U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
(Mark One)
X Quarterly report under section 13 or 15(d) of the Securities Exchange Act of
1934 for the quarterly period ended June 30, 2001.
_____ Transaction report under section 13 or 15(d) of the Securities Exchange
Act of 1934 for the transition period from ________ to __________.
Commission File No.: 0-30851
DIGITAL VILLAGE WORLD TECHNOLOGIES, INC.
(Name of small business in its charter)
Nevada 88-0404114
(State or other Jurisdiction of Incorporation) (IRS Employer Id. No.)
Unit 10, 8980 Fraserwood Court
Burnaby, British Columbia
Canada V5J 5H7
(Address of Principal Office)
Issuer's telephone number: (604) 438-3598
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act 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 ______
-------
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date. At June 30, 2001, there were
12,906,000 common shares outstanding with a par value of $0.0004.
Transitional Small Business Disclosure Format (Check one):
Yes _______ No X
-------
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS AND EXHIBITS
The unaudited financial statements of the registrant for the three-month periods
ended June 30, 2001 and June 30, 2000 are set forth at the end of this Form
10-QSB. The financial statements reflect all adjustments which are, in the
opinion of management, necessary so as to ensure a fair statement of the results
for the interim period presented.
-insert financials-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion should be read in conjunction with the accompanying
financial statements for the three-month periods ended June 30, 2001 and June
30, 2000 and the Annual Report Form 10-KSB for the fiscal year ended December
31, 2001 filed by the Company on April 17, 2001 for the 2000 fiscal year.
Special Note Regarding Forward-Looking Statements - Certain statements in this
report and elsewhere (such as in other filings by the Company with the
Securities and Exchange Commission, press releases, presentations by the Company
or its management and oral statements) may constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Words such as "expects", "anticipates", "intends", "plans", "believes",
"seeks", "estimates", and "should" and variations of these words and similar
expressions, are intended to identify these forward-looking statements. The
Company undertakes no obligation to publicly release the result of any revisions
to these forward-looking statements, which may be made to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
Results of operations - comparison of the three month periods ended June 30,
2001 and June 30, 2000.
The Company is a development stage company and, through its wholly owned Chinese
foreign enterprise Tianjin Navada Digital World Technologies Co. Ltd., will
manage the operations of a Chinese domestic enterprise, CNTime Group, pursuant
to the terms of a profit sharing agreement ("PSA") which provides for the
Company to receive 80% of the profits from the operations of the Chinese venture
with the Company required to provide certain agreed upon capital. In the event
that the Company is unable to (i) provide the required capital or (ii) obtain an
extension for providing the capital, the profit allocation under the PSA will be
adjusted based
2
on the percentage of capital actually contributed. The original PSA dated May
2000 was amended on May 31, 2001 - details of which are included in ITEM 5 of
this Form 10QSB.
Formal operations have not as yet commenced. There was no revenue for the
current quarter compared to $753 in interest income earned during the
corresponding period in 2000. Expenses during the quarter, which included costs
of operations of Digital Village World Technologies (Canada) Inc. ("DV-Canada"),
which was acquired by the Company on December 18, 2000, were $26,949 as compared
to $21,842 for the corresponding period in 2000. The 2001 figure included a
$6,758 provision for depreciation. As a result, for the quarter ended June 30,
2001, the Company had a net loss of $36,747, as compared to a loss of $21,089
for the same quarter of 2000.
General and administrative expenses were $20,191 for the three-month period
ended June 30, 2001 compared to $21,842 for the corresponding period in 2000.
The expenses were primarily due to operating costs of DV-Canada which included
expenditures of $8,362 for rental expenses, $1,995 in telephone and utilities
costs and $7,817 for travel and promotion. The three-month period ended June 30,
2000 included a cost of $20,000 for consulting in respect to preparation of the
corporate business plan. Salaries and benefits expenses were $9,798 for the
period ended June 30, 2001 compared to an insignificant amount in the
corresponding period in 2000.
The Company expects to continue to incur a loss as a result of the expenses
associated with the reporting requirements of the Securities Exchange Act of
1934, costs related to launch of Chinese operations and continuation of the
Canadian business.
Results of operations - comparison of the six-month period ended June 30, 2001
and June 30, 2000.
For the six-month period ended June 30, 2001, revenues were $3,766 as compared
to $1,508 for the corresponding period in 2000. Total expenses were $155,089,
including a $12,107 provision for depreciation and $20,000 in stock-based
compensation. By comparison, during the six-month period ended June 30, 2000,
expenses were $23,185 which included a $20,000 expenditure for consulting in
respect to preparation of the corporate business plan.
Liquidity and Capital Resources
The cash balance for the period June 30, 2001 was $8,858 compared to $43,102 at
June 30, 2000. This decrease was primarily due to increases in operating
expenditures related to DV-Canada after its acquisition in December 2000. For
the period ended June 30, 2001, the Company's operating activities used net cash
of $36,747 compared to $21,089 in the comparable period in 2000. The Company's
financing activities during the period provided net cash of $11,000 which
consisted of a private placement of 11,000 shares of common stock at a price of
$1.00 per share.
3
Working capital was *$164,393** as at June 30, 2001 compared to $42,552 as at
June 30, 2000. The decrease in working capital includes indebtedness of $174,934
due to related parties.
The Company has historically relied upon sales of its common stock, debt
instruments and loans from related parties to finance its operations. Additional
financing will be required to meet its obligations under the Profit Sharing
Agreement and for current and long-term development, marketing, and working
capital. In July 2001, the Company announced a financing subscription totaling
$12,000,000 from two Chinese corporate investors. There can be no assurances
that such financing will actually close. To the extent of any shortfall in
financing, the Company's operations will be delayed, curtailed or prevented, and
the Company may be required to suspend or substantially modify its operations.
There were no income taxes incurred for the reporting period.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is not a party to any pending or to the best of its knowledge, any
threatened legal proceedings. No director, officer or affiliate of the Company,
or owner of record or of more than five percent (5%) of the securities of the
Company, or any associate of any such director, officer or security holder is a
party adverse to the Company or has a material interest adverse to the Company
in reference to pending litigation.
ITEM 2. SALE OF UNREGISTERED SECURITIES
In April 2001, the Company issued 11,000 restricted shares of its common shares
in a Private Placement pursuant to an exemption provided by Regulation S of the
Securities Act of 1933, as amended.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the reporting period, no matters were submitted to a vote of security
holders.
ITEM 5. OTHER INFORMATION
1. On June 7, 2001, the Company signed an Amended Profit Sharing Agreement
("APSA") with Tianjin Teda Yu Cheng Group Co. Ltd. ("Yu Cheng"). Details of
the original PSA signed on May 1, 2000 have been disclosed in previous
filings.
* Less than
** More than
4
Key specific details of the APSA which differ from the May 1, 2000
document are as follows:
a. The original PSA, which was entered into by the Company's Canadian
subsidiary and Yu Cheng, called for the formation of a Chinese domestic
joint venture between Yu Cheng's subsidiary Yu Xun Digital Hi-Tech Co.
Ltd. (Yu Xun) and a China Telecom subsidiary, Tianjin Chuang Xian
Information Development Co. Ltd. (Chuang Xian), the purpose of which
was to undertake two businesses, (i) an education provider (Edubiz) and
(ii) an IT system service provider. The parties have elected to
separate the said businesses whereby Yu Xun will, with the Company,
undertake the Edubiz and Chuang Xian will undertake the IT business on
its own.
b. The parties agreed that semi-annually net profits will be calculated
and 20% thereof, or such other amount as agreed to by the parties,
shall be retained by Yu Xun as working capital and that the balance
returned to the parties on a 80/20 basis, at each party's option, that
is to say either party may choose to leave their portion of the net
profits in the Edubiz as an addition to their loan account with Yu Xun.
c. The Company will provide management and capital through its wholly
owned foreign enterprise, Tianjin Navada Digital World Technologies Co.
Ltd.
d. The Company will provide capital of not less than $250,000 US (Capital)
contributed over 12 months or as otherwise agreed to by the parties. In
the event that the Capital is not raised within the said 12 months, the
profit allocation percentage shall be adjusted based on the percentage
of the $250,000 actually raised by the Company.
The Company issued a press release on June 18, 2001, announcing the signing of
the amended profit sharing agreement.
2. On July 16, 2001, the Company signed an Offshore Securities Subscription
Agreements with two Chinese corporations - Tianjin Global Magnetic Card Co.
Ltd. ("TGM") and Tianjin Teda Yu Cheng Group Co. Ltd. ("Yu Cheng"), the
Company's controlling shareholder, for 10,000,000 common shares and
2,000,000 common shares respectively, all at a price of $1.00 each.
TGM is one of the largest credit and smart card manufacturers in the
Asia-Pacific Region. It was the first card manufacturer in China to be
accredited by MasterCard International and Visa International and is the
only company in its field in China that trades publicly which it has done
since 1993 through the Shanghai Exchange.
TGM produces magnetic and smart cards and related integration and
application systems for domestic and foreign markets.
5
TGM is also one of the National Mints for the People's Republic of China
printing financial documents and packaging products. TGM is rapidly
expanding its involvement with applications and uses of next generation
smart cards throughout China. These initiatives require leading edge
technology as well as access to a broader range of capital markets to
develop them. To meet these needs, TGM is investing in firms like the
Company and its new business unit, Digital Village RF Superconductor
Technology Inc., which is developing micro super conducting devices.
The Company issued a news release on July 12, 2001 announcing the receipt
of the two signed subscription agreements.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. (i) The following is a list of exhibits filed as part of this quarterly
filing on Form 10QSB.
- Financial statements for the period ended June 30, 2001.
b. Filings on Form 8-K
- None -
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.
DIGITAL VILLAGE WORLD TECHNOLOGIES INC.
/s/ Richard Wang
---------------------------------------
Richard Wang, President
Date: August 15, 2001
6
MOEN AND COMPANY
CHARTERED ACCOUNTANTS
PO Box 10129
1400 IBM Tower Telephone: (604)662-8899
701 West Georgia Street Fax: (604)662-8809
Vancouver, BC, Canada, V7Y 1C6
- --------------------------------------------------------------------------------
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
--------------------------------------
Board of Directors and Stockholders
Digital Village World Technologies, Inc. (formerly Body Concepts, Corp.)
(A Nevada Corporation)
(A Development Stage Company)
We have reviewed the accompanying Consolidated Balance Sheets of Digital Village
World Technologies, Inc. (formerly Body Concepts, Corp.) (A Nevada Corporation)
(A Development Stage Company) as of June 30, 2001 and June 30, 2000, and the
Statements of Operations, Cash Flows and Changes in Stockholders' Equity for the
six month periods then ended. These financial statements are the responsibility
of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying financial statements for them to be in conformity
with United States generally accepted accounting principles (GAAP).
"Moen and Company"
Chartered Accountants
Vancouver, British Columbia, Canada
July 23, 2001
7
DIGITAL VILLAGE WORLD TECHNOLOGIES, INC.
(formerly Body Concepts, Inc.)
(A Nevada Corporation)
(A Development Stage Company)
Notes to Consolidated Financial Statements
June 30, 2001
(In U.S. Dollars)
(Unaudited)
Note 1. ORGANIZATION AND NATURE OF BUSINESS
The Company was incorporated under the laws of the State of Nevada on
September 15, 1998, as Body Concepts, Inc. On May 25, 2000 the
Company changed its name from Body Concepts, Inc. to Digital Village
World Technologies, Inc.
On May 19, 2000 the Company increased its authorized capital stock
from 25,000,000 common shares with a par value of $0.001 to
62,500,000 common shares with a par value of $0.0004.
On May 19, 2000 the Company completed a 2.5:1 forward split of its
outstanding stock. This forward split increased the number of issued
and outstanding shares from 1,750,000 common shares to 4,375,000
common shares.
Pursuant to the terms of a share exchange which was effective as of
December 18, 2000, the Company acquired all of the issued and
outstanding stock of Digital Village World Technologies (Canada) Inc.
("DVC") in exchange for the issuance of 8,490,000 shares of its
authorized but previously unissued common stock, which shares were
valued at par value for purposes of the acquisition. The acquisition
was accounted for as a purchase, and accordingly, the operating
results for DVC will be reported only for the period subsequent to
the acquisition. Assets and liabilities of DVC at the date of
acquisition on December 18, 2000, are as follows:
Assets
Cash and cash equivalents $ 56,725
Accounts receivable 10,285
Fixed assets, net 83,028
---------------
150,038
---------------
Liabilities
Accounts payable 13,161
Current portion of loan 6,811
Due to related company 20,000
Due to related parties 144,423
---------------
184,395
Long-term loan 10,785
---------------
195,180
---------------
Net assets (liabilities) (45,142)
8
Cumulative translation, included in above,
Booked in stockholders' equity of the Company 468
---------------
(44,674)
Goodwill on acquisition (note 5) 48,070
---------------
Issuance of 8,490,000 common shares at par value $ 3,396
===============
Note 1. ORGANIZATION AND NATURE OF BUSINESS (cont'd)
DVC is a Canadian company incorporated in the Province of British
Columbia, Canada. DVC is an internet content provider that provides
bi-lingual content in Chinese and English, technical services to
companies in China, and provides third party internet services such
as web design, web hosting and content development for firms that
specialize in naturopathic and traditional eastern health sciences in
North America.
The historical information of Digital Village World Technologies,
Inc. that is the basis for the pro forma information at December 18,
2000 is as follows:
Summary Balance Sheet
Assets
Cash $ 44,171
Advances to related company 20,000
-------------
$ 64,171
=============
Liabilities
Accounts payable 1,871
-------------
Stockholders' equity
Capital stock - par value 1,750
- additional paid-in capital 75,750
-------------
77,500
Deficit (15,200)
-------------
62,300
-------------
$ 64,171
=============
Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of consolidation
The accompanying consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiary, Digital
Village World Technologies (Canada) Inc. All significant intercompany
transactions and balances have been eliminated.
Basis of presentation
9
These financial statements have been prepared in accordance with
Accounting Principles Generally Accepted in the United States
("USGAAP).
Development stage company
The accompanying financial statements have been prepared in
accordance with the provisions of Statement of Financial Accounting
Standard No. 7, "Accounting and Reporting by Development Stage
Enterprises".
Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)
Use of estimates
The preparation of financial statements in conformity with USGAAP
requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the dates of the financial
statements and the reported amounts of revenues and expenses during
the reporting periods. Actual results could differ from those
estimates.
Cash and cash equivalents
Cash and cash equivalents consist of cash on deposit and highly
liquid short-term interest bearing securities with a maturity at the
date of purchase of three months or less.
Income Taxes
Provisions for income taxes are based on taxes payable or refundable
for the current year and deferred taxes on temporary differences
between the amount of taxable income and pretax financial income and
between the tax bases of assets and liabilities and their reported
amounts in the financial statements. Deferred tax assets and
liabilities are included in the financial statement at currently
enacted income tax rates applicable to the period in which the
deferred tax assets and liabilities are expected to be realized or
settled as prescribed in FASB Statement No. 109, Accounting for
Income Taxes. As changes in tax laws or rate are enacted, deferred
tax assets and liabilities are adjusted through the provision for
income taxes.
Compensated absences
Employees of the corporation are entitled to paid vacations, sick
days and other time off depending on job classification, length of
service and other factors. It is impractical to estimate the amount
of compensation for future absences, and accordingly, no liability
has been recorded in the accompanying financial
10
statements. The corporation's policy is to recognize the costs of
compensated absences when paid to employees.
Net profit per share
The Company adopted Statement of Financial Accounting Standards No.
128 that requires the reporting of both basic and diluted earnings
per share. Basic earnings per share is computed by dividing net
income available to common shareowners by the weighted average number
of common shares outstanding for the period. Diluted earnings per
share reflects the potential dilution that could occur if securities
or other contacts to issue common stock were exercised or converted
into common stock. In accordance with FASB 128, any anti-dilution
effects on net loss per share are excluded.
Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)
Disclosure about fair value of financial instruments The Company has
financial instruments, none of which are held for trading purposes.
The Company estimates that the fair value of all financial
instruments at March 31, 2001 as defined in FASB 107, does not differ
materially from the aggregate carrying values of its financial
instruments recorded in the accompanying balance sheet. The estimated
fair value amounts have been determined by the Company using
available market information and appropriate valuation methodologies.
Considerable judgment is required in interpreting market data to
develop the estimates of fair value, and accordingly, the estimates
are not necessarily indicative of the amounts that the Company could
realize in a current market exchange.
Concentration of credit risk
Financial instruments that potentially subject the Company to a
significant concentration of credit risk consist primarily of cash
and cash equivalents which are not collateralized. The Company limits
its exposure to credit loss by placing its cash and cash equivalents
with high credit quality financial institutions.
Fixed assets
Fixed assets are stated at cost less accumulated depreciation.
Depreciation is recorded on the following rates:
Office equipment - 20% per annum on the declining balance basis
11
Vehicles - 30% per annum on the declining balance basis
Computer equipment - 30% per annum on the declining balance basis
As at June 30, 2001, the fixed assets and accumulated depreciation
are as follows:
At Cost Accumulated Net Book
(12/18/00) Depreciation Value
------------ ------------- ------------
Office equipment $ 5,430 $ 561 4,869
Vehicles 28,350 4,403 23,947
Computer equipment 49,248 7,649 41,599
------------ ------------- ------------
$ 83,028 $ 12,613 $ 70,415
============ ============= ============
Long-lived assets
Statement of Financial Accounting Standards No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of," requires that long-lived assets be reviewed for
impairment whenever events or changes in circumstances indicate that
the carrying amount of the asset in question may not be recoverable.
This standard did not have a material effect on the Company's results
of operations, cash flows or financial position.
Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)
Foreign currency translation
The functional currency of the parent Company Digital Village World
Technologies, Inc. is the United States Dollar and of Digital Village
World Technologies (Canada) Inc. is the Canadian Dollar and the
reporting currency on a consolidated basis is the United States
Dollar.
The assets, liabilities, and operations of the Company are expressed
in the functional currency of the Company in United States Dollars.
Operations of the subsidiary Digital Village World Technologies
(Canada) Inc. are in Canadian Dollars and in conformity with US GAAP
they are translated into the reporting currency, the United States
Dollar.
Monetary assets and liabilities are translated at the current rate of
exchange.
The weighted average exchange rate for the period is used to
translate revenue, expenses, and gains or losses from the functional
currency to the reporting currency.
12
The gain or loss on translation is reported as a separate component
of stockholders' equity and not recognized in net income. Gains or
losses on remeasurement are recognized in current net income.
Gains or losses from foreign currency transactions are recognized in
current net income.
Fixed assets are measured at historical exchange rates that existed
at the time of the transaction.
Depreciation is recorded at historical exchange rates that existed at
the time the underlying related asset was acquired.
An analysis of the changes in the cumulative translation adjustment
as disclosed as part of stockholders' equity, is as follows:
Six Months Ended
June 30,
--------------------------
2001 2000
----------- ------------
Beginning balance $ (468) $ --
Change during the period 265 --
----------- ------------
Ending balance $ (203) $ --
=========== ============
Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)
The effect of exchange rate changes on cash balances forms part of
the reconciliation of change in cash and cash equivalents during the
period.
Revenue Recognition
The Securities and Exchange Commission (SEC) issued Staff Accounting
Bulletin (SAB) 101, Revenue Recognition in Financial Statements, in
December 1999. The SAB summarizes certain of the SEC staff's views in
applying generally accepted accounting principles to revenue
recognition in financial statements. During the current year, the
Company performed a review of its revenue recognition policies and
determined that it is in compliance with SAB 101.
Web Site Development Expenses
Web site development expenses relate to the development of new online
services and consist of employee compensation, as well as costs for
content, facilities and equipment. The consensus in the Financial
Accounting Standards Board
13
Emerging Issues Task Force (EITF) Issue No. 00-2, Accounting for Web
Site Development Costs, requires that certain costs to develop Web
sites be capitalized (and amortized) or expensed, depending on the
nature of the costs.
Shipping and Handing Fees and Costs
In September 2000, the Financial Accounting Standards Board Emerging
Issues Task Force (EITF) reached a final consensus on EITF Issue No.
00-10, Accounting for Shipping and Handling Fees and Costs. This
consensus requires that all amounts billed to a customer in a sale
transaction related to shipping and handling, be classified as
revenue. The Company historically has netted shipping charges to
customers with shipping and handling costs which are included in
operating expenses in the Statements of Operations. With respect to
the classification of costs related to shipping and handling incurred
by the seller, the EITF determined that the classification of such
costs is an accounting policy decision that should be disclosed. The
Company will adopt the consensus in the Issue in fiscal 2001.
Note 3. CASH AND CASH EQUIVALENTS - $8,828
The total for cash and cash equivalents as at June 30, 2001, is made
up as follows:
Cash in bank current accounts $ 5,329
Cash in lawyer's trust account 3,499
-------------
Total $ 8,828
=============
Note 4. ACCOUNTS RECEIVABLE - $11,706
The accounts receivable of $11,706 as at June 30, 2001 is the
Canadian Goods and Services Taxes refundable
Note 5. GOODWILL - $48,070
On December 18, 2000 the acquisition of Digital Village World
Technologies (Canada) Inc. included liabilities that exceeded the
assets by $44,674 and the consideration of 8,490,000 treasury shares
at par value of $0.0004 per share or $3,396, resulted in goodwill on
the transaction of $48,070 that is being amortized over ten years,
commencing after revenue commences from proposed operations.
Note 6. ACCOUNTS PAYABLE - $8,289
Details of the total of accounts payable and accrued as at June 30,
2001, are as follows:
14
Blake, Cassels & Graydon, LLP $ 2,332
Frascona, Joiner, Goodman and Greenstein, P.C.
Accrued legal fees 1,871
Payroll and payroll deductions payable 4,086
-----------
Total $ 8,289
===========
Note 7. RELATED PARTY TRANSACTIONS - $174,934
The amount of $144,423 is due to a related party, Tianjin Teda Yu
Cheng Group. $30,511 is due to Directors of the Company as at June
30, 2001 for loans that they have advanced to the Company. These
amounts are unsecured, non interest bearing, with no specific terms
of repayment.
Note 8. LOAN PAYABLE - $15,325
As at January 1, 2000, Mr. Richard Wang, Director and President of
the Company transferred a loan to DVC which was signed by him on June
21, 1999 with Ford Credit Canada Limited for financing of CAD$40,869
for purchase of a new vehicle with the interest rate of 0.10% per
annum for a total of 48 payments with each payment of CAD$851.44
principal and interest. This vehicle is owned by the Company. The
first payment commenced on July 21, 1999 and the last payment is due
on June 21, 2003. This loan is guaranteed by Mr. Richard Wang. As at
June 30, 2001, the principal balance is as follows:
Initial loan $ 27,246
Repayment to June 30, 2001 13,624
------------
Balance, June 30, 2001 13,622
Current portion of loan 6,811
------------
Long term loan at June 30, 2001 $ 6,811
============
Note 9. LEASE OBLIGATIONS
a) Vehicle Lease
On January 19, 2000, DVC entered into a 36 month lease with
Lansdowne Dodge City Ltd. for a vehicle to be used by the
Company. Lease payments are expensed as they are incurred. Lease
obligations are as follows:
2001 CAD$ 8,000
2002 CAD$ 8,000
2003 CAD$ 667
b) Lease of Premises
DVC has lease obligations for office premises in 2001 for
CAD$25,369.
Note 10. CAPITAL STOCK
a) Authorized: 62,500,000 common shares with a par value of $0.0004
per share.
b) Issued and outstanding common shares as at June 30, 2001, are as
follows:
15
Additional
Issued Number of Par Paid-in
Date Shares Value Capital Total
------------- ------------------ ------------- -------------- --------------
private placement 9/15/98 1,000,000 $ 1,000 $ 1,500 $ 2,500
private placement 12/31/98 750,000 750 74,250 75,000
------------------ ------------- -------------- --------------
Balance 12/31/98 1,750,000 1,750 75,750 77,500
------------------ ------------- -------------- --------------
Balance 12/31/99 1,750,000 1,750 75,750 77,500
------------------ ------------- -------------- --------------
Balance, before
forward split 5/19/00 1,750,000 $ 1,750 $ 75,750 $ 77,500
================== ============= ============== ==============
2.5:1 forward split 5/19/00 4,375,000 1,750 75,750 77,500
Share exchange 12/18/00 8,490,000 3,396 3,396
------------------ ------------- -------------- --------------
Balance 12/31/00 12,865,000 5,146 75,750 80,896
issued for cash 2/7/01 10,000 4 9,996 10,000
issued for compensation 3/30/01 20,000 8 19,992 20,000
issued for cash 4/6/01 11,000 4 10,996 11,000
------------------ ------------- -------------- --------------
Balance 6/30/01 12,906,000 $ 5,162 $ 116,734 $ 121,896
================== ============= ============== ==============
Note 11. INCOME TAXES
a) The most recent Federal Income Tax filing for the Company for the
US was for the year ended December 31, 2000, disclosing no income
taxes payable to the US Internal Revenue Service.
Note 11. INCOME TAXES (cont'd)
b) There is a loss of $174,412 carried forward that may be applied
towards future profits.
No deferred income taxes are recorded as an asset. A reserve has
been claimed that offsets the amount of tax credit available
from use of the loss carry forward because there is presently no
indication that these tax losses will be utilized.
Note 12. FINANCIAL INSTUMENTS
The Company's financial instruments consist of cash and cash
equivalents, accounts receivable, prepaid expenses and deposit,
accounts payable and accrued, current portion of loan, due to related
parties and long-term loan payable. It is management's opinion that
the Company is not exposed to significant interest, currency or
credit risks arising from these financial instruments. The fair value
of these financial statements approximates their carrying values.
16
Note 13. PENSION AND EMPLOYMENT LIABILITIES
The Company does not have liabilities as at June 30, 2001, for
pension, post-employment benefits or post-retirement benefits. The
Company does not have a pension plan.
Note 14. NEW BUSINESS - PROFIT SHARING AGREEMENT
By agreement for reference dated May 1, 2000 and as amended on May
31, 2001, Digital Village World Technologies Inc, subsequently
renamed Digital Village World Technologies (Canada) Inc., ("DVC")
entered into an agreement with TianJin TEDA Yu Cheng Group Co Ltd., a
wholly owned subsidiary of the People's Daily Newspaper Group in
China with its principal place of business in Tianjin, the People's
Republic of China.("Yu Cheng").
(a) Proposed New Business Operations.
(i) Yu Cheng has formed a new domestic Chinese company
called Yuxun Digital Hi-Tech Co Ltd. ("Yuxun") which is
a local Internet Service Provider (ISP) in the Tianjin
region;
(ii) Yuxun has agreed to form a domestic joint venture with
Tianjin Chuang Xian Information Development Co Ltd
("Chuang Xian") that will assume Yuxun's ISP business
and Chuang Xian's IT services to form a new business
(New Business);
(iii) The New Business requires working capital; Yu Cheng is
the controlling shareholder of DVC and as such wishes to
advance the business of DVC in China by having DVC
provide overall management for the New Business and to
raise working capital for the New Business in accordance
with this agreement.
Note 14. NEW BUSINESS - PROFIT SHARING AGREEMENT (cont'd)
(b) Management of New Business / Working Capital
(i) YU Cheung hereby appoints DVC to be its manager to
manage the affairs of the New Business for a term of 25
years, unless terminated earlier as provided herein,
provided that (ii)
(ii) DVC assumes the responsibility for raising all working
capital requirements of the New Business.
(c) Profit Sharing
(i) Yu Cheung hereby agrees that 80% of the net profits of
the New Business (Profit Allocation) will be earned by
DVC provided DVC raises the required working capital, as
hereinafter defined, and provides the senior management,
as hereinafter defined, for the New Business.)
(ii) Net Profits will be defined according to GAAP as
determined by the auditor of the New Business, approved
by DVC.
17
(iii) The parties agree that semi-annually Net Profits will be
determined and 20% thereof, or such other amount agreed
to by the parties, shall be retained by the New Business
as working capital and that the balance distributed to
the parties on a 80/20 basis, 80% for DVC and 20% for Yu
Cheung, respectively, at each parties option. Either
party may choose to leave their portion of the Net
Profits in the New Business as addition to a loan
account owed to that party by the New Business.
(d) Management
(i) DVC will form a new Chinese firm, a wholly owned foreign
enterprise (WOFE) which will provide no fewer than two
senior executives, at DVC's cost, to provide on-going
executive management for the New Business.
(ii) Yu Cheng agrees that DVC may appoint 2 out of 5 persons
to be directors of the New Business.
(e) Conversion to Equity
The parties acknowledge that it is their intention to treat
DVC's Profit Allocation as a substitute to owning 80% of the
equity of the New Business and therefore as and when the rules
of China permit DVC to own, through the WOFE, shares in the New
Business, it is agreed that the parties will take such steps as
are necessary to have shares issued to the WOFE and upon such
event occurring the Profit Allocation will be adjusted, to
ensure that the underlying 80/20 arrangement is adhered to.
Note 14. NEW BUSINESS - PROFIT SHARING AGREEMENT (cont'd)
(f) Capital
(i) DVC, through the WOFE, will provide capital of not less
than $500,000 US contributed over 12 months or as
otherwise agreed to by the parties hereto.
(ii) In the event that the Capital is not raised within the
said 12 months, the Profit Allocation shall be adjusted
based on the percentage actually raised of the $500,000
US.
(iii) Yu Cheung will assist the WOFE to have all capital
contributions registered as loans to the New Business,
in order to ensure that when the New Business is able,
that DVC will be able to repatriate the Capital out of
China should DVC so elect.
(g) Annual Budget
The parties agree that they will on an annual basis agree upon
an annual budget, prepared in accordance with United States GAPP
and that unless
18
otherwise agreed, the New Business will be managed in accordance
with the annually agreed upon budget.
(h) Assignment
The Parties agree that DVC may assign this agreement to any 3rd
party provided that any assignee agrees to be bound by the terms
of this agreement.
(i) Termination
(i) This Agreement shall terminate and be of no further
force or effect if DVC fails to meet any material
obligation of this Agreement, or DVC files a voluntary
petition in bankruptcy, or an involuntary petition in
bankruptcy is filed against DVC , or DVC is liquidated
or its business transferred to a receiver, or DVC makes
a general assignment of all its assets on behalf of
creditors.
(ii) Upon the occurrence of any event as set out in i(i),
above, Yu Cheng shall send a written notice to DVC
stating the nature of the breach. If the breach is
curable DVC shall have thirty days from the date of the
notice to cure the breach.
(j) Notice
Notices as to disputes or termination to be given under this
Agreement shall be signed by the party giving such notice and
mailed by certified or registered mail, addressed to the party
to be notified at its then current business address as set forth
at the beginning of this Agreement or as subsequently changed by
giving notice. Notice as to address changes, pricing changes,
warranty changes and other matters relating to policy and
business may by given to such addresses, by facsimile
transmission, telex, telegram or first class mail. Notices by
mail shall be deemed given three days after mailing.
Note 14. NEW BUSINESS - PROFIT SHARING AGREEMENT (cont'd)
(k) Settlement of disputes and Governing Law
(i) In the event a dispute arises in connection with the
interpretation or implementation of this Agreement, the
parties to the dispute shall attempt in the first
instance to resolve such dispute through amicable
consultations. If the dispute cannot be resolved in this
manner within thirty (30) days after first conferring,
then any or all parties to the dispute may refer the
dispute to arbitration by the Beijing International
Arbitration Committee ("Committee"). The number of
arbitrators shall be three. The claimant(s) in the
dispute shall appoint one arbitrator within thirty (30)
days
19
of filing notice of the arbitration, and the
respondent(s) in the dispute shall appoint one
arbitrator within thirty (30) days thereafter. If the
respondent fails to so appoint an arbitrator, the
Arbitration Centre shall appoint the second arbitrator.
The two arbitrators thus appointed shall choose the
third arbitrator, and if they fail to do so within
thirty (30) days after the appointment of the second
arbitrator, the third arbitrator shall be appointed by
the Committee. The arbitration proceedings shall be
conducted in the English language.
(ii) Any award of the arbitrators shall be final and binding
on the parties. The costs of arbitration shall be borne
by the losing party, unless the arbitrators determine
that this would be inequitable. The parties agree and
recognize that any award of the arbitrators shall be
recognizable and enforceable in any court having
jurisdiction over the party against whom the award was
rendered, and also wherever assets of such party are
located.
(iii) The legal relations between the parties under this
contract shall be interpreted in accordance with the
substantive laws of China. Any disputes between the
parties concerning their legal obligations arising under
this contract which are submitted to arbitration
pursuant to this clause shall be decided pursuant to the
substantive laws of China.
(l) Non Competition
The parties agree that during the currency of this agreement
that they will not, directly or indirectly, in any manner
whatsoever, be engaged in any business competitive to the
business of New Business or advise or be concerned with or
interested or lend money to/or guaranty the debts or obligations
of a competitive business.
Note 15. CONSULTING AGREEMENT - BRIAN ROBERTS
By agreement dated February 1, 2000, in accordance to the law of
British Columbia, Canada, Digital Village World Technologies Inc.,
subsequently renamed Digital Village World Technologies (Canada)
Inc., entered into a Consulting Agreement with Brian Roberts
("Roberts") whereby he would assist the Company in completion of its
Business Plan and set up its administrative
20
systems, on a month to month basis. Either party may terminate this
agreement, with or without cause, upon thirty days notice to the
other party.
Terms and Conditions of the agreement:
(a) Remuneration
(i) The Company agrees to issue 250,000 fully paid common
shares of DVC at par value, for all services to be
performed by Roberts under this agreement
(ii) Roberts agrees to enter a pooling agreement at the time
the shares are issued wherein he agrees that he will not
sell, transfer or otherwise dispose of any of the Shares
before 18 months has elapsed from the date the Shares,
directly or indirectly, become publicly traded.
(b) Expenses
In addition to the Shares, in (a), above, DVC shall reimburse
Roberts, for all reasonable and necessary business expenses
incurred by him in the performance of his duties, including,
without limitation, expenses for travel, meals, entertainment
and other miscellaneous business expenses. Roberts shall submit
to DVC written, itemized expense accounts for approval with such
additional substantiation and justification as DVC may
reasonably request.
(c) Non-Competition
During the term of this agreement and for a term of one year
after its termination, Roberts covenants and agrees that he will
not directly or indirectly, whether as owner, shareholder,
director, agent, officer, consultant, independent contractor, or
in any other capacity whatsoever, of a corporation, partnership
or proprietorship, compete with DVC or any of its affiliates.
Note 16. SUBSEQUENT EVENTS
Proposed Equity Funding - $12,000,000
21
On July 16, 2001, the Company signed Offshore Securities Subscription
Agreements with Tianjin Global Magnetic Card Co. Ltd. ("TGM") and
Tianjin Teda Yu Cheng Group Co. Ltd. ("Yu Cheng"), the Company's
present controlling shareholder, for 10,000,000 common shares and
2,000,000 common shares, respectively , all at a price of $1.00 each,
for the issuing a total of 12,000,000 common shares of the Company at
a price of $1.00 per share. Details are as follows:
Yu Cheng agreed to purchase 2,000,000 common shares and TGM agreed to
purchase 10,000,000 common shares at the mutually agreed date.
TGM is one of the largest credit and smart card manufactures in the
Asia-Pacific Region. It was the first card manufacturer in China to
be accredited by MasterCard International and Visa International and
is the only company in its field in China that trades publicly which
it has done since 1993 through the Shanghai Exchange.
TGM produces magnetic and smart cards and related integration and
application systems for domestic and foreign markets. TGM is also one
of the national Mints for the People's Republic of China printing
financial documents and packaging products. TGM is repidly expanding
the applications and the use of next generation smart cards for China
wide application. These initiatives require leading edge technology
as well as access to a broader range of capital markets to develop
them. To meet these needs TGM is investing in firms like the Company
and its new business unit, Digital Village RFS Technology Inc., which
is developing micro super conducting devices.
No definitive agreements relating to the above issuing date have been
signed at the date of these financial statements, and would be
subject to regulatory approvals.
22
DIGITAL VILLAGE WORLD TECHNOLOGIES, INC.
(FORMERLY BODY CONCEPTS, INC.)
(A Nevada Corporation)
(A Development Stage Company)
Consolidated Balance Sheets
June 30, 2001 and June 30, 2000
(In US Dollars)
(Unaudited)
2001 2000
--------- ---------
Assets
Current Assets
Cash and cash equivalents (note 3) $ 8,828 $ 43,102
Accounts receivable (note 4) 11,706 --
Prepaid expenses and deposit 5,107 --
--------- ---------
25,641 43,102
--------- ---------
Fixed Assets, at cost (note 2) 83,028 --
Less: accumulated depreciation (12,613) --
--------- ---------
70,415 --
--------- ---------
Goodwill, at cost (note 5) 48,070 --
--------- ---------
$ 144,126 $ 43,102
========= =========
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable and accrued (note 6) $ 8,289 $ 550
Current portion of loan (note 8) 6,811
Due to related parties (note 7) 174,934 --
--------- ---------
190,034 550
--------- ---------
Long-term Liabilities
Loan payable (note 8) 6,811 --
--------- ---------
Stockholders' Equity
Capital stock (note 10)
Authorized
62,500,000 common shares at $0.0004 par value
Issued
12,906,000 common shares (2000 - 4,375,000 shares - post split) - par value 5,162 1,750
Paid in capital in excess of par value of stock 116,734 75,750
--------- ---------
121,896 77,500
Deficit, accumulated during the development stage (174,412) (34,948)
Cumulative translation (note 2) (203) --
--------- ---------
(52,719) 42,552
--------- ---------
$ 144,126 $ 43,102
========= =========
Approved on behalf of the board:
"Richard Wang" , Director
- ---------------------
"Edward Chen" , Director
- ---------------------
See Accompanying Notes and Independent Accountants' Review Report
DIGITAL VILLAGE WORLD TECHNOLOGIES, INC.
(FORMERLY BODY CONCEPTS, INC.)
(A Nevada Corporation)
(A Development Stage Company)
Consolidated Statements of Operations
(In US Dollars)
(Unaudited)
Cumulative From
Inception Date Six Months
of Sep. 15, 1998 Quarter Ended Ended
to June 30, June 30, June 30,
---------------------------- ----------------------------
2001 2001 2000 2001 2000
------------ ------------ ------------ ------------ ------------
Revenue
Interest and other income $ 7,620 $ $ 753 $ 3,766 $ 1,508
------------ ------------ ------------ ----------- ------------
Administration Costs
Advertising 712 -- -- -- --
Bank charges and interest 1,315 290 102 810 135
Consulting 7,327 -- 20,000 1,323 20,000
Depreciation 12,613 6,758 -- 12,107 --
License, dues and insurance 985 -- -- -- --
Office costs 4,423 927 -- 4,105 --
Rentals and leases 16,632 8,362 (200) 14,411 300
Professional fees 32,413 800 2,000 24,476 2,550
Salary and benefits 40,202 9,798 -- 36,255 --
Stock-based compensation 20,000 -- -- 20,000 --
Telephone and utilities 14,352 1,995 -- 13,819 --
Transfer agent and filing fees 7,247 -- (60) 5,911 200
Travel and promotion 23,811 7,817 -- 21,872 --
------------ ------------ ------------ ----------- ------------
182,032 36,747 21,842 155,089 23,185
------------ ------------ ------------ ----------- ------------
Net profit (loss) for the period $ (174,412) $ (36,747) $ (21,089) $ (151,323) $ (21,677)
============ ============ ============ =========== ============
Basic and diluted profit (loss) per share $ (0.00) $ (0.00) $ (0.01) $ (0.00)
============ ============ =========== ============
Weighted average number of
common shares used to
compute basic and fully
diluted loss per share 12,902,366 4,375,000 12,888,666 4,375,000
============ ============ =========== ============
See Accompanying Notes and Independent Accountants' Review Report
DIGITAL VILLAGE WORLD TECHNOLOGIES, INC.
(FORMERLY BODY CONCEPTS, INC.)
(A Nevada Corporation)
(A Development Stage Company)
Consolidated Statements of Cash Flows
(In US Dollars)
(Unaudited)
Cumulative From
Inception Date Six Months
of Sep. 15, 1998 Quarter Ended Ended
to June 30, June 30, June 30,
---------------------- ----------------------
2001 2001 2000 2001 2000
---------------- --------- --------- --------- ---------
Cash derived from (used for)
Operating activities
Net profit (loss) for the period $ (174,412) $ (36,747) $ (21,089) $(151,323) $ (21,677)
Items not requiring use of cash
Depreciation 12,613 6,758 -- 12,107 --
Cumulative translation (203) 149 -- 265 --
Changes in non-cash
working capital items
Accounts receivable (11,706) -- -- (1,386) --
Prepaid expenses and deposit (5,107) -- -- (5,107) --
Accounts payable and accrued 8,289 (7,071) (344) (11,390) --
---------------- --------- --------- --------- ---------
(170,526) (36,911) (21,433) (156,834) (21,677)
---------------- --------- --------- --------- ---------
Financing activities
Issuance of shares 121,896 11,000 -- 41,000 --
Loan payable 13,622 (1,703) -- (3,406) --
Due to related parties 174,934 30,511 -- 30,511 --
---------------- --------- --------- --------- ---------
310,452 39,808 -- 68,105
---------------- --------- --------- --------- ---------
Investing activities
Capital assets purchased (83,028) -- -- -- --
Goodwill (48,070) -- -- --
---------------- --------- --------- --------- ---------
(131,098) -- --
---------------- --------- --------- --------- ---------
Cash and cash equivalents, increase
(decrease) during the period 8,828 2,897 (21,433) (88,729) (21,677)
Cash and cash equivalents,
beginning of period 5,931 64,535 97,557 64,779
---------------- --------- --------- --------- ---------
Cash and cash equivalents,
end of period $ 8,828 $ 8,828 $ 43,102 $ 8,828 $ 43,102
================ ========= ========= ========= =========
See Accompanying Notes and Independent Accountants' Review Report