UNITED STATES
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 Quarter Ended September 30, 2002
----------------------------------------
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from _________________ to _________________
Commission file number: 000-29915
---------------------------------
CHINA XIN NETWORK MEDIA CORPORATION
-----------------------------------
(Exact name of small business issuer as specified in its charter)
FLORIDA 65-0786722
- ------------------------------- --------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
3767 Thimens Blvd., Suite 226, Montreal, Quebec Canada H4R 1W4
--------------------------------------------------------------
(Address of principal executive offices)
Tel: (514)398-0515 Fax: (514) 398-9901
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(Issuer's telephone number)
APPLICABLE ONLY TO CORPORATE ISSUERS State the number of shares outstanding
Of each of the issuer's classes of common equity, as of the latest
Practicable date: 72,552,155 as of November 5, 2002.
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
TABLE OF CONTENTs
PART I-- FINANCIAL INFORMATION...........................................2
Item 1. Financial Statements..........................................2
Item 2. Plan of Operation.............................................3
PART II-- OTHER INFORMATION..............................................5
Item 1. Legal Proceedings.............................................5
Item 3. Defaults Upon Senior Securities...............................5
Item 4. Submission of Matters to a Vote of Security Holders...........5
Item 5. Other Information.............................................5
Item 6. Exhibits and Reports on Form 8-K..............................5
SIGNATURES............................................................5
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements.
At the end of this filing are attached the financial statements for China Xin
Network Media Corporation and subsidiary, for the period ending September 30,
2002,which are submitted in compliance with item 310 (b) of Regulation SB.
China Xin Network Media Corporation and Subsidiary
(A Development Stage Company)
Financial Statements
September 30,2002
Contents
Review Engagement Report F-1
Unaudited Consolidated Interim Balance Sheet F-2
Unaudited Consolidated Interim Statements of Operations and
Comprehensive Income (Loss) F-3
Unaudited Consolidated Interim Statement of Stockholders' Deficiency F-4
Unaudited Consolidated Interim Statement of Cash Flows F-5
Unaudited Consolidated Interim Notes to Financial Statements F-6-9
-2-
Item 2. Plan of Operation.
The Company
- -----------
CHINA XIN NETWORK MEDIA CORPORATION (the Company) is a Florida
registered company. The Company is a provider of financial, economic
and business information on the Peoples Republic of China. CXN
presently operates from its head office in Montreal through its wholly
owned Canadian subsidiary, China Xin Network (Canada) Inc.
The Company was incorporated on October 19, 2000, to acquire the
exclusive commercialisation rights to the most reliable and timely
financial, economic and business financial information on the People's
Republic of China, published by an agency of the People's Republic of
China, the China Economic Information Network(CEINet).
CXN is a development stage company, which means it is in the process of
developing and growing its business. The company has incurred losses since
its inception, and it anticipate that it will continue to incur losses in
the foreseeable future. CXN will be unable to continue as a going concern
if it is unable to earn sufficient revenues from its operations or raise
additional capital through debt or equity financings to meet its working
capital and joint venture capital contribution obligations. Management is
addressing this concern with a plan of equity and debt financing.
Operations
- ----------
CXN Media has drastically cut back on its operations. It presently operates
from its offices in Montreal. In collaboration with CEINet, content is managed
directly in Montreal. Management is presently in discussions on the future
collaboration with CEINet, with respect to content procurement and management.
Trips are planed for the month of November for meetings with CEINEt management
to review the current operations.
Capital Needs
- -------------
At the end of September 30, 2002, the company had Current liabilities of
$459,709 and approximately US$500 of Cash. Subsequent to the year end,
the President & CEO, Mr. George Lee provided an interest free loan CDN$10,000
to cover rent, telephone and other expenses related to keeping the
offices of CXN operational.
CXN will be unable to continue as a going concern if it is unable to earn
sufficient revenues from its operations or raise additional capital through
debt or equity financings to meet its working capital and joint venture
capital contribution obligations. Management is addressing this concern
with a plan of equity and debt financing or merger with another entity.
In the mean time it is expected that management will provide sufficient
cash interim loans or convertible loans to keep the operations open, until
more permanent solution is attained.
-3-
Product Research & Development
- ------------------------------
CXN does not plan to launch any new products or services until funding issues
are resolved.
It is still completing its due diligence review of it potential Panpac Media,
Smart Investor magazine, acquisition, expected to be completed by the end of
November.
Other Developments
- ------------------
Subsequent to the quarter ending On November 2, 2002, The Company signed
a letter of intent to acquire Benchmark Capital Consulting, Inc., a
consulting and merger and acquisition advisory firm located at 100 Wall Street,
New York, New York. Benchmark Capital Consulting, Inc. is a wholly owned
subsidiary of Benchmark Global Capital Group. A final agreement is subject
to due diligence by Benchmark and requires shareholder approval from both
companies. The Company is in the process of preparing proxy statements to be
sent out to its shareholders. This acquisition will result in Benchmark Global
Capital Group owning majority shares in the Company.
Staff
- -----
The company at the moment is operating with a basic staff of 4 persons
in the Montreal office. The personnel consists of 1 part-time IT support, the
Company's CFO, Mr. Rahman Khan, the President and CEO Mr. George Lee, and 1 part
time corporate support person.
The staffing situation will not increase until proper funding for the company is
established or a merger is completed.
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings.
Not Applicable
Item 2. Changes in Securities.
Not Applicable
Item 3. Defaults Upon Senior Securities
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders.
Not Applicable
Item 5. Other Information.
Not Applicable
-4-
Item 6. Exhibits and Reports on Form 8-K.
In the first quarter, the Company filed an 8-K on September 10, 2002,to announce
the resignation of Director and Chairman of the Company, Mr. Raymond Boisvert.
Subsequent to the end of the quarter 2 more seperate 8-K filings were made. On
November 5, 2002 an 8K was filed announcing the resignation of Mr. Jean-Francois
Amyot, as Director and CEO & Chairman. Mr. George Lee Assumed that post on
October 25, 2002.
The second filing was made on November 2, the anouncement was made to present
the contract and details of the binding letter of intent. It was also announced
in thet 8-K that Mr. David Dingwall resigned fromthe board of directors.
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.
CHINA XIN NETWORK MEDIA CORPORATION
Date: November 15, 2002 /s/ GEORGE LEE
----------------------
Mr. George Lee, President & CEO
-5-
China Xin Network Media Corporation
and Subsidiary
(A Development Stage Company)
Consolidated Interim Financial Statements
For the Period Ended September 30, 2002
and
Cumulative Period From October 19, 2000
(date of inception)
to September 30, 2002
China Xin Network Media Corporation and Subsidiary
(A Development Stage Company)
Financial Statements
September 30,2002
Contents
Review Engagement Report F-1
Unaudited Consolidated Interim Balance Sheet F-2
Unaudited Consolidated Interim Statements of Operations and
Comprehensive Income (Loss) F-3
Unaudited Consolidated Interim Statement of Stockholders' Deficiency F-4
Unaudited Consolidated Interim Statement of Cash Flows F-5
Unaudited Consolidated Interim Notes to Financial Statements F-6-9
REVIEW ENGAGEMENT REPORT
To the Shareholders of
China Xin Network Media Corporation and Subsidiary
(A Development Stage Company)
I have reviewed the consolidated interim balance
sheet of China Xin Network Media Corporation and
Subsidiary (a development stage company) as at
September 30, 2002 and the consolidated interim
statements of operations and comprehensive income
(loss) and cash flows for the period then ended
from October 19, 2000 (date of inception) to
September 30, 2002. My review was made in
accordance with generally accepted standards in the
Unites States of America for review engagements and
accordingly consisted primarily of enquiry,
analytical procedures and discussion related to
information supplied to me by the Company.
A review does not constitute an audit and
consequently I do not express an audit opinion on
these interim consolidated financial statements.
Based on my review, nothing has come to my
attention that causes me to believe that these
interim consolidated financial statements are not,
in all material respects, in accordance with
generally accepted accounting principles in the
United States of America.
/s/Franco La Posta
- ---------------
Chartered Accountant
Franco La Posta, CA
Montreal, Quebec, November 4, 2002
- F1 -
China Xin Network Media Corporation and Subsidiary
(A Development Stage Company)
Consolidated Interim Balance Sheet
As at September 30, 2002
(Unaudited)
Sep 30,2002
US$
-----------
Assets
Current
Cash $ 469
Accounts Receivable 2,269
Receivable use tax 16,498
Advances to officers 38,334
Prepaid expense 979
58,549
---------
Capital Assets (Note 2 (d) ) 122,257
---------
$ 180,806
Liabilities
Current
Due to officers and employees 27,667
Other short term loans 194,788
Accounts payable $ 237,254
---------
459,709
---------
Loans Payable (Note 6) 643,892
Shareholders' Deficiency
Common stock - $.001 par value, 150,000,000 Shares
Authorized - Shares issued and outstanding-67,720,109 67,720
Paid-in capital deficency 356,137
Accumulated deficit during the development stage (1,346,652)
-----------
(922,795)
-----------
$ 180,806
See accompanying notes
Approved on Behalf of the Board:
//s GEORGE LEE Director
- -----------------------
GEORGE LEE
-F2-
China Xin Network Media Corporation and Subsidiary
(A Development Stage Company)
Consolidated Interim Statements of Operations and Comprehensive Income
(Loss)
(Unaudited)
From From Cumulative
July 1, 2002 July 1, 2001 period ended
to to October 19,2000
September 30,2002 September 30,2001 to September
30, 2002
US$ US$ US$
----------------- ----------------- ----------------
Income $ 451 $ - $ 35,067
Expenses
Selling,general
and admin.
expenses (105,856) (290,126) ( 1,381,719)
Loss before
Provision for
Income Taxes (105,405) (290,126) (1,346,652)
Provision for
Income Taxes - - -
Comprehensive
Net (Loss) (105,405) (290,126) (1,346,652)
========= ========= ===========
Basic:
Net loss $ (.00) $ (.00) (0.00)
Fully Diluted $ (.00) $ (.00) (0.00)
Weighted Avg
Number of
Common Shares
Outstanding 67,720,019 67,720,019 67,720,019
Fully Diluted
Weighted Aveg.
Number of
Common Shares
See accompanying
notes
76,552,155 76,552,155 76,552,155
- F3 -
China Xin Network Media Corporation and Subsidiary
(A Development Stage Company)
Consolidated Interim Statements of Stockholders' Deficiency
For the Period from October 19, 2000 to September 30, 2002
(Unaudited)
US$
Accumulated US$
US$ Deficit Accumulated US$
Additional during the other Stock US$
Common Stock US$ Paid-in Development Comprehensive Subscriptions Stockholders'
Shares Amount Capital Stage Income(Loss) Receivable Deficiency
$ $ $ $ $ $
---------- ----------- ----------- ----------- -------------- ------------ -----------
Balances at June 30,2002 56,877,109 56,877 297,013 (1,241,247) (887,357)
Loss for the period
ending September 30,
2002-11-06 (105,405) - - (105,405)
Issuance of Common
Stock in exchange
10,843,000 10,843 59,124 - - - 69,967
For debt.and services
67,720,109 67,720 356,137 (1,346,652) (922,795)
See accompanying notes
- F4 -
China Xin Network Media Corporation and Subsidiary
(A Development Stage Company)
Consolidated Interim Statements of Cash Flows
For the Period Ended
(Unaudited) From
From Cumulative
July 1, 2002 July 1, 2001 period ended
to to October 19, 2000
September 30, September 30, to
2002 2001 September 30,2002
US$ US$ US$
Cash Flows from Operating Activities
Net loss (105,405) (290,126) (1,348,417)
Adjustments to reconcile net loss to net
cash used for operating activities:
Depreciation 17,400 3,505 34,125
Increase in recoverable use tax (10,505) (14,609) (16,488)
Increase in accrued expenses (71,283) 79,943 237,254
Decrease in accrued expenses
- related parties 9,006 - 9,006
Decrease in accounts receivable 7,324 (4,303) 2,269
Decrease in prepaid and deposits 10,990 5,524 (979)
Increase in advances to officers (38,334) - (38,334)
Increase in amounts due to officers
and employees 27,667 - 27,667
Net cash used for operating activities (153,140) (220,066) (1,116,457)
--------- --------- -----------
Net Cash used for Operating Activities
Cash Flows from Investing Activities
Purchase of capital assets (58,134) (164,009)
-------- ---------
Net Cash used for Investing Activities
Cash Flows from Financing Activities
Write-off deficit to Paid-in-Capital 139,877
Write-off comprehensive income to Paid in Capital 10,807
Write-off stock subscription receivable 196,349
Increase in bank indebtedness (18,652) 1,297
Increase in short term loans 194,788 194,788
Decrease in loans-related party (37,247) (37,247)
Decrease in loans payable (35,298) 241,255 669,594
Increase in capital stock 10,843 58,437
Increase in paid-in capital 59,124 47,033
------- ------- ---------
173,558 241,255 1,280,935
------- ------- ---------
Net Cash Provided by Financing Activities
Net(Decrease)Increase in Cash 20,418 (36,945) 469
Cash Beginning of Period (19,949)- 42,671 -
469 5,726 469
Supplemental disclosure of non-cash flow information:
Cash paid during the year for:
Interest $ - $ - $-
Income taxes - - -
$- $ - $-
See accompanying notes -F5-
China Xin Network Media Corporation and Subsidiary
(A Development Stage Company)
Notes to Consolidated Interim Financial Statements
As at September 30, 2002
(Unaudited)
1. Background and Organization
China Xin Network Media Corporation (the Company) is a Florida
registered company. The Company is a provider of financial, economic
and business information on China. CXN presently operates from its
operating company whose head office is located in Montreal . These
consolidated financial statements represents the transactions of its
wholly owned Canadian subsidiary, China Xin Network (Canada) Inc.
The Company was incorporated on October 19, 2000, to acquire the
exclusive commercialisation rights to the most reliable and timely
financial, economic and business financial information on China,
published by an agency of the People's Republic of China, the China
Economic Information Network (CEINet). On May 25, 2001, the Company
signed an exclusive agreement with CEINet.
Under the terms of the agreement, the Company will be the preferred
provider of financial, economic and business information on China.
Subscribers will depend on the Company's financial news, in-depth
research reports and market reviews, which will be written and edited
using the best available practices and quality control expected by
global audience.
CEINet has a equity interest in the Company and facilitates the
Company's translation and editorial functions.
2. Accounting Policies
a)Basis of Presentation
The Company is considered to be a development stage company as of
September 30, 2002 since planned principal operations have not yet
commenced.
b)Principles of Consolidation
The accompanying consolidated financial statements include the
accounts of the Company from October 19, 2000 and its wholly-owned
subsidiary, CXN from October 19, 2000 herein after referred to
together as the ("Companies") after elimination of any significant
intercompany transaction and accounts.
c)Cash and Cash Equivalent
The Company considers highly liquid investments with maturities of
three months or less at the time of purchase to be cash
equivalents.
- F6 -
China Xin Network Media Corporation and Subsidiary
(A Development Stage Company)
Notes to Consolidated Interim Financial Statements
As at September 30, 2002
(Unaudited)
2. Accounting Policies (Cont'd)
d)Furniture, Fixtures and Equipment
Furniture, fixtures and equipment are recorded at cost less
accumulated depreciation which is provided on the straight-line
basis over the estimated useful lives of the assets which range
between three and seven years. Expenditures for maintenance and
repairs are expensed as incurred.
e)Income Taxes
The Company accounts for income taxes in accordance with the
"liability method" of accounting for income taxes. Accordingly,
deferred tax assets and liabilities are determined based on the
difference between the financial statement and tax bases of assets
and liabilities, using enacted tax rates in effect for the year in
which the differences are expected to reverse. Current income
taxes are based on the respective periods' taxable income for
federal, state and foreign income tax reporting purposes. As at
September 30, 2002, these amounts were Nil.
f)Earnings per Share
Earnings per common share is computed pursuant to SFAS No. 128
"Earnings Per Share". Basic earnings per share is computed as net
income (loss) available to common shareholders divided by the
weighted average number of common shares outstanding for the
period. Diluted earnings per share reflects the potential dilution
that could occur from common shares issuable through stock options,
warrants and convertible preferred stock.
g)Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles in the United States of
America 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 date of the
financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ
from those estimates.
h)Fair Value Disclosure at September 30, 2002
The carrying value of recoverable use tax, accrued expenses -
related party, and loans from related party is a reasonable
estimate of their fair value.
i)Effect of New Accounting Standards
The Company does not believe that any recently issued accounting
standards, not yet adopted by the Company, will have a material
impact on its financial position and results of operations when
adopted.
During June 2001, SFAS No. 141, "Business Combinations" was issued.
This standard addresses financial accounting and reporting for
business combinations. All business combinations within the scope
of SFAS 141 are to be accounted for using one method - the purchase
method. Use of the pooling-of-interests method is prohibited. The
provisions of SFAS 141 apply to all business combinations initiated
after June 30, 2001. It also applies to all business combinations
accounted for using the purchase method for which the date of
acquisition is July 1, 2001 or later.
During June 2001, SFAS No. 142, "Goodwill" and Other Intangible
Assets" was issued. This standard addresses how intangible assets
that are acquired individually or with a group of other assets (but
not those acquired in a business combination) should be accounted
for in financial statements upon their acquisition. SFAS 142 also
addresses how goodwill and other intangibles assets should be
accounted for after they have been initially recognized in the
financial statements. The provision of SFAS 142 is effective for
fiscal years beginning after December 15, 2001.
- F7 -
China Xin Network Media Corporation and Subsidiary
(A Development Stage Company)
Notes to Consolidated Interim Financial Statements
As at September 30, 2002
(Unaudited)
3. Going Concern
The Company's financial statements are prepared using generally
accepted accounting principles applicable to a going concern which
contemplates the realization of assets and liquidation of liabilities
in the normal course of business. The Company has not established
revenues sufficient to cover its operating costs and allow it to
continue as a going concern. Until such time the company is raising
investment capital to cover its ongoing operating costs.
4. Provision for Income Tax
Income taxes are provided for the tax effects of transactions reported
in the financial statements and consist of taxes currently due plus
deferred taxes related to differences between the financial statement
and income tax bases of assets and liabilities for financial statement
and income tax reporting purposes. Deferred tax assets and
liabilities represent the future tax return consequences of these
temporary differences, which will either be taxable or deductible in
the year when the assets or liabilities are recovered or settled.
Accordingly, measurement of the deferred tax assets and liabilities
attributable to the book-tax basis differentials are computed by the
Company at a rate of approximately 34% for federal and 6% for state.
5. Commitments and Contingencies
a)Insurance
The Company maintains adequate property and general liability
insurance. At the date of the Balance Sheet, the Company is not
aware of any claims.
b)Rent
The Company leases office space under temporary lease expiring in
June 2003. Minimum monthly payments are approximately $1,100.
6. Loans Payable
These notes payable have been recorded as loans and contractually
carry an interest rate of prime plus 2%. These notes are convertible
at the option of the holder at a rate of $ 0.125 per common share
plus an equivalent number of warrants at an exercise price of $ 0.30.
As of the balance sheet date all the holders of these notes have opted
to convert their shares and the legal formalities pertaining to the
issuance of the remaining shares. Accordingly no interest has been
accrued on these notes in these financial statements.
Subsequent to June 30, 2002, the formalities relating to their
conversion to common shares have been initiated. Once these and other
shares have been issued the outstanding shares of the company will
stand at 76,552,155.
The loan agreement also gave the investors right to warrants to be
issued on a 1:1 ratio. The total warrants to be issued amount to
9,373,667 which are exercisable at US 0.30. As of the date of these
statements, these warrants have not been issued.
- F8 -
China Xin Network Media Corporation and Subsidiary
(A Development Stage Company)
Notes to Consolidated Interim Financial Statements
As at September 30, 2002
(Unaudited)
7. Subsequent Events
Significant Changes to Key Management and Share Capital
Management Changes
On September 9, 2002, in a move to restructure the Company, Mr.
Raymond Boisvert resigned from the Company as President and Director.
Based on the founders agreement Mr. Boisvert sold the 50% interest in
3884368 Canada Inc. for $ 1.00 to Mr. Jean-Francois Amyot. This
transfer resulted in Mr. Amyot becoming the beneficial owner of all
the founders shares amounting to 18,743,768
As part of the restructuring the Company, in order to harmonize and
better control both its costs and content, transferred its editorial
operations, previously carried out in Beijing, to its Montreal Head
Office.
In further developments, on October 25, 2002, Mr. Jean-Francois Amyot
the Company's Chairman and CEO, stepped down from management and Mr.
George Lee, became China Xin Network Media's overall Chairman and CEO.
Mr. Amyot transferred all his shares in 3884368 Canada Inc., to Mr.
Lee giving Mr. Lee the beneficial ownership of all the outstanding
shares of 3884368 Canada Inc. As of the date of this report, Mr. Lee
was also the sole Director of the Company, following the resignation
of Mr. David Dingwall from the Board on November 5, 2002.
Share Capital
As fully stated in Note 6, all necessary formalities relating to the
conversion of the loans to common shares have been initiated. Once
these and other shares have been issued the outstanding common shares
of the company will stand at 76,552,155. It is expected that the
formalities relating to the conversion of shares will be completed in
the coming weeks.
The loan agreement also gave the investors right to warrants to be
issued on a 1:1 ratio. The total warrants to be issued amount to
9,373,667 which are exercisable at US 0.30. As of the date of these
statements, these warrants have not been issued.
-F9-