
Communitions Technology Ltd. Republic of
China
Beijing Stargain Environmental November 2001 Peoples 50% Inactive
Monitor Technology Ltd. Republic of
China
...
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.
BASIS OF PRESENTATION
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.
INTERIM FINANCIAL INFORMATION
The financial statements of the Company as of March 31, 2002 and for the three
months ended March 31, 2002 and 2001 and from inception (May 12, 1999) through
March 31, 2002, and related footnote information are un-audited. All adjustments
(consisting only of normal recurring adjustments) have been made which, in the
opinion of management, are necessary for a fair presentation. Results of
operations for the three months ended March 31, 2002 and 2001 and from inception
(May 12, 1999) through March 31, 2002 are not necessarily indicative of the
results that may be expected for any future period. The balance sheet at
December 31, 2001 was derived from audited financial statements. Certain
information and footnote disclosures, normally included in financial statements
prepared in accordance with accounting principles generally accepted in the
United States of America, have been omitted. These financial statements should
be read in conjunction with the audited financial statements and notes for the
period from inception (May 12, 1999) to December 31, 2001.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 March 31, 2002. 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
d) Inventories will be stated at the lower of cost, on a first-in first-out basis, or market value.
e) 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.
f) 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.
g) 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.
h) 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.
i) 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.
j) 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.
k) 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.
RELATED PARTY TRANSACTIONS
Loans from directors, shareholders and other related parties of $729,725 and
$720,827 at March 31, 2002 and December 31, 2001, respectively, are non-interest
bearing, currently payable and not evidenced by any notes.
NOTE PAYABLE
On January 31, 2002 the Company issued a debenture payable for $27,176 in
payment of legal fees. The note is payable July 31, 2002 and accrues interest at
8 1/2 percent. The debenture can be converted to common stock at the option of
the holder at the bid price of the stock on the date of conversion. The number
of shares issued would be the amount of the debenture payable divided by the bid
price.
WAIVER OF STAFF BENEFITS
During the period from inception the Company has accrued severance benefits in
accordance with the estimated payments required when staff are terminated. The
Company has reduced staff. However, most of the staff were placed in other
positions before termination and the benefits which the Company would ordinarily
pay are not applicable. The Company has taken the reduction in the liability for
severance benefits to salaries and related costs in the three months ended March
31, 2002.
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 to date have been for know-how and patents in unrelated communications
areas that have helped to finance expenses of the Company. The Company has
reduced its quarterly expenses to $31,600 (not including the benefit from
severance pay reduction credited to salaries and benefits of $29,602) for the
three months ended March 31, 2002, as compared $68,400 for the three months
ended March 31, 2001. The major reduction was in salaries from $32,700 in the
quarter ended March 31, 2001 as compared to $4,100 for the quarter ended March
31, 2002.
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.
PART II. OTHER INFORMATION
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 - None
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: May 13, 2002 Asia SuperNet Corporation
By: /s/Robert H. Trapp
Robert H. Trapp
Director/Principal Accounting Officer
17
