SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended December 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to .
Commission File No. 0-30430
INTERMOST CORPORATION
(Exact name of small business issuer as specified in its charter)
Utah 87-0418721
- ------------------------------- --------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
38th Floor, Guomao Building, Renmin South Road
Shenzhen, China 518005
---------------------------------------------------
(Address of principal executive offices) (Zip Code)
86 755 220 1941
---------------------------
(Issuer's telephone number)
---------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes No X
As of December 31, 1999, 9,824,112 shares of Common Stock of the issuer
were outstanding.
<PAGE>
INTERMOST CORPORATION
INDEX
Page
Number
-------
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Balance Sheets -
December 31, 1999 and June 30, 1999 ......................... 1
Consolidated Condensed Statements of Operations -
For the three months ended December 31, 1999 and 1998......... 2
Consolidated Condensed Statements of Operations -
For the six months ended December 31, 1999 and 1998........... 3
Consolidated Condensed Statements of Cash Flows -
For the six months ended December 31, 1999 and 1998 .......... 4
Notes to Consolidated Condensed Financial Statements.......... 5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................... 7
PART II - OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds............... 12
Item 6. Exhibits and Reports on Form 8-K........................ 12
SIGNATURES ............................................................ 13
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
INTERMOST CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
ASSETS
<TABLE>
June 30, 1999 December 31, 1999
------------- -----------------
RMB RMB US$
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents 4,376,907 3,025,032 365,342
Accounts receivable, net 63,996 1,292,773 156,132
Deferred compensation expense - 4,552,576 549,828
Deposits, prepayments and other receivables 946,951 3,747,851 452,639
Due from related companies 168,953 216,249 26,117
--------- ---------- ---------
Total current assets 5,556,807 12,834,481 1,550,058
--------- ---------- ---------
Machinery and equipment, net 820,730 1,252,532 151,272
Intangible assets 2,400,000 1,799,997 217,391
Due from a joint venture partner 243,291 1,549,999 187,198
--------- ---------- ---------
Total assets 9,020,828 17,437,009 2,105,919
========= ========== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accruals 1,168,482 1,614,120 194,942
Deposits from customers 158,901 664,263 80,225
Business tax payable 26,173 50,549 6,105
Due to directors 254,420 245,038 29,594
--------- ---------- ---------
Total current liabilities 1,607,976 2,573,970 310,866
--------- ---------- ---------
Minority interest - 1,340,987 161,955
--------- ---------- ---------
Shareholders' equity:
Common stock 81,318 81,318 9,821
Shares to be issued - 8,280,000 1,000,000
Less: subscription receivable - (4,140,000) (500,000)
Additional paid-in capital 9,278,162 14,248,571 1,720,842
Accumulated deficit (1,954,378) (4,946,455) (597,398)
Cumulative translation adjustments 7,750 (1,382) (167)
--------- ---------- ---------
Total shareholders' equity 7,412,852 13,522,052 1,633,098
--------- ---------- ---------
Total liabilities and shareholders'
equity 9,020,828 17,437,009 2,105,919
========= ========== =========
</TABLE>
The accompanying notes are an integral part of these financial statements
1
<PAGE>
INTERMOST CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
Three Months Ended December 31,
-----------------------------------
1998 1999
------ ------
RMB RMB US$
Net sales 551,647 3,605,352 435,429
Cost of services 116,558 3,194,407 385,798
------- --------- ---------
Gross Profit 435,089 410,945 49,631
Selling, general and administrative
expenses (513,128) (3,295,672) (398,028)
Other income, net 596 36,216 4,374
------- --------- ---------
Income (loss) before income taxes
and minority interest (77,443) (2,848,511) (344,023)
Provision for income taxes - - -
------- --------- ---------
Income (loss) before minority interest (77,443) (2,848,511) (344,023)
Minority interest - 159,009 19,204
------- --------- ---------
Net income (loss) (77,443) (2,689,502) (324,819)
======= ========= =========
Net income (loss)
per common share - Basic (0.01) (0.28) (0.03)
======= ========= =========
Weighted average number of
shares outstanding 8,456,420 9,755,178 9,755,178
========= ========= ===========
The accompanying notes are an integral part of these financial statements
2
<PAGE>
INTERMOST CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
Six Months Ended December 31,
--------------------------------------
1998 1999
-------- ---------
RMB RMB US$
Net sales 1,099,021 6,317,689 763,006
Cost of services 231,327 4,948,492 597,644
--------- --------- ---------
Gross Profit 867,694 1,369,197 165,362
Selling, general and administrative
expenses (820,564) (4,556,500) (550,302)
Other income, net 596 36,217 4,374
--------- --------- ---------
Income (loss) before income taxes
and minority interest 47,726 (3,151,086) (380,566)
Provision for income taxes - - -
--------- --------- ---------
Income (loss) before minority interest 47,726 (3,151,086) (380,566)
Minority interest - 159,009 19,204
--------- --------- ---------
Net income (loss) 47,726 (2,992,077) (361,362)
========= ========= =========
Net income (loss)
per common share - Basic 0.01 (0.31) (0.04)
========= ========= =========
Weighted average number of
shares outstanding 8,456,061 9,758,579 9,758,579
========= ========= ==========
The accompanying notes are an integral part of these financial statements
3
<PAGE>
INTERMOST CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
Six Months Ended December 31,
-----------------------------
1998 1999
------ -------
RMB RMB US$
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) 47,726 (2,992,077) (361,362)
Adjustments to reconcile net loss to net cash
used in operating activities:
Amortization - 600,002 72,464
Depreciation of machinery and equipment 9,621 181,266 21,892
Minority interest - (159,009) (19,204)
Compensation expense - 417,834 50,463
(Increase) decrease in operating assets -
Accounts receivable, net (160,599) (1,228,777) (148,403)
Deposits, prepayments and other receivables (388,440) (338,273)
Due from related companies - (2,800,900) (5,712)
Increase (decrease) in operating liabilities -
Accruals 102,713 445,638 53,821
Deposits from customers - 505,362 61,034
Business tax payable - 24,376 2,944
Other payables 756,154 - -
Due to directors - (9,381) (1,133)
--------- --------- ---------
Net cash used in operating activities 367,177 (5,062,963) (611,469)
--------- --------- ---------
Cash flows from investing activities:
Purchase of plant and equipment (165,964) (613,068) (74,042)
Increase in due from a joint venture partner - (1,306,708) (157,815)
--------- --------- ---------
Net cash used in investing activities (165,964) (1,919,776) (231,857)
--------- --------- ---------
Cash flows from financing activities:
Cash received from joint venture partner - 1,499,997 181,159
Cash received from a subscriber - 4,140,000 500,000
Cash proceeds from issuance of capital stock 55,658 - -
--------- --------- ---------
Net cash provided by financial activities 55,658 5,639,997 681,159
--------- --------- ---------
Effect of cumulative translation adjustment - (9,133) (1,103)
Net increase (decrease) in cash and cash equivalents 256,870 (1,351,876) (163,270)
Cash and cash equivalents, beginning of period - 4,376,907 528,612
--------- --------- ---------
Cash and cash equivalents, end of period 256,870 3,025,032 365,342
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
INTERMOST CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. INTERIM FINANCIAL PRESENTATION
The interim consolidated financial statements are prepared pursuant to the
requirements for reporting on Form 10-QSB. These financial statements have
not been audited by independent accountants. The June 30, 1999 balance
sheet data was derived from audited financial statements but does not
include all disclosures required by generally accepted accounting
principles. The interim financial statements and notes thereto should be
read in conjunction with the financial statements and notes included in the
Company's Form 10-SB. In the opinion of management, these interim financial
statements reflect all adjustments of a normal recurring nature necessary
for a fair statement of the results for the interim periods presented. The
current period results of operations are not necessarily indicative of
results which ultimately will be reported for the full year ending June 30,
2000.
2. CURRENCY PRESENTATION AND FOREIGN CURRENCY TRANSLATION
Translation of amounts from Renminbi ("Rmb") into United States dollars
("US$") is for the convenience of readers and has been made at the noon
buying rate in New York City for cable transfers in foreign currencies as
certified for customs purposes by the Federal Reserve Bank of New York on
December 31, 1999 of US$1.00 = Rmb8.28. No representation is made that the
Renminbi amounts could have been, or could be, converted into United States
dollars at that rate or at any other rate.
3. INVESTMENT IN JIAYIN
In the quarter ended December 31, 1999, Jiayin E-Commerce Development
Company Ltd. ("Jiayin") was formed and registered. The Company contributed
US$423,000 for a 70% interest in Jiayin and Shenzhen Jiayin Investment
Development Co., Ltd. contributed US$181,000 for a 30% interest in Jiayin.
Jiayin paid US$544,000 to Shenzhen Jiayin Investment Development Co., Ltd.
for the technological know-how relating to cyber-cash and telephone payment
systems.
4. MINORITY INTEREST
In connection with the formation of the Jiayin, the Company recorded a
minority interest of US$161,955 reflecting the portion of the Jiayin not
owned by the Company.
5. SHAREHOLDERS' EQUITY
During the quarter ended December 31, 1999, the Company received
subscription proceeds of US$500,000 from the offer of 400,000 shares of
common stock, out of a total of 800,000 shares offered, at US$1.25 per
share. The shares issuable in connection with the receipt of those proceeds
had not been issued at December 31, 1999. Subscriptions for the remaining
400,000 shares, purchasable for $500,000, had been received but
subscription proceeds had not been received at December 31, 1999.
5
<PAGE>
6. COMPENSATION EXPENSE
Under a two-year employment contract, the Company has agreed to issue
15,000 shares of common stock to an employee after each six months of
employment commencing on November 15, 1999. In this connection, US$17,260
has been recorded as compensation expense during the three months and six
months ended December 31, 1999 by reference to the average market price of
the Company's common stock during the period from November 15, 1999 to
December 31, 1999.
Pursuant to the aforementioned employment contract, the Company granted to
the employee stock options to purchase (i) 250,000 shares of common stock
of the Company at US$3.50 per share exercisable after November 2000, and
(ii) 250,000 shares of common stock of the Company at US$4.00 per share
exercisable after November 2001. In this connection, compensation cost of
US$33,203 has been recorded during the three months and six months ended
December 31, 1999.
7. SUBSEQUENT EVENTS
a. Dunwell Computer (Hong Kong) Ltd.
---------------------------------
In January 2000, the Company signed a Letter of Intent to purchase
Dunwell Computer (Hong Kong) Ltd. Dunwell is a Hong Kong licensed
Internet Service Provider and e-commerce solutions provider. Pursuant
to the terms of the Letter of Intent, the Company will pay HK$2.8
million (equivalent to approximately US$361,757) for 70% of the stock
of Dunwell. The purchase price is payable 50% in cash and 50% in stock
at US$3.50 per share. Closing of the purchase of Dunwell is subject to
execution of definitive documents and satisfaction of standard closing
conditions.
b. Authorization of Issuance of Shares to Employees
------------------------------------------------
In January 2000, the Company's board authorized the issuance of 41,110
restricted shares of common stocks to selected non-executive key
employees with over one year employment as a one-time bonus
recognizing their contribution in the company start-up stage. The
Company expects to recognize a charge during the quarter ending March
31, 2000 in connection with the issuance of those shares.
c. Issuance of Shares to Jiayin Investment Development Co.
-------------------------------------------------------
In January 2000, the Company issued 75,512 restricted shares of common
stock to Shenzhen Jiayin Investment Development Co. Ltd. for $302,045
pursuant to the terms of the Jiayin Joint Venture agreement.
d. Private Placement Agreements
----------------------------
In January 2000, the Company entered into private placement agreements
with three investors pursuant to which those investors agreed to
purchase a total of 953,334 shares of restricted common stock in
exchange for $3 million. As of January 31, 2000, subscription proceeds
of $1.58 million had been deposited with the Company in connection
with the subscriptions.
6
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
The following discussion and analysis should be read in conjunction with the
Company's financial statements and notes thereto included elsewhere in this Form
10-QSB. Except for the historical information contained herein, the discussion
in this Form 10-QSB contains certain forward looking statements that involve
risks and uncertainties, such as statements of the Company's plans, objectives,
expectations and intentions. The cautionary statements made in this Form 10-QSB
should be read as being applicable to all related forward statements wherever
they appear in this Form 10-QSB. The Company's actual results could differ
materially from those discussed here. For a discussion of certain factors that
could cause actual results to be materially different, refer to the Company's
Form 10-SB.
Material Changes in Results of Operations for the Six Months Ended December 31,
1999 as Compared to the Six Months Ended December 31, 1998.
Net sales are derived principally from web advertisement, web site design,
information fees, systems integration and e-commerce solutions, referred to as
"business portals and e-commerce solutions", and from software design and
general internet solutions and business consulting services, referred to as
"software development and consulting commission income".
The following table reflects the total net sales and percentage of net
sales represented by business portals and e-commerce solutions and by software
development and consulting services, and percent change in each of those
categories, for the periods indicated:
<TABLE>
Percent
Total Net Sales Percent of Total Net Sales Change from
six months
ended
December 31,
1998 to six
months ended
December 31,
1999
--------------------------------- --------------------------------
Six Months Ended December 31, Six Months Ended December 31,
--------------------------------- --------------------------------
1998 1999
US$ US$ 1998 1999
--------------- --------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Business portals and
e-commerce solutions
- - Web site design and development 94,908 225,029 71.5% 29.5% 137.1%
- - Web advertisement 31,510 64,257 23.7% 8.4% 103.9%
- - Systems sales and integration 0 320,858 0.0% 42.1% n.m.
- - Web hosting 6,314 26,541 4.8% 3.5% 320.4%
- - Telephone payment systems 0 221 0.0% 0.0% n.m.
--------------- --------------- -------------- --------------
132,732 636,906 100.0% 83.5% 379.8%
Software development and consulting
- - Software development 0 126,100 0.0% 16.5% n.m.
- - Consulting 0 0 0.0% 0.0% n.m.
--------------- --------------- -------------- --------------
0 126,100 0.0% 16.5% n.m.
--------------- --------------- -------------- --------------
Total 132,732 763,006 100.0% 100.0% 474.8%
=============== =============== ============== ==============
</TABLE>
7
<PAGE>
The increase in each category of revenues during the six months ended
December 31, 1999 was primarily attributable to marketing efforts and increased
name brand awareness in connection with those efforts and the operation of our
www.ChinaE.com site. Nominal revenues were received during the quarter ended
December 31, 1999 from the commencement of telephone payment systems by the
Jiayin Joint Venture.
Cost of Services. Cost of services consist principally of salary for
computer network technicians, costs of systems sales and integration,
subcontract fees, depreciation and amortization, and other costs associated with
the same, including travel, welfare, office and related expenses allocable to
the engineering and technician staff. Additionally, other cost of services
includes certain other costs associated with the offering of special promotional
packages, which package included participation in a seminar, lodging and
advertisement.
The following table reflects the principal components of cost of services
and percentage of net sales represented by each component for the periods
indicated:
<TABLE>
Percent
Total Cost of Services Percent of Total Net Sales Change from
six months
ended
December 31,
1998 to six
months ended
December 31,
1999
--------------------------------- --------------------------------
Six Months Ended December 31, Six Months Ended December 31,
--------------------------------- --------------------------------
1998 1999
US$ US$ 1998 1999
--------------- --------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Engineering/technician salaries 10,958 73,572 8.3% 9.6% 571.4%
Subcontract fees 0 109,771 0.0% 14.4% n.m.
Cost of system sales and integration 0 311,259 0.0% 40.8% n.m.
Depreciation 1,273 7,498 1.0% 1.0% 489.0%
Other 15,707 95,544 11.8% 12.5% 508.3%
------------- --------------- -------------- --------------
Total 27,938 597,644 21.0% 78.3% 2,039.2%
============= =============== ============== ==============
</TABLE>
For the six months ended December 31, 1999, costs of services increased
2039.2%, to US$597,644, or 78.3% of net sales, compared to US$27,938, or 21% of
net sales, for the six months ended December 31, 1998.
The principal components of cost of services during the six months ended
December 31, 1999 were engineer/technician salaries; subcontract fees; cost of
hardware; other costs associated with support on the engineering/technician
staff; and depreciation of equipment utilized in connection with services.
The increase in costs of services was principally attributable to
expenditures to support the increase in net sales, including an increase in
engineering/technician headcount from 7 at December 31, 1998 to 95 at December
31, 1999 and the sale of certain hardware during the current period. The
increase in costs of services as a percentage of revenues was primarily
attributable to the sale of hardware which has a lower profit margin than
service revenues.
8
<PAGE>
Selling, General and Administrative Expense. Selling, general and
administrative expense ("SG&A") consists principally of (1) sales commissions,
advertising, trade show and seminar expenses, and direct-field sales expense,
(2) salary for administrative and sales staff, (3) corporate overhead and (4)
amortization of intangibles.
The following table reflects the principal components of SG&A and
percentage of net sales represented by each component for the periods indicated:
<TABLE>
Percent
Total SG&A Percent of Total Net Sales Change from
six months
ended
December 31,
1998 to six
months ended
December 31,
1999
--------------------------------- --------------------------------
Six Months Ended December 31, Six Months Ended December 31,
--------------------------------- --------------------------------
1998 1999
US$ US$ 1998 1999
--------------- --------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Sales and marketing salaries and
commissions 20,329 45,715 15.3% 6.0% 124.9%
Other sales and marketing expenses 14,219 100,641 10.7% 13.2% 607.8%
Rentals 10,047 15,046 7.6% 2.0% 49.8%
Administrative salaries 25,600 44,761 19.3% 5.9% 74.8%
Other corporate 28,907 271,675 21.8% 35.6% 839.8%
Amortization of intangibles - 72,464 - 9.5% n.m.
--------------- --------------- -------------- --------------
Total 99,102 550,302 74.7% 72.1% 455.3%
=============== =============== ============== ==============
</TABLE>
For the six months ended December 31, 1999, SG&A increased 455.3%, to
US$550,302, or 72.1% of net sales, compared to US$99,102, or 74.7% of net sales,
for the six months ended December 31, 1998.
The increase in SG&A has been principally attributable to a combination of
(1) aggressive marketing efforts associated with the commencement and growth of
revenue producing operations, including costs associated with sales commissions,
attendance at international trade conferences, industry journal advertising and
other related expenses, (2) an increase in administrative support staff and
corporate overhead to support anticipated growth in revenues, including non-cash
charges totaling US$50,463 associated with the Company's agreement to issue
certain shares and options to an officer, and (3) amortization of intangibles.
The principal components of SG&A during the six months ended December 31,
1999 were sales and marketing salaries and commissions; other marketing
expenditures; administrative salaries and benefits; other corporate expense,
which includes occupancy expense, general office expenses travel, general staff
welfare expense and consulting fees, among others; and amortization of
intangibles.
Amortization expense relates eighty systems integration contracts from
Labtam Corporation in July 1999. At the time of the acquisition, five of those
contracts were active and seventy-five contracts were inactive and are viewed as
the purchase of a customer list.
9
<PAGE>
In accordance with the terms of the agreement, we issued 69,700 shares of
common stock to Labtam as payment in full of the purchase price of the
contracts. The market value of those shares, approximately US$290,000, was
recorded as an intangible asset.
The intangible asset is being amortized over a 24 month period,
representing the life of the contracts. During the six ended December 31, 1999,
we recorded a charge for amortization of the contracts of US$72,464. We will
incur amortization expense approximately US$36,000 for each quarter through June
30, 2001.
Other Income. Other income consists principally of interest income. For the
six months ended December 31, 1999 other income totaled US$4,374 compared to
US$0 of other income for the six months ended December 31, 1998. The increase in
other income was attributable to increased balances of cash held in interest
bearing accounts.
Minority Interest. Minority interest of US$19,204 was reported during the
current period. No minority interest was reported during the prior year period.
Minority interest reflects the proportionate interest in the earnings/(loss) of
Jiayin Joint Venture not attributable to the Company.
Material Changes in Financial Condition, Liquidity and Capital Resources.
At December 31, 1999 we had cash and cash equivalents of US$365,342 and
working capital of US$1,239,192 as compared to US$528,612 of cash and cash
equivalents and US$476,912 of working capital at June 30, 1999.
Operations used US$611,469 of cash during the six months ended December 31,
1999 and provided US$44,345 of cash during the six months ended December 31,
1998. Funds used in operations primarily relate to the losses incurred during
the period, increases in trade and other receivables and increases in other
current and non-current assets, all relating to the start-up and growth of
operations, which were partially offset by an increase in trade payables.
Investing activities used US$231,857 during the six months ended December
31, 1999 and US$20,044 during the six months ended December 31, 1998. Funds used
in investing activities consist of purchases of equipment to support operations
and amounts due from our joint venture partner, Jiayin Investment Company
Limited.
Financing activities provided US$681,159 of cash during the six months
ended December 31, 1999 and US$6,722 during the six months ended December 31,
1998. The cash provided by financing activities was attributable to the receipt
of subscription proceeds totaling US$500,000 relating to the sale of 400,000
shares of common stock and the receipt of cash from our joint venture partner
during the current period and the receipt of proceeds from the sale of common
stock during the prior year period.
We had no long term debt at December 31, 1999 or June 30, 1999.
Subsequent to December 31, 1999, in January 2000, we issued 75,512
restricted shares of common stock to Shenzhen Jiayin Investment Development Co.
Ltd. for US$302,045 pursuant to the terms of the Jiayin Joint Venture agreement.
In January 2000, we also entered into private placement agreements with
three investors pursuant to which those investors agreed to purchase a total of
953,334 shares of restricted common stock in exchange for US$3 million. As of
January 31, 2000, subscription proceeds of US$1.58 million had been deposited
with us in connection with the subscriptions.
10
<PAGE>
In January 2000, we also signed a Letter of Intent to purchase Dunwell
Computer (Hong Kong) Ltd. Dunwell is a Hong Kong licensed Internet Service
Provider and e-commerce solutions provider. Pursuant to the terms of the Letter
of Intent, we will pay HK$2.8 million, approximately US$361,757 for 70% of the
stock of Dunwell. The purchase price is payable 50% in cash and 50% in stock at
US$3.50 per share. Closing of the purchase of Dunwell is subject to execution of
definitive documents and satisfaction of standard closing conditions.
Depending upon the rate of growth and the growth initiatives undertaken, we
may seek additional capital in the future to support expansion of operations and
acquisitions. We are presently involved in discussions with various financing
sources with respect to providing equity financing, including completion of the
sale of shares pursuant to the offering which commenced during the quarter ended
December 31, 1999.
Certain Factors Affecting Future Operating Results
Our operating results have been, and will continue to be, affected by a
wide variety of factors that could have a material adverse effect on revenues
and profitability during any particular period, including the level and rate of
acceptance of our products and services by the Chinese people, continued growth
in use of the Internet in China, entry of new competition (including established
companies from outside of China and companies with substantially greater
resources), fluctuations in the level of orders for services which are received
and can be delivered in a quarter, rescheduling or cancellation of orders by
customers, competitive pressures on selling prices, changes in product, service
or customer mix, rapid changes in technology, dependence upon certain key
employees, availability and cost of computer technicians, loss of any strategic
relationships, our ability to introduce new products and services on a timely
basis, new product and service introductions by our competitors, requirements
for additional capital to support future growth and acquisitions, fluctuations
in exchange rates, and general economic conditions, among others. Various
factors which effect our future operating results are discussed in our Form
10-SB.
Subsequent to December 31, 1999, our board authorized the issuance of
41,110 restricted shares of common stocks to selected non-executive key
employees with over one year employment as a one-time bonus recognizing their
contribution in the company start-up stage. We expect to recognize a charge
during the quarter ending March 31, 2000 in connection with the issuance of
those shares.
Future revenues and operating results may also be effected by the
operations of Dunwell Computer (Hong Kong ) Ltd. if we consummate the
acquisition of Dunwell pursuant to an existing letter of intent.
Except as noted above, we are not aware of any trends, events or
uncertainties which have had, or are reasonably likely to have, a material
impact on our operations or our short-term or long-term liquidity.
Year 2000 Issue
We experienced no material failures as a result of the Year 2000 Issue and
our financial condition and results of operations at, and for the period ended,
December 31, 1999 were not materially effected by the Year 2000 Issue.
11
<PAGE>
PART II - OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
(a) In December 1999, the Company received subscriptions and subscription
proceeds with respect to the offer and sale of 400,000 shares of common stock.
(b) The securities were offered without the use of an underwriter or
placement agent and were sold to a total of 8 accredited investors.
(c) The securities were offered for aggregate consideration of US$500,000.
No underwriting discounts or commissions were paid.
(d) The offer and sale of the securities was made in reliance on the
exemption set out in Section 4(2) of the Securities Act of 1933. The shares were
offered without general solicitation or advertising to a limited group of
accredited investors. Certificates evidencing the shares had not been issued as
of December 31, 1999 but will bear legends restricting transferability.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit No. Description
----------- -------------
27.1 Financial Data Schedule
(b) Reports on Form 8-K
None
12
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
INTERMOST CORPORATION
Dated: February 15, 2000 By: /s/ Jun Liang
-----------------------------------
Jun Liang, President and C.E.O,
Principal Accounting and Financial
Officer
13
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-mos
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 365,342
<SECURITIES> 0
<RECEIVABLES> 156,132
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,550,058
<PP&E> 151,272
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,105,919
<CURRENT-LIABILITIES> 310,866
<BONDS> 0
0
0
<COMMON> 9,821
<OTHER-SE> 1,623,277
<TOTAL-LIABILITY-AND-EQUITY> 2,105,919
<SALES> 763,006
<TOTAL-REVENUES> 763,006
<CGS> 597,644
<TOTAL-COSTS> 597,644
<OTHER-EXPENSES> 550,302
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (380,566)
<INCOME-TAX> 0
<INCOME-CONTINUING> (380,566)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (361,362)
<EPS-BASIC> (0.04)
<EPS-DILUTED> (0.04)
</TABLE>
