UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10 - QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended March 31, 2001.
COL China Online International Inc.
-----------------------------------
(Exact name of small business issuer as specified in its charter)
Delaware
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(State or other jurisdiction of incorporation)
52-2224845
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(Commission File Number) (IRS Employer Identification Number)
3177 South Parker Road
Aurora, Colorado, 80014
-----------------------
(Address of principal executive offices including zip code)
(303) 695-8530
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(Small Business Issuer telephone number, including area code)
Not Applicable
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(Former Name or Former Address, 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 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 __ No X
As of May 1, 2001, the Registrant had outstanding 8,300,000 shares of its common
stock, par value $0.0005.
Transitional Small Business Disclosure Format (Check One):
Yes __ No X
COL China Online International Inc.
(A Development Stage Company)
FORM 10-QSB
March 31, 2001
Table of Contents
Page No.
PART I. FINANCIAL INFORMATION
-----------------------------
Item 1. Financial Statements
Balance Sheet as of March 31, 2001 (unaudited)........................3
Statements of Operations for the Three Months Ended
March 31, 2001, Nine Months Ended March 31, 2001
and Cumulative From Inception to March 31, 2001
(unaudited).......................................................4
Statements of Cash Flows for the Nine Months Ended
March 31, 2001 and Cumulative From Inception to
March 31, 2001 (unaudited)........................................5
Notes to Consolidated Financial Statements............................6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Liquidity and Capital Resources.......................................8
Statement of Operations for the Periods Ended March 31, 2001..........9
PART II. OTHER INFORMATION
--------------------------
Item 6. Exhibits and Reports on Form 8-K......................................9
2
PART I. FINANCIAL INFORMATION
-----------------------------
Item 1. Financial Statements
COL CHINA ONLINE INTERNATIONAL INC.
(A Development Stage Company)
BALANCE SHEET
(unaudited)
ASSETS
------
MARCH 31,
2001
---------
CURRENT ASSETS:
Cash $ 4,101
Receivable, Migration 18,420
---------
22,521
DEFERRED OFFERING COST 75,000
---------
TOTAL ASSETS $ 97,521
=========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
----------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 128,095
PAYABLE - AFFILIATE 185,000
STOCKHOLDERS' DEFICIENCY:
Preferred stock, $.001 par value; 5,000,000 shares authorized, --
none outstanding
Common stock, $.001 par value; 100,000,000 shares authorized; 8,300
8,300,000 shares issued and outstanding
Additional paid-in capital 140,790
Deficit accumulated during the development stage (364,664)
---------
Total stockholders' deficiency (215,574)
---------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY $ 97,521
=========
3
COL CHINA ONLINE INTERNATIONAL INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
(Unaudited)
THREE MONTHS NINE MONTHS CUMULATIVE FROM
ENDED ENDED INCEPTION
MARCH 31, MARCH 31, MARCH 31,
2001 2001 2001
----------- ----------- -----------
NET REVENUES $ -- $ -- $ --
GENERAL AND ADMINISTRATIVE EXPENSES 7,013 36,597 205,731
EXCESS PUBLIC OFFERING COSTS 61,487 158,731 158,731
----------- ----------- -----------
NET LOSS $ (68,500) $ (195,328) $ (364,664)
=========== =========== ===========
NET LOSS PER COMMON SHARE $ (.01) $ (.02) $ (.03)
=========== =========== ===========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING $ 8,300,000 $ 8,300,000 $ 8,300,000
=========== =========== ===========
4
COL CHINA ONLINE INTERNATIONAL INC.
(A Development Stage Company)
STATEMENT OF CASH FLOWS
(Unaudited)
NINE MONTHS CUMULATIVE
ENDED FROM INCEPTION
MARCH 31, MARCH 31,
2001 2001
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(195,328) $(364,664)
Expenses paid by principal stockholder -- 89,343
Adjustments to reconcile net loss to net cash from operating activities:
Changes in operating assets and liabilities:
Increase in receivable, Migration -- (18,420)
Increase in deferred offering costs (7,055) (75,000)
Increase in accounts payable 9,134 128,095
--------- ---------
Net cash (used) in operating activities (193,249) (240,646)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITY -- --
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock, net of offering costs -- 59,747
Advance by affiliate 185,000 185,000
--------- ---------
Net cash provided by financing activities 185,000 244,747
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NET INCREASE (DECREASE) IN CASH (8,249) 4,101
CASH, beginning of period 12,350 --
--------- ---------
CASH, end of period $ 4,101 $ 4,101
========= =========
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Capital contribution of expenses incurred by principal stockholder $ -- $ 89,343
========= =========
Accounts payable for offering costs $ 75,000 $ 75,000
========= =========
5
COL CHINA ONLINE INTERNATIONAL INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
PERIODS ENDED MARCH 31, 2001
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
------------------------------------------------------------
Nature of Operations - COL China Online International Inc. ("COL
International") was incorporated as a Delaware corporation on February 22,
2000, for the purpose of acquiring Migration Developments Limited
("Migration") and raising equity capital. COL International is considered
to be in the development stage, due to its limited operations and lack of
revenues to date. Operations since inception include organization matters,
raising equity and acquisition negotiations with Migration.
Deferred Offering Costs - Costs incurred in connection with COL
International's proposed public offering are being deferred. Such amounts
will be offset against the proceeds of the offering, if the offering is
successful, or expensed in operations, if the offering is unsuccessful or
to the extent such costs exceed the expected capital to be raised. As of
March 31, 2001, COL has deferred $75,000, which is the minimum amount
expected to be received in the public offering. Amounts in excess of this
amount have been expensed.
2. INTERIM FINANCIAL STATEMENTS:
-----------------------------
The accompanying financial statements are unaudited. However, in the
opinion of management, the accompanying financial statements reflect all
adjustments (which are normal and recurring in nature) necessary for a fair
presentation. The interim financial information is not necessarily
indicative of financial results expected for the year.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to the Securities and
Exchange Commission's rules and regulations. Management believes the
disclosures made are adequate to make the information not misleading and
suggests that these financial statements be read in conjunction with COL
International's registration statement on Form SB-2.
3. LIQUIDITY AND CONTINUING OPERATIONS:
------------------------------------
COL International is in the development stage and has not incurred revenues
since inception. Furthermore, COL International was incorporated for the
primary purpose of acquiring Migration. Migration has operations in the
People's Republic of China ("PRC") and has incurred operating losses since
its inception. Migration's operations have been funded by its major
stockholder. As of March 31, 2001, COL International has limited funds and
is totally dependent upon its primary stockholder or Migration's major
stockholder for continued funding.
6
COL CHINA ONLINE INTERNATIONAL INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
PERIODS ENDED MARCH 31, 2001
The financial statements have been prepared on a going concern basis which
contemplates the realization of assets and liquidation of liabilities in
the ordinary course of business. Continuation of COL International as a
going concern is dependent upon the continued funding by COL
International's primary stockholder or Migration's major stockholder, the
successful merger with Migration or another operating company and,
ultimately achieving profitable operations. The financial statements do not
include any adjustments should COL International be unable to continue
operations as a going concern.
4. POTENTIAL MERGER WITH MIGRATION DEVELOPMENTS LIMITED:
-----------------------------------------------------
COL International has entered into an agreement to acquire Migration
through issuance of 40,200,000 shares of common stock. The acquisition is
contingent upon COL International's successful completion of its public
offering. As COL International has no substantive operations, all costs
associated with the merger are being expensed in operations. If the
acquisition is successfully completed, COL International will remain the
legal surviving entity and Migration will become a subsidiary. For
financial reporting purposes, however, Migration will be considered the
surviving financial reporting entity as its stockholders will have majority
ownership and control both management and the Board of Directors of the
combined company. Therefore, after the acquisition, financial statements
will reflect the operations of Migration as if Migration had acquired COL
International. No goodwill will be recorded in the acquisition. The major
stockholder of COL International also serves as an advisor to Migration.
5. PROPOSED PUBLIC OFFERING:
-------------------------
COL International has prepared a filing statement with the Securities and
Exchange Commission for the sale of a minimum of 1,500,000 and a maximum of
2,000,000 shares of common stock at $.05 per share. In connection with this
offering, COL International will register the 1,250,000 shares previously
issued in a private placement. This offering is expected to be
self-underwritten by COL International. The proceeds from the proposed
public offering will not be adequate to cover the costs of the offering.
Such excess costs are currently being partially funded by Migration's
majority stockholder.
7
Item 2. Management's Discussion And Analysis Of Financial Condition And Results
Of Operations
The following is a discussion and comparison of the financial condition and
results of operations of COL International as of March 31, 2001 and the periods
then ended. These discussions should be read in conjunction with our financial
statements, the notes to the financial statements, and the other financial data
included elsewhere in Form SB-2.
This quarterly report on Form 10-QSB includes statements that are not purely
historical and are "forward-looking statements" within the meaning of Section
37A of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. Forward-looking statements involve risks and
uncertainties that could cause actual results to differ from projected results.
COL CHINA ONLINE INTERNATIONAL INC.
COL International is a development stage company incorporated on February 22,
2000. Its sole purpose is to acquire Migration through an exchange of shares. To
date, COL International has raised limited capital from its founders and in a
private offering of securities. COL International has also coordinated a public
offering and the exchange of shares with Migration. COL International has
recognized no revenues, nor is it expected to in the future, until it acquires
Migration. COL International's expenses have been related primarily to
professional fees incurred in connection with the planned exchange of shares
between the companies. After the proposed public offering and exchange of
shares, Migration will own approximately 80 percent of COL International.
The ability of COL International to continue operations as a going concern is
dependent upon the successful completion of the exchange with Migration and the
continued support from COL International's principal stockholder and/or
Migration's majority stockholder until the acquisition occurs. The proceeds from
the public offering will not be adequate to cover the costs of the offering.
After the acquisition, the continuation of the combined entity will be dependent
upon the continued support of Migration's majority stockholder, until such time
as, when or if, the combined entity achieves positive cash flows from operations
or additional funds are raised in future private and public offerings.
Liquidity and Capital Resources
COL International has negative working capital as of March 31, 2001 of
approximately ($105,500). As of the date of this filing, $185,000 has been
advanced by Migration's majority stockholder to COL International. As COL
International is expected to continue to operate on a negative cash flow basis
for at least the near term, the entity will continue to be dependent upon
Migration's majority stockholder for continued financial support. COL
International intends to raise additional funds through public or private
offerings in the future; however, there is no assurance COL International will
be successful in these endeavors.
For the nine months ended March 31, 2001, cash used in operations was $193,249,
which was comprised principally of a net loss of $195,328 offset by an increase
in deferred offering costs and accounts payable. COL International had no cash
flows from investing activities. For this same period cash flows from financing
activities was $185,000. This is comprised of advances from Migration's majority
stockholder of $185,000 through March 31, 2001. These amounts are without
interest or collateral and repayable only out of 20 percent of future pre-tax
net profits or convertible into common stock of COL International at the greater
of $1.20 or 90 percent of the market price of COL International's common stock.
Advances made after the effective date of the registration statement, which are
$40,000, may be convertible at $1.20 per share or 110 percent of the weighted
average trading price for twenty days preceding the date of notice of conversion
of COL International common stock.
8
For the period from inception on February 22, 2000 to March 31, 2001, cash used
in operations was $240,646, which was comprised principally of a cumulative net
loss of $364,664 offset by expenses paid directly by the principal stockholder
of $89,343, an increase in deferred offering costs, accounts receivable and
accounts payable. COL International had no cash flows from investing activities.
For this same period cash flows from financing activities was $244,747. This is
comprised of advances from Migration's majority stockholder of $185,000 and
proceeds from the issuance of common stock, net of offering costs of $59,747.
Statement of Operations for the Periods Ended March 31, 2001
The financial statements reflect the operations of COL International from its
inception on February 22, 2000 to March 31, 2001 including certain costs, which
were incurred and paid to third parties prior to incorporation of COL
International by COL International's primary stockholder. COL International's
total expenses and related net loss relate primarily to professional fees paid
to attorneys and accountants in connection with the proposed public offering and
acquisition of Migration. Of this amount approximately $61,000, $160,000 and
$160,000 for the three months, nine months and cumulative from inception to
March 31, 2001, respectively, relate to public offering costs. These costs are
being expensed as COL International has deferred $75,000 of offering costs as of
March 31, 2001, which is the minimum amount expected to be received from the
public offering. Costs in excess of this amount will be expenses in operations
as incurred.
The balance of general and administrative costs of approximately $7,000 and
$36,000 for the three and nine months ended March 31, 2001, respectively,
represent general expenses of operating an office in Denver, Colorado. A
substantial portion of the remaining costs included in the $206,000 of general
and administrative costs from inception to March 31, 2001, represent
professional fees associated with the merger with Migration.
After the acquisition, a substantial portion of costs paid to professionals,
including accountants and attorneys are not expected to be recurring as they
related to due diligence costs associated with the acquisition with Migration.
However, having foreign operations with public reporting obligations in the
United States subjects COL International to certain additional costs not
normally associated with a US public company with only US operations. These
costs are substantial and include, among other costs, travel and coordination
with foreign professionals. Therefore, COL International is unable to accurately
estimate the amount of costs, which will not be recurring.
PART II. OTHER INFORMATION
--------------------------
Item 6. Exhibits And Reports On Form 8-K
(a) Exhibits.
---------
None.
(b) Reports on Form 8-K.
--------------------
None.
9
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act Of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
COL CHINA ONLINE INTERNATIONAL INC.
Date: May 21, 2001 By: /s/ Mark K. Shaner
--------------------------------------
Mark K. Shaner
President
10