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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-QSB
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1999
OR
|_| 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 0-28345
China Broadband Corp.
(formerly Institute for Counseling, Inc.)
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(Exact name of small business issuer in its charter)
NEVADA 52-2197688
- --------------------------------- ------------------------------------
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
624 Wilderness Drive, S.E.,
Calgary, Alberta
Canada T2J 1Z2
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(Address of principal place of business or intended principal place of business)
(403) 225-2198
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(Issuer's telephone number)
Not Applicable
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(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer: (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. Yes [X] No [ ]
The number of outstanding common shares, with $0.001 par value, of the
registrant at September 30, 1999 was 2,304,000.
Transitional Small Business Disclosure Format (check one):
Yes [ ] No [X]
CHINA BROADBAND CORP.
(formerly Institute for Counseling, Inc.)
INDEX TO THE FORM 10-QSB
For the quarterly period ended September 30, 1999
Page
----
Part I - FINANCIAL INFORMATION ...........................................1
ITEM 1. FINANCIAL STATEMENTS .........................................1
Institute for Counseling, Inc. ..................................1
Balance Sheet ..............................................1
Statements of Loss and Deficit .............................2
Statement of Cash Flows ....................................3
Statement of Stockholders' Equity ..........................4
Notes to the Financial Statements ..........................5
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS .........................7
Part II - OTHER INFORMATION ...............................................9
ITEM 1. LEGAL PROCEEDINGS ............................................9
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS ....................9
ITEM 3. DEFAULTS UPON SENIOR SECURITIES ..............................9
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS ..........9
ITEM 5. OTHER INFORMATION ............................................9
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K .............................9
SIGNATURES
Part I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
INSTITUTE FOR COUNSELLING INC.
(A Development Stage Company)
BALANCE SHEETS
September 30, 1999 and December 31, 1998
(Stated in US Dollars)
(Unaudited - See Note 1)
ASSETS
September 30, December 31,
1999 1998
--------------- -------------
Current
Cash $ 22,869 $ 53,925
Accounts receivable 2,670 1,606
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$ 25,539 $ 55,531
=============== =============
LIABILITIES
Current
Accounts payable $ 14,964 $ 24,626
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STOCKHOLDERS' EQUITY
Common stock - Note 2 56,001 56,001
Deficit accumulated during the development
stage (45,426) (25,096)
--------------- -------------
10,575 30,905
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$ 25,539 $ 55,531
=============== =============
SEE ACCOMPANYING NOTES
1
INSTITUTE FOR COUNSELLING INC.
(A Development Stage Company)
STATEMENTS OF LOSS AND DEFICIT
ACCUMULATED DURING THE DEVELOPMENT STAGE
for the nine month and three month periods ended September 30, 1999
and for the period February 9, 1993 (Date of Incorporation) to December 31, 1998
and February 9, 1993 (Date of Incorporation) to September 30, 1999
(Stated in US Dollars)
(Unaudited - See Note 1)
February 9, 1993 February 9, 1993
Nine months Three months (Date of Incor- (Date of Incor-
Ended ended poration) to poration) to
September 30, September 30, December 31, September 30,
1999 1999 1998 1999
-------------- -------------- -------------- ---------------
Expenses
Accounting and audit $ 2,510 $ 1,510 $ 3,963 $ 6,473
Consulting 2,300 2,300 - 2,300
Filing fees 355 (782) - 355
Foreign exchange 279 279 - 279
Legal 6,041 (4,459) 9,428 15,469
Management services - - 10,700 10,700
Promotion and entertainment 4,865 - - 4,865
Rent 3,980 2,050 1,005 4,985
-------------- -------------- -------------- ---------------
Net loss for the period 20,330 898 $ 25,096 $ 45,426
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Deficit accumulated during the development
stage, beginning of the period 25,096 44,528
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Deficit accumulated during the development
stage, end of the period $ 45,426 $ 45,426
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Net loss per share $ 0.01 $ 0.00
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Weighted average number of shares
outstanding (on a post forward split basis) 2,304,000 2,304,000
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SEE ACCOMPANYING NOTES
2
INSTITUTE FOR COUNSELLING INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
for the nine month and three month periods ended September 30, 1999
and for the period February 9, 1993 (Date of Incorporation) to December 31, 1998
and February 9, 1993 (Date of Incorporation) to September 30, 1999
(Stated in US Dollars)
(Unaudited - See Note 1)
February 9, February 9,
1993 1993
Nine months Three months (Date of In- (Date of In-
ended ended corporation) to poration) to
September 30, September 30, December 31, September 30,
1999 1999 1998 1999
-------------- -------------- -------------- --------------
Cash Flows from Operating
Activities
Net loss for the period $ (20,330) $ (898) $ (25,096) $ (45,426)
Changes in non-cash working capital
balances related to operations
Accounts receivable (1,064) (140) (1,606) (2,670)
Accounts payable (9,662) (1,134) 24,626 14,964
-------------- -------------- -------------- --------------
(31,056) (2,172) (2,076) (33,132)
-------------- -------------- -------------- --------------
Cash Flows from Financing Activities
Common stock issued - - 56,001 56,001
-------------- -------------- -------------- --------------
- - 56,001 56,001
-------------- -------------- -------------- --------------
Net increase (decrease) in cash during the
period (31,056) (2,172) 53,925 22,869
Cash, beginning of the period 53,925 25,041 - -
-------------- -------------- -------------- --------------
Cash, end of the period $ 22,869 $ 22,869 $ 53,925 $ 22,869
============== ============== ============== ==============
SEE ACCOMPANYING NOTES
3
INSTITUTE FOR COUNSELLING INC.
(A Development Stage Company)
STATEMENTS OF STOCKHOLDERS' EQUITY
for the period February 9, 1993 (Date of Incorporation) to September 30, 1999
(Stated in US Dollars)
(Unaudited - See Note 1)
Deficit
Accumulated
Common Stock During the
(Note 3) Development
# $ Stage Total
----------- ----------- -------------- -----------
Issue of initial founders stock upon
Incorporation 100 $ 1 $ - $ 1
Net loss from incorporation to
December 31, 1993 - - (1) (1)
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Balance, December 31, 1993, 1994, 1995,
1996 and 1997 100 1 $ (1) $ -
Twenty thousand for one forward
Split of outstanding shares 1,999,900 - - -
Stock issued pursuant to an
offering memorandum - at $0.25 104,000 26,000 - 26,000
Stock issued for cash - at $0.15 200,000 30,000 - 30,000
Net loss for the period ended
December 31, 1998 - - (25,095) (25,095)
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Balance, December 31, 1998 2,304,000 56,001 (25,096) 30,905
Net loss for the period ended
September 30, 1999 - - (20,330) (20,330)
----------- ----------- -------------- -----------
Balance, September 30, 1999 2,304,000 $ 56,001 $ (45,426) $ 10,575
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SEE ACCOMPANYING NOTES
4
INSTITUTE FOR COUNSELLING INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
September 30, 1999
(Stated in US Dollars)
(Unaudited - See Note 1)
Note 1 Interim Reporting
These financial statements have not been audited or reviewed and have
been prepared on a compilation basis only. Readers are cautioned that
these statements may not be appropriate for their purposes. While the
information presented in the accompanying interim nine month financial
statements is unaudited, it includes all adjustments which are, in the
opinion of management necessary to present fairly the financial
position, results of operations and cash flows for the interim period
presented. It is suggested that these interim financial statements be
read in conjunction with the company's annual audited December 31,
1998 financial statements.
Note 2 Common Stock
a) Authorized:
50,000,000 common shares, no par value
b) Issued:
# $
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Issue of initial founders stock upon incorporation
- at $0.01 100 1
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Balance, December 31, 1997 and 1996 100 1
Twenty thousand for one forward split of outstanding stock
1,999,900 -
Stock issued for cash - at $0.15 200,000 30,000
Stock issued pursuant to an offering memorandum
- at $0.25 104,000 26,000
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Balance, December 31, 1998 and September 30, 1999 2,304,000 56,001
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c) Commitments:
Offering Memorandum
The company received $26,000 and issued 104,000 shares pursuant
to an offering memorandum dated September 15, 1998. The company
has also allotted 15,000 common shares for future issuance at
$0.25 per common share pursuant to the offering.
5
Institute for Counselling Inc.
(A Development Stage Company)
Notes to the Financial Statements
September 30, 1999 (Stated in US Dollars)
(Unaudited - See Note 1) - Page 2
Note 3 Uncertainty Due to the Year 2000 Issue
The Year 2000 Issue arises because many computerized systems use two
digits rather than four to identify a year. Date-sensitive systems may
recognize the year 2000 as 1900 or some other date, resulting in
errors when information using the year 2000 date is processed. In
addition, similar problems may arise in some systems which use certain
dates in 1999 to represent something other than a date. Although the
change in date has occurred, it is not possible to conclude that all
aspects of the Year 2000 Issue that may affect the company, including
those related to customers, suppliers or other third parties, have
been fully resolved.
6
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Certain statements and information contained in this Report constitute
forward-looking statements within the meaning of Section 21E of the Securities
Exchange Act of 1934. Such forward-looking statements involve known and unknown
risks, uncertainties and other factors that may cause the actual results,
performance or achievement of the Company, or developments in the Company's
industry, to differ materially from the anticipated results, performance or
achievements expressed or implied by such forward-looking statements. Such
factors include, but are not limited to: the Company's limited operating history
and history of losses, the Company's relative concentration of customers, the
risks related to the Company's ability to commercialize its technology, risks
associated with changes in market demand for the Company's technology, risks
involving the management of growth and integration of acquisitions, competition,
product development risks and risks of technological change, dependence on
third-party marketing relationships and suppliers, the Company's ability to
protect its intellectual property rights and the other risks and uncertainties
detailed in the Company's Securities and Exchange Commission filings.
During our year ended September 30, 1999, the Company's business strategy
was to provide consulting services to emerging and start up businesses involved
in the oil and gas sector. The Company also examined oil and gas projects of
merit with the intention of acquiring financing and developing those projects.
Subsequent to September 30, 1999, Institute for Counseling, Inc. acquired
all of the issued and outstanding shares in the capital of China Broadband (BVI)
Corp., a company incorporated under the laws of the British Virgin Islands and
changed its name to China Broadband Corp. The Company began implementing a
business strategy to become a leading facilities-based provider of high
capacity, high speed Internet, data and voice services in the major urban
markets throughout the People's Republic of China.
Nine Month Period Ended September 30, 1999
The Company had no significant business activities and had no revenues from
operations during the nine-month period ended September 30, 1999. During the
nine-month period ended, the Company had expenses of $20,330, including
accounting and audit expenses of $2,510; legal expenses of $6,041; consulting
fees of $2,300; promotion and entertainment expenses of $4,865 and rent expense
of $3,980. The accounting and auditing expenses and the legal expenses were
primarily a result of the increased professional fees associated with becoming a
reporting issuer under the Securities Exchange Act of 1934, as amended. The
Company had a loss of $20,330 or $0.01 per share for the nine-month period ended
September 30, 1999.
Three Month Period Ended September 30, 1999
The Company had no significant business activities and had no revenues from
operations during the three-month period ended September 30, 1999. During the
three-month period ended, the Company incurred accounting and audit expenses of
$1,510; expenses related to consulting fees of $2,300 and rent expense of
$2,050. The Company also received a credit towards legal fees in the amount of
$4,459. The Company's net expenses for the three-month period ended September
30, 1999 was $898. The Company had a loss of $898 for the three-month period
ended September 30, 1999.
Since the Company is in its development stage, all losses accumulated since
inception have been considered as part of the Company's development stage
activities.
7
Liquidity and Capital Resources
Since inception, the Company has financed its operations primarily through
sales of its equity securities. As of September 30, 1999, the Company had cash
and cash equivalents of $22,869, and working capital of $10,575. From inception
to September 30, 1999, the Company had raised approximately $56,001 from the
sale of such securities.
Subsequent Events
On April 14, 2000, the Company completed a reverse-split of its common
stock on a .65104 for 1 basis reducing the Company's issued and outstanding
share capital to 1,500,000 shares of common stock. The Company also acquired all
of the issued and outstanding shares in the capital of China Broadband (BVI)
Corp., a company incorporated under the laws of the British Virgin Islands,
consisting of 15,000,000 common shares in consideration for an aggregate of
13,500,000 of our shares of common stock, pursuant to a securities purchase
agreement. On April 27, 2000, the Company filed Articles of Amendment to the
Articles of Incorporation in the State of Nevada. The former shareholders of
China Broadband (BVI) became the controlling shareholders of China Broadband,
Inc. The Company owns a 50% interest in Big Sky Network Canada Ltd., a British
Virgin Islands corporation, and SoftNet Systems, Inc., a Delaware corporation,
owns the remaining 50% interest. SoftNet Systems acquired its 50% interest in
Big Sky Network by committing $2 million to fund Big Sky Network's deployment of
Internet access on Shekou CATV and by providing $500,000 to Big Sky Network for
working capital.
At the time of our acquisition of China Broadband (BVI), China Broadband
(BVI) had the following assets:
o $2.5 million in cash;
o an executed cooperation joint venture agreement with Shekou CATV,
approved by regulators in China;
o letters of intent to enter into similar cooperation joint venture
agreements with Zhuhai CATV, Cheugdu CATV, Dalian Metropolitan Network
Centre and Cixi CATV; and
o a management team experienced in negotiating cooperation joint venture
agreements to implement a cable broadband fulfillment strategy in
China.
Because the Company had only approximately 1,500,000 (post reverse-split)
shares issued and outstanding on the date of our acquistion of China Broadband
(BVI), the 13,500,000 new shares issued to the former shareholders of China
Broadband (BVI) represented a majority holding of the Company's stock and
consequently such shareholders obtained control of the corporation. In instances
like this, accounting principles require that the transaction be reflected in
financial statements as a "reverse acquisition" where the subsidiary essentially
acquires the parent. In this form of accounting, the statements are created by
aggregating the accounts of the subsidiary, as would have been the case if
shareholders of China Broadband (BVI) had retained ownership, and then adding
the accounts of the parent for the relevant period when all the companies came
under common control. In this case, common control started immediately after the
completion of the acquisition, effectively April 14, 2000. Consequently, the
financial statements of the Company for periods subsequent to the acquisition
will include the accounts of China Broadband (BVI) and Big Sky Network for the
full fiscal period, but only the financial information for China Broadband Corp.
for the period following the date of acquisition. Also, according to proper
accounting practice to portray China Broadband Corp. and China Broadband (BVI)
as if they were operating as a single entity, transactions between the companies
will be eliminated.
Subsequent to the nine-month period ended September 30, 1999, the Company
raised cash of $3,750 pursuant to the sale of 15,000 shares of common stock
during the three-month period ended March 31, 2000. Subsequent to the Company's
acquisition of China Broadband (BVI) on April 14, 2000, the Company completed
three private placements of 3,336,667 shares of our common stock for proceeds of
$11,397,502.50.
PLAN OF OPERATION
As of June 30, 2000, the Company's management anticipates that the Company
currently has sufficient working capital to fund the Company's plan of operation
through the year ended December 31, 2000. The Company's costs to fund its plan
of operation for the fiscal year ending December 31, 2000 is estimated to be
approximately $8
8
million to $10 million (primarily salaries, travel, office and other similar
expenses). These funds are intended to permit us to expand our marketing efforts
through additions to staff and to develop and execute a comprehensive market
exposure program to implement our business strategy of becoming a leading
facilities-based provider of high capacity, high speed Internet, data and voice
services in the major urban markets throughout the People's Republic of China.
The Company anticipates that its operating expenses and capital expenditure
may increase significantly during the year ending December 31, 2001, the next
phase of the Company's development. The amount and timing of expenditures during
the year ending December 31, 2001 will depend on the success of any contracts it
secures, and there is no assurance the Company will receive significant revenues
or operate profitably. Current cash resources are not anticipated to be
sufficient to fund the next phase of the Company's development and management
intends to seek additional private equity or debt financing. There can be no
assurances that any such funds will be available, and if funds are raised, that
they will be sufficient to achieve the Company's objective, or result in
commercial success.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
a) Sales of Unregistered Securities
None.
b) Use of Proceeds from Sales of Registered Securities
Not Applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
As of September 30, 1999, there were no changes in or disagreements with
accountants on accounting or financial disclosure.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibit
Number Description
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27 Financial Data Schedule
9
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
China Broadband Corp.
(formerly Institute for Counseling, Inc.)
Date: July 3, 2000 By: /s/ Matthew Heysel
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Name: Matthew Heysel
Title: Chief Executive Officer
Date: July 3, 2000 By: /s/ Thomas Milne
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Name: Thomas Milne
Title: Chief Financial Officer
(Principal Financial and
Accounting Officer)
10
EXHIBIT INDEX
Exhibit
Number Description
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27 Financial Data Schedule