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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
[X] Quarterly Report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended June 30, 2000
[ ] Transition Report pursuant to 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period to
Commission File Number 0-28659
-----------------
QINNET.COM, INC.
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(Exact name of small Business Issuer as specified in its charter)
Delaware 75-2610514
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
450 North Brand Boulevard, 6th Floor
Glendale, CA 91203
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (818) 291-6250
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None
-------------------------------------------------------
(Former name, former address and former fiscal year, if
changed since last report)
State the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date:
1,300,497 Shares of $0.00001 par value Common Stock outstanding as of
August 4, 2000.
Transitional Small Business Disclosure Format (check one):
Yes [ ] No [X]
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PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
The accompanying unaudited financial statements have been prepared in
accordance with the instructions to Form 10-QSB and Item 310 (b) of
Regulation S-B, and, therefore, do not include all information and
footnotes necessary for a complete presentation of financial
position, results of operations, cash flows, and stockholders' equity
in conformity with generally accepted accounting principles. In the
opinion of management, all adjustments considered necessary for a
fair presentation of the results of operations and financial position
have been included and all such adjustments are of a normal recurring
nature. Operating results for the six months ended June 30, 2000 are
not necessarily indicative of the results that can be expected for
the year ending December 31, 2000.
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Qinnet.com, Inc.
(a development stage company)
Consolidated Balance Sheets
June 30, 2000 and 1999
(Unaudited)
June 30, June 30,
2000 1999
---------- ----------
Assets
Cash on hand and in bank $ 10,842 $ -
---------- ----------
Liabilities
Due to controlling shareholder $ 10,879 $ -
---------- ----------
Stockholders' Equity
Common stock - $0.00001 par value. 50,000,000
shares authorized. 1,300,497 and 1,250,497
shares issued and outstanding, respectively 13 13
Additional paid-in capital 333,147 50,147
Contributed capital 5,358 5,358
Accumulated deficit (338,555) (5,518)
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(37) 50,000
Stock subscription receivable - (50,000)
---------- ----------
Total stockholders' equity (37) -
---------- ----------
Total Liabilities and Stockholders' Equity $ 10,842 $ -
========== ==========
The financial information presented herein has been prepared by management
without audit by independent certified public accountants. 3
The accompanying notes are an integral part of these financial statements.
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Qinnet.com, Inc.
(a development stage company)
Consolidated Statements of Operations and Comprehensive Income
Six and Three months ended June 30, 2000 and 1999
(Unaudited)
Six Six Three Three
months months months months
ended ended ended ended
June 30, June 30, June 30, June 30,
2000 1999 2000 1999
------- -------- -------- --------
Revenues $ - $ - $ - $ -
--------- --------- --------- ---------
Expenses
General and administrative
expenses 139 - 139 -
Reorganization expenses 333,000 - 333,000 -
--------- --------- --------- ---------
Total operating expenses 333,139 - 333,139 -
--------- --------- --------- ---------
Loss from operations (333,139) - (333,139) -
Other income (expense)
Interest income 180 - 180 -
Foreign currency translation
Loss (78) - (78) -
--------- --------- --------- ---------
Loss before provision for
income taxes (333,037) - (333,037) -
Provision for income taxes - - - -
--------- --------- --------- ---------
Net Loss (333,037) - (333,037) -
Other comprehensive income - - - -
--------- --------- --------- ---------
Comprehensive Loss $ (333,037)$ - $ (333,037)$ -
========= ========= ========= =========
Net loss per weighted-average
Share of common stock
outstanding, calculated on
net loss-basic and fully
diluted $(0.26) nil $(0.26) nil
========= ========= ========= =========
Weighted-average number
of common stock shares
outstanding - basic and
fully diluted 1,272,201 1,250,248 1,293,905 1,250,498
========= ========= ========= =========
The financial information presented herein has been prepared by management
without audit by independent certified public accountants. 4
The accompanying notes are an integral part of these financial statements.
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Qinnet.com, Inc.
(a development stage company)
Consolidated Statements of Cash Flows
Six months ended June 30, 2000 and 1999
(Unaudited)
Six months Six months
ended ended
June 30, June 30,
2000 1999
---------- ----------
Cash flows from operating activities
Net loss for the period $ (333,037) $ -
Adjustments to reconcile net loss
to net cash provided by operating
activities
Common stock issued for
reorganization costs 333,000 -
---------- ----------
Net cash used in operating activities (37) -
---------- ----------
Cash flows from investing activities
Cash paid for acquisition of
Internet Corporation of America, Inc. (50,000) -
---------- ----------
Cash flows from financing activities
Cash collected on stock subscription receivable 50,000 -
Cash advanced by controlling shareholder 10,879 -
---------- ----------
Proceeds from sale of common stock 60,879 -
---------- ----------
Increase (decrease) in cash 10,842 -
Cash at beginning of period - -
---------- ----------
Cash at end of period $ 10,842 $ -
========== ==========
Supplemental Disclosures of Interest
and Income Taxes Paid
Interest paid $ - $ -
========== ==========
Income taxes paid (refunded), net $ - $ -
========== ==========
The financial information presented herein has been prepared by management
without audit by independent certified public accountants. 5
The accompanying notes are an integral part of these financial statements.
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Qinnet.com, Inc.
(a development stage company)
Notes to Consolidated Financial Statements
Note A - Basis of Presentation and Background
Qinnet.com, Inc. (Company) was incorporated on May 31, 1989 as
Specialistics, Inc. under the laws of the State of Delaware, as a
wholly-owned subsidiary of Debbie Reynolds Hotel and Casino, Inc.
(formerly Halter Venture Corporation), a publicly-owned
corporation (DRHC). The Company has had no substantial
operations or substantial assets since inception. The business
purpose of the Company is to seek out and obtain a merger,
acquisition or outright sale transaction whereby the Company's
stockholders will benefit. The Company has not engaged in any
negotiations from inception and has not undertaken any steps to
initiate the search for a merger or acquisition candidate. In
anticipation of various business combination transactions which
did not reach completion, the Company changed its corporate name
to Eastern Group International, Ltd. on July 18, 1996 and
TeleSpace Limited on December 27, 1996, respectively.
The Company changed its corporate name to Qinnet.com, Inc. on
December 14, 1999.
In October 1992, DRHC divested itself of 100% of its holdings in
the Company by distributing 100% of the issued and outstanding
stock of the Company to DRHC stockholders. The then majority
stockholder of DRHC became the majority stockholder of the
Company. This stockholder then continued to maintain the
corporate status of the Company and provides all nominal working
capital support on the Company's behalf.
The Company has no assets or business operations through June 30,
2000. Accordingly, the Company is considered in the development
stage and, as such, has generated no significant operating
revenues and has incurred cumulative operating losses of
approximately $338,500. Accordingly, the Company is fully
dependent upon management and/or significant stockholders to
provide sufficient working capital to preserve the integrity of
the corporate entity during this phase. It is the intent of
management and significant stockholders to provide sufficient
working capital necessary to support and preserve the integrity
of the corporate entity.
On April 13, 2000, the Company purchased 100.0% of the issued and
outstanding shares of Internet Corporation of America, Inc. for
$50,000 cash and 50,000 shares of restricted, unregistered common
stock. This change in control of Internet Corporation of
America, Inc. occurred in conjunction with closing under an
Agreement and Plan of Reorganization (the "Reorganization
Agreement") between the Internet Corporation of America, Inc. and
the Company. As a result of this transaction, Internet
Corporation of America, Inc. became a wholly-owned subsidiary of
the Company.
The Reorganization was approved by the unanimous consent
of the Board of Directors of the Company on March 11, 2000. The
Reorganization is intended to qualify as a reorganization within
the meaning of Section 368(a)(1)(B) of the Internal Revenue Code
of 1986, as amended.
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Qinnet.com, Inc.
(a development stage company)
Notes to Consolidated Financial Statements - Continued
Note A - Basis of Presentation and Background - Continued
Upon effectiveness of the Reorganization Agreement, pursuant to
Rule 12g-3(a) of the General Rules and Regulations of the
Securities and Exchange Commission, the Company became the
successor issuer to Internet Corporation of America, Inc. for
reporting purposes under the Securities Exchange Act of 1934
(Act) and elected to report under the Act, effective March 21,
2000. A copy of the Reorganization Agreement is filed as an
exhibit to a Form 8-K filed on April 14, 2000.
The accompanying financial statements present the consolidated
financial condition, operations and cash flows of Qinnet.com,
Inc. and its wholly-owned subsidiary, Internet Corporation of
America, from April 14, 2000, the date of its acquitision. All
significant intercompany transactions have been eliminated in
consolidation. The consolidated entities are collectively
referred to as the "Company".
During interim periods, the Company follows the accounting
policies set forth in its Annual Report Pursuant to Section 13 or
15(d) of The Securities Exchange Act of 1934 on Form 8-K as filed
with the U. S. Securities and Exchange Commission on April 14,
2000. The information presented herein may not include all
disclosures required by generally accepted accounting principles
and the users of financial information provided for interim
periods should refer to the annual financial information and
footnotes contained the Exhibits for Form 8-K as filed on April
14, 2000 when reviewing the interim financial results presented
herein.
In the opinion of management, the accompanying interim financial
statements, prepared in accordance with the instructions for Form
10-QSB, are unaudited and contain all material adjustments,
consisting only of normal recurring adjustments necessary to
present fairly the financial condition, results of operations and
cash flows of the Company for the respective interim periods
presented. The current period results of operations are not
necessarily indicative of results which ultimately will be
reported for the full fiscal year ending December 31, 2000.
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
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Qinnet.com, Inc.
(a development stage company)
Notes to Consolidated Financial Statements - Continued
NOTE B - Summary of Significant Accounting Policies
1. Cash and cash equivalents
-------------------------------
The Company considers all cash on hand and in banks, including
accounts in book overdraft positions, certificates of deposit
and other highly-liquid investments with maturities of three
months or less, when purchased, to be cash and cash
equivalents.
2. Reorganization costs
--------------------------
The Company has adopted the provisions of AICPA Statement of
Position 98-5, "Reporting on the Costs of Start-Up Activities"
whereby all organization and initial costs incurred with the
acquisition of Internet Corporation of America, Inc. were
charged to operations as incurred.
3. Income taxes
------------------
For the period May 31, 1989 (date of inception) through
December 31, 1990, the Company was included in the
consolidated income tax return of DRHC. For the two years
ended December 31, 1992 and 1991, respectively, the Company
(and its parent, DRHC) were included in the consolidated
income tax return of the Company's majority stockholder. As
of December 31, 1993, the Company began filing its own
separate federal income tax return. The Company has no net
operating loss carryforwards available to offset financial
statement or tax return taxable income in future periods.
3. Income taxes - continued
------------------------------
The Company uses the asset and liability method of accounting
for income taxes. At June 30, 2000 and 1999, respectively,
the deferred tax asset and deferred tax liability accounts, as
recorded when material to the financial statements, are
entirely the result of temporary differences. Temporary
differences represent differences in the recognition of assets
and liabilities for tax and financial reporting purposes.
Due to the provisions of Internal Revenue Code Section 338,
the Company will have no net operating loss carryforwards
available to offset financial statement or tax return taxable
income in future periods as a result of a change in control
involving 50 percentage points or more of the issued and
outstanding securities of the Company.
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Qinnet.com, Inc.
(a development stage company)
Notes to Consolidated Financial Statements - Continued
4. Loss per share
--------------------
Basic earnings (loss) per share is computed by dividing the
net income (loss) by the weighted-average number of shares of
common stock and common stock equivalents (primarily
outstanding options and warrants). Common stock equivalents
represent the dilutive effect of the assumed exercise of the
outstanding stock options and warrants, using the treasury
stock method. The calculation of fully diluted earnings
(loss) per share assumes the dilutive effect of the exercise
of outstanding options and warrants at either the beginning of
the respective period presented or the date of issuance,
whichever is later. As of June 30, 2000 and 1999 and 1998,
the Company had no warrants and options outstanding which
could be deemed to be dilutive.
Note C - Related Party Transactions
For the period May 31, 1989 (date of inception) through September
30, 1992, DRHC provided office space and management services to
the Company for a fee of $100 per month. Total expenses under
this arrangement aggregated $4,000 for the total period.
Note D - Common Stock Transactions
On June 27, 1996, the Company's Board of Directors approved and
effected a one for seven reverse stock split. Further, on July
29, 1999, the Company's Board of Directors approved and effected
a one for eight reverse stock split. All issued and outstanding
share and per share amounts reflect the cumulative effect of both
reverse splits as of the first day of the first period presented.
On November 27, 1996, the Company executed a Stock Purchase
Agreement (Agreement) with Telespace, Ltd., a privately-owned
corporation. The Agreement calls for Telespace, Ltd. to
pay$50,000 for approximately 7,714,000 pre-reverse split shares
of restricted, unregistered common stock to be utilized in
facilitating a proposed reverse merger with a privately owned
corporation. The use of the proceeds is intended to pay for
various reorganization, recapitalization and other fees and
expenses related to the change in ownership control and proposed
acquisition transaction. This amount was satisfied in full on
December 31, 1999
On April 13, 2000, the Company purchased 100.0% of the issued and
outstanding shares of Internet Corporation of America, Inc. for
$50,000 cash and 50,000 shares of restricted, unregistered common
stock. This change in control of Internet Corporation of
America, Inc. occurred in conjunction with closing under an
Agreement and Plan of Reorganization (the "Reorganization
Agreement") between the Internet Corporation of America, Inc. and
the Company. As a result of this transaction, Internet
Corporation of America, Inc. became a wholly-owned subsidiary of
the Company. The stock issued in this transaction was valued at
approximately $283,000, which approximates the "fair value" of
the shares issued based upon the average quoted closing price of
the Company's common stock on April 14 and April 17, 2000,
respectively. The total cost of acquiring Internet Corporation
of America, Inc. was valued at approximately $333,000 which was
charged to operations as "reorganization expense"
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Qinnet.com, Inc.
(a development stage company)
Notes to Consolidated Financial Statements - Continued
NOTE E - Merger Transactions
On July 1, 1999, the Company entered into a merger agreement with
AmeriCom USA, Inc. (AmeriCom), a publicly-owned Delaware
corporation, whereby the Company would exchange one share of its
common stock for each issued and outstanding share of common
stock of AmeriCom (approximately 33,265,756 shares). The
Company would be the surviving entity of the merger transaction.
Additionally, the Company would assume all obligations related
to issued and outstanding stock options of AmeriCom and the
AmeriCom Option Plan. This transaction did not consummate and
the Company has no further obligations thereunder.
As of June 30, 2000, the Company has an agreement in principle to
merge with Qinnet Holdings Corp. (a Washington State
corporation), a privately-owned corporation controlled by the
Company's controlling shareholder. As of this date, the proposed
merger has not been completed. Due to common control and
ownership of the two merging corporations, this transaction will
be accounted for on an "as-if-pooled" basis in accordance with
Interpretation #39 of Accounting Principles Board Opinion #16
whereby the combined financial statements of the merged entities
will become the historical financial statements of the Company.
In anticipation of this merger transaction, the Company changed
its corporate name to Qinnet.com, Inc. on December 14, 1999.
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Item 2. Management's Discussion and Analysis or Plan of
Operations
QINNET CORPORATE ORGANIZATION
Qinnet.com, Inc. ("Qinnet") is a Delaware corporation that was
incorporated on May 31, 1989. Qinnet has no business assets or
operations other than its agreement to merge with Qinnet Holdings
Corp. ("Qinnet Holdings"), as described below.
Qinnet entered into a merger agreement with Qinnet Holdings on
January 12, 2000 (the "Merger Agreement"). Qinnet Holdings Corp.
is a Washington corporation that was incorporated in June, 1999.
The Merger Agreement contemplates the merger of Qinnet and Qinnet
Holdings (the "Merger").
The Merger Agreement contemplates that Qinnet will issue one share
of Qinnet common stock for each share of Qinnet Holdings common
stock upon completion of the Merger. Qinnet plans to file a Form
S-4 registration statement with the Securities and Exchange
Commission under the Securities Act of 1933 (the "Act") in order
to qualify the issue of the Qinnet common stock to the
shareholders of Qinnet Holdings. The closing of the Merger will
be subject to approval by the shareholders of Qinnet and Qinnet
Holdings. As of August 4, 2000, there are a total of 13,109,100
shares of Qinnet Holdings outstanding. In addition, Qinnet
Holdings has granted options to purchase 1,950,000 shares of its
common stock at a price of $5.00 per share under Rule 701 of the
Act. Accordingly, it is anticipated that Qinnet will issue a
total of 13,109,100 shares of Qinnet common stock upon completion
of the Merger, provided that this number will increase if any of
the outstanding options of Qinnet Holdings are exercised prior to
completion of the merger. Any options of Qinnet Holdings not
exercised prior to the merger will survive and continue as options
to purchase shares of Qinnet common stock after the merger on the
same terms and conditions existing prior to the merger.
Qinnet Holdings is presently preparing the audited financial
statements which will be necessary to complete the filing of the
Form S-4 registration statement. The Company is not able to
proceed with the filing of the Form S-4 registration statement or
completion of the Merger until such time as audited financial
statements for Qinnet Holdings have been finalized. The auditors
for Qinnet Holdings have requested certain legal opinions
regarding the corporate organization of Qinnet Holdings and its
subsidiaries in China. Qinnet Holdings is working with its legal
counsel in China in order to finalize the required legal
opinions.
A copy of the Merger Agreement was filed as an exhibit to the
Company's Form 8-K filed on April 14, 2000
AGREEMENT AND PLAN OF REORGANIZATION
Qinnet entered into an agreement and plan of reorganization with
Internet Corporation of America, Inc. ("ICA") on April 13, 2000
(the "Reorganization Agreement"). Under the Reorganization
Agreement, Qinnet acquired all of the issued and outstanding
shares of the common stock of ICA. The closing under the
Reorganization Agreement consisted of a cash and stock for stock
exchange in which Qinnet acquired all of the issued and
outstanding common
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stock of ICA in exchange for the payment of
$50,000 and the issuance of 50,000 shares of its common stock. As
a result of this transaction, ICA became a wholly-owned
subsidiary of Qinnet.
ICA was a reporting company under the Securities Exchange Act of
1934 prior to the acquisition. Upon effectiveness of the
Reorganization Agreement, pursuant to Rule 12g-3(a) of the
General Rules and Regulations of the Securities and Exchange
Commission, Qinnet became the successor issuer to ICA for
reporting purposes under the Securities Exchange Act of 1934 and
has elected to report under the Act effective April 14, 2000.
The Reorganization Agreement was approved by the unanimous
consent of the Board of Directors of Qinnet on April 11, 2000.
The Reorganization Agreement is intended to qualify as a
reorganization within the meaning of Section 368(a)(1)(B) of the
Internal Revenue Code of 1986, as amended. Prior to the
Agreement, Qinnet had 1,250,497 shares of common stock issued and
outstanding. Following the Agreement, Qinnet had 1,300,497 shares
of common stock outstanding.
A copy of the Reorganization Agreement was filed as an exhibit to
the Company's Form 8-K filed on April 14, 2000.
BUSINESS OF QINNET HOLDINGS
The business activities of Qinnet Holdings are carried out in
China by Beijing QinNet Electronic Technologies Co., Ltd.
("Qinnet Beijing"), a wholly owned subsidiary of Qinnet Holdings.
Upon completion of the Merger, Qinnet Beijing will become a
subsidiary of Qinnet.
Qinnet Holding's business plan is to become a leading Internet
Technology Provider (ITP) to Chinese companies and businesses in
the fields of electronic commerce, Internet Service Providers
("ISPs") and Internet Content Providers ("ICPs") across China.
The business objective of Qinnet Holdings is to provide full
Internet, electronic business and electronic commerce solutions
to government entities, private enterprises and individuals in
the various provinces of China. The goal is to achieve exposure,
critical mass and scale to the high growth potential of this
huge, but largely untapped market. China is considered one of
the fastest growing markets for the Internet in the world. Qinnet
Holdings plans to assemble a management team that has significant
Chinese and North American information technology and business
experience in order to implement its business plan. Qinnet
Holdings plans to develop its "www.qinnet.com" Internet web site
in connection with the expansion of its Qinnet.com business.
BUSINESS PLAN
Qinnet Holdings plans to implement its business plan in
overlapping phases through its subsidiary, Qinnet Beijing:
Acquisition of Tjvan, Brainn and Beijing IT
Qinnet Beijing has completed three acquisitions of ISP and ICP
businesses in China - tjvan.net (Tianjin), brainninfo.com
(Shenyang) and Beijing IT Consulting (Beijing), each of which is
discussed below. These three businesses are within relatively
close proximity to Beijing, and are
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the foundation for Qinnet
Holdings' expansion plans. These operations have varying
strengths as ITP, ISP and ICP operations. All are characterized
by founders and management who are motivated by the qinnet.com
strategy, who have achieved relative success in their individual
operations to-date and are located in cities which are likely to
see high Internet growth. Qinnet Beijing has acquired 70% of each
operation through a local JV and is providing capital, technology
and management skill for expansion. Each of the three operations
has additional management to add to Qinnet Beijing's existing
Chinese management capability.
Business Expansion & Integration
The business expansion strategy is to leverage our existing
resources within China to identify additional business
opportunities across the country. The rapid development of the
Internet has created various technology needs in many areas. The
Company plans on targeting small to medium sized businesses
located in areas with large populations and large Internet growth
potentials. The company plans on providing Internet technology to
these enterprises in the form of web site design, web hosting and
business to business e-commerce solutions. Additionally, the
Company will seek to identify additional good quality JV partners
with strong local connections. Examples include Shanghai,
Guangzhou, and Shenzhen. These areas generally are located near
the coastal region, have a large number of foreign firms in
operation and have a business climate characterized by strong
government support. Businesses with a solid local ISP and ICP
emphasis and strong, motivated management will be targeted.
This phase of business expansion and integration will also
necessitate the integration of the acquisitions under the Qinnet
Beijing umbrella. Major web sites will feature elements of
commonality while ensuring local flavor and input. Qinnet Beijing
should be able to benefit from technology synergies via new
hardware and software upgrades. Each acquisition will operate
under common business, technical and control parameters
established by Qinnet Beijing to monitor performance.
Plan to Earn Revenues
Qinnet Holdings plans to generate revenues from the following:
a) Content related services including web hosting, web design and
on-line services.
b) IP telephony services.
c) Electronic Book Publishing, on-line book sales via JV and new
E-Book web site.
d) Electronic commerce services.
e) Data communications services, including China nation-wide e-
mail services and installation of ISDN services.
f) Dial up and leased line access to individuals and corporate
customers:
Acquisition of Tjvan.com in Tianjin
In October 1999, Qinnet Beijing and Tianjin Xiandao Information
Network Co., Ltd. ("Tjvan.com") signed an agreement to establish
a joint venture company, in which Qinnet
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Beijing owns 70% of the
equity interest, to accelerate growth of Tjvan.com's existing
Internet and Internet related business operations. With capital
invested by Qinnet Beijing, the two have agreed to upgrade
existing equipment, add more lines and strengthen marketing
development to increase the current customer base of 12,000 to
20,000 within a year.
Qinnet Beijing has invested 3 million RMB ($360,000 US) to acquire
a 70% equity interest in Tvan.com and to finance Tjvan.com's ISP
expansion. Expansion of the partnership with China Unicom will
include exclusive ISDN lines and IP Telephony distributorship in
Tianjin as well as co-operating and sharing access to each other's
web sites and customer base. The joint venture will allow Qinnet
Beijing to lever the valuable experience of Tjvan.com for future
ISP operations and acquisitions. With the capital injection, the
joint venture plans to increase the number of subscribers from
12,000 to greater than 20,000 and 40,000 within two years to
become the largest ISP in Tianjin. This user base in a single
location will provide a solid foundation for Qinnet's growth.
As the second largest ISP in Tianjin, Tjvan.com has established a
strategic alliance with China Unicom Tianjin for ISP dial-up
operations. In this exclusive agreement, China Unicom provides
the ISP dial-up operation with new infrastructure and DDN/ISDN
lines at half price. Tjvan.com provides marketing, customer
support, network management and other related business services.
The two parties will equally share the operating profit. As of
December 31, 1999, Tjvan.com had 8,300 dial-up subscribers with
50% of these being corporate users. The number of subscribers
nearly tripled in 6 months. As of August 1, 2000 the number of
subscribers had increase to over 12,000. Tianjin city has an
estimated 400,000 PC users with 30,000 Internet subscribers.
Acquisition of Brainninfo.com in Shenyang
Qinnet Beijing has entered into a joint venture agreement with
Shenyang Brainn Information Co., Ltd. ("Braininfo.com") and has
established a joint venture company to accelerate
Brainninfo.com's Internet business development. Qinnet Beijing
now owns a controlling 51% interest in the joint venture company,
called Shenyang Qinnet-Brainn Information Technologies Company
Ltd. Qinnet Beijing has the option to increase its interest to
70% if Qinnet Beijing elects to provide additional funding to the
Brainninfo.com Internet business in the approximate amount of
$200,000. The business plan for this joint venture is to: (1)
jointly establish the e-book online service to become the first
online book sales web site in the Liaoning Province, (2) add
equipment to expand its service capacity to serve over 2,000
corporate/individual subscribers; (3) construct 50 data
information stations across the City of Shenyang.
Brainninfo.com is connected to Jitong (China GBNet) and comprises
customer service, research & development, web design, technical
support and international business staff. All key staff are
university graduates with Bachelor, Masters or Ph.D. degrees. In
one year Brainninfo.com developed over 20 web sites and e-
commerce models including the following:
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Liaoning Food Web (www.infood.org),
Liaoning Consumer Association Web (www.ln315.org.cn)
China Art & Handcraft Web (www.netdragon.com.cn)
Liaoning Education Publishers Web (www.edupress.com)
Shenyang Electronics Street Information Web (www.brainninfo.com)
The major web sites developed are Liaoning Food Web and Shenyang
Electronics Street Information Web, as well as a "Web City"
(under development and partially in use) which publishes the
latest information on real estate in Shenyang. The Shenyang
Electronics Street Information Web publishes the latest prices of
computer hardware and software daily for 3,500 computer stores
along the "Electronics Street" in Shenyang. Other web sites
under development include job-hunting and housing information.
Through the assistance of Brainninfo.com, Qinnet.Com has
completed negotiation and entered into a joint venture with
Liaoning Educational Press the largest book publishing house in
the Northeast of China. This joint venture will establish the
first and only Electronic book publishing business in China and
will create an online book sales operation. Brainninfo.com has
also developed and patented software for e-commerce solutions to
establish online bookstores which can be sold to any bookstore
that wants to go on-line.
Greater Shenyang is one of the largest cities in China with a
population over 10 million. It is the capital of Liaoning
province, the industrial and hi-tech center of Northeast China.
Greater Shenyang includes 7 large cities with over million people
each located in close proximity to each other (Fushun, Fuxin,
Dalian, Yingkou, Anshan, and Benxi).
Acquisition of Beijing IT Consulting Co., Ltd. in Beijing
Qinnet Beijing has acquired Beijing IT Consulting Co., Ltd.
("BITC"). BITC created two web sites a year ago. These two web
sites, www.cheyou.com ("cheyou" in Chinese means "Friends of
Automobiles") and www.xinxi.net ("xinxi" in Chinese means
"Information"), were designed to provide services for over 1,000
registered corporate customers and receive over 20,000 page views
per day in the Chinese auto industry and the general public.
BITC is in the process of completing a software module program
that will allow small to medium sized businesses to establish web
sites in a cost effective and swift fashion and allow them to
build their own e-commerce business. BTIC will commence
marketing and sales efforts for this web site design service in
the fourth quarter of 2000. BTIC will also provide hosting
service to this client base. It is anticipated that each
customer will retain BTIC for future web design and hosting work
as their business mature through the Internet. Since Qinnet
Beijing is also headquartered in Beijing, Qinnet Beijing has
merged the operations of BITC with its operations in Beijing.
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Beijing Qinnet has entered into a joint venture with NetTop.
NetTop is an IP Internet technology company. NetTop manages data
traffic "voice and data transmission" between North America and
Asia to China. This joint venture is named QinTop. Beijing
Qinnet has invested 2,000,000 RMB to this project to date.
QinTop's business will be the expansion of IP services to China.
Total funding to date has been 2,000,000 RMB. The company
anticipated significant revenues and operating profits to begin
over the next 6 -12 months.
PLAN OF OPERATIONS
Qinnet Holdings' plan of operations for the next twelve months is
to complete the following objectives within the time period
specified:
A. Commencement of hardware purchasing for the QinTop IP data
transmission network between North America, Asia and China.
The Company plans to purchase hardware from major
manufacturers such as CISCO. The projected initial
hardware, software and communications lines costs are up to
$500,000.
B. Establish web site and e-publishing business operations
through the joint venture with Liaoning Educational Press.
Total expenditures are under evaluation. It is anticipated
that significant levels of capital investment will be
required for these operations.
C. Commence the installation of ISDN lines for ISP service in
Tianjin pursuant to an agreement with a joint venture
partner. Under the agreement, Qinnet Beijing will
participate with its partner in the ISDN project on a 50/50
basis. Qinnet Holdings anticipates spending approximately
$500,000 on installation of ISDN services over the next
twelve months;
D. Commence establishment of a China nation-wide e-mail system
based on IP telephony and accessible to users by computer,
conventional telephone, cellular telephones, facsimile
machines and pager devices. Qinnet Holdings anticipates
spending approximately $1,800,000 on start-up costs for this
e-mail system over the next twelve months;
E. Continue to fund its existing joint venture arrangements,
including its joint venture arrangements with Tjvan.com and
Braininfo.com. Qinnet Holdings anticipates spending
approximately $1,000,000 on funding its existing joint
venture arrangements over the next twelve months;
F. Evaluate and complete further acquisitions of Internet
Technology provider businesses based in China. Qinnet
Holdings anticipates spending approximately $300,000 on
acquisitions over the next twelve months.
G. In addition to the above expenses, Qinnet Holdings
anticipates spending approximately $800,000 on working
capital over the next twelve months.
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Qinnet Holdings anticipates that it will spend approximately
$5,100,000 over the next twelve month period in pursuing its
stated plan of operations. Of these anticipated expenditures, we
anticipate that approximately $2,000,000 will be spent in the
next six months. Qinnet Holdings currently has cash in the
approximate amount of $2,580,000. Accordingly, Qinnet Holdings
will be able to complete its stated plan of operations without
additional financing over the next six month period.
Qinnet Holding currently employs over 100 people in its
operations and anticipates hiring 200 additional employees over
the next twelve months if Qinnet Holdings is successful in
implementing its plan of operations. Of these employees, 180 are
anticipated to be located in China and 20 are anticipated to be
in North America. Of the Chinese employees, Qinnet Holdings
anticipates that 60 would be employees with technical expertise,
100 would be employees engaged in marketing and servicing of
customers and 20 would be management employees.
Qinnet Holdings will require additional equity financing to
complete its objectives. The Company will plan its expenditures
around its capital resources in order to maintain its operations:
(i) Qinnet Holdings wishes to expand or accelerate its plan of
operations; (ii) the actual costs incurred in pursuing the stated
plan of operations are greater than anticipated; or (iii) Qinnet
Holdings is not successful in achieving revenues upon completion
of the stated plan of operations. Qinnet Holdings does not have
any arrangement in place for any debt or equity financing which
would enable Qinnet Holdings to achieve additional financing if
required. However, the Company is seeking the appropriate
investment banking relationships to assist in the funding process
and is currently in discussions with several major investment
organizations regarding the companies capital needs. There is no
assurance that Qinnet Holdings will be able to secure additional
financing if additional financing is required.
The business plan of Qinnet Holdings may differ from the stated
plan of operations. The board of directors of Qinnet Holdings
may decide not to pursue the stated plan of operations. In
addition, the Qinnet Holdings may modify the stated plan of
operations if actual costs are greater than anticipated or if
Qinnet Holdings secures financing in order to expand or
accelerate its plan of operations.
Qinnet believes the above statements may be forward-looking
statements. Actual results and the actual plan of operations may
differ materially from what is stated above. Factors which may
cause the actual results of Qinnet or its actual plan of
operations to vary include, among other things, decisions of the
board of directors not to pursue a specific course of action
based on its re-assessment of the facts or new facts, changes in
the Internet business or general economic conditions and those
other factors identified herein.
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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.
EXHIBITS
27.1 Financial Data Schedule
REPORTS ON FORM 8-K
Current Report on Form 8-K filed April 14, 2000
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SIGNATURES
In accordance with the requirements of the Securities and
Exchange Act of 1934, the Registrant has duly caused this
report to be signed on its behalf by the undersigned,
thereunto duly authorised.
QINNET.COM, INC.
Date: August 18, 2000
By: /s/ Paul Schwartz
-----------------
PAUL SCHWARTZ, Director
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