SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
Quarterly Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
For the quarterly period ended: March 31, 2000
Commission file number 0-26559
CIK No. 0001082603
XIN NET CORP.
(Exact name of registrant as specified in this charter)
Florida 330-751560
------------------------------- --------------------
(State of other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
#830 - 789 West Pender Street, Vancouver, B.C. Canada V6C 1H2
-------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (604) 632-9638
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 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 the filing
requirements for at least the past 90 days.
YES X NO
----- -----
As of March 31, 2000, there were 21,360,000 shares of $0.001 par value common
stock outstanding
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PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
XIN NET CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, 2000 AND DECEMBER 31, 1999
( PREPARED BY MANAGEMENT AND WITHOUT AUDIT )
<S> <C> <C>
STATED IN U.S. DOLLARS MARCH 31, 2000 DECEMBER 31, 1999
- ----------------------------------------------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS
Cash $ 4,949,431 $ 5,512,614
Other Receivables 370,009 223,466
Prepaid Expenses 16,361
Inventory 30,343 99,206
------------------------ --------------------------
TOTAL CURRENT ASSETS 5,423,151 5,851,647
PROPERTY AND EQUIPMENT, NET 575,269 422,620
OTHER ASSETS
Organizational Costs, Net
------------------------ --------------------------
TOTAL ASSETS $ 5,999,332 $ 6,275,190
======================== ==========================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable and Other Accrued Liabilities $ 201,912 $ 162,041
Unearned Revenue 231,782 118,739
Current portion of Obligation under Capital Lease 60,598 58,920
------------------------ --------------------------
454,409 339,700
OBLIGATION UNDER CAPITAL LEASE 112,366 126,269
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common Stock : $0.001 Par Value
Authorized : 50,000,000
Issued and Outstanding : 21,360,000 (1999: 21,360,000) 21,360 21,360
Additional Paid In Capital 7,214,025 7,214,025
Accumulated Deficit (1,735,492) (1,318,945)
Accumulated Other Comprehensive Income (107,219) (107,219)
------------------------ --------------------------
TOTAL STOCKHOLDERS' EQUITY 5,392,674 5,809,221
------------------------ --------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 5,999,332 $ 6,275,190
======================== ==========================
See accompanying notes to financial statements.
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<TABLE>
<CAPTION>
XIN NET CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2000 AND 1999
(PREPARED BY MANAGEMENT AND WITHOUT AUDITED)
<S> <C> <C>
STATED IN U.S. DOLLARS 2000 1999
- ------------------------------------------------------------------------------------------------------
REVENUE $ 729,339 $ 174,144
COST OF REVENUE 149,504 36,346
---------------------------------------------
GROSS PROFIT 579,835 137,798
---------------------------------------------
EXPENSES
Administration and office 232,101 19,505
Advertising and promotion 223,200 -
Amortization 39,314 1,904
Business development 92,042 -
Compensation expenses - 42,000
Consulting and management fees 18,262 9,923
Foreign exchange (gain) loss 5,312 -
Interest 4,563 1,106
Miscellaneous 43,415 -
Professional fees 31,430 10,068
Rent 48,752 2,124
Salaries and benefits 113,881 11,617
Selling expenses 167,876 46,451
Shareholder information, transfer agent and
filing fees 24,324 -
---------------------------------------------
1,044,472 144,698
---------------------------------------------
OPERATING PROFIT (LOSS) (464,637) (6,900)
OTHER INCOME
Interest 48,090 1,033
---------------------------------------------
NET EARNINGS (LOSS) AVAILABLE TO COMMON
STOCKHOLDERS $ (416,547) $ ( 5,867)
=============================================
BASIC EARNINGS (LOSS) PER COMMON
SHARES $ (0.02) $ -
=============================================
BASIC WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 21,360,000 14,075,000
=============================================
See accompanying notes to financial statements.
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<TABLE>
<CAPTION>
XIN NET CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE THREE-MONTH PERIOD ENDED MARCH 31, 2000 AND YEAR ENDED DECEMBER 31, 1999
(PREPARED BY MANAGEMENT AND WITHOUT AUDIT )
<S> <C> <C> <C> <C> <C> <C>
ACCUMULATED
STOCK ADDITIONAL OTHER
COMMON AMOUNT AT PAID IN ACCUMULATED COMPREHENSIVE
STATED IN U.S. DOLLARS SHARES PAR VALUE CAPITAL DEFICIT INCOME TOTAL
- --------------------------------------------------------------------------------------------------------------------------
Balance , December 31, 1998 14,075,000 $ 14,075 $ 862,990 $ (234,918) $ (111,388) $ 530,759
Exercise of Stock Option for cash at
$0.40 per share in April 1999 1,400,000 1,400 558,600 560,000
Compensatory Cost - Stock Options 42,000 42,000
Private placement of Common Stock for
cash at $1.00 per share in May 1999 5,500,000 5,500 5,494,500 5,500,000
Offering Costs (385,000) (385,000)
Common Stock for Services Rendered
at $1.00 per share in September 1999 385,000 385 384,615 385,000
Capital Contributions for Past Services 256,320 256,320
Loss for the year ended
December 31, 1999 (1,084,027) (1,084,027)
Other Comprehensive Income : 4,169 4,169
Translation adjustments
-----------------------------------------------------------------------------------
Balance, December 31, 1999 21,360,000 $ 21,360 $7,214,025 $ (1,318,945) $ (107,219) $ 5,809,221
Loss for the three months ended
March 31, 2000 (416,547) (416,547)
-----------------------------------------------------------------------------------
Balance, March 31, 2000 21,360,000 $ 21,360 $7,214,025 $ (1,735,492) $ (107,219) $ 5,392,674
===================================================================================
See accompanying notes to financial statements.
</TABLE>
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<CAPTION>
XIN NET CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2000 AND 1999
( PREPARED BY MANAGEMENT AND WITHOUT AUDIT )
<S> <C> <C>
STATED IN U.S. DOLLARS 2000 1999
- -------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (416,547) $ (5,867)
Adjustments to reconcile net loss to net cash
Provided by (Used in) operating activities
Depreciation and amortization 39,314 1,904
Compensatory cost - Stock options - 42,000
Changes in assets and liabilities
(Increase) Decrease in accounts receivable (146,543) (28,131)
(Increase) in prepaid expenses (57,007) 2,614
Decrease in inventory 68,863 (15,002)
(Decrease) in accounts payable 39,871 79,422
Increase in unearned revenue 113,043 1,517
------------------------------------------------
(359,006) 78,457
------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (191,952) (20,245)
------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal repayment on capital lease obligations (12,225) -
------------------------------------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (563,183) 58,212
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD 5,512,614 336,189
------------------------------------------------
CASH AND CASH EQUIVALENTS - END OF PERIOD $ 4,949,431 $ 394,401
================================================
See accompanying notes to financial statements.
</TABLE>
XIN NET CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2000 AND 1999
( PREPARED BY MANAGEMENT AND WITHOUT AUDIT )
STATED IN U.S. DOLLARS 2000 1999
- --------------------------------------------------------------------------------
SUPPLEMENTAL INFORMATION :
Cash paid for :
Interest $ 4,563 $ 1,106
Income taxes - -
Noncash investing and financing :
Capital Contributions for services performed - -
Compensatory cost - Stock option $ - $ 42,000
See accompanying notes to financial statements.
<PAGE>
XIN NET CORP. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000 AND 1999
( PREPARED BY MANAGEMENT AND WITHOUT AUDIT )
1 BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in
conformity with generally accepted accounting principles. However,
certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been omitted or condensed pursuant to the
rules and regulations of the Securities and Exchange Commission
("SEC"). In the opinion of the management all adjustments of a normal
recurring nature necessary for a fair presentation have been included.
The results for interim periods are not necessarily indicative of
results for the entire year. These condensed consolidated financial
statements and accompanying notes should be read in conjunction with
the Company's annual consolidated financial statements and the notes
thereto for the fiscal year ended December 31, 1999 included in its
Annual Report on Form 10-KSB.
The unaudited condensed consolidated financial statements include Xin
Net Corp. and its subsidiaries. Significant inter-company transactions
and accounts have been eliminated.
Certain prior-period amounts have been reclassified to conform to the
current period's presentation.
2 CAPITAL LEASE OBLIGATION
The Company leases computer equipment, through its wholly owned
subsidiary company Infornet Investment Corp., repayable at
approximately $5,784 (CND 8,407) per month to June 30, 2002. The
liability includes imputed interest at an average rate of 6.12% per
annum.
<PAGE>
XIN NET CORP. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000 AND 1999
( PREPARED BY MANAGEMENT AND WITHOUT AUDIT )
2 CAPITAL LEASE OBLIGATION ( CONTINUED )
Total minimum lease payments
for the year ended December 31
2000 $ 52,056
2001 69,408
2002 66,156
-----------------------
187,620
Less : Amount representing interest (14,656)
-----------------------
Present value of minimum lease payment 172,964
Less : Current portion (60,598)
-----------------------
$ 112,366
=======================
3 EARNINGS PER SHARE
Basic earnings per share is computed by dividing net earnings available
to common stockholders by the weighted-average number of common shares
outstanding during the period. Diluted earnings per share is computed
by dividing net earnings available to common stockholders by the
weighted-average number of common shares outstanding during the period
increased to include the number of additional common shares that would
have been outstanding if potentially dilutive common shares had been
issued.
The following table sets forth the computations of shares and net
earnings used in the calculation of basic and diluted earnings per
share for the first quarter ended 2000 and 1999 :
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XIN NET CORP. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000 AND 1999
( PREPARED BY MANAGEMENT AND WITHOUT AUDIT )
3 EARNINGS PER SHARE ( CONTINUED )
03/31/2000 03/31/1999
----------- ----------
Net loss for the period $ (416,547) $ (5,867)
Weighted-average shares outstanding 21,360,000 14,075,000
BASIC LOSS PER SHARE $ (0.02) $ (0.00)
========== ==========
Due to the loss for the three months ended March 31, 2000 and 1999, the
effect of outstanding warrants and stock options were not included as
the effect would be anti-dilutive.
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<CAPTION>
4 SEGMENT AND GEOGRAPHIC DATA
The Company's reportable segments are geographic areas that provide
internet services and products to the Chinese markets. Summarized
financial information concerning the Company's reportable segments is
shown in the following table. The "Other" column includes corporate
related items, and, as it relates to segment profit (loss), income and
expenses not allocated to reportable segments.
<S> <C> <C> <C> <C>
FOR 3 MONTHS ENDED 3/31/2000 CHINA CANADA OTHER TOTAL
---------------------------- ----- ------ ----- -----
Revenue from customers $729,339 $ - $ - $729,339
Interest revenue - - 48,090 48,090
Inter-segment revenue - - - -
Operating income (loss) (362,021) (8,490) (94,126) (464,637)
Total assets $2,656,925 $11,134 $3,331,273 $5,999,332
FOR 3 MONTHS ENDED 3/31/1999 CHINA CANADA OTHER TOTAL
---------------------------- ----- ------ ----- -----
Revenue from customers $ 174,144 $ - $ - $174,144
Interest revenue 1,033 - - 1,033
Inter-segment revenue - - - -
Operating income (loss) 71,027 (21,194) (56,733) (6,900)
Total assets $ 714,922 $6,648 $ 77 $721,647
</TABLE>
<PAGE>
XIN NET CORP. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000 AND 1999
( PREPARED BY MANAGEMENT AND WITHOUT AUDIT )
4 SEGMENT AND GEOGRAPHIC DATA (CONTINUED)
RECONCILIATION OF SEGMENT INFORMATION
3 MONTHS ENDED
03/31/2000 03/31/1999
------------- -------------
Revenue from customers $729,339 $ 174,144
Interest revenue 48,090 1,033
Inter-segment revenues - -
-------------------------------
TOTAL CONSOLIDATED REVENUES $ 777,429 $ 175,177
========== =========
<PAGE>
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS FOR THE THREE MONTH PERIOD ENDED MARCH 31, 2000
COMPARED TO THE SAME PERIOD IN 1999.
The Company had revenues from its operations in China in the amount of $729,339
in the first quarter of 2000 as compared to $174,144 in the same period in 1999.
The Company had a cost of revenue of $149,504 which resulted in a gross profit
of $579,835 in the first quarter of 2000, as opposed to a cost of revenue of
$36,346 which resulted in a gross profit of $137,798 in the quarter in 1999.
The Company incurred total expenses of $1,044,472 in the quarter in 2000
compared to $144,698 in the quarter in 1999. The Company had a very significant
increase in expenses in the period in 2000 over 1999 as a result of expenditures
to expand its ISP, Domain Name Registration and E-commerce business in China.
The largest expenses of operations in the quarter were $232,101 for
administration and office, $223,200 for advertising and promotion, $92,042 for
business development, $113,881 for salaries and benefits, and $167,876 for
selling expenses.
The Company had an operating loss of ($464,637) in the period in 2000 compared
to a loss of ($6,900) in 1999. The net loss after interest income in the period
was ($416,547) in 2000 and ($5,867) in 1999. Loss per share was ($.02) in the
period in 2000 and nominal in 1999.
<PAGE>
PART II
OTHER INFORMATION
Item 1. Legal Proceedings - None.
Item 2. Changes in securities - None.
Item 3. Defaults upon senior securities - None.
Item 4. Submission of matters to a vote of security holders - None.
Item 5. Other information - None.
Item 6. Exhibits and reports on Form 8-K
(a) The following are filed as Exhibits to this
Quarterly Report. The numbers refer to the Exhibit Table of
Item 601 of Regulation S-K:
None.
(b) Reports on Form 8-K filed during the three months
ended March 31, 2000. (incorporated by reference)
None.
<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 of the
undersigned thereunto duly authorized.
Dated: May 12, 2000
XIN NET CORP.
by:/s/Marc Hung
Marc Hung, President
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 4,949,431
<SECURITIES> 0
<RECEIVABLES> 370,009
<ALLOWANCES> 0
<INVENTORY> 30,343
<CURRENT-ASSETS> 5,423,151
<PP&E> 575,269
<DEPRECIATION> 0
<TOTAL-ASSETS> 5,999,332
<CURRENT-LIABILITIES> 454,409
<BONDS> 0
0
0
<COMMON> 21,360
<OTHER-SE> 5,478,533
<TOTAL-LIABILITY-AND-EQUITY> 5,999,332
<SALES> 0
<TOTAL-REVENUES> 729,339
<CGS> 0
<TOTAL-COSTS> 149,504
<OTHER-EXPENSES> 1,044,422
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (48,090)
<INCOME-PRETAX> (416,547)
<INCOME-TAX> 0
<INCOME-CONTINUING> (416,547)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (416,547)
<EPS-BASIC> (.02)
<EPS-DILUTED> (.02)
</TABLE>
