-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, K/JYr87ZlMtJgioExN7f9RUVkMLzkmYk1oAiWVmDKaSFFSIhZGKP+Uwy+58JlCVw VCNaTbAvCgoVLdX7QDkg1w== 0000898430-01-501987.txt : 20010820 0000898430-01-501987.hdr.sgml : 20010820 ACCESSION NUMBER: 0000898430-01-501987 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010630 FILED AS OF DATE: 20010817 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DIGITAL VILLAGE WORLD TECHNOLOGIES INC CENTRAL INDEX KEY: 0001115911 STANDARD INDUSTRIAL CLASSIFICATION: BLANK CHECKS [6770] IRS NUMBER: 88040114 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-30851 FILM NUMBER: 1717424 BUSINESS ADDRESS: STREET 1: LOEB & LOEB LLP STREET 2: 10100 SANTA MONICA BLVD SUITE 2200 CITY: LOS ANGELES STATE: CA ZIP: 90067-4164 BUSINESS PHONE: 3034943000 MAIL ADDRESS: STREET 1: LOEB & LOEB LLP STREET 2: 10100 SANTA MONICA BLVD SUITE 2200 CITY: LOS ANGELES STATE: CA ZIP: 90067-4164 10QSB 1 d10qsb.txt FORM 10QSB U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-QSB (Mark One) X Quarterly report under section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended June 30, 2001. _____ Transaction report under section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from ________ to __________. Commission File No.: 0-30851 DIGITAL VILLAGE WORLD TECHNOLOGIES, INC. (Name of small business in its charter) Nevada 88-0404114 (State or other Jurisdiction of Incorporation) (IRS Employer Id. No.) Unit 10, 8980 Fraserwood Court Burnaby, British Columbia Canada V5J 5H7 (Address of Principal Office) Issuer's telephone number: (604) 438-3598 Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ______ ------- State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date. At June 30, 2001, there were 12,906,000 common shares outstanding with a par value of $0.0004. Transitional Small Business Disclosure Format (Check one): Yes _______ No X ------- PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS AND EXHIBITS The unaudited financial statements of the registrant for the three-month periods ended June 30, 2001 and June 30, 2000 are set forth at the end of this Form 10-QSB. The financial statements reflect all adjustments which are, in the opinion of management, necessary so as to ensure a fair statement of the results for the interim period presented. -insert financials- ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION The following discussion should be read in conjunction with the accompanying financial statements for the three-month periods ended June 30, 2001 and June 30, 2000 and the Annual Report Form 10-KSB for the fiscal year ended December 31, 2001 filed by the Company on April 17, 2001 for the 2000 fiscal year. Special Note Regarding Forward-Looking Statements - Certain statements in this report and elsewhere (such as in other filings by the Company with the Securities and Exchange Commission, press releases, presentations by the Company or its management and oral statements) may constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as "expects", "anticipates", "intends", "plans", "believes", "seeks", "estimates", and "should" and variations of these words and similar expressions, are intended to identify these forward-looking statements. The Company undertakes no obligation to publicly release the result of any revisions to these forward-looking statements, which may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. Results of operations - comparison of the three month periods ended June 30, 2001 and June 30, 2000. The Company is a development stage company and, through its wholly owned Chinese foreign enterprise Tianjin Navada Digital World Technologies Co. Ltd., will manage the operations of a Chinese domestic enterprise, CNTime Group, pursuant to the terms of a profit sharing agreement ("PSA") which provides for the Company to receive 80% of the profits from the operations of the Chinese venture with the Company required to provide certain agreed upon capital. In the event that the Company is unable to (i) provide the required capital or (ii) obtain an extension for providing the capital, the profit allocation under the PSA will be adjusted based 2 on the percentage of capital actually contributed. The original PSA dated May 2000 was amended on May 31, 2001 - details of which are included in ITEM 5 of this Form 10QSB. Formal operations have not as yet commenced. There was no revenue for the current quarter compared to $753 in interest income earned during the corresponding period in 2000. Expenses during the quarter, which included costs of operations of Digital Village World Technologies (Canada) Inc. ("DV-Canada"), which was acquired by the Company on December 18, 2000, were $26,949 as compared to $21,842 for the corresponding period in 2000. The 2001 figure included a $6,758 provision for depreciation. As a result, for the quarter ended June 30, 2001, the Company had a net loss of $36,747, as compared to a loss of $21,089 for the same quarter of 2000. General and administrative expenses were $20,191 for the three-month period ended June 30, 2001 compared to $21,842 for the corresponding period in 2000. The expenses were primarily due to operating costs of DV-Canada which included expenditures of $8,362 for rental expenses, $1,995 in telephone and utilities costs and $7,817 for travel and promotion. The three-month period ended June 30, 2000 included a cost of $20,000 for consulting in respect to preparation of the corporate business plan. Salaries and benefits expenses were $9,798 for the period ended June 30, 2001 compared to an insignificant amount in the corresponding period in 2000. The Company expects to continue to incur a loss as a result of the expenses associated with the reporting requirements of the Securities Exchange Act of 1934, costs related to launch of Chinese operations and continuation of the Canadian business. Results of operations - comparison of the six-month period ended June 30, 2001 and June 30, 2000. For the six-month period ended June 30, 2001, revenues were $3,766 as compared to $1,508 for the corresponding period in 2000. Total expenses were $155,089, including a $12,107 provision for depreciation and $20,000 in stock-based compensation. By comparison, during the six-month period ended June 30, 2000, expenses were $23,185 which included a $20,000 expenditure for consulting in respect to preparation of the corporate business plan. Liquidity and Capital Resources The cash balance for the period June 30, 2001 was $8,858 compared to $43,102 at June 30, 2000. This decrease was primarily due to increases in operating expenditures related to DV-Canada after its acquisition in December 2000. For the period ended June 30, 2001, the Company's operating activities used net cash of $36,747 compared to $21,089 in the comparable period in 2000. The Company's financing activities during the period provided net cash of $11,000 which consisted of a private placement of 11,000 shares of common stock at a price of $1.00 per share. 3 Working capital was *$164,393** as at June 30, 2001 compared to $42,552 as at June 30, 2000. The decrease in working capital includes indebtedness of $174,934 due to related parties. The Company has historically relied upon sales of its common stock, debt instruments and loans from related parties to finance its operations. Additional financing will be required to meet its obligations under the Profit Sharing Agreement and for current and long-term development, marketing, and working capital. In July 2001, the Company announced a financing subscription totaling $12,000,000 from two Chinese corporate investors. There can be no assurances that such financing will actually close. To the extent of any shortfall in financing, the Company's operations will be delayed, curtailed or prevented, and the Company may be required to suspend or substantially modify its operations. There were no income taxes incurred for the reporting period. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The Company is not a party to any pending or to the best of its knowledge, any threatened legal proceedings. No director, officer or affiliate of the Company, or owner of record or of more than five percent (5%) of the securities of the Company, or any associate of any such director, officer or security holder is a party adverse to the Company or has a material interest adverse to the Company in reference to pending litigation. ITEM 2. SALE OF UNREGISTERED SECURITIES In April 2001, the Company issued 11,000 restricted shares of its common shares in a Private Placement pursuant to an exemption provided by Regulation S of the Securities Act of 1933, as amended. ITEM 3. DEFAULTS UPON SENIOR SECURITIES Not Applicable. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS During the reporting period, no matters were submitted to a vote of security holders. ITEM 5. OTHER INFORMATION 1. On June 7, 2001, the Company signed an Amended Profit Sharing Agreement ("APSA") with Tianjin Teda Yu Cheng Group Co. Ltd. ("Yu Cheng"). Details of the original PSA signed on May 1, 2000 have been disclosed in previous filings. * Less than ** More than 4 Key specific details of the APSA which differ from the May 1, 2000 document are as follows: a. The original PSA, which was entered into by the Company's Canadian subsidiary and Yu Cheng, called for the formation of a Chinese domestic joint venture between Yu Cheng's subsidiary Yu Xun Digital Hi-Tech Co. Ltd. (Yu Xun) and a China Telecom subsidiary, Tianjin Chuang Xian Information Development Co. Ltd. (Chuang Xian), the purpose of which was to undertake two businesses, (i) an education provider (Edubiz) and (ii) an IT system service provider. The parties have elected to separate the said businesses whereby Yu Xun will, with the Company, undertake the Edubiz and Chuang Xian will undertake the IT business on its own. b. The parties agreed that semi-annually net profits will be calculated and 20% thereof, or such other amount as agreed to by the parties, shall be retained by Yu Xun as working capital and that the balance returned to the parties on a 80/20 basis, at each party's option, that is to say either party may choose to leave their portion of the net profits in the Edubiz as an addition to their loan account with Yu Xun. c. The Company will provide management and capital through its wholly owned foreign enterprise, Tianjin Navada Digital World Technologies Co. Ltd. d. The Company will provide capital of not less than $250,000 US (Capital) contributed over 12 months or as otherwise agreed to by the parties. In the event that the Capital is not raised within the said 12 months, the profit allocation percentage shall be adjusted based on the percentage of the $250,000 actually raised by the Company. The Company issued a press release on June 18, 2001, announcing the signing of the amended profit sharing agreement. 2. On July 16, 2001, the Company signed an Offshore Securities Subscription Agreements with two Chinese corporations - Tianjin Global Magnetic Card Co. Ltd. ("TGM") and Tianjin Teda Yu Cheng Group Co. Ltd. ("Yu Cheng"), the Company's controlling shareholder, for 10,000,000 common shares and 2,000,000 common shares respectively, all at a price of $1.00 each. TGM is one of the largest credit and smart card manufacturers in the Asia-Pacific Region. It was the first card manufacturer in China to be accredited by MasterCard International and Visa International and is the only company in its field in China that trades publicly which it has done since 1993 through the Shanghai Exchange. TGM produces magnetic and smart cards and related integration and application systems for domestic and foreign markets. 5 TGM is also one of the National Mints for the People's Republic of China printing financial documents and packaging products. TGM is rapidly expanding its involvement with applications and uses of next generation smart cards throughout China. These initiatives require leading edge technology as well as access to a broader range of capital markets to develop them. To meet these needs, TGM is investing in firms like the Company and its new business unit, Digital Village RF Superconductor Technology Inc., which is developing micro super conducting devices. The Company issued a news release on July 12, 2001 announcing the receipt of the two signed subscription agreements. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a. (i) The following is a list of exhibits filed as part of this quarterly filing on Form 10QSB. - Financial statements for the period ended June 30, 2001. b. Filings on Form 8-K - None - SIGNATURES In accordance with the requirements of the Exchange Act, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. DIGITAL VILLAGE WORLD TECHNOLOGIES INC. /s/ Richard Wang --------------------------------------- Richard Wang, President Date: August 15, 2001 6 MOEN AND COMPANY CHARTERED ACCOUNTANTS PO Box 10129 1400 IBM Tower Telephone: (604)662-8899 701 West Georgia Street Fax: (604)662-8809 Vancouver, BC, Canada, V7Y 1C6 - -------------------------------------------------------------------------------- INDEPENDENT ACCOUNTANTS' REVIEW REPORT -------------------------------------- Board of Directors and Stockholders Digital Village World Technologies, Inc. (formerly Body Concepts, Corp.) (A Nevada Corporation) (A Development Stage Company) We have reviewed the accompanying Consolidated Balance Sheets of Digital Village World Technologies, Inc. (formerly Body Concepts, Corp.) (A Nevada Corporation) (A Development Stage Company) as of June 30, 2001 and June 30, 2000, and the Statements of Operations, Cash Flows and Changes in Stockholders' Equity for the six month periods then ended. These financial statements are the responsibility of the Company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the accompanying financial statements for them to be in conformity with United States generally accepted accounting principles (GAAP). "Moen and Company" Chartered Accountants Vancouver, British Columbia, Canada July 23, 2001 7 DIGITAL VILLAGE WORLD TECHNOLOGIES, INC. (formerly Body Concepts, Inc.) (A Nevada Corporation) (A Development Stage Company) Notes to Consolidated Financial Statements June 30, 2001 (In U.S. Dollars) (Unaudited) Note 1. ORGANIZATION AND NATURE OF BUSINESS The Company was incorporated under the laws of the State of Nevada on September 15, 1998, as Body Concepts, Inc. On May 25, 2000 the Company changed its name from Body Concepts, Inc. to Digital Village World Technologies, Inc. On May 19, 2000 the Company increased its authorized capital stock from 25,000,000 common shares with a par value of $0.001 to 62,500,000 common shares with a par value of $0.0004. On May 19, 2000 the Company completed a 2.5:1 forward split of its outstanding stock. This forward split increased the number of issued and outstanding shares from 1,750,000 common shares to 4,375,000 common shares. Pursuant to the terms of a share exchange which was effective as of December 18, 2000, the Company acquired all of the issued and outstanding stock of Digital Village World Technologies (Canada) Inc. ("DVC") in exchange for the issuance of 8,490,000 shares of its authorized but previously unissued common stock, which shares were valued at par value for purposes of the acquisition. The acquisition was accounted for as a purchase, and accordingly, the operating results for DVC will be reported only for the period subsequent to the acquisition. Assets and liabilities of DVC at the date of acquisition on December 18, 2000, are as follows: Assets Cash and cash equivalents $ 56,725 Accounts receivable 10,285 Fixed assets, net 83,028 --------------- 150,038 --------------- Liabilities Accounts payable 13,161 Current portion of loan 6,811 Due to related company 20,000 Due to related parties 144,423 --------------- 184,395 Long-term loan 10,785 --------------- 195,180 --------------- Net assets (liabilities) (45,142)
8 Cumulative translation, included in above, Booked in stockholders' equity of the Company 468 --------------- (44,674) Goodwill on acquisition (note 5) 48,070 --------------- Issuance of 8,490,000 common shares at par value $ 3,396 ===============
Note 1. ORGANIZATION AND NATURE OF BUSINESS (cont'd) DVC is a Canadian company incorporated in the Province of British Columbia, Canada. DVC is an internet content provider that provides bi-lingual content in Chinese and English, technical services to companies in China, and provides third party internet services such as web design, web hosting and content development for firms that specialize in naturopathic and traditional eastern health sciences in North America. The historical information of Digital Village World Technologies, Inc. that is the basis for the pro forma information at December 18, 2000 is as follows: Summary Balance Sheet Assets Cash $ 44,171 Advances to related company 20,000 ------------- $ 64,171 ============= Liabilities Accounts payable 1,871 ------------- Stockholders' equity Capital stock - par value 1,750 - additional paid-in capital 75,750 ------------- 77,500 Deficit (15,200) ------------- 62,300 ------------- $ 64,171 =============
Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of consolidation The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Digital Village World Technologies (Canada) Inc. All significant intercompany transactions and balances have been eliminated. Basis of presentation 9 These financial statements have been prepared in accordance with Accounting Principles Generally Accepted in the United States ("USGAAP). Development stage company The accompanying financial statements have been prepared in accordance with the provisions of Statement of Financial Accounting Standard No. 7, "Accounting and Reporting by Development Stage Enterprises". Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd) Use of estimates The preparation of financial statements in conformity with USGAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. Cash and cash equivalents Cash and cash equivalents consist of cash on deposit and highly liquid short-term interest bearing securities with a maturity at the date of purchase of three months or less. Income Taxes Provisions for income taxes are based on taxes payable or refundable for the current year and deferred taxes on temporary differences between the amount of taxable income and pretax financial income and between the tax bases of assets and liabilities and their reported amounts in the financial statements. Deferred tax assets and liabilities are included in the financial statement at currently enacted income tax rates applicable to the period in which the deferred tax assets and liabilities are expected to be realized or settled as prescribed in FASB Statement No. 109, Accounting for Income Taxes. As changes in tax laws or rate are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes. Compensated absences Employees of the corporation are entitled to paid vacations, sick days and other time off depending on job classification, length of service and other factors. It is impractical to estimate the amount of compensation for future absences, and accordingly, no liability has been recorded in the accompanying financial 10 statements. The corporation's policy is to recognize the costs of compensated absences when paid to employees. Net profit per share The Company adopted Statement of Financial Accounting Standards No. 128 that requires the reporting of both basic and diluted earnings per share. Basic earnings per share is computed by dividing net income available to common shareowners by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contacts to issue common stock were exercised or converted into common stock. In accordance with FASB 128, any anti-dilution effects on net loss per share are excluded. Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd) Disclosure about fair value of financial instruments The Company has financial instruments, none of which are held for trading purposes. The Company estimates that the fair value of all financial instruments at March 31, 2001 as defined in FASB 107, does not differ materially from the aggregate carrying values of its financial instruments recorded in the accompanying balance sheet. The estimated fair value amounts have been determined by the Company using available market information and appropriate valuation methodologies. Considerable judgment is required in interpreting market data to develop the estimates of fair value, and accordingly, the estimates are not necessarily indicative of the amounts that the Company could realize in a current market exchange. Concentration of credit risk Financial instruments that potentially subject the Company to a significant concentration of credit risk consist primarily of cash and cash equivalents which are not collateralized. The Company limits its exposure to credit loss by placing its cash and cash equivalents with high credit quality financial institutions. Fixed assets Fixed assets are stated at cost less accumulated depreciation. Depreciation is recorded on the following rates: Office equipment - 20% per annum on the declining balance basis 11 Vehicles - 30% per annum on the declining balance basis Computer equipment - 30% per annum on the declining balance basis As at June 30, 2001, the fixed assets and accumulated depreciation are as follows:
At Cost Accumulated Net Book (12/18/00) Depreciation Value ------------ ------------- ------------ Office equipment $ 5,430 $ 561 4,869 Vehicles 28,350 4,403 23,947 Computer equipment 49,248 7,649 41,599 ------------ ------------- ------------ $ 83,028 $ 12,613 $ 70,415 ============ ============= ============
Long-lived assets Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset in question may not be recoverable. This standard did not have a material effect on the Company's results of operations, cash flows or financial position. Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd) Foreign currency translation The functional currency of the parent Company Digital Village World Technologies, Inc. is the United States Dollar and of Digital Village World Technologies (Canada) Inc. is the Canadian Dollar and the reporting currency on a consolidated basis is the United States Dollar. The assets, liabilities, and operations of the Company are expressed in the functional currency of the Company in United States Dollars. Operations of the subsidiary Digital Village World Technologies (Canada) Inc. are in Canadian Dollars and in conformity with US GAAP they are translated into the reporting currency, the United States Dollar. Monetary assets and liabilities are translated at the current rate of exchange. The weighted average exchange rate for the period is used to translate revenue, expenses, and gains or losses from the functional currency to the reporting currency. 12 The gain or loss on translation is reported as a separate component of stockholders' equity and not recognized in net income. Gains or losses on remeasurement are recognized in current net income. Gains or losses from foreign currency transactions are recognized in current net income. Fixed assets are measured at historical exchange rates that existed at the time of the transaction. Depreciation is recorded at historical exchange rates that existed at the time the underlying related asset was acquired. An analysis of the changes in the cumulative translation adjustment as disclosed as part of stockholders' equity, is as follows:
Six Months Ended June 30, -------------------------- 2001 2000 ----------- ------------ Beginning balance $ (468) $ -- Change during the period 265 -- ----------- ------------ Ending balance $ (203) $ -- =========== ============
Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd) The effect of exchange rate changes on cash balances forms part of the reconciliation of change in cash and cash equivalents during the period. Revenue Recognition The Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin (SAB) 101, Revenue Recognition in Financial Statements, in December 1999. The SAB summarizes certain of the SEC staff's views in applying generally accepted accounting principles to revenue recognition in financial statements. During the current year, the Company performed a review of its revenue recognition policies and determined that it is in compliance with SAB 101. Web Site Development Expenses Web site development expenses relate to the development of new online services and consist of employee compensation, as well as costs for content, facilities and equipment. The consensus in the Financial Accounting Standards Board 13 Emerging Issues Task Force (EITF) Issue No. 00-2, Accounting for Web Site Development Costs, requires that certain costs to develop Web sites be capitalized (and amortized) or expensed, depending on the nature of the costs. Shipping and Handing Fees and Costs In September 2000, the Financial Accounting Standards Board Emerging Issues Task Force (EITF) reached a final consensus on EITF Issue No. 00-10, Accounting for Shipping and Handling Fees and Costs. This consensus requires that all amounts billed to a customer in a sale transaction related to shipping and handling, be classified as revenue. The Company historically has netted shipping charges to customers with shipping and handling costs which are included in operating expenses in the Statements of Operations. With respect to the classification of costs related to shipping and handling incurred by the seller, the EITF determined that the classification of such costs is an accounting policy decision that should be disclosed. The Company will adopt the consensus in the Issue in fiscal 2001. Note 3. CASH AND CASH EQUIVALENTS - $8,828 The total for cash and cash equivalents as at June 30, 2001, is made up as follows: Cash in bank current accounts $ 5,329 Cash in lawyer's trust account 3,499 ------------- Total $ 8,828 =============
Note 4. ACCOUNTS RECEIVABLE - $11,706 The accounts receivable of $11,706 as at June 30, 2001 is the Canadian Goods and Services Taxes refundable Note 5. GOODWILL - $48,070 On December 18, 2000 the acquisition of Digital Village World Technologies (Canada) Inc. included liabilities that exceeded the assets by $44,674 and the consideration of 8,490,000 treasury shares at par value of $0.0004 per share or $3,396, resulted in goodwill on the transaction of $48,070 that is being amortized over ten years, commencing after revenue commences from proposed operations. Note 6. ACCOUNTS PAYABLE - $8,289 Details of the total of accounts payable and accrued as at June 30, 2001, are as follows: 14 Blake, Cassels & Graydon, LLP $ 2,332 Frascona, Joiner, Goodman and Greenstein, P.C. Accrued legal fees 1,871 Payroll and payroll deductions payable 4,086 ----------- Total $ 8,289 ===========
Note 7. RELATED PARTY TRANSACTIONS - $174,934 The amount of $144,423 is due to a related party, Tianjin Teda Yu Cheng Group. $30,511 is due to Directors of the Company as at June 30, 2001 for loans that they have advanced to the Company. These amounts are unsecured, non interest bearing, with no specific terms of repayment. Note 8. LOAN PAYABLE - $15,325 As at January 1, 2000, Mr. Richard Wang, Director and President of the Company transferred a loan to DVC which was signed by him on June 21, 1999 with Ford Credit Canada Limited for financing of CAD$40,869 for purchase of a new vehicle with the interest rate of 0.10% per annum for a total of 48 payments with each payment of CAD$851.44 principal and interest. This vehicle is owned by the Company. The first payment commenced on July 21, 1999 and the last payment is due on June 21, 2003. This loan is guaranteed by Mr. Richard Wang. As at June 30, 2001, the principal balance is as follows: Initial loan $ 27,246 Repayment to June 30, 2001 13,624 ------------ Balance, June 30, 2001 13,622 Current portion of loan 6,811 ------------ Long term loan at June 30, 2001 $ 6,811 ============
Note 9. LEASE OBLIGATIONS a) Vehicle Lease On January 19, 2000, DVC entered into a 36 month lease with Lansdowne Dodge City Ltd. for a vehicle to be used by the Company. Lease payments are expensed as they are incurred. Lease obligations are as follows: 2001 CAD$ 8,000 2002 CAD$ 8,000 2003 CAD$ 667
b) Lease of Premises DVC has lease obligations for office premises in 2001 for CAD$25,369. Note 10. CAPITAL STOCK a) Authorized: 62,500,000 common shares with a par value of $0.0004 per share. b) Issued and outstanding common shares as at June 30, 2001, are as follows: 15
Additional Issued Number of Par Paid-in Date Shares Value Capital Total ------------- ------------------ ------------- -------------- -------------- private placement 9/15/98 1,000,000 $ 1,000 $ 1,500 $ 2,500 private placement 12/31/98 750,000 750 74,250 75,000 ------------------ ------------- -------------- -------------- Balance 12/31/98 1,750,000 1,750 75,750 77,500 ------------------ ------------- -------------- -------------- Balance 12/31/99 1,750,000 1,750 75,750 77,500 ------------------ ------------- -------------- -------------- Balance, before forward split 5/19/00 1,750,000 $ 1,750 $ 75,750 $ 77,500 ================== ============= ============== ============== 2.5:1 forward split 5/19/00 4,375,000 1,750 75,750 77,500 Share exchange 12/18/00 8,490,000 3,396 3,396 ------------------ ------------- -------------- -------------- Balance 12/31/00 12,865,000 5,146 75,750 80,896 issued for cash 2/7/01 10,000 4 9,996 10,000 issued for compensation 3/30/01 20,000 8 19,992 20,000 issued for cash 4/6/01 11,000 4 10,996 11,000 ------------------ ------------- -------------- -------------- Balance 6/30/01 12,906,000 $ 5,162 $ 116,734 $ 121,896 ================== ============= ============== ==============
Note 11. INCOME TAXES a) The most recent Federal Income Tax filing for the Company for the US was for the year ended December 31, 2000, disclosing no income taxes payable to the US Internal Revenue Service. Note 11. INCOME TAXES (cont'd) b) There is a loss of $174,412 carried forward that may be applied towards future profits. No deferred income taxes are recorded as an asset. A reserve has been claimed that offsets the amount of tax credit available from use of the loss carry forward because there is presently no indication that these tax losses will be utilized. Note 12. FINANCIAL INSTUMENTS The Company's financial instruments consist of cash and cash equivalents, accounts receivable, prepaid expenses and deposit, accounts payable and accrued, current portion of loan, due to related parties and long-term loan payable. It is management's opinion that the Company is not exposed to significant interest, currency or credit risks arising from these financial instruments. The fair value of these financial statements approximates their carrying values. 16 Note 13. PENSION AND EMPLOYMENT LIABILITIES The Company does not have liabilities as at June 30, 2001, for pension, post-employment benefits or post-retirement benefits. The Company does not have a pension plan. Note 14. NEW BUSINESS - PROFIT SHARING AGREEMENT By agreement for reference dated May 1, 2000 and as amended on May 31, 2001, Digital Village World Technologies Inc, subsequently renamed Digital Village World Technologies (Canada) Inc., ("DVC") entered into an agreement with TianJin TEDA Yu Cheng Group Co Ltd., a wholly owned subsidiary of the People's Daily Newspaper Group in China with its principal place of business in Tianjin, the People's Republic of China.("Yu Cheng"). (a) Proposed New Business Operations. (i) Yu Cheng has formed a new domestic Chinese company called Yuxun Digital Hi-Tech Co Ltd. ("Yuxun") which is a local Internet Service Provider (ISP) in the Tianjin region; (ii) Yuxun has agreed to form a domestic joint venture with Tianjin Chuang Xian Information Development Co Ltd ("Chuang Xian") that will assume Yuxun's ISP business and Chuang Xian's IT services to form a new business (New Business); (iii) The New Business requires working capital; Yu Cheng is the controlling shareholder of DVC and as such wishes to advance the business of DVC in China by having DVC provide overall management for the New Business and to raise working capital for the New Business in accordance with this agreement. Note 14. NEW BUSINESS - PROFIT SHARING AGREEMENT (cont'd) (b) Management of New Business / Working Capital (i) YU Cheung hereby appoints DVC to be its manager to manage the affairs of the New Business for a term of 25 years, unless terminated earlier as provided herein, provided that (ii) (ii) DVC assumes the responsibility for raising all working capital requirements of the New Business. (c) Profit Sharing (i) Yu Cheung hereby agrees that 80% of the net profits of the New Business (Profit Allocation) will be earned by DVC provided DVC raises the required working capital, as hereinafter defined, and provides the senior management, as hereinafter defined, for the New Business.) (ii) Net Profits will be defined according to GAAP as determined by the auditor of the New Business, approved by DVC. 17 (iii) The parties agree that semi-annually Net Profits will be determined and 20% thereof, or such other amount agreed to by the parties, shall be retained by the New Business as working capital and that the balance distributed to the parties on a 80/20 basis, 80% for DVC and 20% for Yu Cheung, respectively, at each parties option. Either party may choose to leave their portion of the Net Profits in the New Business as addition to a loan account owed to that party by the New Business. (d) Management (i) DVC will form a new Chinese firm, a wholly owned foreign enterprise (WOFE) which will provide no fewer than two senior executives, at DVC's cost, to provide on-going executive management for the New Business. (ii) Yu Cheng agrees that DVC may appoint 2 out of 5 persons to be directors of the New Business. (e) Conversion to Equity The parties acknowledge that it is their intention to treat DVC's Profit Allocation as a substitute to owning 80% of the equity of the New Business and therefore as and when the rules of China permit DVC to own, through the WOFE, shares in the New Business, it is agreed that the parties will take such steps as are necessary to have shares issued to the WOFE and upon such event occurring the Profit Allocation will be adjusted, to ensure that the underlying 80/20 arrangement is adhered to. Note 14. NEW BUSINESS - PROFIT SHARING AGREEMENT (cont'd) (f) Capital (i) DVC, through the WOFE, will provide capital of not less than $500,000 US contributed over 12 months or as otherwise agreed to by the parties hereto. (ii) In the event that the Capital is not raised within the said 12 months, the Profit Allocation shall be adjusted based on the percentage actually raised of the $500,000 US. (iii) Yu Cheung will assist the WOFE to have all capital contributions registered as loans to the New Business, in order to ensure that when the New Business is able, that DVC will be able to repatriate the Capital out of China should DVC so elect. (g) Annual Budget The parties agree that they will on an annual basis agree upon an annual budget, prepared in accordance with United States GAPP and that unless 18 otherwise agreed, the New Business will be managed in accordance with the annually agreed upon budget. (h) Assignment The Parties agree that DVC may assign this agreement to any 3rd party provided that any assignee agrees to be bound by the terms of this agreement. (i) Termination (i) This Agreement shall terminate and be of no further force or effect if DVC fails to meet any material obligation of this Agreement, or DVC files a voluntary petition in bankruptcy, or an involuntary petition in bankruptcy is filed against DVC , or DVC is liquidated or its business transferred to a receiver, or DVC makes a general assignment of all its assets on behalf of creditors. (ii) Upon the occurrence of any event as set out in i(i), above, Yu Cheng shall send a written notice to DVC stating the nature of the breach. If the breach is curable DVC shall have thirty days from the date of the notice to cure the breach. (j) Notice Notices as to disputes or termination to be given under this Agreement shall be signed by the party giving such notice and mailed by certified or registered mail, addressed to the party to be notified at its then current business address as set forth at the beginning of this Agreement or as subsequently changed by giving notice. Notice as to address changes, pricing changes, warranty changes and other matters relating to policy and business may by given to such addresses, by facsimile transmission, telex, telegram or first class mail. Notices by mail shall be deemed given three days after mailing. Note 14. NEW BUSINESS - PROFIT SHARING AGREEMENT (cont'd) (k) Settlement of disputes and Governing Law (i) In the event a dispute arises in connection with the interpretation or implementation of this Agreement, the parties to the dispute shall attempt in the first instance to resolve such dispute through amicable consultations. If the dispute cannot be resolved in this manner within thirty (30) days after first conferring, then any or all parties to the dispute may refer the dispute to arbitration by the Beijing International Arbitration Committee ("Committee"). The number of arbitrators shall be three. The claimant(s) in the dispute shall appoint one arbitrator within thirty (30) days 19 of filing notice of the arbitration, and the respondent(s) in the dispute shall appoint one arbitrator within thirty (30) days thereafter. If the respondent fails to so appoint an arbitrator, the Arbitration Centre shall appoint the second arbitrator. The two arbitrators thus appointed shall choose the third arbitrator, and if they fail to do so within thirty (30) days after the appointment of the second arbitrator, the third arbitrator shall be appointed by the Committee. The arbitration proceedings shall be conducted in the English language. (ii) Any award of the arbitrators shall be final and binding on the parties. The costs of arbitration shall be borne by the losing party, unless the arbitrators determine that this would be inequitable. The parties agree and recognize that any award of the arbitrators shall be recognizable and enforceable in any court having jurisdiction over the party against whom the award was rendered, and also wherever assets of such party are located. (iii) The legal relations between the parties under this contract shall be interpreted in accordance with the substantive laws of China. Any disputes between the parties concerning their legal obligations arising under this contract which are submitted to arbitration pursuant to this clause shall be decided pursuant to the substantive laws of China. (l) Non Competition The parties agree that during the currency of this agreement that they will not, directly or indirectly, in any manner whatsoever, be engaged in any business competitive to the business of New Business or advise or be concerned with or interested or lend money to/or guaranty the debts or obligations of a competitive business. Note 15. CONSULTING AGREEMENT - BRIAN ROBERTS By agreement dated February 1, 2000, in accordance to the law of British Columbia, Canada, Digital Village World Technologies Inc., subsequently renamed Digital Village World Technologies (Canada) Inc., entered into a Consulting Agreement with Brian Roberts ("Roberts") whereby he would assist the Company in completion of its Business Plan and set up its administrative 20 systems, on a month to month basis. Either party may terminate this agreement, with or without cause, upon thirty days notice to the other party. Terms and Conditions of the agreement: (a) Remuneration (i) The Company agrees to issue 250,000 fully paid common shares of DVC at par value, for all services to be performed by Roberts under this agreement (ii) Roberts agrees to enter a pooling agreement at the time the shares are issued wherein he agrees that he will not sell, transfer or otherwise dispose of any of the Shares before 18 months has elapsed from the date the Shares, directly or indirectly, become publicly traded. (b) Expenses In addition to the Shares, in (a), above, DVC shall reimburse Roberts, for all reasonable and necessary business expenses incurred by him in the performance of his duties, including, without limitation, expenses for travel, meals, entertainment and other miscellaneous business expenses. Roberts shall submit to DVC written, itemized expense accounts for approval with such additional substantiation and justification as DVC may reasonably request. (c) Non-Competition During the term of this agreement and for a term of one year after its termination, Roberts covenants and agrees that he will not directly or indirectly, whether as owner, shareholder, director, agent, officer, consultant, independent contractor, or in any other capacity whatsoever, of a corporation, partnership or proprietorship, compete with DVC or any of its affiliates. Note 16. SUBSEQUENT EVENTS Proposed Equity Funding - $12,000,000 21 On July 16, 2001, the Company signed Offshore Securities Subscription Agreements with Tianjin Global Magnetic Card Co. Ltd. ("TGM") and Tianjin Teda Yu Cheng Group Co. Ltd. ("Yu Cheng"), the Company's present controlling shareholder, for 10,000,000 common shares and 2,000,000 common shares, respectively , all at a price of $1.00 each, for the issuing a total of 12,000,000 common shares of the Company at a price of $1.00 per share. Details are as follows: Yu Cheng agreed to purchase 2,000,000 common shares and TGM agreed to purchase 10,000,000 common shares at the mutually agreed date. TGM is one of the largest credit and smart card manufactures in the Asia-Pacific Region. It was the first card manufacturer in China to be accredited by MasterCard International and Visa International and is the only company in its field in China that trades publicly which it has done since 1993 through the Shanghai Exchange. TGM produces magnetic and smart cards and related integration and application systems for domestic and foreign markets. TGM is also one of the national Mints for the People's Republic of China printing financial documents and packaging products. TGM is repidly expanding the applications and the use of next generation smart cards for China wide application. These initiatives require leading edge technology as well as access to a broader range of capital markets to develop them. To meet these needs TGM is investing in firms like the Company and its new business unit, Digital Village RFS Technology Inc., which is developing micro super conducting devices. No definitive agreements relating to the above issuing date have been signed at the date of these financial statements, and would be subject to regulatory approvals. 22 DIGITAL VILLAGE WORLD TECHNOLOGIES, INC. (FORMERLY BODY CONCEPTS, INC.) (A Nevada Corporation) (A Development Stage Company) Consolidated Balance Sheets June 30, 2001 and June 30, 2000 (In US Dollars) (Unaudited)
2001 2000 --------- --------- Assets Current Assets Cash and cash equivalents (note 3) $ 8,828 $ 43,102 Accounts receivable (note 4) 11,706 -- Prepaid expenses and deposit 5,107 -- --------- --------- 25,641 43,102 --------- --------- Fixed Assets, at cost (note 2) 83,028 -- Less: accumulated depreciation (12,613) -- --------- --------- 70,415 -- --------- --------- Goodwill, at cost (note 5) 48,070 -- --------- --------- $ 144,126 $ 43,102 ========= ========= Liabilities and Stockholders' Equity Current Liabilities Accounts payable and accrued (note 6) $ 8,289 $ 550 Current portion of loan (note 8) 6,811 Due to related parties (note 7) 174,934 -- --------- --------- 190,034 550 --------- --------- Long-term Liabilities Loan payable (note 8) 6,811 -- --------- --------- Stockholders' Equity Capital stock (note 10) Authorized 62,500,000 common shares at $0.0004 par value Issued 12,906,000 common shares (2000 - 4,375,000 shares - post split) - par value 5,162 1,750 Paid in capital in excess of par value of stock 116,734 75,750 --------- --------- 121,896 77,500 Deficit, accumulated during the development stage (174,412) (34,948) Cumulative translation (note 2) (203) -- --------- --------- (52,719) 42,552 --------- --------- $ 144,126 $ 43,102 ========= =========
Approved on behalf of the board: "Richard Wang" , Director - --------------------- "Edward Chen" , Director - --------------------- See Accompanying Notes and Independent Accountants' Review Report DIGITAL VILLAGE WORLD TECHNOLOGIES, INC. (FORMERLY BODY CONCEPTS, INC.) (A Nevada Corporation) (A Development Stage Company) Consolidated Statements of Operations (In US Dollars) (Unaudited)
Cumulative From Inception Date Six Months of Sep. 15, 1998 Quarter Ended Ended to June 30, June 30, June 30, ---------------------------- ---------------------------- 2001 2001 2000 2001 2000 ------------ ------------ ------------ ------------ ------------ Revenue Interest and other income $ 7,620 $ $ 753 $ 3,766 $ 1,508 ------------ ------------ ------------ ----------- ------------ Administration Costs Advertising 712 -- -- -- -- Bank charges and interest 1,315 290 102 810 135 Consulting 7,327 -- 20,000 1,323 20,000 Depreciation 12,613 6,758 -- 12,107 -- License, dues and insurance 985 -- -- -- -- Office costs 4,423 927 -- 4,105 -- Rentals and leases 16,632 8,362 (200) 14,411 300 Professional fees 32,413 800 2,000 24,476 2,550 Salary and benefits 40,202 9,798 -- 36,255 -- Stock-based compensation 20,000 -- -- 20,000 -- Telephone and utilities 14,352 1,995 -- 13,819 -- Transfer agent and filing fees 7,247 -- (60) 5,911 200 Travel and promotion 23,811 7,817 -- 21,872 -- ------------ ------------ ------------ ----------- ------------ 182,032 36,747 21,842 155,089 23,185 ------------ ------------ ------------ ----------- ------------ Net profit (loss) for the period $ (174,412) $ (36,747) $ (21,089) $ (151,323) $ (21,677) ============ ============ ============ =========== ============ Basic and diluted profit (loss) per share $ (0.00) $ (0.00) $ (0.01) $ (0.00) ============ ============ =========== ============ Weighted average number of common shares used to compute basic and fully diluted loss per share 12,902,366 4,375,000 12,888,666 4,375,000 ============ ============ =========== ============
See Accompanying Notes and Independent Accountants' Review Report DIGITAL VILLAGE WORLD TECHNOLOGIES, INC. (FORMERLY BODY CONCEPTS, INC.) (A Nevada Corporation) (A Development Stage Company) Consolidated Statements of Cash Flows (In US Dollars) (Unaudited)
Cumulative From Inception Date Six Months of Sep. 15, 1998 Quarter Ended Ended to June 30, June 30, June 30, ---------------------- ---------------------- 2001 2001 2000 2001 2000 ---------------- --------- --------- --------- --------- Cash derived from (used for) Operating activities Net profit (loss) for the period $ (174,412) $ (36,747) $ (21,089) $(151,323) $ (21,677) Items not requiring use of cash Depreciation 12,613 6,758 -- 12,107 -- Cumulative translation (203) 149 -- 265 -- Changes in non-cash working capital items Accounts receivable (11,706) -- -- (1,386) -- Prepaid expenses and deposit (5,107) -- -- (5,107) -- Accounts payable and accrued 8,289 (7,071) (344) (11,390) -- ---------------- --------- --------- --------- --------- (170,526) (36,911) (21,433) (156,834) (21,677) ---------------- --------- --------- --------- --------- Financing activities Issuance of shares 121,896 11,000 -- 41,000 -- Loan payable 13,622 (1,703) -- (3,406) -- Due to related parties 174,934 30,511 -- 30,511 -- ---------------- --------- --------- --------- --------- 310,452 39,808 -- 68,105 ---------------- --------- --------- --------- --------- Investing activities Capital assets purchased (83,028) -- -- -- -- Goodwill (48,070) -- -- -- ---------------- --------- --------- --------- --------- (131,098) -- -- ---------------- --------- --------- --------- --------- Cash and cash equivalents, increase (decrease) during the period 8,828 2,897 (21,433) (88,729) (21,677) Cash and cash equivalents, beginning of period 5,931 64,535 97,557 64,779 ---------------- --------- --------- --------- --------- Cash and cash equivalents, end of period $ 8,828 $ 8,828 $ 43,102 $ 8,828 $ 43,102 ================ ========= ========= ========= =========
See Accompanying Notes and Independent Accountants' Review Report -----END PRIVACY-ENHANCED MESSAGE-----