UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Commission file number: 0-26217
CHINA NETTV HOLDINGS INC.
(Exact name of small business issuer as specified in its charter)
Nevada 98-02031-70
(State or other jurisdiction of (IRS Employee Identification No.)
incorporation or organization)
Suite 830 - 789 West Pender Street, Vancouver, B.C. V6C 1H2
(Address of principal executive offices)
(604) 689-4407
(Issuer's telephone number)
Securities Registered pursuant to section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934
during the preceding 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
----- -----
Check if disclosure of delinquent filers pursuant to Item 405 of Regulation S-B
is not contained in this form, and no disclosure will be contained, to the best
of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB.
X
-----
State issuer's revenues for its most recent fiscal year. $0
Aggregate market value of the voting stock held by non-affiliates of the
registrant as of August 31, 2000. $50,859,300
Number of outstanding shares of the registrant's par value $0.0001 common stock,
as of August 31, 2000. 13,562,480
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CHINA NETTV HOLDINGS INC.
FORM 10-KSB
INDEX
Page
----
Part I
Item 1. Business...........................................................3
Item 2. Properties.........................................................6
Item 3. Legal Proceedings..................................................6
Item 4. Submission of Matters of a Vote of Security Holders................6
Part II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters................................................7
Item 6. Management's Discussion and Analysis of Financial
Condition and Results of Operation.................................7
Item 7. Financial Statements and Supplementary Data........................12
Item 8. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure................................12
Part III
Item 9. Directors and Executive Officers of the Registrant.................12
Item 10. Executive Compensation.............................................14
Item 11. Security Ownership of Certain Beneficial Owners and Management.....16
Item 12. Certain Relationships and Related Transactions.....................17
Part IV
Item 13. Exhibits, Financial Statement Schedule and Reports on Form 8-K.....17
Signatures ..............................................................28
2
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Part I
ITEM 1. BUSINESS
When used in this Form 10-KSB, the words "expects," "anticipates," "estimates"
and similar expressions are intended to identify forward-looking statements.
Such statements are subject to risks and uncertainties, including those set
forth below under "Risks and Uncertainties," that could cause actual results to
differ materially from those projected. These forward-looking statements speak
only as of the date hereof. The Company expressly disclaims any obligation or
undertaking to release publicly any updates or revisions to any forward-looking
statements contained herein to reflect any change in the Company's expectations
with regard thereto or any change in events, conditions or circumstances on
which any statement is based. This discussion should be read together with the
financial statements and other financial information included in this Form
10-KSB.
(a) General Description and Development of Business
HISTORY OF COMPANY
The Company was incorporated on September 15, 1998 as Vancouver's Finest Coffee
Company for the purpose of building a retail premium coffee business that sells
premium quality coffee drinks through Company-owned and operated retail kiosks.
In early 2000, the Company commissioned a study into the viability of the coffee
kiosk business and, at the Company's Annual General Meeting in March, 2000, the
shareholders have approved a resolution for the directors to pursue another line
of business other than the originally proposed coffee kiosk business.
In May 2000, the Company acquired 100% control of China NetTV Inc., a British
Virgin Islands company. China NetTV has a Letter of Intent to form a Joint
Venture in China with Sichuan QianFeng Digital Audio/Video Equipment Co. Ltd.
In June 2000, China NetTV Inc. signed a Joint Venture contract with Sichuan
QianFeng Digital Audio/Video Equipment Co. Ltd.
In September 2000, the Joint Venture Company Chengdu Qianfeng NetTV Co., Ltd.
was formed after receiving approval from Moftec (Ministry of Foreign Trade and
Economic Cooperation).
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BUSINESS
CORPORATE OVERVIEW
The Company structure and major subsidiaries is as follows, with the
jurisdiction of incorporation of each subsidiary included in parentheses:
+--------------------------+
---------| CHINA NETTV HOLDINGS INC.|
| | (Nevada, USA) |
| +--------------------------+
+------------------------+
|China NetTV Inc. |
|(100% owned) |
|(British Virgin Islands)|
+------------------------+
|
|
+------------------------+ +-----------------------------------------------+
|China Net TV (H.K.) Ltd.| |Chengdu Qianfeng NetTV Co., Ltd. |
|(100% owned) |-----|Joint Venture with Qianfeng Digital Audio/Video|
|(Hong Kong) | |Equipment Co. Ltd. |
+------------------------+ |(51% owned) |
|(Sichuan, CHINA) |
+-----------------------------------------------+
GENERAL OPERATIONS
The Company was formed with the intent of construction and promotion of coffee
kiosks in and around Vancouver, B.C. The Company was initially incorporated as
Vancouver's Finest Coffee Company on September 15, 1998. Pursuant to an
independent study on the business potential of the coffee kiosk business in
Vancouver indicating that the business no longer presented the potential
initially anticipated, the Company's management abandoned the coffee kiosk
business in March of this year.
On May 4, 2000, the Company signed an agreement to acquire China NetTV Corp., a
company organized under the laws of the British Virgin Islands, who in turn had
signed a letter of intent with Sichuan Qianfeng Digital Audio/Video Equipment
Co. Ltd. ("QF Digital") of China, to form a co-operative Joint Venture in China.
On May 30, 2000, the Company changed its name to China NetTV Holdings Inc. to
reflect its change in business. The Company intends to develop digital set-top
box technologies in China through its Joint Venture Agreement with QF Digital.
CURRENT BUSINESS
Through its wholly owned subsidiary, China NetTV Inc., the Company is in a Joint
Venture with Qianfeng Digital Audio/Video Equipment Co. Ltd. The Joint Venture
is approved by Moftec (Ministry of Foreign Trade and Economic Cooperation).
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QF Digital was formed in 1998 from its parent Company, Chengdu QianFeng
Electronics Company Limited ("QianFeng Electronics"), a Shanghai Stock Exchange
listed company, to concentrate on digital products. QianFeng Digital supplies
proprietary digital data transmission technology and solutions for the
television broadcasting and cable industries in China. It is an integrated
supplier of complete turnkey digital TV broadcasting solutions.
Since inception, QF Digital has also developed its own proprietary IC chip
technology and has started to produce DVD and VCD players for the local market.
QF Digital is now developing a series of DTV-C (Digital TV - Cable) products
including the DTV-C Set Top Box. The DTV-C Set Top Boxes will be exported to the
North American market and marketed to the Chinese TV market.
JOINT VENTURE AGREEMENT
The terms of the Joint Venture contract signed between China NetTV Corp., a
wholly owned subsidiary of the Company, and Qianfeng Digital Audio/Video
Equipment Co. Ltd. (QF Digital) are as follows:
o A Ministry of Foreign Trade and Economic Co-operation approved
Joint-Venture Company was formed in China on September 4, 2000.
o China NetTV owns 51% and QF Digital owns 49%.
o China NetTV controls the Board of Directors 4 : 3.
o China NetTV will provide start-up financing of US$1.5 million.
o QF Digital will vend in all its assets, including technology
contracts to own 49%.
o China NetTV will provide further financing of up to another $8.5
million to grow the business.
INDUSTRY - NORTH AMERICAN MARKET
According to a Value Line report dated April 7, 2000, the deployment of digital
video and data services is still in the very early stages. Several years ago,
cable operators in the United States begin installing digital headend systems
and set top converters. The deployment gained significant momentum last year,
fueled in part, by AT&T's acquisition of cable giant TCI.
In terms of digital penetration, however, the transition is just beginning, with
U.S. market share of below 8% or less than 4 million digital video subscribers.
Rapid growth is expected as the two dominant players in this market,
Scientific-Atlantic and Motorola's General Instrument plan to rapidly saturate
the U.S. market over the next 3 to 5 years. The Company believes that foreign
operators (China NetTV is planning to export), which tend to be a few years
behind their American counterparts, will drive the North American market by the
end of the decade.
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INDUSTRY - CHINESE MARKET
According to an Asian Initiatives Inc. Report, China has 350 million analog TV
sets served by cable, non-cable as well as satellite operators. The Ministry
responsible for broadcasting lists over 5,300 cable operators and almost 40,000
stations and relay stations. There is over 250,000 km of fiber optic cable and
10 times as much non-fiber cable. Microwave covers another 80,000 km. There are
350 million TV sets in China growing at a rate of 10% per year and over 80
million cable subscribers, with that number expecting to grow at a rate of over
10 million per year. The Chinese TV market is a growing one and these are all
potential Digital TV Cable users.
COMPETITIVE ADVANTAGE
The Company believes by entering in a Joint Venture Agreement with Qianfeng
Digital, it will have a distinct competitive advantage in the Chinese and Asian
marketplace.
QF Digital's parent company, QF Electronics, was designated as a High Technology
Enterprise by the Government of China in 1995, and the formation of QF Digital
was approved and supported by the Chinese Department of Electronics Industry. QF
Digital is also currently acting as an advisor to the Ministry with regards to
the migration of analog broadcasting to digital broadcasting. The history of
Government support for the Company's joint venture partner assists in
establishing credibility.
QF Digital is also a very well known brand name in China, especially in
Southwestern China where initial operations will be launched. The Company
believes market penetration will be assisted as a result of working with an
established company.
Finally, QF Digital's history of working closely with the Cable Companies in
China, in particular Sichuan Cable, to introduce digital broadcasting to their
systems, gives the Company an immediate establishment within the region.
The Company believes that it will be able to take advantage of its position in
the market through the competitive advantages it holds as a result of its joint
venture agreement with Qianfeng Digital.
EMPLOYEES
As of August 31, 2000, the Company currently has no employees. The Company
continues to rely on the expertise of the officers and directors to carry out
its business strategy. The Company anticipates the need for increased
administrative and other staff as the business of the Company grows.
6
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ITEM 2. PROPERTIES
The Company currently maintains an office at Suite 830 - 789 West Pender Street,
Vancouver, B.C., Canada as its corporate headquarters.
As of August 31, 2000, The Registrant had the following tangible assets. (The
amount is quoted in US Dollar)
(a) Real Estate. None
(b) Computer and Office Equipment $0
ITEM 3. LEGAL PROCEEDINGS
The Company is not, and does not anticipate being a party to any legal
proceedings in the foreseeable future.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted during the fiscal year covered by this report to a
vote of security holders of the Company, through the solicitation of proxies or
otherwise.
Part II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
(a) The Company's common stock is traded on the NASD Electronic Bulletin Board
under the symbol "CNHD". Prices reported represent prices between dealers, do
not include markups, markdowns or commissions and do not necessarily represent
actual transactions. The market for the Company's shares has been sporadic and
at times very limited.
The following table sets forth high and low bid quotations of the Company's
common stock for the fiscal year ended August 31, 2000 as follows:
Bid
2000
High Low
First Quarter n/a n/a
Second Quarter n/a n/a
Third Quarter n/a n/a
Fourth Quarter 4.00 1.00
7
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Such Bulletin Board quotations reflect interdealer prices, without mark up, mark
down or commission and may not necessarily represent actual transactions.
(b) As of August 31, 2000, the Company had approximately 44 shareholders of
record of the common stock.
(c) No dividends on outstanding common stock have been paid within the last two
fiscal years, and interim periods. The Company does not anticipate or intend
upon paying dividends for the foreseeable future.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
When used in this Form 10-KSB, the words "expects," "anticipates," "estimates"
and similar expressions are intended to identify forward-looking statements.
Such statements are subject to risks and uncertainties, including those set
forth below under "Risks and Uncertainties," that could cause actual results to
differ materially from those projected. These forward-looking statements speak
only as of the date hereof. The Company expressly disclaims any obligation or
undertaking to release publicly any updates or revisions to any forward-looking
statements contained herein to reflect any change in the Company's expectations
with regard thereto or any change in events, conditions or circumstances on
which any statement is based. This discussion should be read together with the
financial statements and other financial information included in this Form
10-KSB.
The Company had cash capital of $194,931 at 2000 year end.
The Company had no other capital resources other than the ability to use its
common stock to achieve additional capital raising in a private placement. At
the fiscal year end the Company had $194,931 in current assets and current
liabilities of $86,271.
The increase in cash was due to a private placement of 8,500 units.
Plan of Operation
-----------------
At the Company's First Annual General Meeting held on March 24, 2000, the
Company's shareholders approved a resolution to allow the directors to pursue
another line of business other than the originally proposed coffee kiosk
business. Based on the analysis of the merits of the coffee kiosk business,
management made the decision not to continue to proceed in this direction.
8
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On May 4, 2000, the Company signed an agreement to acquire China NetTV Corp.,
who in turn had signed a letter of intent with Sichuan Qianfeng Digital
Audio/Video Equipment Co. Ltd. to form a co-operative Joint Venture in China.
On May 11, 2000, the Company accepted the resignation of Kirsten Wilson, Ryan
Wilson and Fred Burns and appointed Ernest Cheung, Maurice Tsakok and Marc Hung
to the Board of Directors. Mr. Cheung was appointed President of the Company.
On May 30, 2000, the Company changed its name to China NetTV Holdings Inc. to
reflect its change in business.
On July 10, 2000, the Company's wholly owned subsidiary, China NetTV Inc. signed
a joint - venture contract with Sichuan Qianfeng Digital Audio/Video Equipment
Co. Ltd. ("QF Digital"). Under the terms of the Joint-Venture, QF Digital will
contribute all of its assets and the Company will invest $1.5 million to finance
initial production.
Liquidity and Capital Resources
-------------------------------
The Company has had no revenues from operations since inception. The operations
of the Company have been financed through private placements.
In July 2000 the Company commenced a private placement of up to 5,000,000 units
at $2.00 per unit. Each unit consists of one share of common capital stock of
the Company and one warrant. Each warrant entitles the investor to purchase an
additional unit until August 15, 2002 for $3.00. Each additional unit consists
of one share of common stock and one warrant to purchase an additional common
share for $5.00 until August 15, 2003. There is no minimum sales requirement and
the shares will be issued on the closing date of the private placement. The
terms of the sale provides for a commission of 7% to be paid by cash or common
stock of the Company, at the option of the sales agent, excepting the sales made
by related parties. At September 30, 2000, the Company had received $170,000 for
the purchase of 8,500 units on which a 7% commission will be paid.
Results of Operations
---------------------
The Company has had no operations during this reporting period.
RISKS AND UNCERTAINTIES
The Company has sought to identify what it believes to be the most significant
risks to its business, but cannot predict whether or to what extent any of such
risks may be realized nor can there be any assurances that the Company has
identified all possible risks that might arise. Investors should carefully
consider all of such risk factors before making an investment decision with
respect to the Company's stock.
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LIMITED OPERATING HISTORY; ANTICIPATED LOSSES; UNCERTAINLY OF FUTURE RESULTS.
China NetTV Holdings Inc. has only a limited operating history upon which an
evaluation of the Company and its prospects can be based. The Company's
prospects must be evaluated with a view to the risks encountered by a company in
an early stage of development, particularly in light of the uncertainties
relating to the new and evolving distribution methods with which the Company
intends to operate and the acceptance of the Company's business model. To the
extent that such expenses are not subsequently followed by commensurate
revenues, the Company's business, results of operations and financial condition
will be materially adversely affected. There can be no assurance that the
Company will be able to generate sufficient revenues from the sale of their
products. If cash generated by operations is insufficient to satisfy the
Company's liquidity requirements, the Company may be required to sell additional
equity or debt securities. The sale of additional equity or convertible debt
securities would result in additional dilution to the Company's stockholders.
POTENTIAL FLUCTUATIONS IN QUARTERLY OPERATING RESULTS.
The Company's quarterly operating results may fluctuate significantly in the
future as a result of a variety of factors, most of which are outside the
Company's control, including: the level of use of the Digital Audio/Video
equipment; the demand for high-tech goods; seasonal trends purchases of
electronics, and advertising placements; the amount and timing of capital
expenditures and other costs relating to the expansion of the Company's
manufacturing operations; the introduction of new products and services by the
Company or its competitors; price competition or pricing changes in the
industry; technical difficulties or product development difficulties; general
economic conditions, and economic conditions specific to Digital Audio/Video
equipment. The Company's quarterly results may also be significantly impacted by
the impact of the accounting treatment of acquisitions, financing transactions
or other matters. Particularly at the Company's early stage of development, such
accounting treatment can have a material impact on the results for any quarter.
Due to the foregoing factors, among others, it is likely that the Company's
operating results will fall below the expectations of the Company or investors
in some future quarter.
LIMITED PUBLIC MARKET, POSSIBLE VOLATILITY OF SHARE PRICE.
The Company's Common Stock is currently quoted on the NASD OTC Bulletin Board
under the ticker symbol CNHD. As of August 31, 2000, there were approximately
13,562,480 shares of Common Stock outstanding, of which approximately 7,562,480
were tradable without restriction under the Securities Act. There can be no
assurance that a trading market will be sustained in the future. Factors such
as, but not limited to, technological innovations, new products, acquisitions or
strategic alliances entered into by the Company or its competitors, failure to
meet security analysts' expectations, government regulatory action, patent or
proprietary rights developments, and market conditions for technology stocks in
general could have a material effect on the volatility of the Company's stock
price.
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MANAGEMENT OF GROWTH
The Company, through its subsidiaries, expects to experience significant growth
in the number of employees and the scope of its operations. In particular, the
Company intends to hire additional engineering, sales, marketing, and
administrative personnel. Additionally, acquisitions could result in an increase
in employee headcount and business activity. Such activities could result in
increased responsibilities for management. The Company believes that is ability
to increase its customer support capability and to attract, train, and retain
qualified technical, sales, marketing, and management personnel, will be a
critical factor to its future success. In particular, the availability of
qualified sales engineering and management personnel is quite limited, and
competition among companies to attract and retain such personnel is intense.
During strong business cycles, the Company expects to experience continued
difficulty in filling its needs for qualified sales, engineering, and other
personnel.
The Company's future success will be highly dependent upon its ability to
successfully manage the expansion of its operations. The Company's ability to
manage and support its growth effectively will be substantially dependent on its
ability to implement adequate improvements to financial and management controls,
reporting and order entry systems, and other procedures and hire sufficient
numbers of financial, accounting, administrative, and management personnel. The
Company's expansion and the resulting growth in the number of its employees has
resulted in increased responsibility for both existing and new management
personnel. The Company is in the process of establishing and upgrading its
financial accounting and procedures. There can be no assurance that the Company
will be able to identify, attract, and retain experienced accounting and
financial personnel. The Company's future operating results will depend on the
ability of its management and other key employees to implement and improve its
systems for operations, financial control, and information management, and to
recruit, train, and manage its employee base. There can be no assurance that the
Company will be able to achieve or manage any such growth successfully or to
implement and maintain adequate financial and management controls and
procedures, and any inability to do so would have a material adverse effect on
the Company's business, results of operations, and financial condition.
The Company's future success depends upon its ability to address potential
market opportunities while managing its expenses to match its ability to finance
its operations. This need to manage its expenses will place a significant strain
on the Company's management and operational resources. If the Company is unable
to manage its expenses effectively, the Company's business, results of
operations, and financial condition will be materially adversely affected.
RISKS ASSOCIATED WITH ACQUISITIONS.
As part of its business strategy, the Company expects to acquire assets and
businesses relating to or complementary to its operations. These acquisitions by
the Company will involve risks commonly encountered in acquisitions of
companies. These risks include, among other things, the following: the Company
may be exposed to unknown liabilities of the acquired companies; the Company may
incur acquisition costs and expenses higher than it anticipated;
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fluctuations in the Company's quarterly and annual operating results may occur
due to the costs and expenses of acquiring and integrating new businesses or
technologies; the Company may experience difficulties and expenses in
assimilating the operations and personnel of the acquired businesses; the
Company's ongoing business may be disrupted and its management's time and
attention diverted; the Company may be unable to integrate successfully.
POLITICAL RISKS
The market in China is monitored by the government, which could impose taxes or
restrictions at any time which would make operations unprofitable and infeasible
and cause a write-off of capital investment in Chinese manufacturing
opportunities.
A number of factors, beyond the Company's control and the effect of which cannot
be accurately predicted may affect the marketing of the Company's digital
set-top boxes. These factors include political policy on foreign ownership,
political policy to open the doors to foreign investors, and political policy on
technology exports.
RISKS ASSOCIATED WITH INTERNATIONAL MARKETS
The future success of the Company will depend in part on its ability to generate
sales within China. There can be no assurance, however, that the Company will be
successful in generating sales of its products. In addition, these will be
subject to a number of risks, including: foreign currency risk; the risks that
agreements may be difficult or impossible to enforce and receivables difficult
to collect through a foreign country's legal system; foreign customers may have
longer payment cycles; or foreign countries could impose withholding taxes or
otherwise tax the Company's foreign income, impose tariffs, embargoes, or
exchange controls, or adopt other restrictions on foreign trade. In addition,
the laws of certain countries do not protect the Company's offerings and
intellectual property rights to the same extent as the laws of the United
States. The Company has taken steps to mitigate these risks through joint
ventures with domestic Chinese companies, but there can be no assurance in the
adequacy of these protection measures.
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The response to this Item is included as a separate Exhibit to this report.
Please see pages 17 through 26.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
In connection with the audits of the most recent fiscal years and any interim
period preceding resignation, no disagreements exist with any former accountant
on any matter of accounting principles or procedure, which disagreements if not
resolved to the satisfaction of the former accountant would have caused them to
make reference in connection with their report to the subject matter of the
disagreement(s).
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The principal accountant's report on the financial statements for any of the
past two years contained no adverse opinion or a disclaimer of opinion nor was
qualified as to uncertainty, audit scope or accounting principles.
Part III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a) The following table furnishes the information concerning the Company's
directors and officers as of August 31, 2000. The directors of the Company are
elected every year and serve until their successors are elected and qualify.
Name Age Title Term
---- --- ----- ----
Ernest Cheung 50 President, Treasurer and Director Annual
Maurice Tsakok 49 Secretary and Director Annual
Marc Hung 55 Director Annual
On May 11, 2000, the Company appointed Ernest Cheung, Maurice Tsakok and Marc
Hung as members of the Board of Directors
On May 11, 2000, the Company accepted the resignations of Kirsten Wilson as
President and Director, Ryan Wilson as Secretary, Treasurer and Director, and
Fred Burns as Director, effective immediately.
On May 11, 2000, the remaining Board Members decided not to fill the vacancies
left by the resignation of the above Directors. Mr. Cheung was appointed
President and Treasurer of the Company. Mr. Tsakok was appointed Secretary of
the Company.
The following table sets forth the portion of their time the Officers and
Directors devote to the Company:
Ernest Cheung 30%
Maurice Tsakok 25%
Marc Hung 25%
The term of office for each director is one (1) year, or until his/her successor
is elected at the Company's annual meeting and is qualified. The term of office
for each officer of the Company is at the pleasure of the board of directors.
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The board of directors does not have a nominating committee. Therefore, the
selection of persons or election to the board of directors was neither
independently made nor negotiated at arm's length.
(b) Identification of Certain Significant Employees.
Strategic matters and critical decisions are handled by the directors and
executive officers of the Company.
(c) Family Relationships. None
(d) Business Experience.
The following is a brief account of the business experience during the past five
years of each director and executive officer of the Company, including principal
occupations and employment during that period and the name and principal
business of any corporation or other organization in which such occupation and
employment were carried on.
Ernest Cheung, President, Treasurer, and Director, age 50, has held these titles
with the Company since May, 2000. He received a B. Math in 1973 from University
of Waterloo Ontario. He received an MBA in Finance and Marketing from Queen's
University, Ontario in 1975. From 1991 to 1993 he was Vice President of Midland
Walwyn Capital, Inc. of Toronto, Canada, now Merrill Lynch Canada. From 1992
-1995 he served as Vice President and Director of Tele Pacific International
Communications Corp. He has also served as President for Richco Investors, Inc.
since 1995. He is currently a Director of Xin Net Corp. since 1997, Agro
International Holdings, Inc. since 1997, Spur Ventures, Inc. since 1997, Richco
Investors Inc. since 1995 and Drucker Industries, Inc. since 1997.
Maurice Tsakok, Director since May 2000, age 49, was employed, from 1976 to
1994, by Bank of Montreal as Systems Analyst, from 1994 to 1996, by Sagit Mutual
Funds, a mutual fund company who as a Vice-President was responsible for
computer operations and research on global technology companies. From 1997 to
present, he acted as a consultant on the high-tech industry and provides
technical analysis on high-tech companies. He holds a Mechanical Engineering
degree (1974 University of Minnesota) as well as an MBA specializing in
Management Information Systems (MIS) (1976 Hofstra University). From 1997 to
date he has been a principal director in Gemsco Management, Ltd. He has been a
Director of the Company since 1996. He is currently a Director of Xin Net Corp.
since 1997, Richco Investors Inc. since 1995.
Marc Hung, B.A.Sc.(E.E.), M.A. Sc. (E.E.) University of Montreal (1969 & 1971),
Director since May 2000, age 55. From May 1992 to April 1997, Marc Hung was
director, Power System Technology, a division of Institut de Recherche en
Electricite du Quebec (IREQ), Hydro-Quebec's Research Institute. His main tasks
consisted of general management, networking, promotion of the division's
technological products and services and negotiations with potential partners for
spinning off promising innovations.
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The field of responsibility included, amongst others, software products and
services, software engineering and telecommunications technology. From May 1997
to June 1998, he was loaned by Hydro-Quebec to the Canadian Centre for Magnetic
Fusion (CCFM), a fundamental research entity formed by Hydro-Quebec, the
Institute National de Recherche Scientifique (INRS) and (up to March 1997)
Atomic Energy of Canada Ltd. Besides general management, his main mandate was to
develop and propose a plan for the commercialization of the Centre's innovative
products and services. From 1997 to date he has been President and principal of
Sinhoy Management, Ltd. He is currently a Director and President of Xin Net
Corp. since 1998.
(e) Directors Compensation
Directors who are also officers of the Registrant receive no cash compensation
for services as a director. On May 31, 2000, the Company granted 2,000,000 stock
options at $2.00 per share with an expiry date of May 31, 2005, of which 500,000
of the options were issued indirectly to the Company's Officers and Directors
through separate management companies. As of August 31, 2000, no options have
yet been exercised.
ITEM 10. EXECUTIVE COMPENSATION
Section 16(a) of the Securities Exchange Act of 1934, as amended (The "Exchange
Act"), requires the Registrant's officers and directors, and persons who own
more than 10% of a registered class of the Registrant's equity securities, to
file reports of ownership and changes in ownership of equity securities of the
Registrant with the Securities and Exchange Commission and NASDAQ. Officers,
directors and greater-than 10% shareholders are required by the Securities and
Exchange Commission regulation to furnish to Registrant with copies of all
Section 16(a) that they file.
Some of the officers and directors of the Company will not devote more than a
portion of their time to the affairs of the Company. There will be occasions
when the time requirements of the Company's business conflict with the demands
of their other business and investment activities. Such conflict may require
that the company attempt to employ additional personnel. There is no assurance
that the services of such persons will be available or that they can be obtained
upon terms favorable to the Company.
EXECUTIVE COMPENSATION
(a) Cash Compensation.
Compensation paid by the Company for all services provided up to August 31, 2000
to each of its executive officers
15
<PAGE>
<TABLE>
SUMMARY COMPENSATION TABLE OF EXECUTIVES
<CAPTION>
Annual Compensation Long Term Compensation
<S> <C> <C> <C> <C> <C> <C>
(a) (b) (c) (d) (e) (f) (g)
Name and Year Salary Bonus Other Restricted Securities
Principal ($) ($) Annual Stock Underlying/
Position Compensation Awards Options
($) ($) (#)
Ernest Cheung 2000 0 0 0 0 300,000 (1)
President, Treasurer
and Director
Maurice Tsakok 2000 0 0 0 0 100,000 (2)
Secretary and Director
Marc Hung 2000 0 0 0 0 100,000 (3)
Director
</TABLE>
(h) The Company has made no Long Term Compensation payouts (LTIP or other)
(1) Options are indirectly owned through Archer Pacific Management Inc. The
Options were issued on May 31, 2000 and expire on May 31, 2005. The
300,000 options may be exercised in whole or in part at $2.00 per
share.
(2) Options are indirectly owned through Gemsco Management Inc. The Options
were issued on May 31, 2000 and expire on May 31, 2005. The 100,000
options may be exercised in whole or in part at $2.00 per share.
(3) Options are indirectly owned through Sinhoy Management Ltd. The
Options were issued on May 31, 2000 and expire on May 31, 2005. The
100,000 options may be exercised in whole or in part at $2.00 per
share.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
a) Beneficial owners of five percent (5%) or greater, of the Company's common
stock: No preferred stock is outstanding at the date of this offering. The
following sets forth information with respect to ownership by holders of more
than five percent (5%) of the Registrant's common stock known by the Registrant
based upon 13,562,480 shares outstanding at August 31, 2000.
Title of Name and Address of Amount of Beneficial Percent
Class Beneficial Owner Interest of Class
Common Richco Investors Inc. 6,000,000 44%
Suite 830 - 789 W. Pender St.
Vancouver, BC V6C 1H2
16
<PAGE>
b) The following sets forth information with respect to the Company's common
stock beneficially owned by each Officer and Director, and by all Directors and
Officers as a group, at August 31, 2000.
Title of Name and Address of Amount of Beneficial Percent
Class Beneficial Owner Interest of Class
Common Ernest Cheung 200,400 (1) 1.5%
Suite 830 - 789 West Pender Street
Vancouver, B.C. V6C 1H2
Common Maurice Tsakok 42,200 (1) 0.3%
Suite 830 - 789 West Pender Street
Vancouver, B.C. V6C 1H2
Common Marc Hung 0 0.0%
Suite 830 - 789 West Pender Street
Vancouver, B.C. V6C 1H2
Total as a group 242,600 1.8%
(1) Shares are owned indirectly through Richco Investors Inc.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
17
<PAGE>
Part IV
ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
a) Financial Statements and Schedules. The following financial statements and
schedules for the Company as of August 31, 2000 are filed as part of this
report.
(1) Financial statements of China NetTV Holdings Inc. and subsidiaries.
Year ended August 31, 2000
Page
Independent Auditor's Report for year ended August 31, 2000.................18
Consolidated Balance Sheet at end of August 31, 2000........................19
Consolidated Statement of Operations at end of August 31, 2000..............20
Consolidated Statement of Stockholders' Equity at end of August 31, 2000....21
Consolidated Statement of Cash Flows at end of August 31, 2000..............22
Schedule of Non-Cash Flows from Operating Activities........................23
Notes to the Consolidated Financial Statements..............................24
18
<PAGE>
ANDERSEN ANDERSEN & STRONG, L.C. 941 East 3300 South, Suite 202
-------------------------------- Salt Lake City, Utah 84106
CERTIFIED PUBLIC ACCOUNTANTS AND BUSINESS CONSULTANTS Telephone 801 486-0096
Member SEC Practice Section of the AICPA Fax 801 486-0098
Board of Directors
China NetTV Holdings, Inc. and Subsidiary
Vancouver B. C. Canada
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have audited the accompanying balance sheet of China NetTV Holdings, Inc. and
subsidiary (a development stage company) at August 31, 2000, and the related
statements of operations, stockholders' equity, and cash flows for the years
ended August 31, 2000 and 1999 and the period September 15, 1998 (date of
inception) to August 31, 2000. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the balance sheet is free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the balance sheet. An audit also includes assessing the
accounting principles used and significant estimates made by management as well
as evaluating the overall balance sheet presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of China NetTV Holdings, Inc. and
subsidiary at August 31, 2000, and the results of operations, and cash flows for
the years ended August 31, 2000 and 1999 and the period September 15, 1998 (date
of inception) to August 31, 2000, in conformity with generally accepted
accounting principles.
Salt Lake City, Utah /s/ Andersen Andersen and Strong
November 2, 2000 --------------------------------
Andersen Andersen and Strong
19
<PAGE>
CHINA NETTV HOLDINGS, INC. AND SUBSIDIARY
(DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEET
AUGUST 31, 2000
--------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS
Cash $ 194,931
----------
Total Current Assets $ 194,931
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable - related parties $ 84,603
Accounts payable 1,668
----------
Total Current Liabilities 86,271
----------
STOCKHOLDERS' EQUITY
Common stock
200,000,000 shares authorized, at $0.001 par
value; 13,562,480 shares issued and outstanding 13,562
Capital in excess of par value 22,686
Common stock subscriptions received - Note 3 170,000
Deficit accumulated during the development stage (97,588)
----------
Total Stockholders' Equity 108,660
----------
Total Liabilities and Stockholders' Equity $ 194,931
==========
The accompanying notes are an integral part of these financial statements.
20
<PAGE>
CHINA NETTV HOLDINGS, INC. AND SUBSIDIARY
(DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEARS ENDED AUGUST 31, 2000 AND 1999 AND
THE PERIOD SEPTEMBER 15, 1998 (DATE OF INCEPTION) TO AUGUST 31, 2000
--------------------------------------------------------------------------------
AUG 31, AUG 31, SEPT 15, 1998
2000 1999 TO AUG 31, 2000
------------- ------------- ---------------
REVENUES $ - $ - $ -
EXPENSES 78,995 18,593 97,588
------------- ------------- -------------
NET LOSS $ (78,995) $ (18,593) $ (97,588)
============= ============= =============
NET LOSS PER COMMON SHARE
Basic $ - $ -
------------- -------------
AVERAGE OUTSTANDING SHARES
Basic 13,562,480 7,991,000
------------- -------------
The accompanying notes are an integral part of these financial statements.
21
<PAGE>
<TABLE>
CHINA NETTV HOLDINGS, INC. AND SUBSIDIARY
(DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE PERIOD SEPTEMBER 15, 1998 (DATE OF INCEPTION)
TO AUGUST 31, 2000
-----------------------------------------------------------------------------------------------------------------
<CAPTION>
COMMON STOCK CAPITAL IN
------------ EXCESS OF ACCUMULATED
SHARES AMOUNT PAR VALUE DEFICIT
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
BALANCE SEPTEMBER 15, 1998 (date of inception) - $ - $ - $ -
Issuance of common stock for cash
at $.001 - February 5, 1999 6,000,000 6,000 - -
Issuance of common stock for cash
at $.002 - February 7, 1999 7,500,000 7,500 7,500 -
Issuance of common stock for cash
at $.10 - February 23, 1999 62,480 62 6,186 -
Capital contributions - expenses
paid by officer - - 4,500 -
Net operating loss for the year ended
August 31, 1999 - - - (18,593)
------------ ------------ ------------ ------------
BALANCE AUGUST 31, 1999 13,562,480 13,562 18,186 (18,593)
Capital contributions - expenses
paid by officer - - 4,500 -
Net operating loss for the year ended
August 31, 2000 - - - (78,995)
------------ ------------ ------------ ------------
BALANCE AUGUST 31, 2000 13,562,480 $ 13,562 $ 22,686 $ (97,588)
============ ============ ============ ============
The accompanying notes are an integral part of these financial statements.
22
</TABLE>
<PAGE>
<TABLE>
CHINA NETTV HOLDINGS, INC. AND SUBSIDIARY
(DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED AUGUST 31, 2000 AND 1999 AND THE PERIOD
SEPTEMBER 15, 1998 (DATE OF INCEPTION) TO AUGUST 31, 2000
------------------------------------------------------------------------------------------------
<CAPTION>
CASH FLOWS FROM SEPT 15, 1998
OPERATING ACTIVITIES AUG 31, AUG 31, TO AUGUST 31,
2000 1999 2000
------------- ------------- -------------
<S> <C> <C> <C>
Net loss $ (78,995) $ (18,593) $ (97,588)
Adjustments to reconcile net loss to
net cash provided by operating
activities
Change in accounts payable (1,211) 2,879 1,668
Capital contribution - expenses 4,500 4,500 9,000
Net Decrease in Cash From Operations (75,706) (11,214) (86,920)
------------- ------------- -------------
CASH FLOWS FROM INVESTING
ACTIVITIES
- - -
------------- ------------- -------------
CASH FLOWS FROM FINANCING
ACTIVITIES
Common stock subscriptions received 170,000 - 170,000
Proceeds from loan - related party 80,103 4,500 84,603
Proceeds from issuance of common stock - 27,248 27,248
------------- ------------- -------------
250,103 31,748 281,851
------------- ------------- -------------
Net Increase in Cash 174,397 20,534 194,931
Cash at Beginning of Period 20,534 - -
------------- ------------- -------------
Cash at End of Period $ 194,931 $ 20,534 $ 194,931
============= ============= =============
SCHEDULE OF NONCASH FLOWS FROM OPERATING ACTIVITIES
Capital contributions - expenses
paid by officer $ 4,500 $ 4,500
------------- -------------
The accompanying notes are an integral part of these financial statements.
23
</TABLE>
<PAGE>
CHINA NETTV HOLDINGS, INC. AND SUBSIDIARY
(DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
1. ORGANIZATION
The Company was incorporated under the laws of the State of Nevada on September
15, 1998 with the name "Vancouver's Finest Coffee Company" with authorized
common stock of 200,000,000 shares at $0.001 par value. On May 30, 2000 the name
was changed to "China NetTV Holdings, Inc."
The Company was organized for the purpose of marketing retail specialty coffee
through the establishment of coffee kiosks however during May 2000 the Company
changed its business purpose to the operations of digital technology. Note 5.
Since its inception the Company has completed Regulation D offerings of
13,562,480 shares of its capital stock for cash.
The Company is in the development stage.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Accounting Methods
------------------
The Company recognizes income and expenses based on the accrual method of
accounting.
Dividend Policy
---------------
The Company has not yet adopted a policy regarding payment of dividends.
Income Taxes
------------
On August 31, 2000 the Company had a net operating loss carryforward of $97,588.
The tax benefit from the loss carry forward has been fully offset by a valuation
reserve because the use of the future tax benefit is doubtful since the Company
has no operations. The loss carryforward will expire in 2021
Basic and Diluted Net Income (Loss) Per Share
---------------------------------------------
Basic net income (loss) per share amounts are computed based on the weighted
average number of shares actually outstanding. Diluted net income (loss) per
share amounts are computed using the weighted average number of common shares
and common equivalent shares outstanding as if shares had been issued on the
exercise of the preferred share rights unless the exercise becomes antidilutive
and then only the basic per share amounts are shown in the report.
Cash and Cash Equivalents
-------------------------
The Company considers all highly liquid instruments purchased with a maturity,
at the time of purchase, of less than three months, to be cash equivalents.
25
<PAGE>
CHINA NETTV HOLDINGS, INC. AND SUBSIDIARY
(DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
Principals of Consolidation
---------------------------
The consolidated financial statements shown in this report includes the
historical operating information of the parent and its wholly owned subsidiary.
All intercompany transactions have been eliminated
Concentration of Credit Risk
----------------------------
Financial instruments that potentially subject the Company to significant
concentration of credit risk consists primarily of cash. Cash balances are
maintained in accounts that are not federally insured for amounts over $100,000
but are other wise in financial institutions of high credit quality.
Financial Instruments
---------------------
The carrying amounts of financial instruments, including cash, and accounts
payable, are considered by management to be their estimated fair values.
Estimates and Assumptions
-------------------------
Management uses estimates and assumptions in preparing financial statements in
accordance with generally accepted accounting principles. Those estimates and
assumptions affect the reported amounts of the assets and liabilities, the
disclosure of contingent assets and liabilities, and the reported revenues and
expenses. Actual results could vary from the estimates that were assumed in
preparing these financial statements.
Comprehensive Income
--------------------
The Company has adopted Statement of Financial Accounting Standards No. 130. The
adoption of this standard had no impact on the total stockholder's equity.
Other Recent Accounting Pronouncements
--------------------------------------
The Company does not expect that the adoption of other recent accounting
pronouncements to have any material impact on its financial statements.
26
<PAGE>
CHINA NETTV HOLDINGS, INC. AND SUBSIDIARY
(DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
3. STOCK SUBSCRIPTIONS RECEIVED
The Company has commenced a private placement sale of 5,000,000 units at $2.00
per unit. Each unit consists of one share of common capital stock of the Company
and one warrant. Each warrant entitles the investor to purchase an additional
unit until August 15, 2002 for $3.00. Each additional unit consists of one
common share and one warrant to purchase an additional common share for $5.00
until August 15, 2003. There is no minimum sales requirement and the shares will
be issued on the closing date of the private placement. The terms of the sale
provides for a commission of 7% to be paid by cash or common stock of the
Company, at the option of the sales agent, excepting the sales made by related
parties. At August 31, 2000 the Company had received $170,000 for the purchase
of 8,500 units on which a commission of 7% will be paid on the closing date of
the offering.
4. RELATED PARTY TRANSACTIONS
Related parties have acquired 44% of the common stock issued.
5. STOCK OPTION PLAN
The Company's board of directors approved a stock option plan for the sale of
2,000,000 shares of the company's common stock at $2.00 per share. The directors
have retained the right to cancel the plan at any time in the future and can
award the options to officers and directors, employees, and others as designated
by the directors.
6. ACQUISITION OF ALL OUTSTANDING SHARES OF CHINA NETTV INC.
During May 2000 the Company acquired all of the outstanding stock of China NetTV
Inc. China NetTV Inc. was organized in the Virgin Islands on January 31, 2000.
China NetTV Inc. does not own any assets except for the joint venture agreement
outlined in the following. .
On June 30, 2000 China NetTV Inc. entered into a joint venture agreement with
Chengdu Qianfeng Digital AV Equipment Co. Ltd., a Chinese company, by the mutual
formation of a joint venture company known as "Chengdu Qianfeng NetTV CO., LTD
in which each partner will own approximately one half interest. The business
purpose of the joint venture company is to develop network technology and
information appliance products, hardware and software products of information
technology, information consultant, technique and maintenance service, network
system integration, cable digital TV head-end integration, network connection
equipment, satellite ground station equipment, cable and wireless digital
transmit equipment.
27
<PAGE>
(2) Financial Statement Schedules
All schedules are omitted because they are not applicable or the required
information is shown in the financial statements or notes thereto.
(3) Exhibits
The exhibits listed below are required by Item 601 of Regulation S-K. Each
management contract or compensatory plan or arrangement required to be filed as
an exhibit to this Form 10-K has been identified.
Exhibit
Number Description of Document
------ -----------------------
3.1(a) Articles of Incorporation of the Registrant
3.2(a) By-laws of the Registrant
10.1(b) Agreement between the Registrant and China NetTV Corp. dated May 4,
2000
10.2(c) Letter of Intent between the China NetTV Corp. and Chengdu Qianfeng
Digital Audio/Video Equipment Co. Ltd. of China dated April 6, 2000.
10.3 Consultant Stock Option Agreement between the Registrant and Farmind
Link Corp. dated May 31, 2000
10.4(d) Consultant Stock Option Agreement between the Registrant and Archer
Pacific Management Inc. dated May 31, 2000
10.5(d) Consultant Stock Option Agreement between the Registrant and Gemsco
Management Ltd. dated May 31, 2000
10.6(d) Consultant Stock Option Agreement between the Registrant and Sinhoy
Management Ltd. dated May 31, 2000
10.7 Consultant Stock Option Agreement between the Registrant and Kathy
Wang dated May 31, 2000
10.8 Consultant Stock Option Agreement between the Registrant and Terry
Amisano dated May 31, 2000
10.9 Joint Venture Agreement between China NetTV Corp. and Qianfeng
Digital Audio/Video Equipment Co. Ltd. dated June 30, 2000
23 Consent of Andersen, Andersen & Strong, L.C.
27.1 Financial Data Schedule for the year ended August 31, 2000
(electronic filing only)
99.1(b) News Release of Registrant, dated May 11, 2000
99.2 News Release of Registrant, dated July 12, 2000
----------
(a) Included as an Exhibit to China NetTV Holdings Inc.'s registration
statement on Form 10-SB filed on May 28, 1999
(b) Included as an Exhibit to China NetTV Holdings Inc.'s current report on
Form 8-K filed on May 30, 2000
28
<PAGE>
(c) Previously filed as an exhibit to the Company's Form 10-QSB dated June
1, 2000
(d) Management Stock Option Agreement
b) Reports on Form 8-K
On May 30, 2000, the Company filed a Form 8-K describing the change of control
in the Company, the Company's acquisition of China NetTV Corp., a corporation
formed under the laws of the British Virgin Islands and the Company's subsequent
name change to China NetTV Holdings Inc. from Vancouver's Finest Coffee Company.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Date: November 29, 2000 CHINA NETTV HOLDINGS INC.
By: /s/ Ernest Cheung
-----------------
Ernest Cheung
President
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
/s/ Ernest Cheung President and Director November 29, 2000
--------------------
Ernest Cheung
/s/ Maurice Tsakok Secretary and Director November 29, 2000
--------------------
Maurice Tsakok
/s/ Marc Hung Director November 29, 2000
--------------------
Marc Hung
29
