================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------------------
FORM 10-QSB/A
Amendment No. 2
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______________ to __________________.
COMMISSION FILE NUMBER 0-28345
CHINA BROADBAND CORP.
(formerly Institute for Counseling, Inc.)
(Exact name of small business issuer as specified in its charter)
NEVADA 52-2197688
(Jurisdiction of incorporation) (I.R.S. Employer Identification No.)
2080, 440-2 AVENUE S.W.
CALGARY, ALBERTA
CANADA T2P 5E9
(Address of principal place of business or intended principal place of business)
(403) 234-8885
(Issuer's telephone number)
NOT APPLICABLE
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer: (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
past 12 months (or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing requirements for the
past 90 days. Yes X No
--- ---
The number of outstanding common shares, with $0.001 par value, of the
registrant at June 30, 2000 was 18,341,517.
Transitional Small Business Disclosure Format (check one): Yes No X
--- ---
<PAGE>
CHINA BROADBAND CORP.
(formerly Institute for Counseling, Inc.)
INDEX TO THE FORM 10-QSB
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2000
PAGE
----
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS F-1
China Broadband Corp.
Consolidated Balance Sheet (Unaudited) F-2
Consolidated Statement of Operations (Unaudited) F-3
Consolidated Statement of Stockholders' Equity (Unaudited) F-4
Consolidated Statement of Cash Flows (Unaudited) F-5
Notes to the Consolidated Financial Statements (Unaudited) F-6
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS..........................................1
PART II - OTHER INFORMATION..................................................6
ITEM 1. LEGAL PROCEEDINGS................................................6
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS........................6
ITEM 3. DEFAULTS UPON SENIOR SECURITIES..................................6
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS..............6
ITEM 5. OTHER INFORMATION................................................6
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.................................7
SIGNATURES...................................................................7
i
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
China Broadband Corp.
Consolidated Balance Sheet (Unaudited)
Consolidated Statement of Operations (Unaudited)
Consolidated Statement of Stockholders' Equity (Unaudited)
Consolidated Statement of Cash Flows (Unaudited)
Notes to the Consolidated Financial Statements (Unaudited)
F-1
<PAGE>
<TABLE>
<CAPTION>
CHINA BROADBAND CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED BALANCE SHEET
(US Dollars)
(unaudited)
ASSETS
JUNE 30, March 31,
2000 2000
--------------- ---------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 9,690,074 $ 738,201
Interest receivable 39,240 -
Due from officers and employees (Note 4) 215,056 28,942
Prepaid expenses 64,217 -
--------------- ---------------
10,008,587 767,143
DUE FROM BIG SKY NETWORK CANADA LTD. (Note 6) 1,995,465 -
INVESTMENT IN BIG SKY NETWORK CANADA LTD. (Note 1) 189,901 -
FIXED ASSETS 56,910 -
--------------- ---------------
$ 12,250,863 $ 767,143
================ ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 34,889 $ -
Unearned revenue (Note 7) 416,666 -
Stockholder advances - 24,719
---------------- ---------------
451,555 24,719
---------------- ---------------
MINORITY INTEREST - 230,000
---------------- ---------------
STOCKHOLDERS' EQUITY
Common stock (Note 3) 76,803 73,471
Additional paid-in capital 12,050,752 696,529
Accumulated deficit (328,247) (257,576)
---------------- ---------------
11,799,308 512,424
$ 12,250,863 $ 767,143
================ ===============
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</FN>
</TABLE>
F-2
<PAGE>
<TABLE>
<CAPTION>
CHINA BROADBAND CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENT OF OPERATIONS
(US Dollars)
(unaudited)
THREE MONTHS February 1
ENDED JUNE 30, to June 30,
2000 2000
---------------- ---------------
<S> <C> <C>
REVENUE
TECHNICAL CONSULTING (NOTE 7) $ 83,333 $ 83,333
GENERAL AND ADMINISTRATIVE EXPENSES 184,278 441,854
STOCK COMPENSATION 15,235 15,235
---------------- ---------------
(116,180) (373,756)
EQUITY LOSS IN BIG SKY NETWORK CANADA LTD. (80,099) (80,099)
INTEREST INCOME 125,608 125,608
---------------- ---------------
LOSS FOR THE PERIOD BEFORE PROVISION
FOR INCOME TAXES (70,671) (328,247)
PROVISION FOR INCOME TAXES - -
---------------- ---------------
LOSS FOR THE PERIOD $ (70,671) $ (328,247)
================ ===============
BASIC LOSS PER SHARE $ 0.00 $ (0.02)
================ ===============
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 16,957,671 16,205,766
================ ===============
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</FN>
</TABLE>
F-3
<PAGE>
<TABLE>
<CAPTION>
CHINA BROADBAND CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(US Dollars)
(unaudited)
Additional
Common Paid-In
Stock Capital Deficit
--------------- -------- ---------------
<S> <C> <C> <C>
Balance, February 1, 2000 $ 59,971 $ - $ -
Issue of common stock for the outstanding shares of
China Broadband (BVI) Corp. 13,500 696,529 -
Stocks issued pursuant to private placement agreements at
$0.20 per share 500 99,500 -
Shares issued pursuant to private placement agreements at
$1.00 per share 1,530 1,528,470 -
Shares issued pursuant to private placement agreements at
$7.50 per share 1,302 9,761,201 -
Share issue costs - (50,183) -
Stock compensation - 15,235 -
Loss for the period - - (328,247)
--------------- ----------- ---------------
Balance, June 30, 2000 $ 76,803 $12,050,752 $(328,247)
=============== =========== ===============
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</FN>
</TABLE>
F-4
<PAGE>
<TABLE>
<CAPTION>
CHINA BROADBAND CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
(US Dollars)
(unaudited)
THREE MONTHS February 1
ENDED JUNE 30, to June 30,
2000 2000
--------------- ---------------
<S> <C> <C>
OPERATING ACTIVITIES
Loss for the period $ (70,671) $ (328,247)
Add item not affecting cash
Equity loss in Big Sky Network Canada Ltd. 80,099 80,099
Stock Compensation 15,235 15,235
Changes in non-cash operating working capital 137,265 133,042
--------------- ---------------
161,928 (99,871)
--------------- ---------------
FINANCING ACTIVITIES
Issue of common stocks for cash 11,892,503 11,892,503
Share issuance costs (50,183) (50,183)
--------------- ---------------
11,842,320 11,842,320
INVESTING ACTIVITIES
Increase in due from Big Sky Network Canada Ltd. (1,995,465) (1,995,465)
Fixed asset additions (56,910) (56,910)
--------------- ---------------
(2,052,375) (2,052,375)
--------------- ---------------
INCREASE IN CASH AND CASH EQUIVALENTS 8,951,873 9,690,074
CASH AND CASH EQUIVALENTS, beginning of period 738,201 -
--------------- ---------------
CASH AND CASH EQUIVALENTS, end of period $ 9,690,074 $ 9,690,074
=============== ===============
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Stocks issued to acquire investment in Big Sky
Network Canada Ltd. 270,000 270,000
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</FN>
</TABLE>
F-5
<PAGE>
CHINA BROADBAND CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000
(US Dollars)
(unaudited)
1. INCORPORATION AND NATURE OF BUSINESS
INCORPORATION AND BACKGROUND
China Broadband Corp. is a development stage enterprise and is seeking
to become a leading facilities based provider of high capacity, high
speed internet, data and voice services in major urban markets
throughout the People's Republic of China.
On April 14, 2000, China Broadband Corp. (the "Corporation"), a public
shell company, acquired China Broadband (BVI) Corp. ("CBB - BVI") in a
transaction accounted for as a recapitalization. This recapitalization
was effected through the issuance of 13,500,000 shares of common stock
of the Corporation, constituting approximately 90% of its shares out-
standing after the acquisition, in exchange for all of the outstanding
shares of China Broadband (BVI) Corp.
As a result of the application of the accounting principles governing
recapitalizations, CBB - BVI (incorporated on February 1, 2000) is
treated as the acquiring or continuing entity for financial accounting
purposes.
The recapitalization of CBB - BVI was affected through the issuance of
stock by CBB - BVI in exchange for the tangible net assets of the
Corporation, valued at fair value, which approximates the Corporation's
historical costs. As a result, the consolidated financial statements
will be deemed to be a continuation of CBB - BVI 's historical
financial statements.
INVESTMENT IN BIG SKY NETWORK CANADA LTD.
CBB - BVI acquired 50,000 shares representing all the of the
outstanding shares of Big Sky Network Canada Ltd. ("BSN"), a company
incorporated under the laws of the Territory of the British Virgin
Islands from officers, directors and persons related to the officers
and directors for 12,500,000 common shares of CBB - BVI. CBB - BVI was
incorporated for the purpose of acquiring the shares of BSN. BSN did
not have any substantial operations prior to February 1, 2000. This
transaction was accounted for as a recapitalization of BSN. This
recapitalization was effected through the issuance of 12,500,000 common
shares of the CBB - BVI constituting all of its issued and outstanding
shares.
F-6
<PAGE>
On February 22, 2000, BSN issued an additional 10,000 shares to SoftNet
Systems, Inc. for cash consideration of $500,000. As the Corporation
controlled BSN, the financial statements of the Corporation included
the accounts of BSN. On April 25, 2000, BSN issued a further 40,000
shares to SoftNet Systems, Inc. for cash consideration of $2,000,000.
As a result of the April 25, 2000 transaction, the Corporation no
longer controls BSN and, therefore, BSN's accounts have been
deconsolidated from these financial statements. For the period April
26, 2000 to June 30, 2000, the Corporation's investment in BSN is
accounted for using the equity method.
BSN signed a joint venture agreement on September 21, 1999 with China
Merchants Shekou Industrial Zone, Ltd. ("China Merchants") to establish
Shenzhen China Merchants Big Sky Network Ltd. ("Shenzhen JV"), the
purpose of which is to provide internet access to Chinese residential
and business customers through the existing cable television
infrastructure. Under the terms of the joint venture agreement, China
Merchants agreed to provide all the non-broadcast rights on the cable
network of a cable television station controlled by China Merchants.
BSN is required to contribute a total of $3,000,000 to the Shenzhen JV
as cash or equipment. BSN is also responsible for providing technical
support to the Shenzhen JV. Over the Shenzhen JV's fifteen year
duration, BSN will be entitled to receive 60% of the profits earned
between 2000 and 2004, 50% of the profits earned between 2005 and 2009
and 40% of the profits earned between 2010 and 2014. BSN is entitled to
appoint four of the seven directors on the board of directors of the
Shenzhen JV for the first five years of its operation and is thereafter
entitled to appoint three of the seven directors.
UNCERTAINTIES AND RISK FACTORS
The Corporation's operations may be adversely affected by significant
political, economic and social uncertainties in the People's Republic
of China. Although the government of the People's Republic of China has
been pursuing economic reform policies, no assurance can be given that
it will continue to pursue such policies or that such policies may not
be significantly altered, especially in the event of a change in
leadership, social or political disruption or unforeseen circumstances
affecting the People's Republic of China's political, economic and
social conditions. There is also no guarantee that the pursuit of
economic reforms by the government of the People's Republic of China
will be consistent or effective.
The People's Republic of China has recently enacted new laws and
regulations governing internet access and the provision of online
business, economic and financial information. Current or proposed laws
aimed at limiting the use of online services could, depending upon
interpretation and application, result in significant uncertainty to
the Corporation, additional costs and technological challenges in order
to comply with any statutory or regulatory requirements imposed by such
legislation. Additional legislation and regulations that may be enacted
by the government of the People's Republic of China could have an
adverse effect on the Corporation's business, financial condition and
results of operations.
The success of the Corporation will depend on the acceptance of
broadband internet services, which remains unproven in the People's
Republic of China. The Corporation may not be able to attract and
retain subscribers, or it may face intense competition which could have
an
F-7
<PAGE>
adverse affect on the Corporation's business, financial condition and
results of operations. The Corporation's services were launched on June
30, 2000 and is currently expanding its subscriber base in Shekou
province.
Substantially all of the Corporation's revenues and operating expenses
will be denominated in the Chinese renminbi, which is currently freely
convertible, however, there can be no assurance that this will continue
or that the ability to purchase or retain foreign currencies will
continue in the future.
These financial statements have been prepared on a going concern basis.
The Corporation's ability to continue as a going concern is dependent
upon its ability to generate profitable operations in the future and to
obtain the necessary financing to meet its obligations and repay its
liabilities arising from normal business operations when they come due.
The outcome of these matters cannot be predicted with any certainty at
this time. These financial statements do not include any adjustments to
the amounts and classification of assets and liabilities that may be
necessary should the Corporation be unable to continue as a going
concern.
BASIS OF PRESENTATION
These consolidated financial statements include the accounts of the
Corporation and its wholly owned subsidiary, CBB - BVI. All material
intercompany accounts and transactions have been eliminated.
F-8
<PAGE>
2. SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The information presented in the accompanying financial statements is
unaudited and includes all adjustments which are, in the opinion of
management, necessary to present fairly the financial position, results
of operations and cash flows for the interim periods presented. It is
suggested that these interim financial statements be read in
conjunction with the audited consolidated financial statements of CBB -
BVI as at March 31, 2000 and for the period from February 1, 2000 (date
of incorporation) to March 31, 2000.
STOCK-BASED COMPENSATION
In accounting for our employee and director stock options, the
Corporation has elected to follow Accounting Principles Board No. 25,
"ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES", ("APB 25"), and related
interpretations. Pursuant to APB 25, the Corporation did not record any
compensation expense for any period in these consolidated financial
statements insofar as the exercise price for all options we have
granted to date to our employees and directors have equaled the market
price of the underlying common shares on the effective date of grant.
Stock options issued to consultants to the Corporation are accounted
for at fair value as provided for under Statement of Financial
Accounting Standards No. 123, "ACCOUNTING FOR STOCK-BASED
COMPENSATION". Options granted to consultants to the Corporation had a
fair value that was different from the exercise price, and accordingly
compensation expense of $15,235 was recorded in the consolidated
financial statements.
3. COMMON STOCK
AUTHORIZED
The authorized capital of the Corporation is 50,000,000 common shares
having a par value of $0.001 each.
<TABLE>
<CAPTION>
ISSUED
NUMBER AMOUNT
-------------- ---------------
<S> <C> <C>
Balance, February 1, 2000 2,319,000 $ 59,971
Share consolidation (809,150) -
Common shares issued on April 14, 2000 for the outstanding
shares of China Broadband (BVI) Corp. upon recapitalization 13,500,000 13,500
Shares issued for cash pursuant to private placement agreements at
$0.20 per share 500,000 500
F-9
<PAGE>
<CAPTION>
<S> <C> <C>
Shares issued for cash pursuant to private placement agreements at
$1.00 per share 1,530,000 1,530
Shares issued for cash pursuant to private placement agreements at
$7.50 per share 1,301,667 1,302
-------------- ---------------
18,341,517 $ 76,803
============== ===============
</TABLE>
OPTIONS
On April 14, 2000, the Corporation granted options to officers,
directors and consultants to the Corporation to acquire 4,175,000
common shares of the Corporation at a price of $1.00 per share. These
options are fully vested at the date of grant, and expire on April 14,
2005.
4. INVESTMENT IN PARTIALLY OWNED EQUITY AFFILIATE
The Corporation owns 50% of BSN. Summarized financial information for
BSN at June 30, and for the period ended, is as follows:
------------
$
------------
Current assets 1,565,840
Investment in Shekou Joint Venture 2,769,408
---------
Total assets 4,335,248
---------
Current liabilities 1,995,465
Total stockholders' equity 2,339,783
---------
Total liabilities and equity 4,335,248
---------
Net Loss 160,217
=========
5. DUE FROM OFFICERS AND EMPLOYEES
Amounts due from officers and employees are advances for travel
expenses, are non-interest bearing and payable on demand.
6. DUE FROM BIG SKY NETWORK CANADA LTD.
The advance is non-interest bearing, unsecured and payable on demand.
7. UNEARNED REVENUE
The Corporation received a $500,000 advance payment from Big Sky
Network Canada Ltd. for technical consulting services to be provided by
the Corporation to BSN over a twelve month period commencing in May,
2000.
F-10
<PAGE>
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Certain statements and information contained in this Report constitute
forward-looking statements within the meaning of Section 21E of the Securities
Exchange Act of 1934. Such forward-looking statements involve known and unknown
risks, uncertainties and other factors that may cause the actual results,
performance or achievement of the Company, or developments in the Company's
industry, to differ materially from the anticipated results, performance or
achievements expressed or implied by such forward-looking statements. Such
factors include, but are not limited to: the Company's limited operating history
and history of losses, the Company's relative concentration of customers, the
risks related to the Company's ability to commercialize its technology, risks
associated with changes in market demand for the Company's technology, risks
involving the management of growth and integration of acquisitions, competition,
product development risks and risks of technological change, dependence on
third-party marketing relationships and suppliers, the Company's ability to
protect its intellectual property rights and the other risks and uncertainties
detailed in the Company's Securities and Exchange Commission filings.
OVERVIEW
China Broadband Corp., through our investment in Big Sky Network Canada
Ltd. ("Big Sky Network"), a British Virgin Islands corporation, seeks to become
a leading facilities-based provider of high capacity, high speed Internet, data
and voice services in the major urban markets throughout the People's Republic
of China. We own a 50% interest in Big Sky Network. See "History of the
Company." Through the local fixed hybrid optical fibre-coaxial cable
architecture of existing cable television networks in China, we intend to
provide broadband (i.e., high capacity, high speed) data transport and dedicated
Internet access to businesses, individuals, telecommunications carriers,
Internet service providers, Internet content providers, e-commerce providers and
systems integrators.
Big Sky Network has formed joint ventures with existing cable
television operators in China to provide broadband services in China. The first
joint venture received governmental approval and began offering broadband
services at Shekou, China on June 30, 2000. Big Sky Network has executed a joint
venture agreement with Chengdu CATV to begin Internet service in the provincial
capital of Sichuan Province and has signed letters of intent with Zhuhai CATV,
Dalian Metropolitan Network Centre and Cixi CATV. Under the terms of the joint
ventures, Big Sky Network's joint venture partners provide bandwidth on their
existing optical fibre-coaxial cable systems to enable the joint venture to
provide high speed data transport and Internet access, advanced Web hosting,
co-location, facilities-based Internet transport services and other enhanced
Internet services on a large scale.
Big Sky Network is also negotiating additional agreements with cable
television operators throughout China.
HISTORY OF THE COMPANY
Prior to March 31, 2000, China Broadband Corp.'s (formerly Institute
for Counselling, Inc.) business strategy was to provide consulting services to
emerging and start up businesses involved in the oil and gas sector. The company
also examined oil and gas projects of merit with the intention of acquiring
financing and developing those projects.
On April 14, 2000, China Broadband Corp. completed a reverse-split
of its common stock on a .65108 for 1 basis reducing its issued and outstanding
share capital to 1,509,850 shares of common stock.
On April 14, 2000, China Broadband Corp. acquired all of the issued and
outstanding shares in the capital of China Broadband (BVI) Corp., a company
incorporated under the laws of the British Virgin Islands. China Broadband (BVI)
Corp. was formed on February 1, 2000, and had no business activities prior to
that time. China Broadband (BVI) Corp. was incorporated for the purposes of
acquiring all of the issued and outstanding shares of Big Sky Network, a company
developing a business to become a facilities-based provider of high capacity,
high speed Internet, data and voice services in the major urban markets
throughout the People's Republic of China. Big Sky Network had an executed
cooperation joint venture agreement with Shekou CATV and Chengdu CATV and
1
<PAGE>
letters of intent to enter into similar cooperation joint venture agreements
with Zhuhai CATV, Dalian Metropolitan Network Centre and Cixi CATV. China
Broadband (BVI) Corp. acquired 50,000 shares, representing a majority of the
issued and outstanding capital stock of Big Sky Network on March 1, 2000. Big
Sky Network issued to Softnet Systems, Inc. 10,000 shares on February 22, 2000
for $500,000 and 40,000 shares for $2,000,000 on April 25, 2000.
China Broadband Corp. acquired all of the issued and outstanding shares
of China Broadband (BVI) Corp. in exchange for 13,500,000 shares of its common
stock on April 14, 2000. Because China Broadband Corp. had 1,509,850 (post
reverse-split) shares issued and outstanding on the date of our acquisition, the
former shareholders of China Broadband (BVI) acquired 90% control of China
Broadband Corp. In instances like this, generally accepted accounting principles
require that the transaction be reflected in financial statements as a
recapitalization of the legal parent, China Broadband Corp., and China Broadband
(BVI) Corp. is treated as the acquiring or continuing entity for financial
accounting purposes. The financial statements of the Company for periods
subsequent to the acquisition will include the accounts of China Broadband (BVI)
Corp. and Big Sky Network for the full fiscal period, and the accounts of China
Broadband Corp. for the period following the date of acquisition.
After giving effect to the acquisitions, China Broadband Corp. owned
all of the issued and outstanding capital of China Broadband (BVI) Corp. and
China Broadband (BVI) Corp. owned 50% of the issued and outstanding capital of
Big Sky Network.
Subsequent to China Broadband Corp.'s acquisition of China Broadband
(BVI) Corp. on April 14, 2000, China Broadband Corp. completed three private
placements of 3,336,667 shares of its common stock for proceeds of $11,392,502.
On April 27, 2000, Institute for Counselling, Inc. changed its name to
"China Broadband Corp."
The "Company" refers to China Broadband Corp. and its subsidiaries.
THREE MONTH PERIOD ENDED JUNE 30, 2000
The Company was formed on February 1, 2000, and had no business
activities prior to that time. The discussion set forth below describes the
result of operation for the three-month period ended June 30, 2000.
Revenues. During the fiscal quarter ended June 30, 2000, the Company
had earned revenues of $83,333 revenues by providing technical consulting
services to Big Sky Network for the months of May and June 2000. The Company
earns $41,667 per month providing these services to Big Sky Network and expects
this revenue to continue to May, 2001. The Company also earned interest income
of $125,608 from its cash and short-term deposits.
Expenses. The Company incurred general operating expenses of $184,278.
These expenses included accounting and audit expenses of $28,376 and legal
expenses of $47,050 related to the preparation of the Company's reports under
the Securities Exchange Act of 1934, as amended. Consulting expenses of $52,890
and travel expenses of $45,420 were incurred during the three month period ended
June 30, 2000 primarily related to the negotiation of various joint venture
agreements in China, including the July 8, 2000 agreement with Chengdu Huayu
Information Co. Ltd. and the July 21, 2000 strategic alliance agreement with
Chengdu Huaya Information Co. Ltd. to develop a fiber optic network to connect
cities in the Sichuan province. The Company anticipates that expenses will
increase during the third and fourth quarters of 2000 as the Company's joint
venture operations begin to develop broadband service offerings in China and the
Company increases efforts to enter into additional joint ventures.
Loss. The Company had a loss of $116,180 from its operations. The
Company also recorded an equity loss of $80,099 related to Big Sky Network's
ongoing operating expenses incurred by the first joint venture offering services
in Shekou, China, leasing office space and hiring employees to commence signing
up subscribers. The Company's loss for the three-month period ended June 30,
2000, after interest income of $125,608, was of $70,671. The Company anticipates
that losses will increase in the third and fourth quarters of 2000, due to
expenses related to expanding its business operations to facilitate additional
joint venture relationships. The Company also anticipates
2
<PAGE>
that its equity loss related to Big Sky Network will increase in the third and
fourth quarters of 2000 as additional ongoing operating expenses are incurred as
joint venture agreements are executed and office space is leased and employees
are hired to commence signing up subscribers. Loss per share for the three-month
period ended June 30, 2000 is $nil.
Since the Company is in its development stage, all losses accumulated
since inception have been considered as part of the Company's development stage
activities.
PERIOD FROM INCEPTION (FEBRUARY 1, 2000) THROUGH JUNE 30, 2000.
The Company was formed on February 1, 2000, and had no business
activities prior to that time. On April 25, 2000, Big Sky Network issued 40,000
shares to SoftNet Systems, Inc. and, as a result, the company no longer
controlled Big Sky Network and deconsolidated the accounts of Big Sky Network
from April 25, 2000 onward. For the period from April 26, 2000 to June 30, 2000
the Company's investment in Big Sky Network is accounted for using the equity
method, resulting in an equity loss of $80,099 for the period.
Revenues. During the period from inception (February 1, 2000) through
June 30, 2000, the Company earned revenues of $83,333 by providing technical
consulting services to Big Sky Network for the months of May and June 2000. The
Company earns $41,667 per month providing these services to Big Sky Network and
expects this revenue to continue to May, 2001. The Company also earned interest
income of $125,608 from its cash and short-term deposits.
Expenses. The Company incurred general operating expenses of $441,854.
These expenses included accounting and audit expenses of $28,345 and legal
expenses of $95,739 related to the preparation of the Company's reports under
the Securities Exchange Act of 1934, as amended. Consulting expenses of $52,890
and travel expenses of $156,898 were incurred during the period ended June 30,
2000 primarily related to the negotiation of various joint venture agreements in
China, including the executed July 8, 2000 agreement with Chengdu Huayu
Information Co. Ltd. and the July 21, 2000 strategic alliance agreement with
Chengdu Huaya Information Co. Ltd. to develop a fiber optic network to connect
cities in the Sichuan Province. The Company anticipates that expenses will
increase in future periods as the Company begins to implement its business
strategy.
Loss. The Company had a loss of $373,756 from its operations during the
period. The Company also recorded an equity loss of $80,099 related to Big Sky
Network's ongoing operating expenses incurred by the first joint venture
offering services of Shekou, China, leasing office space and hiring employees to
commence signing up subscribers. The Company's loss for the period from
inception (February 1, 2000) through June 30, 2000, after interest income of
$125,608, was of $328,247 or $0.02 per share. The Company anticipates that it
will continue to incur losses in future periods until the Company's joint
venture partners successfully launch broadband subscription services and
revenues generated from subscriptions are sufficient to cover the costs
associated with business development and general administrative expense. The
Company also anticipates that its equity loss related to Big Sky Network will
increase in the third and fourth quarters of 2000 as additional ongoing
operating expenses are incurred as joint venture agreements are executed and
office space is leased and employees are hired to commence signing up
subscribers.
Since the Company is in its development stage, all losses accumulated
since inception have been considered as part of the Company's development stage
activities.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 2000, the Company had cash and cash equivalents of
$9,690,074, and working capital of $9,557,032. Since inception, the Company has
financed its operations primarily through sales of its equity securities and
raised a total of $11,842,320, net of share issuance costs of $50,183.
During the quarter ended June 30, 2000, the Company raised $11,392,503
through the issuance of common stock, and incurred share issuance costs of
$50,183. Cash increased from $738,201 at the beginning of the period to
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$9,690,074, an increase of $8,951,873. During the quarter ended June 30, 2000,
the Company used cash of $2,552,375. During the quarter ended June 30, 2000, the
Company invested $189,901 in Big Sky Network to meet its 50% working interest in
the Skekou joint venture. In addition, the Company advanced $1,995,465 to Big
Sky Network, allowing Big Sky to fund its monetary commitment to the Shekou
joint venture. In addition, the company had fixed asset additions of $56,910.
Operating activities included a loss of $55,436 for the quarter and a
non-cash equity loss in Big Sky Network of $80,099 and an inflow of cash flow
from changes in non-cash working capital accounts of $137,265 resulting
primarily from an increase in deferred revenue of $416,667 related to an advance
by Big Sky Network Canada Ltd. Systems, Inc. of ten months of technical
consulting fees, offset by increases of $186,114 to advances receivable from
officers and employees for travel advances and an increase of $64,217 for
prepaid expenses related to deposits on furniture and rent, retainers for legal
firm and transfer agent, and accrued interest receivable of $39,240.
During the quarter ended June 30, 2000, China Broadband Corp. completed
the following transactions related to its common stock:
- On April 14, 2000, China Broadband Corp. completed a
reverse-split of its common stock on a .65108 for 1 basis
reducing its issued and outstanding share capital from
2,319,000 to 1,509,850 shares of common stock.
- On April 14, 2000, China Broadband Corp. issued 13,500,000
shares of common stock for all of the issued and outstanding
stock of China Broadband (BVI) Corp.
- On April 14, 2000, China Broadband Corp. granted options to
officers, directors and consultants to China Broadband Corp.
exercisable to acquire a total of 4,175,000 shares at $1.00
per share. These options were fully vested and expire on April
14, 2005.
- In April 2000, China Broadband issued 500,000 shares at $0.20
per share; in May 2000, China Broadband issued 1,530,000
shares at $1.00 per share and 1,301,667 shares at $7.50 per
share. Total gross proceeds were $11,392,503.
PLAN OF OPERATION
As of June 30, 2000, the Company's management anticipates that the
Company currently has sufficient working capital to fund the Company's plan of
operation through the year ended December 31, 2000. The Company's costs to fund
its plan of operation for the fiscal year ending December 31, 2000 is estimated
to be approximately $8 million to $10 million (primarily salaries, travel,
office and other similar expenses). These funds are intended to permit us to
expand our marketing efforts through additions to staff and to develop and
execute a comprehensive market exposure program to implement our business
strategy of becoming a leading facilities-based provider of high capacity, high
speed Internet, data and voice services in the major urban markets throughout
the People's Republic of China.
The Company anticipates that its operating expenses and capital
expenditure may increase significantly during the year ending December 31, 2001,
the next phase of the Company's development. The amount and timing of
expenditures during the year ending December 31, 2001 will depend on the success
of any contracts it secures, and there is no assurance the Company will receive
significant revenues or operate profitably. Current cash resources are not
anticipated to be sufficient to fund the next phase of the Company's development
and management intends to seek additional private equity or debt financing.
There can be no assurances that any such funds will be available, and if funds
are raised, that they will be sufficient to achieve the Company's objective, or
result in commercial success.
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SUBSEQUENT EVENTS
Subsequent to the period ended June 30, 2000, the following events
occurred:
- Big Sky Network Canada Ltd. executed a joint venture
agreement dated July 8, 2000 with Chengdu Huayu Information
Co. Ltd., the municipal network company, to provide high-speed
Internet access via the cable television architecture in
Chengdu, the provincial capital of Sichuan Province.
- Big Sky Network Canada Ltd. entered into a strategic alliance
on July 21,2000 with Chengdu Huayu Information Co. Ltd. to
build a fiber optic network to connect cities in Sichuan
Province.
- China Broadband replaced Amisano Hanson, Chartered Accountants
as its independent auditor with Arthur Andersen LLP on August
24, 2000.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
a) Sales of Unregistered Securities
On April 14, 2000, China Broadband Corp. issued 13,500,000
shares of common stock for all of the issued and outstanding
stock of China Broadband (BVI) Corp. Theses shares were issued
pursuant to an exemption from registration under Rule 506 of
Regulation D promulgated under the Securities Act of 1933, as
amended.
On April 14, 2000, China Broadband Corp. granted options to
officers, directors and consultants to China Broadband Corp.
exercisable to acquire a total of 4,175,000 at $1.00 per
share. Theses securities were issued pursuant to an exemption
from registration under Rule 506 of Regulation D promulgated
under the Securities Act of 1933, as amended.
On April 14, 2000, China Broadband Corp. issued 500,000 shares
to accredited investors at $0.20 per share for gross proceeds
of $100,000. Theses securities were issued pursuant to an
exemption from registration under Rule 506 of Regulation D
promulgated under the Securities Act of 1933, as amended.
On May 12, 2000, China Broadband Corp. issued 1,530,000 shares
to accredited investors at $1.00 per share for gross proceeds
of $1,530,000. Theses securities were issued pursuant to an
exemption from registration under Rule 506 of Regulation D
promulgated under the Securities Act of 1933, as amended.
On May 12, 2000, China Broadband Corp. issued 1,301,667 shares
to accredited investors at $7.50 per share for gross proceeds
of $9,762,703. Theses securities were issued pursuant to an
exemption from registration under Rule 506 of Regulation D
promulgated under the Securities Act of 1933, as amended.
b) Use of Proceeds from Sales of Registered Securities
Not Applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
During the quarter ended June 30, 2000, there were no changes in or
disagreements with accountants on accounting or financial disclosure. On August
24, 2000, China Broadband Corp. replaced Amisano Hanson, Chartered Accountants
as its independent auditor with Arthur Andersen LLP. China Broadband Corp. filed
a current report on Form 8-K to report the change in auditors on August 24,
2000.
On September 22, 2000, China Broadbank Corp. replaced Arthur Andersen
LLP as its independent auditor with Deloitte & Touche LLP. China Broadband Corp.
filed a current report in Form 8-K to report the change in auditors on September
26, 2000.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
None.
(b) Reports on Form 8-K.
Form 8-K filed on April 28, 2000, reporting acquisition of
China Broadband (BVI) Corp.
Form 8-K/A filed on August 1, 2000, amending Form 8-K filed on
April 28, 2000, containing audited financial statements of
acquired business: China Broadband (BVI) Corp. -- Consolidated
Financial Statements Together With Auditors' Report as at
March 31, 2000 and for the Period from February 1, 2000 (date
of incorporation) to March 31, 2000.
Form 8-K filed on August 24, 2000, reporting change in
auditor.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CHINA BROADBAND CORP.
(formerly Institute for Counseling, Inc.)
Date: November 9, 2000 By: /s/ MATTHEW HEYSEL
--------------------------------
Name: Matthew Heysel
Title: Chief Executive Officer
Date: November 9, 2000 By: /s/ THOMAS MILNE
-----------------------------------
Name: Thomas Milne
Title: Chief Financial Officer
(Principal Financial and Accounting
Officer)
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