SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K/A
Amendment No. 1
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) April 14, 2000
China Broadband Corp.
--------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
Nevada
--------------------------------------------------------------------------------
(State or Other Jurisdiction of Incorporation)
0-28345 72-1381282
--------------------------------------------------------------------------------
(Commission File Number) (IRS Employer Identification No.)
2080, 442 - 2 Ave. S.W.
Calgary, Alberta, Canada T2P 5E9
--------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(403) 234-8885
--------------------------------------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
624 Wilderness Drive, S.E., Calgary, Alberta, Canada T2J 1Z2
--------------------------------------------------------------------------------
(Former name or Former Address, if Changed Since Last Report)
<PAGE>
Item 7. Financial Statements and Exhibits
(a) Financial Statements of the Business Acquired:
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.
(b) Exhibits
Exhibit
Number Description
------ -----------
2.1 Purchase Agreement for the Acquisition of CB-BVI. (previously
filed as Exhibit 2 on Form 8-K on April 28, 2000).
10.1 Joint Venture Contract between Big Sky and China Merchants.
(previously filed as Exhibit 10 on Form 8-K on April 28, 2000)
2
<PAGE>
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 hereunto duly authorized.
CHINA BROADBAND CORP.
-------------------------------------
(Registrant)
Date August 1, 2000 By: /s/ Matthew Heysel
-------------------------------------
Name: Matthew Heysel
Title: Chairman, Chief Executive
Officer and Director
3
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
------ -----------
2.1 Purchase Agreement for the Acquisition of CB-BVI. (previously
filed as Exhibit 2 on Form 8-K on April 28, 2000).
10.1 Joint Venture Contract between Big Sky and China Merchants.
(previously filed as Exhibit 10 on Form 8-K on April 28, 2000)
<PAGE>
China Broadband Corp.
Index to Financial Statements
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.
Auditors' Report .............................................F-1
Consolidated Balance Sheet ...................................F-2
Consolidated Statements of Operations ........................F-3
Consolidated Statement of Stockholders' Equity ...............F-4
Consolidated Statement of Cash Flows .........................F-5
Notes to Consolidated Financial Statements ...................F-6
<PAGE>
================================================================================
Auditors' Report
================================================================================
To the Shareholders of China Broadband (BVI) Corp.:
We have audited the consolidated balance sheet of China Broadband (BVI) Corp. (a
development stage enterprise) as at March 31, 2000 and the consolidated
statements of operations, stockholders' equity and cash flows for the period
from February 1, 2000 (date of incorporation) to March 31, 2000. These financial
statements are the responsibility of the Corporation's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards
in Canada which are substantially similar to auditing standards generally
accepted in the United States. Those standards require that we plan and perform
an audit to obtain reasonable assurance whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation.
In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the Corporation as at March 31,
2000 and the results of its operations and its cash flows for the period from
February 1, 2000 (date of incorporation) to March 31, 2000 in accordance with
generally accepted accounting principles in the United States.
Calgary, Canada. /s/ Arthur Andersen LLP
July 25, 2000. Chartered Accountants
F-1
<PAGE>
CHINA BROADBAND (BVI) CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED BALANCE SHEET
AS AT MARCH 31, 2000
(US Dollars)
ASSETS
CURRENT ASSETS
Cash $ 738,201
Due from officer (Note 4) 28,942
-------------
$ 767,143
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Shareholder advances (Note 4) $ 24,719
-------------
MINORITY INTEREST 230,000
-------------
STOCKHOLDERS' EQUITY
Common shares (Note 3) 770,000
Deficit (257,576)
-------------
512,424
$ 767,143
=============
Approved on behalf of the Board of China Broadband (BVI) Corp.
Director
----------------------------------------
Director
----------------------------------------
The accompanying notes are an integral part of
these consolidated financial statements.
F-2
<PAGE>
CHINA BROADBAND (BVI) CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE PERIOD FEBRUARY 1, 2000 (DATE OF INCORPORATION) TO MARCH 31, 2000
(US Dollars)
REVENUE $ -
-------------
GENERAL AND ADMINISTRATIVE EXPENSES 257,576
-------------
LOSS FOR THE PERIOD BEFORE PROVISION FOR
INCOME TAXES (257,576)
PROVISION FOR INCOME TAXES -
-------------
LOSS FOR THE PERIOD $ (257,576)
=============
BASIC LOSS PER SHARE $ (0.03)
=============
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 7,803,916
=============
The accompanying notes are an integral part of
these consolidated financial statements.
F-3
<PAGE>
CHINA BROADBAND (BVI) CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FEBRUARY 1, 2000 (DATE OF INCORPORATION) TO MARCH 31, 2000
(US Dollars)
<TABLE>
Common
Shares Deficit
------------- -------------
(Note 3)
<S> <C> <C>
February 1, 2000 $ - $ -
Issue of common shares for the outstanding shares of
Big Sky Networks Canada Ltd. (Note 1) 270,000 -
Issue of common shares for cash pursuant to private placement (Note 3) 500,000 -
Loss for the period - (257,576)
------------- -------------
March 31, 2000 $ 770,000 $ (257,576)
============== =============
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
F-4
<PAGE>
CHINA BROADBAND (BVI) CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIOD FEBRUARY 1, 2000 (DATE OF INCORPORATION) TO MARCH 31, 2000
(US Dollars)
OPERATING ACTIVITIES
Loss for the period $ (257,576)
Changes in non-cash operating working capital
Due from officer (28,942)
Shareholder advances 24,719
-------------
(261,799)
FINANCING ACTIVITIES
Issue of common shares for cash 500,000
-------------
INVESTING ACTIVITIES
Cash acquired on the consolidation of Big Sky Networks
Canada Ltd. (Note 1) 500,000
-------------
INCREASE IN CASH 738,201
CASH, beginning of period -
-------------
CASH, end of period $ 738,201
=============
The accompanying notes are an integral part of
these consolidated financial statements.
F-5
<PAGE>
CHINA BROADBAND (BVI) CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
(US Dollars)
1. INCORPORATION AND NATURE OF BUSINESS
China Broadband (BVI) Corp. (the "Corporation") was incorporated in the
Territory of the British Virgin Islands on February 1, 2000 under the
International Business Companies Act. The Corporation 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.
The Corporation acquired 50,000 shares representing all of the outstanding
shares of Big Sky Networks 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 the Corporation. The Corporation 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
Corporation constituting of all of its issued and outstanding shares.
On February 22, 2000, BSN issued an additional 10,000 shares to SoftNet
Systems, Inc. for cash consideration of $500,000. On April 25, 2000, BSN
issued a further 40,000 shares to SoftNet Systems, Inc. for cash
consideration of $2,000,000.
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.
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
F-6
<PAGE>
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 adverse affect on
the Corporation's business, financial condition and results of operations.
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.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The consolidated financial statements have been prepared in accordance with
accounting principles generally accepted in the United States.
Consolidation
The consolidated financial statements include the accounts of the
Corporation and its subsidiary, BSN. At March 31, 2000, BSN is 83% owned by
the Corporation (See Note 1). All material intercompany accounts and
transactions have been eliminated. Following the issuance of 40,000 shares
of BSN to SoftNet Systems, Inc. on April 25, 2000, BSN will become a 50%
owned investment of the Corporation and will be accounted for using the
equity method.
Estimates and assumptions
The preparation of these consolidated financial statements in accordance
with generally accepted accounting principles in the United States 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 these consolidated financial statements and the
reported amount of revenues and expenses during the reporting period.
Actual results may differ from those estimates.
Foreign currency translation
The Corporation uses the U.S. dollar as its reporting currency. The
Corporation had not commenced operations as of March 31, 2000 and all
significant transactions have been transacted in U.S. dollars, or converted
to U.S. dollars at the exchange rates in effect at the dates the
transactions occurred.
When operations commence in the People's Republic of China, the functional
currency of the Shenzhen JV and any other joint ventures to be entered into
will be Chinese renminbi, as it is anticipated that the joint venture
operations will be financially and operationally independent. Foreign
currency denominated accounts and transactions will be translated to U.S.
dollars as follows:
o all asset and liability accounts will be translated into U.S. dollars
at the rate of exchange in effect as of the end of the fiscal year;
F-7
<PAGE>
o all shareholders' equity accounts will be translated into U.S. dollars
using historical exchange rates; and
o all revenue and expense accounts will be translated into U.S. dollars
at the average rate of exchange for the fiscal year.
Cumulative gain or loss arising from the conversion of the foreign currency
denominated accounts and transactions into U.S. dollars will be recorded as
a foreign currency translation adjustment as a component of accumulated
other comprehensive income or loss for that period.
Income taxes
The Corporation follows the liability method of accounting for income taxes
pursuant to Statement of Financial Accounting Standards, No. 109
"Accounting for Income Taxes." The Corporation is incorporated in the
Territory of the British Virgin Islands where there are no corporate income
taxes, and accordingly, no income taxes are recorded in these financial
statements. When operations commence in the People's Republic of China, the
Shenzhen joint venture and any other joint ventures to be entered into,
will be subject to corporate income taxes at the statutory rates in the
People's Republic of China.
Net income per share
Net income per share is calculated using the weighted average number of
shares outstanding during the period.
Fair value of financial instruments
The Corporation's financial instruments consist of cash, shareholder
advances and amount due from officer. As at March 31, 2000, the carrying
value of the advances and amount due approximated their fair value due to
their short-term nature.
3. COMMON SHARES
Authorized
The authorized capital of the Corporation is 20,000,000 common shares
having a par value of $1.00 each.
Issued
<TABLE>
Number Amount
-------------- ---------------
<S> <C> <C>
Common shares issued for the outstanding shares of BSN 12,500,000 $ 270,000
Issuance of common shares for cash pursuant to a private
placement at $0.20 per share 2,500,000 500,000
-------------- ---------------
15,000,000 $ 770,000
============== ===============
</TABLE>
F-8
<PAGE>
4. RELATED PARTY TRANSACTIONS
The amount due from officer of $28,942 is an advance for travel expenses,
is non-interest bearing and payable on demand. Subsequent to March 31,
2000, $28,942 has been incurred on travel and related expenses on behalf of
the Corporation.
Shareholder advances of $24,719 is non-interest bearing and payable on
demand.
5. RECENT PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 133, "Accounting for Derivative
Instruments and Hedging Activities," as subsequently amended by Statement
of Financial Accounting Standard No. 137, which established accounting and
reporting standards requiring that every derivative instrument, including
certain derivative instruments embedded in other contracts, be recorded in
the balance sheet as either an asset or liability measured at its fair
value for fiscal quarters of fiscal years beginning after June 15, 2000. It
is management's opinion that this standard will not have a significant
impact on the Corporation's consolidated financial position, results of
operations or cash flows.
6. EVENTS SUBSEQUENT TO MARCH 31, 2000
In addition to the subsequent event described in Note 1, on April 14, 2000,
the Corporation was acquired by China Broadband Corp. ("CBB") (formerly,
Institute for Counseling, Inc.) in a transaction accounted for as a
recapitalization. This recapitalization was effected through the issuance
of 13,500,000 common shares of CBB, constituting approximately 90% of its
shares outstanding after the acquisition, in exchange for all of the
outstanding shares of the Corporation. Before the acquisition, CBB had
1,500,000 common shares outstanding.
As a result of the application of the accounting principles governing
recapitalizations, the Corporation is treated as the acquiring or
continuing entity for financial accounting purposes.
The recapitalization of the Corporation will be accounted for as an
issuance of stock by the Corporation in exchange for the tangible net
assets of CBB, valued at fair value, which approximates CBB's historical
costs. As a result, the consolidated financial statements will be deemed to
be a continuation of the Corporation's historical financial statements.
CBB had no significant operations in the preceding year, incurring general
and administrative expenses of approximately $28,000. The following pro
forma balance sheet as at March 31, 2000 reflects the recapitalization and
the April 25, 2000 issuance of 40,000 BSN shares to SoftNet Systems, Inc.
as if they had both occurred on March 31, 2000. This pro forma balance
sheet has been prepared for information purposes only and does not purport
to be indicative of what the financial position would have been had the
above two transactions actually taken place on March 31, 2000, and may not
be indicative of any future financial position.
March 31, 2000
--------------
(unaudited)
Current assets $ 275,000
Investment in BSN 270,000
-------------
$ 545,000
Current Liabilities $ 36,000
Stockholders' Equity 509,000
-------------
$ 545,000
F-9
<PAGE>
Subsequent to April 14, 2000, the Corporation issued the following shares
in a series of private placement agreements:
i) 500,000 common shares at $0.20 per share for total proceeds of
$100,000;
ii) 1,530,000 common shares at $1.00 per share for total proceeds of
$1,530,000;
iii) 1,301,667 common shares at $7.50 per share for total proceeds of
$9,762,500.
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.
F-10
