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, 2002.
____ 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 _______ 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, 2002, there were
12,906,000 common shares outstanding with a par value of $0.0004.
Transitional Small Business Disclosure Format (Check one):
Yes _______ No _______
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS AND EXHIBITS
The unaudited financial statements of the registrant for the three-month and six
month periods ended June 30, 2002 and June 30, 2001, follow. 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.
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 V7Y 1C6
- --------------------------------------------------------------------------------
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
--------------------------------------
To the Directors and Shareholders of
Digital Village World Technologies, Inc.
(A Nevada Corporation)
(A Development Stage Company)
We have reviewed the accompanying Consolidated Balance Sheets of Digital Village
World Technologies, Inc. (A Nevada Corporation) (A Development Stage Company) as
of June 30, 2002 and June 30, 2001, and the Statements of Operations, Retained
Earnings, Cash Flows and Changes in Stockholders' Equity for the six month
periods then ended in accordance with Statements on Standards for Accounting and
Review Services issued by the America Institute of Public Accountants. All
information included in these financial statements is the representation of
Digital Village World Technologies, Inc.
A review consists principally of inquiries of company personnel and analytical
procedures applied to financial data. It is substantially less in scope than an
examination 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.
On the basis of our review, we are not aware of any material modifications that
should be made to the accompanying financial statements in order for them to be
in conformity with United States generally accepted accounting principles
(GAAP).
/s/ Moen and Company
Chartered Accountants
Vancouver, British Columbia, Canada
August 12, 2002
DIGITAL VILLAGE WORLD TECHNOLOGIES, INC.
(A Nevada Corporation)
(A Development Stage Company)
Consolidated Balance Sheets
June 30, 2002 and June 30, 2001
(In US Dollars)
(Unaudited)
2002 2001
-------------- --------------
Assets
Current Assets
Cash and cash equivalents (note 3) $ 4,520 $ 8,828
Accounts receivable (note 4) 7,879 11,706
Prepaid expenses and deposit - 5,107
-------------- --------------
12,399 25,641
-------------- --------------
Fixed Assets, at cost (note 2) 65,783 83,028
Less: accumulated depreciation (19,169) (12,613)
-------------- --------------
46,614 70,415
-------------- --------------
Investment and advance in Yuxun Digital
Hi-Tech Co. Ltd. (note 14) 56,774 -
-------------- --------------
Goodwill, at cost (note 5) 48,070 48,070
-------------- --------------
$ 163,857 $ 144,126
============== ==============
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable and accrued (note 6) $ 13,165 $ 8,289
Current portion of loan (note 8) - 6,811
-------------- --------------
13,165 15,100
-------------- --------------
Long-term Liabilities
Due to related parties (note 7) 347,341 174,934
Loan payable (note 8) - 6,811
-------------- --------------
347,341 181,745
-------------- --------------
Stockholders' Equity
Capital stock (note 9)
Authorized
62,500,000 common shares at $0.0004
par value
Issued
12,906,000 common shares - par value 5,162 5,162
Paid in capital in excess of par
value of stock 116,734 116,734
-------------- --------------
121,896 121,896
Deficit, accumulated during the development stage (318,745) (174,412)
Cumulative translation adjustment (note 2) 200 (203)
-------------- --------------
(196,649) (52,719)
-------------- --------------
$ 163,857 $ 144,126
============== ==============
Approved on behalf of the board:
/s/ Stephen E Dadson , Director
- -----------------------------------
/s/ Richard Wang , Director
- -----------------------------------
See Accompanying Notes and Independent Accountants' Review Report
DIGITAL VILLAGE WORLD TECHNOLOGIES, 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,
----------------------- -----------------------
2002 2002 2001 2002 2001
---------- ---------- ---------- ---------- ----------
Revenue
Interest and other income $ 7,791 $ - $ - $ - $ 3,766
---------- ---------- ---------- ---------- ----------
Administration Costs
Advertising 712 - - - -
Bank charges and interest 2,116 18 290 68 810
Consulting 11,982 - - - 1,323
Depreciation 19,169 2,840 6,758 5,681 12,107
License, dues and insurance 3,302 - - 1,417 -
Office costs 9,278 851 927 2,832 4,105
Rentals and leases 37,647 5,933 8,362 10,923 14,411
Professional fees 81,007 15,212 800 17,080 24,476
Salary and benefits 56,991 - 9,798 1,428 36,255
Stock-based compensation 20,000 - - - 20,000
Telephone and utilities 19,355 1,530 1,995 2,862 13,819
Transfer agent and filing fees 20,248 (7,188) - (3,733) 5,911
Travel and promotion 39,019 5,273 7,817 11,530 21,872
Loss on disposition of fixed assets 5,710 - - - -
---------- ---------- ---------- ---------- ----------
326,536 24,469 36,747 50,088 155,089
---------- ---------- ---------- ---------- ----------
Net profit (loss) for the period $ (318,745) $ (24,469) $ (36,747) $ (50,088) $ (151,323)
========== ========== ========== ========== ==========
Basic and diluted profit (loss) per share $ (0.00) $ (0.00) $ (0.00) $ (0.01)
========== ========== ========== ==========
Weighted average number of
common shares used to
compute basic and fully
diluted loss per share 12,906,000 12,902,366 12,906,000 12,888,666
========== ========== ========== ==========
See Accompanying Notes and Independent Accountants' Review Report
DIGITAL VILLAGE WORLD TECHNOLOGIES, INC.
(A Nevada Corporation)
(A Development Stage Company)
Consolidated Statements of Retained Earnings (Deficit)
(In US Dollars)
(Unaudited)
Cumulative From
Inception Date Six Months
of Sep. 15, 1998 Quarter Ended Ended
to June 30, June 30, June 30,
----------------------- -----------------------
2002 2002 2001 2002 2001
---------- ---------- ---------- ---------- ----------
Retained earnings (deficit),
beginning of period $ - $ (294,276) $ (137,665) $ (268,657) $ (23,089)
Net profit (loss) for the period (318,745) (24,469) (36,747) (50,088) (151,323)
---------- ---------- ---------- ---------- ----------
Retained earnings (deficit),
end of period $ (318,745) $ (318,745) $ (174,412) $ (318,745) $ (174,412)
========== ========== ========== ========== ==========
See Accompanying Notes and Independent Accountants' Review Report
DIGITAL VILLAGE WORLD TECHNOLOGIES, 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,
----------------------- -----------------------
2002 2002 2001 2002 2001
---------- ---------- ---------- ---------- ----------
Cash derived from (used for)
Operating activities
Net profit (loss) for the period $ (318,745) $ (24,469) $ (36,747) $ (50,088) $ (151,323)
Items not requiring use of cash
Depreciation 19,169 2,840 6,758 5,681 12,107
Cumulative translation adjustment 200 (198) 149 20 265
Changes in non-cash
working capital items
Accounts receivable (7,879) (813) - (3,006) (1,386)
Prepaid expenses and deposit - - - - (5,107)
Accounts payable and accrued 13,165 (15,534) (7,071) (35,359) (11,390)
---------- ---------- ---------- ---------- ----------
(294,090) (38,174) (36,911) (82,752) (156,834)
---------- ---------- ---------- ---------- ----------
Financing activities
Issuance of shares 121,896 - 11,000 - 41,000
Loan payable - - (1,703) - (3,406)
Due to related parties 347,341 - 30,511 84,989 30,511
---------- ---------- ---------- ---------- ----------
469,237 - 39,808 84,989 68,105
---------- ---------- ---------- ---------- ----------
Investing activities
Capital assets purchased (65,783) - - - -
Investment and advance (56,774) - - - -
Goodwill (48,070) - - - -
---------- ---------- ---------- ---------- ----------
(170,627) - - - -
---------- ---------- ---------- ---------- ----------
Cash and cash equivalents, increase
(decrease) during the period 4,520 (38,174) 2,897 2,237 (88,729)
Cash and cash equivalents,
beginning of period - 42,694 5,931 2,283 97,557
---------- ---------- ---------- ---------- ----------
Cash and cash equivalents,
end of period $ 4,520 $ 4,520 $ 8,828 $ 4,520 $ 8,828
========== ========== ========== ========== ==========
See Accompanying Notes and Independent Accountants' Review Report
DIGITAL VILLAGE WORLD TECHNOLOGIES, INC.
(A Nevada Corporation)
(A Development Stage Company)
Statement of Changes in Stockholders' Equity
From Date of Inception on September 15, 1998 to June 30, 2002
(In US Dollars)
(Unaudited)
Deficit Accum-
Number of Additional Total ulated During Total
Common par Paid-in Capital The Develop- Cumulative Stockholders'
Shares Value Capital Stock ment Stage Translation Equity
----------------------------------------------------------------------------------------
9/15/98 issuance of common
stock for cash 1,000,000 $1,000 $ 1,500 $ 2,500 $ - $ - $ 2,500
12/31/98 issuance of common
stock for cash 750,000 750 74,250 75,000 - - 75,000
Net loss for the year ended
December 31, 1998 - - - - (737) - (737)
----------------------------------------------------------------------------------------
Balance, December 31, 1998 1,750,000 1,750 75,750 77,500 (737) - 76,763
Net loss for the year ended
December 31, 1999 - - - - (12,534) - (12,534)
----------------------------------------------------------------------------------------
Balance, December 31, 1999 1,750,000 1,750 75,750 77,500 (13,271) - 64,229
Balance, May 19, 2000
before forward split 1,750,000 1,750 75,750 77,500 (13,271) - 64,229
========================================================================================
05/19/00 2.5 to 1 forward split 4,375,000 1,750 75,750 77,500 (13,271) - 64,229
12/18/00 share exchange 8,490,000 3,396 - 3,396 - - 3,396
Net loss for the year ended
December 31, 2000 - - - - (9,818) - (9,818)
Cumulative translation - - - - - (468) (468)
----------------------------------------------------------------------------------------
Balance, December 31, 2000 12,865,000 5,146 75,750 80,896 (23,089) (468) 57,339
2/7/01 issuance of common
stock for cash 10,000 4 9,996 10,000 - - 10,000
3/30/01 issuance of common
stock for compensation 20,000 8 19,992 20,000 - - 20,000
4/6/01 issuance of common
stock for cash 11,000 4 10,996 11,000 - - 11,000
Net loss for year ended
December 31, 2001 - - - - (245,568) - (245,568)
Cumulative translation - - - - - 648 648
----------------------------------------------------------------------------------------
Balance, December 31, 2001 12,906,000 5,162 116,734 121,896 (268,657) 180 (146,581)
Net loss for six months ended
June 30, 2002 - - - - (50,088) - (50,088)
Cumulative translation - - - - - 20 20
----------------------------------------------------------------------------------------
Balance, June 30, 2002 12,906,000 $5,162 $116,734 $121,896 $(318,745) $ 200 $(196,649)
========================================================================================
See Accompanying Notes and Independent Accountants' Review Report
DIGITAL VILLAGE WORLD TECHNOLOGIES, INC.
(A Nevada Corporation)
(A Development Stage Company)
Notes to Consolidated Financial Statements
June 30, 2002
(In US 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 each par value.
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)
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
=============
DIGITAL VILLAGE WORLD TECHNOLOGIES, INC.
(A Nevada Corporation)
(A Development Stage Company)
Notes to Consolidated Financial Statements
June 30, 2002
(In US Dollars)
(Unaudited)
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
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".
DIGITAL VILLAGE WORLD TECHNOLOGIES, INC.
(A Nevada Corporation)
(A Development Stage Company)
Notes to Consolidated Financial Statements
June 30, 2002
(In US Dollars)
(Unaudited)
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 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.
DIGITAL VILLAGE WORLD TECHNOLOGIES, INC.
(A Nevada Corporation)
(A Development Stage Company)
Notes to Consolidated Financial Statements
June 30, 2002
(In US Dollars)
(Unaudited)
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 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
Vehicles - 30% per annum on the declining balance basis
Computer equipment - 30% per annum on the declining balance basis
As at June 30, 2002, the fixed assets and accumulated depreciation are
as follows:
Accumulated Net Book
At Cost Depreciation Value
-----------------------------------
12/31/01 6/30/01 6/30/02 6/30/02 6/30/02
---------- ---------- ---------- ---------- ----------
Office equipment $ 5,430 $ 5,430 $ 5,430 $ 6,064 $ (634)
Vehicles 11,105 28,350 11,105 (2,055) 13,160
Computer equipment 49,248 49,248 49,248 15,160 34,088
---------- ---------- ---------- ---------- ----------
$ 65,783 $ 83,028 $ 65,783 $ 19,169 $ 46,614
========== ========== ========== ========== ==========
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 in these financial
statements.
DIGITAL VILLAGE WORLD TECHNOLOGIES, INC.
(A Nevada Corporation)
(A Development Stage Company)
Notes to Consolidated Financial Statements
June 30, 2002
(In US Dollars)
(Unaudited)
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.
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,
----------------------------
2002 2001
------------- -------------
Beginning balance $ 180 $ (468)
Change during the period 20 265
------------- -------------
Ending balance $ 200 $ (203)
============= =============
The effect of exchange rate changes on cash balances forms part of the
reconciliation of change in cash and cash equivalents during the
period.
DIGITAL VILLAGE WORLD TECHNOLOGIES, INC.
(A Nevada Corporation)
(A Development Stage Company)
Notes to Consolidated Financial Statements
June 30, 2002
(In US Dollars)
(Unaudited)
Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)
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. When the Company has revenue, the
Company will perform a review of its revenue recognition policies and
determine that it is in compliance with SAB 101.
Note 3. CASH AND CASH EQUIVALENTS - $4,520
The total for cash and cash equivalents as at June 30, 2002, is made
up as follows:
Cash in bank current accounts $ 2,675
Cash in lawyer's trust account 1,845
------------
Total $ 4,520
============
Note 4. ACCOUNTS RECEIVABLE - $7,879
The accounts receivable balance of $7,879 as at June 30, 2002 is
Canadian Goods and Services Taxes refundable. $4,732 was subsequently
received on August 9, 2002.
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 will evaluated at each reporting
period. Management has determined that there is no impairment in the
value of this goodwill below its cost.
Note 6. ACCOUNTS PAYABLE - $13,165
Details of the total of accounts payable and accrued as at June 30,
2002, are as follows:
Frascona, Joiner, Goodman and Greenstein, P.C. $ 2,323
Moen and Company 4,862
Loeb & Loeb LLP 756
Resident Agents of Nevada, Inc. 197
RR Donnelley Receivables, Inc. 5,027
------------
Total $ 13,165
============
DIGITAL VILLAGE WORLD TECHNOLOGIES, INC.
(A Nevada Corporation)
(A Development Stage Company)
Notes to Consolidated Financial Statements
June 30, 2002
(In US Dollars)
(Unaudited)
Note 7. RELATED PARTY TRANSACTIONS - $347,341
The amount of $144,423 is due to a related party, Tianjin Teda Yu
Cheng Group. The amount of $202,918 is due to Directors of the Company
as at June 30, 2002 for loans that they have advanced to the Company.
These amounts are unsecured, non interest bearing, with no specific
terms of repayment, but in any event no earlier than June 30, 2003,
and accordingly are classified as long-term liabilities. The
comparative amount was previously disclosed as a current liability at
June 30, 2001, and is restated in these financial statements.
Note 8. LEASE OBLIGATIONS
a) Vehicle Lease
On January 19, 2000, DVC entered into a 36 month lease with
Lansdowne Dodge City Ltd. for a vehicle to be used by the
Company. Lease payments are expensed as they are incurred. Lease
obligations are as follows:
2002 CAD$ 4,000
2003 CAD$ 667
b) Lease of Premises
DVC has lease obligations for office premises for the next 12
months for CAD$25,369.
Note 9. 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, 2002, are as
follows:
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 6/30/02 12,906,000 $ 5,162 $ 116,734 $ 121,896
========== ========== ========== ==========
DIGITAL VILLAGE WORLD TECHNOLOGIES, INC.
(A Nevada Corporation)
(A Development Stage Company)
Notes to Consolidated Financial Statements
June 30, 2002
(In US Dollars)
(Unaudited)
Note 10. 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.
b) There is a loss of $318,745 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 11. FINANCIAL INSTUMENTS
The Company's financial instruments consist of cash and cash
equivalents, accounts receivable, accounts payable and accrued and due
to related parties. 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.
Note 12. PENSION AND EMPLOYMENT LIABILITIES
The Company does not have liabilities as at June 30, 2002, for
pension, post-employment benefits or post-retirement benefits. The
Company does not have a pension plan.
Note 13. 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 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);
DIGITAL VILLAGE WORLD TECHNOLOGIES, INC.
(A Nevada Corporation)
(A Development Stage Company)
Notes to Consolidated Financial Statements
June 30, 2002
(In US Dollars)
(Unaudited)
Note 13. PROFIT SHARING AGREEMENT (cont'd)
(iii) The 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 Business and to raise
working capital for the Business in accordance with this
agreement.
(b) Management of New Business / Working Capital
(i) YU Cheung hereby appoints DVC to be its manager to
manage the affairs of the 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 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 Business. )
(ii) Net Profits will be defined according to GAAP as
determined by the auditor of the Business, approved by
DVC.
(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 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 Business as addition to a loan account
owed to that party by the 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 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
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.
DIGITAL VILLAGE WORLD TECHNOLOGIES, INC.
(A Nevada Corporation)
(A Development Stage Company)
Notes to Consolidated Financial Statements
June 30, 2002
(In US Dollars)
(Unaudited)
Note 13. 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 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 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.
DIGITAL VILLAGE WORLD TECHNOLOGIES, INC.
(A Nevada Corporation)
(A Development Stage Company)
Notes to Consolidated Financial Statements
June 30, 2002
(In US Dollars)
(Unaudited)
Note 13. 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 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.
Mr. Edward Chen, who resigned on May 15, 2002 as Director of the
Company has paid $56,774 (480,000 Chinese Yuan) to Yuxun on behalf of
the Company. This amount was recorded as an investment and advance to
Yuxun Digital Hi-Tech Co. Ltd. and as a loan from related parties.
DIGITAL VILLAGE WORLD TECHNOLOGIES, INC.
(A Nevada Corporation)
(A Development Stage Company)
Notes to Consolidated Financial Statements
June 30, 2002
(In US Dollars)
(Unaudited)
Note 13. PROFIT SHARING AGREEMENT (cont'd)
The abovementioned joint venture has not been formed as yet due to
inability of DVC to raise the $500,000 in capital as at June 30,
2002. This deal is being renegotiated.
Note 14. 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 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.
DIGITAL VILLAGE WORLD TECHNOLOGIES, INC.
(A Nevada Corporation)
(A Development Stage Company)
Notes to Consolidated Financial Statements
June 30, 2002
(In US Dollars)
(Unaudited)
Note 15. PROPOSED DEBT FINANCING
The Company has, in January, 2002 entered into negotiations with a
group of seven company shareholders for loans totaling in the
aggregate $300,000 US, non-interest bearing, for a term of twenty-four
months, secured by promissory notes to be issued to each lender for
the specific amounts borrowed by the Company.
To June 30, 2002, $96,000 US has been advanced to the Company and is
included in amounts advanced by related parties (see note 7).
Note 16. PROPOSED ACQUISITION/PROPOSED CHANGE OF CONTROL
Subsequent to June 30, 2002, the Company entered into an Asset
Purchase Agreement ( the "Agreement") with Beijing Super Energy Yu
Heng Technology Developments Co. Ltd. ("Super Energy"). Pursuant to
the Agreement, the Company would acquire all of the assets of Super
Energy Yu Hen Co. Ltd, a 100% owned subsidiary of Super Energy in
exchange for 12,000,000 shares of the Company, representing
approximately 48.18 percent of the outstanding shares of the Company.
Closing of the Agreement would result in a change in control of the
Company. As of the date of this filing, the Agreement had not been
closed.
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 and six month periods ended June 30,
2002 and June 30, 2001 and the Annual Report Form 10KSB filed by the Company on
April 8, 2002 for the 2001 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 and six month periods ended June
30, 2002 and June 30, 2001.
The Company is a development stage company and, through its wholly owned Chinese
foreign enterprise Tianjin Navada Digital World Technologies Co. Ltd. ("WOFE"),
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 on the percentage of capital actually contributed.
The original PSA dated May 2000 was amended on May 31, 2001 and is currently
being re-negotiated.
Formal Chinese business operations have not as yet commenced. There was no
revenue for the quarter and also no revenue earned during the comparable quarter
in 2001. 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 $24,469 as compared to
$36,747 for the comparable period in 2001. The 2002 figure included a $2,840
provision for depreciation. As a result, for the quarter ended June 30, 2002,
the Company had a net loss of $24,469, as compared to a loss of $36,747 for the
same quarter of 2001.
General and administrative expenses were $24,469 for the three-month period
ended June 30, 2002 versus $36,747 for the corresponding period in 2001. The
expenses were primarily due to operating costs of DV-Canada which included
expenditures of $5,933 for rental expenses, $1,530 in telephone and utilities
costs, a credit balance for transfer agent fees of <$7,188>, and $5,273 for
travel and promotion. Professional fees for the quarter were $15,212 as against
$800 during the 2001 quarter. The 2001 comparative quarterly period reflected
costs of $8,362 for rental expenses, $1,995 for telephone and utility costs, nil
for transfer agent costs, and $7,817 for travel and promotion. Salaries and
benefits expenses were nil for the period ended June 30, 2002 against $9,798 in
the corresponding period in 2001.
During the six-month period ended June 30, 2002, expenses totaled $50,088 which
included $10,923 for rental expenses, $2,862 in telephone and utilities costs,
an overall credit amount of <$3,733> for transfer agent costs and $11,530 for
travel and promotion. The 2001 comparative six-month period reflected costs of
$14,411 for rental expenses, $13,819 in telephone and utilities costs, $5,911
for transfer agent fees and $21,872 for travel and promotion. Salaries and
benefits were $1,428 for the six-month period ended June 30, 2002 against
$36,258 in the comparable period in 2001. Professional fees for the 2002
six-month period totaled $17,080 as against $24,476 in the 2001 comparative
period. Revenues for the six-month period ended June 30, 2002 were nil as
compared to $3,766 during the comparable six-month period in 2001.
For the remainder of the current fiscal year, the Company expects to incur a
loss as a result of expenses associated with compliance with the reporting
requirements of the Securities Exchange Act of 1934 and costs related to launch
of Chinese operations. During the balance of the 2002 fiscal year, the Company
expects to launch its Chinese operations coincident with the closing of a
significant equity financing.
Liquidity and Capital Resources
The cash balance at the end of the period was $4,520 compared to $8,828 at June
30, 2001. Accounts receivable at June 30, 2002 were $7,879 and there were no
pre-paid expenses. Comparative figures for June 30, 2001 were $11,706 and
$5,107. For the three-month period ended June 30, 2002, the Company's
activities used cash and cash equivalents of $38,174 compared to a net increase
in cash of $2,897 in the comparable period for 2001. For the six-month period
ended June 30, 2002, the Company's activities increased cash by $2,237 compared
to a usage of $88,729 in the comparable period in 2001.
Working capital was <$766> as at June 30, 2002 versus $10,541 as at June 30,
2001.
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. 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
None for the period.
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
On July 23, 2002, the Company entered into an Asset Purchase Agreement (the
"Agreement") with Beijing Super Energy Yu Heng Technology Developments Co. Ltd.
("Super Energy"). Puruant to the Agreement, the Company would acquire all of the
assets of Super Energy Yu Hen Co. Ltd, a 100% owned subsidiary of Super Energy
in exchange for 12,000,000 shares of the Company, representing approximately
48.18 percent of the outstanding shares of the Company. Closing of the Agreement
would result in a change in control of the Company. As of the date of this
filing, the Agreement had not been closed.
During the quarter on May 15, 2002, Peng Chen, a director and Vice President of
the Company, resigned his positions for personal reasons.
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, 2002.
b. Filings on Form 8-K
- none -
Exhibit 99.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Digital Village World Technologies,
Inc. (the "Company") on Form 10-QSB for the period ending June 30, 2002, as
filed with the Securities and Exchange Commission on the date hereof (the
"Report'), I, Stephen Dadson, Chief Executive Officer of the Company, certify,
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and result of operations of the
Company.
/s/ Stephen Dadson
- -------------------------------------------
Stephen Dadson
Chief Executive Officer
August 12, 2002
Exhibit 99.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Digital Village World Technologies,
Inc. (the "Company") on Form 10-QSB for the period ending June 30, 2002, as
filed with the Securities and Exchange Commission on the date hereof (the
"Report'), I, Richard Wang, Chief Financial Officer of the Company, certify,
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and result of operations of the
Company.
/s/ Richard Wang
- -------------------------------------------
Richard Wang
Chief Financial Officer
August 12, 2002
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/ Yu Wen Cheng /s/ Richard Wang
- ------------------------------------- -------------------------------------
Yu Wen Cheng, President Richard Wang, Director
Date: August 14, 2002