UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number: 0 - 7619
Asia SuperNet Corporation
----------------------------------------------------
(Exact name of registrant as specified in its charter)
COLORADO 93-0636333
------------------------------ ------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1700 Lincoln Street, Suite 3200
Denver, Colorado 80203
-------------------------------------- --------
(Address of principal executive offices) (Zip Code)
(303) 860-1700
-----------------------------
(registrant's telephone number)
Powersoft Technologies Inc. 1281 Alberni Street Vancouver,
British Columbia V6E 4R4
----------------------------------------------------------
(Former name, former address and former fiscal year
if changed since last report)
Securities registered pursuant to Section 12(g) of the Act:
Title of Each Class: Name of exchange on which registered:
$0.001 Par Value common stock OTC Bulletin Board
----------------------------- ------------------------------------
Indicate by check mark whether the registrant (1) filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 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 [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not 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-K or any amendment to this
Form 10-K. [ ]
As of May 15, 2000 the aggregate market value of the voting common equity held
by non-affiliates of the registrant, based on the closing price of $1.75 on that
date, was approximately $425,460.
As of May 15, 2000, the registrant had outstanding 1,189,005 shares of common
stock.
<PAGE>
INDEX TO FORM 10-K
OF
ASIA SUPERNET CORPORATION
Page
PART I
Item 1. Business 3
Item 2. Description of Property 5
Item 3. Legal Proceedings 5
Item 4. Submission of Matters to a Vote of Security Holders 6
PART II
Item 5. Market for Registrant's Securities and Related
Stockholder Matters 6
Item 6. Selected Financial Data 8
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
Item 7a. Quantitative and Qualitative Disclosures About Market Risk 11
Item 8. Financial Statements 12
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosures 12
PART III
Item 10. Directors and Executive Officers of the registrant 13
Item 11. Executive Compensation 14
Item 12. Security Ownership of Certain Beneficial Owners and Management 15
Item 13. Certain Relationships and Related Transactions 16
PART IV
Item 14. Exhibits and Reports on Form 8-K 17
(a) Exhibits
(b) Reports on Form 8-K
Signatures 18
2
<PAGE>
PART I
ITEM 1. BUSINESS
Asia SuperNet Corporation, formerly known as Powersoft Technologies Inc.
("Company") was originally organized in California on March 24, 1958 as Time
Saver Markets, Inc. From 1958 to 1994, the Company effected numerous name
changes and engaged in businesses other than those it presently operates. In
August 1994, the Company changed its corporate domicile to Delaware. In November
1994, the Company, then known as Alpine International Corp. changed its name to
Heng Fai China Industries, Inc. On March 31, 1998, Heng Fai China Industries,
Inc. changed its name to Powersoft Technologies Inc. On December 22, 1999,
Powersoft Technologies Inc. was merged into Asia SuperNet Corporation.
On January 18, 1999, the Company entered into an agreement with SAR Trading
Limited ("SAR") wherein SAR agreed to buy and the Company agreed to sell all of
its interests in the majority of its subsidiaries for approximately $4,838,000
in the form of the assumption of certain liabilities. In consideration of the
assumption of liabilities, the Company issued two notes payable to SAR in the
amounts of $1,000,000 and $3,838,000. The $1,000,000 note is immediately
convertible into 20,000,000 common shares of the Company. The $3,838,000 note is
convertible into shares of common stock of the Company, in minimum increments of
$250,000 each, at the average 15 day trading price at the option of the Company
by giving seven trading days notice in writing to SAR. SAR is owned 100% by Fai
H. Chan. On June 18, 1999, the Company agreed to offset the amounts due from a
related party resulting from the sale, of $1,365,278 with the $3,838,000 note
payable. The agreements were subject to shareholder approval, which was obtained
on November 10, 1999. SAR is a company wholly owned by Fai H. Chan, an officer,
director and shareholder of the Company. The Company intends to focus its future
operations on the acquisition of companies operating in the fields of computer
technology and the Internet, and telecommunications and financial software
applications for the securities industry.
Agreement with CyberConstruction Company, Inc.
----------------------------------------------
On February 12, 1999, the Company entered into a Technology License and Services
Agreement (the "Agreement") with CyberConstruction Company, Inc. ("Cyber").
Cyber has developed and continues to develop certain software applications,
methods, operating procedures, Internet infrastructure design and Internet site
template development (collectively the "Technology"). The Agreement grants a
nontransferable license to the Company to use and execute this Technology
developed by Cyber, along with related services, for the Company's customers.
The Company agrees to grant and transfer to Cyber, as a consideration of the
license and related services, its preferred stock with a face value of $10
million, as part of an issuance of up to $50 million of its preferred shares.
The Company has agreed that upon the sooner of (i) the licensing or acquisition
of technologies utilizing the $50 million proceeds from the sale of preferred
shares; or (ii) February 13, 2001, the Company will endeavor to meet the listing
requirements of Nasdaq for the registration for the preferred stock. The
transaction contemplated by the agreement has not yet been consummated and
consequently, has not yet been recorded.
Historical Information
----------------------
In 1994, the Company acquired Vancouver Hong Kong Properties Ltd., a Canadian
corporation ("Vancouver Hong Kong"), which owns an apartment building in North
Vancouver, British Columbia ("Apartment Building").
In January 1995, the Company acquired a wholly-owned subsidiary, Heng Fai China
& Asia Industries Limited ("Asia"), a company incorporated in Hong Kong, along
with Asia's wholly-owned subsidiary, Heng Fai China Industries Limited
3
<PAGE>
("China"). China is incorporated in Hong Kong and owned options ("Option") to
acquire, through its wholly owned subsidiary, Cangzhou Min You Cement Co., Ltd.,
a foreign-owned enterprise registered in the People's Republic of China ("PRC")
("Min You"), direct or joint venture operating lease interests in the following
three cement factories in the Hebei province of PRC: (i) the Hebei Cangzhou City
Chemical Corporation Factory ("Cangzhou Factory"); (ii) the Qingxian Cement
Factory ("Qingxian Factory"); and (iii) the Hebei Cangzhou Area Construction
Materials Factory ("Hebei Factory"). Min You did not exercise its Options to
acquire interests in the Qingxian Factory and the Hebei Factory, and such
Options have since expired.
In April 1995, Min You exercised an Option to lease a production line at the
Cangzhou Factory. Such lease provided for the use of the production line at
Cangzhou Factory for a five year period commencing January 1, 1995.
In September 1996, the Company, through its wholly owned subsidiary, Worldwide
Container Company, Ltd. ("Worldwide"), acquired a 70% interest in Wuhan Monkey
King Container Co., Ltd. ("Wuhan"), in exchange for 727,272 shares of the
Company's restricted Common Stock. Wuhan is a sino-foreign equity joint venture
registered in PRC which is engaged in the design, manufacture, lease and repair
of standard and non-standard containers and related steel structure products.
In January 1997, the Company acquired from Fai H. Chan, an officer, director and
shareholder of the Company, 100% of the outstanding common stock of Greatly Hong
Kong Limited ("Greatly HK") in exchange for nominal consideration. Greatly HK
had a 25% interest in Hebei Cherry Valley Duck Ltd. ("Duck Farm"), a cooperative
joint venture established in the PRC which was engaged in the management and
operation of a duck farm in PRC. The investment was wholly financed by an
interest free, short term advance from Fai H. Chan. Other than the investment in
the Duck Farm and advance from Fai H. Chan, Greatly HK had no other material
assets and liabilities, or operations at the time of acquisition.
In March 1997, the Company acquired from Fai H. Chan, an officer, director and
shareholder of the Company, 100% of the outstanding common stock Heng Fai China
Industries Acquisition Limited ("Heng Fai Acquisition") in exchange for nominal
consideration. Heng Fai Acquisition had an option to form a cooperative joint
venture in PRC, but otherwise had no material assets and liabilities, or
operations at the time of acquisition. Heng Fai Acquisition entered into a
conditional agreement ("Agreement") with an unaffiliated party in PRC ("PRC
Party") to establish a joint venture, Heng Li (Zhangjiagang Free Trade Zone)
International Trading and Development Co., Ltd. ("Heng Li"), to develop and
construct a commercial building in Zhangjiagang Free Trade Zone, PRC. However,
the Agreement was not completed and an application has been submitted to cancel
the registration of Heng Li.
1997 Divestitures
-----------------
After several years of direct investments in PRC, as described above, the
Company believed the returns on such investments were unsatisfactory. The
Company believed its best course of action was to write-off or discontinue a
substantial part of its PRC operations ("Divestiture"). Pursuant to
reorganization, the Company commenced the Divestiture and entered into the
following agreements to terminate or substantially reduce its interest in its
PRC operations as follows:
Min You. In December 1997, the Company, through China, transferred 81% of its
interest in Min You to two unrelated parties in Hong Kong and PRC. China
retained a 19% interest in Min You and full provisions have been made against
the remaining cost of investment in Min You. Applications for the change in
ownership in Min You have been approved by the respective authorities in PRC.
4
<PAGE>
Wuhan. In December 1997, the Company effected an agreement to reverse the
acquisition by returning its 70% interest in Wuhan and to redeem the 727,272
shares of restricted Common Stock previously issued pursuant to the acquisition.
Applications for the change in ownership in Wuhan have been approved by the
respective authorities of PRC during 1998.
Duck Farm. In December 23, 1997, Greatly HK effected an agreement to dispose of
its 25% interest in the Duck Farm. Applications for the change in ownership of
the Duck Farm have been approved by the respective authorities in PRC during
1998.
Heng Li. Heng Fai Acquisition did not exercise its option to form Heng Li as
certain conditions of the joint venture agreement were not met. In December
1997, the Company canceled the registration of Heng Li.
Real Estate Operations
----------------------
The Company operated an apartment building, Lord Highlands Apartments, 260 East
12 Street, North Vancouver, British Columbia, Canada V7L 2J6 ("Apartment
Building"), located within the Central Lonsdale area of the City of North
Vancouver, British Columbia until its sale to SAR. The Apartment Building
consisted of 60 individual residential units of a total of approximately 57,340
square feet. Developments in the immediate area consisted primarily of low to
medium density residential units, with commercial development focused along
Lonsdale Avenue to the west and the more prominent cross streets such as 13th
Street and 15th Street.
Segment Information
-------------------
Information pertaining to the Company's operating segment is in Footnote 14 in
the accompanying consolidated financial statements.
Employees
---------
The Company currently has no employees
Government Regulation
---------------------
The Company is not aware of any government regulations in the United States or
Canada which would materially adversely affect its business. The Company's
participation in the operations of the Apartment Building were subject to
significant governmental regulation in Canada and the Company believes it is in
compliance with such regulations to the extent the same are applicable to the
Company.
ITEM 2. DESCRIPTION OF PROPERTY
The Company currently has no ownership or leases of property.
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to any material pending or ongoing litigation.
5
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the quarter ended December 31, 1999, the following matters were placed
before and approved by the stockholders of the Company as follows:
(1) The stockholders elected the following two directors to serve until the next
Annual Meeting of Stockholders or until their successors are elected and
qualify:
For Withheld Against
--- -------- -------
Fai H. Chan 10,757,921 37,843 0
Robert H. Trapp 10,757,242 33,521 0
(2) The stockolders agreed to reincorporate the Company by changing the state of
incorporation from Delaware to Colorado by the adoption of a Plan and Agreement
of Merger pursuant to which the Company will effectuate a 30 to 1 reverse split
of its common stock and will be merged with and into Asia SuperNet Corporation,
a Colorado corporation, which is a wholly owned subsidiary of the Company formed
specifically for the purpose of the reincorporation and which shall be the
surviving corporation. There were 8,251,841 votes in favor of the merger; 67,794
votes against the merger; and 41,106 votes abstained.
(3) The stockolders approved an agreement between the Company and SAR Trading
Limited ("SAR"), a company wholly owned by Fai H. Chan, an officer, director and
majority stockholder of the Company, whereby the Company agreed to sell and SAR
agreed to purchase all of the operating subsidiaries of the Company in
consideration for which the Company agreed to issue SAR $4,838,000 of
convertible debt. There were 8,265,930 votes in favor of the agreement; 52,820
votes against the agreement; and 41,991 votes abstained.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock is quoted on the OTC Bulletin Board ("OTC"). However,
there is no established public trading market for the Company's common stock.
The following table sets forth, for the periods indicated, the reported high and
low bid price quotations for the Common Stock for the periods such securities
have been reported on the OTC. Such quotations reflect inter-dealer prices, but
do not include retail mark-ups, mark-downs or commissions and may not
necessarily represent actual transactions.
Common Stock
------------
High Bid Low Bid
--------- -------
Year ended December 31, 1999:
- ----------------------------
First Quarter $ 0.045 $ 0.022
Second Quarter 0.024 0.020
Third Quarter 0.026 0.018
Fourth Quarter 3.660 0.010
6
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High Bid Low Bid
--------- -------
Year ended December 31, 1998:
- ----------------------------
First Quarter $ 0.245 $ 0.100
Second Quarter 0.210 0.120
Third Quarter 0.130 0.090
Fourth Quarter 0.085 0.050
As of April 18, 2000, there were approximately 1,434 holders of record of the
common stock based upon information furnished by OTR/Oxford Transfer & Registrar
Securities Agent, the transfer agent for the common stock. The number of record
holders does not include holders whose securities are held in street name. The
closing price of the common stock as reported on the Bulletin Board on May 15,
2000 was $1.75.
The Company has never paid and does not anticipate paying any cash dividends on
its common stock in the foreseeable future. The Company intends to retain all
earnings for use in the Company's business operations and in the expansion of
its business.
On February 5, 1999, 13,700,000 shares of common stock of the Company were
issued erroneously to SAR in exchange for a portion of the debt that is to be
issued pursuant to the agreements with SAR. Because the agreements had not yet
been approved by the Company's shareholders, the 13,700,000 shares of common
stock were canceled.
Recent Issuance of Unregistered Securities
------------------------------------------
On January 18, 1999, the Company entered into an agreement with SAR Trading
Limited ("SAR") wherein SAR agreed to buy and the Company agreed to sell all of
its interests in the majority of its subsidiaries for approximately $4,838,000
in the form of the assumption of certain liabilities. In consideration of the
assumption of liabilities, the Company issued two notes payable to SAR in the
amounts of $1,000,000 and $3,838,000. The $1,000,000 note was converted into
666,667 common shares of the Company.
The issuance of the common stock was made in reliance upon the exemption from
registration provided by Section 4(2) of the Securities Act of 1933, as amended
(1933 Act). The purchaser had access to full information concerning the Company
and represented that it purchased the common stock for the purchaser's own
account and not for the purpose of distribution. The common stock will contain a
restrictive legend advising that the securities represented by the common stock
may not be offered for sale, sold or otherwise transferred without having first
been registered under the 1933 Act or pursuant to an exemption from registration
under the 1933 Act. No underwriters were involved in the transaction.
7
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected financial data of the Company and its
subsidiaries. The selected consolidated financial data in the table for the
Company's five years ended December 31, 1999, 1998, 1997, 1996 and 1995, are
derived primarily from the consolidated financial statements included elsewhere
herein. The data should be read in conjunction with "Management's Discussion and
Analysis of Results of Operations and Financial Condition," the consolidated
financial statements of the Company and related notes thereto and other
financial information included elsewhere herein. All dollar amounts reflect U.S.
Dollars.
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net operating revenues .......... $ 411 7,736 7,801 603 354,952
(Loss) income from
continuing operations ......... (172,269) (101,159) (601,014) (1,488,244) (1,880,672)
Total assets .................... 33,671 1,215,766 2,388,062 10,625,380 1,723,856
Long-term obligations:
Mortgage loans
payable ...................... -- 710,277 837,966 865,594 975,108
Long-term note payable ....... -- -- -- 88,744 91,415
Per common share,
basic and diluted:
(Loss) per share from
continuing operations .......... (0.33) (0.19) (1.21) (3.72) (0.18)
Cash dividends per
common share ................. -- -- -- -- --
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Consolidated
Financial Statements of the Company and related Notes thereto, and other
financial information included elsewhere herein. The financial statements of the
Company are prepared in conformity with United States generally accepted
accounting principles.
Introduction
The primary business of the Company during 1999 was the ownership of an
apartment building in North Vancouver, British Columbia and the holding of
investments securities in Hong Kong.
On January 18, 1999, the Company entered into an agreement with SAR Trading
Limited ("SAR") wherein SAR agreed to buy and the Company agreed to sell all of
its interests in the majority of its subsidiaries for approximately $4,838,000
in the form of the assumption of certain liabilities. In consideration of the
assumption of liabilities, the Company issued two notes payable to SAR in the
amounts of $1,000,000 and $3,838,000. The $1,000,000 note was converted into
666,667 common shares of the Company. The $3,838,000 note is convertible into
shares of common stock of the Company, in minimum increments of $250,000 each,
at the average 15 day trading price at the option of the Company by giving seven
trading days notice in writing to SAR. SAR is owned 100% by Fai H. Chan. On June
18, 1999, the Company agreed to offset the amounts due from a related party
8
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resulting from the sale, of $1,365,278 with the $3,838,000 note payable. The
agreements were approved by the stockholders on November 10, 1999. This
transaction essentially liquidated the operations of the Company and transfers
control of the Company to SAR.
Results of Operations
YEAR ENDED DECEMBER 31, 1999 AS COMPARED TO THE YEAR ENDED DECEMBER 31, 1998
The Company and its subsidiaries' principal activity during the year ended
December 31, 1999 was the operation of a rental property in North Vancouver,
British Columbia in Canada and holding of securities investments in Hong Kong.
There were no significant changes in the revenues and expenses attributable to
the operation of Vancouver Hong Kong's real estate between the period ended
December 31, 1999 and the year ended December 31, 1998. The apartment building
is a 60 unit, three-story wood frame building constructed in the late 1960's.
Management believed that the monthly rents received from the tenants were
reasonably in line with market rents, taking into account the size and condition
of the units plus the amenities.
The Company did not engage in investment activity during the year ended December
31, 1999 because of the uncertainty related to the international securities
markets.
The legal and professional fees have been increased to $153,675 for the year
ended December 31, 1999 from $24,787 for the year ended December 31, 1998. This
is due to the corporate restructuring and the sale of all the subsidiaries of
the Company to SAR.
On November 10, 1999, the shareholders of Powersoft approved the reincorporation
of Powersoft by changing the state of incorporation from Delaware to Colorado by
the adoption of an Agreement and Plan of Merger pursuant to which Powersoft has
merged with and into Asia SuperNet, a Colorado Corporation. The stockholders of
Asia SuperNet approved the respective Agreement and Plan of Merger on October 1,
1999 (the Reincorporation Merger). The Reincorporation Merger was effective as
of December 22, 1999.
Following the Reincorporation Merger, Powersoft ceased to exist and Asia
SuperNet became the surviving corporation. By operation of law, all assets and
liabilities of Powersoft were vested in Asia SuperNet and Asia SuperNet acquired
all of the assets and liabilities of Powersoft. As a result of the
Reincorporation Merger, each thirty issued and outstanding shares of Powersoft
common stock were converted into one share of Asia SuperNet common stock.
On December 9, 1999, the Company completed the sale of all of its interests in
all of the subsidiaries. In consideration for the assumption of the
subsidiaries' liabilities by the purchaser, the Company issued $4,838,000 in the
form of promissory notes to SAR.
At December 31, 1999, Asia SuperNet became inactive following the disposal of
all of its equity interests in its subsidiaries to SAR.
The loss on disposal of subsidiaries amounted to $1,532,747. Revenues from the
discontinued operations of the subsidiaries were $324,917 in 1999 and $312,894
in 1998.
9
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YEAR ENDED DECEMBER 31, 1998 AS COMPARED TO THE YEAR ENDED DECEMBER 31, 1997
There were no significant changes in the revenues and expenses attributable to
the operation of Vancouver Hong Kong's real estate between the year ended
December 31, 1998 and the year ended December 31, 1997.
Investment income decreased from income of $138,794 through December 31, 1997 to
a loss of $25,154 through December 31, 1998. The Company has not engaged in
investment activity during the year ended December 31, 1998. This is because of
the uncertainty related to the international securities markets. The net
investment loss in 1998 consists of the loss due to the expiration of the
warrants, amounting to $145,800 and interest income.
Consulting expense decreased from an aggregate of $772,250 for the year ended
December 31, 1997 to $562,500 for the year ended December 31, 1998, due to
amortization period of certain consulting agreements expiring early in 1998.
Interest expense increased from $309,201 for the year ended December 31, 1997 to
$492,804 for the same period in 1998.
The Company's net loss from continuing operations was $101,059 for the year
ended December 31, 1998, as compared to a net loss of $601,014 for the year
ended December 31, 1997. The reasons for the trend are the reductions in the
other operating administrative expenses and consulting fees during the year
ended December 31, 1998.
Inflation
The effect on inflation on the Company's operations is not material and is not
anticipated to have any material effect in the future.
Liquidity and Capital Resources
The net cash provided by operating activities for the year ended December 31,
1999 amounted to $100,021. The Company meets its working capital requirements
from the collection of amounts from related parties. During the year ended
December 31, 1999, the Company did not make additional cash investments in
securities or facilities.
The net cash used by financing activities amounted to $109,149 for the year
ended December 31, 1999. This is due primarily to the increase in the margin
loan payable.
As discussed in Note 2 of the notes to the consolidated financial statements,
the Company's operating losses and deficiency in net tangible assets raise
substantial doubts concerning the Company's ability to continue as a going
concern. However, the Company's principal shareholder has agreed to continue to
provide the Company with necessary financial support.
New Accounting Standards Not Yet Adopted
In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This statement establishes accounting and
reporting standards for derivative instruments. It requires an entity to
recognize all derivatives as either assets or liabilities in the statement of
financial position and measure those instruments at fair value. This statement
was effective for years beginning after June 15, 1999, although early adoption
was permitted. In July 1999, the FASB issued Statement No. 137, "Accounting for
Derivative Instruments and Hedging Activities--Deferral of the Effective Date of
10
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FASB Statement No. 133," which provides the effective date is for all fiscal
quarters of all fiscal years beginning after June 15, 2000.
The Company believes that the effects of adopting these standards will not be
material to the Company's financial position or results of operations.
Regional Economic Developments
Several countries in Asia have recently experienced significant adverse economic
developments including substantial exchange rate fluctuations, inflation, social
unrest, increased interest rates, reduced economic growth rates, corporate
bankruptcies, declines in the market value of shares listed on stock exchanges,
emergency loan agreements with the International Monetary Fund and
government-imposed austerity measures. To date, neither the PRC nor Hong Kong
have experienced these developments. However, they may occur in the PRC or Hong
Kong in the future, which could have a material effect on a Company's financial
condition or results of operations.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk generally represents the risk of loss that may result from the
potential change in the value of a financial instrument as a result of
fluctuations in interest and currency exchange rates, equity and commodity
prices, changes in the implied volatility of interest rate, foreign exchange
rate, equity and commodity prices and also changes in the credit ratings of
either the issuer of the financial instrument or its related country of origin.
Market risk is inherent to many non-derivative financial instruments, and
accordingly, the scope of the Company's market risk management procedures
includes all market risk sensitive financial instruments.
The Company faced two types of market risk: foreign exchange rate risk and
equity price risk.
Foreign Exchange Rate Risk. Foreign exchange rate risk arises from the
possibility that changes in foreign exchange rates will impact the value of
financial instruments. When the Company buys or sells a financial instrument
denominated in a currency other than U.S. dollars, exposure exists from a net
open currency position. The Company is then exposed to a risk that the exchange
rate may move against it. At December 31, 1999 and 1998, the currency creating
foreign currency risk for the Company was the Hong Kong dollar.
Equity Price Risk. The Company is exposed to equity price risk as a consequence
of making investments in equity securities. Equity price risk results from
changes in the level or volatility of equity prices, which affect the value of
equity securities or instruments that derive their value from a particular
stock, a basket of stocks or a stock index. The Company attempts to reduce the
risk of loss inherent in its inventory of equity securities by entering into
transactions designed to mitigate the Company's market risk profile.
The Company utilizes a wide variety of market risk management methods,
including: limits for each trading activity; marking all positions to market on
a timely basis; timely profit and loss statements; and independent verification
of pricing. The Company believes that these procedures, which stress timely
communication, are the most important elements of the risk management process.
Efforts to further strengthen the Company's management of market risk are
continuous, and the enhancement of risk management systems is a priority of the
Company. This includes the development of quantitative methods, profit and loss
and variance reports, and the review and approval of pricing models.
11
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The table below provides a comparison of the carrying amount to the fair value
of the securities owned by the Company that are classified as available-for-sale
securities.
<TABLE>
<CAPTION>
December 31, 1999 December 31, 1998
-------------------------------- ----------------------------------
Fair Value Carrying Value Fair Value Carrying Value
---------- -------------- ---------- --------------
<S> <C> <C> <C> <C>
Foreign Exchange Rate Risk:
- --------------------------
Equity Securities denominated
in Hong Kong dollars ................... $ -- $ -- $ 439,290 $ 439,290
Equity Price Risk:
- -----------------
Equity Securities* ..................... $ -- $ -- $ 439,290 $ 439.290
</TABLE>
*Includes equity securities denominated in Hong Kong dollars.
Included in the above securities are shares of common stock of Online Credit
International Limited, formerly Heng Fung Holdings Company Limited. The
securities were held by a wholly-owned subsidiary that was included in the sale
to SAR
ITEM 8. FINANCIAL STATEMENTS
The Consolidated Financial Statements that constitute Item 8 are attached at the
end of this Annual Report on Form 10-K. An Index to these Consolidated Financial
Statements is also included in Item 14 (a) of this Annual Report on Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURES
There have been no changes in or disagreements with accountants on accounting,
financial disclosure or other matters, which would require disclosure herein.
12
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PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
The names and ages of all directors and executive officers of the Company are as
follows:
Name Age Position
- ---------------- --- -----------------------------------------------
Fai H. Chan 55 President, Chief Executive Officer and Director
Robert H. Trapp 44 Secretary, Treasurer and Director
Management Biographies
Fai H. Chan has been the president and a director of the Company since June 1994
and has served as the Company's Chief Executive Officer since June 1995. In
1998, Mr. Chan was appointed president and chairman of the board of directors of
eVision USA.Com, Inc., formerly known as Fronteer Financial Holdings, Ltd., a
holding company which among other things, owns a securities broker/dealer
located in Colorado. From June 1993 to the present, he has been a director of
Inter-Asia Equities, Inc., a Canadian company. Since September 1992 to the
present, he has been a director of Heng Fung Holdings Co., Ltd. ("Heng Fung"), a
public company in Hong Kong, which is listed on the Hong Kong Stock Exchange. In
1995, Mr. Chan was appointed managing director and chairman of Heng Fung, for
which he still serves. In May 1998, he was appointed a director of Global Med
Technologies, Inc. Since March 1988, he has been chairman of the board of
directors of American Pacific Bank, a bank in Oregon, and between April 1991 and
April 1993, he was the chief executive officer of said bank.
Robert H. Trapp has been the secretary and treasurer and a director of the
Company since June 1994. In May 1998, he was appointed a director of Global Med
Technologies, Inc. In 1997 and 1998, Mr. Trapp was appointed managing director
and director of eVision USA.Com, Inc., formerly known as Fronteer Financial
Holdings, Ltd. Since May 1995, Mr. Trapp has been a director of Heng Fung
Holdings Co., Ltd., a public company in Hong Kong, which is listed on the Hong
Kong Stock Exchange. Since April 1994, Mr. Trapp has been the secretary of the
Company. Since February 1995, Mr. Trapp has been a director of Inter-Asia
Equities, Inc. a Canadian company. Since July 1991, he has also been the
Canadian operational manager of Pacific Concord Holding (Canada) Ltd.,
responsible for management, marketing, and financial reporting operations of
such company to Pacific Concord Holding Ltd. of Hong Kong. Between March and
June 1991, Mr. Trapp was a securities trainee at Pacific International
Securities in Vancouver, B.C., Canada. Between September 1985 and June 1989, Mr.
Trapp served as an executive officer and a director of Inter-Asia Equities, Inc.
All officers of the Company are elected to serve in such capacities until the
next annual meeting of the Board of Directors of the Company and until their
successors are duly elected and qualified.
There are no material proceedings to which any director, officer or affiliate of
the Company, any owner of record or beneficially of more than 5% of any class of
voting securities of the Company, or any associate of any such director,
officer, affiliate of the Company or security holder is a party adverse to the
Company or any of its subsidiaries.
13
<PAGE>
Committees of the Board of Directors
------------------------------------
The Board of Directors has not established any committees.
Section 16(a) Beneficial Ownership Reporting Compliance
To the Company's knowledge, during the year ended December 31, 1999, there were
no directors, officers or more than 10% shareholders of the Company that failed
to timely file a Form 3, Form 4 or Form 5; other than Fai H. Chan who failed to
timely file a Form 5.
ITEM 11. EXECUTIVE COMPENSATION
Summary Compensation Table
--------------------------
During the year ended December 31, 1999, Heng Fai Management, Inc., a wholly
owned subsidiary of the Company, paid $250,000 in consulting and management fees
to Tight Hold Investment Limited, a company wholly owned by Fai H. Chan, the
Company's chief executive officer.
Name and Principal Year Other Annual
Positions Ended Compensation Compensation ($)
- ------------------ ----- ------------ ---------------
Fai H. Chan, President 1999 $ 250,000 --
CEO, and Director 1998 $ 500,000 --
1997 $ 500,000 --
Stock Option Plans
------------------
The Company currently has no stock option plans.
Option/SAR Grants in Last Year
------------------------------
There were no options granted during the year ended December 31, 1999.
Aggregate Option/SAR Exercises in Last Year
And Year-End Options/SAR Values
-------------------------------------------
No options were exercised during the year ended December 31, 1999 and there were
no unexercised options as of the end of the year ended December 31, 1999.
Employment Agreements
---------------------
There are no employment agreements between the Company and its executive
officers.
14
<PAGE>
Remuneration of Directors
-------------------------
Directors do not receive compensation for attendance at meetings of the Board of
Directors. All directors are entitled to reimbursement of reasonable travel and
lodging expenses related to attending meetings of the Board of Directors.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth, as of May 15, 2000, certain information with
respect to stock ownership of: (i) all persons known by the Company to be
beneficial owners of five percent or more of its outstanding common stock: (ii)
each of the Company's directors and executive officers; and (iii) all directors
and executive officers as a group. Unless otherwise indicated, the beneficial
owners have sole voting and investment power over the shares of common stock
listed below.
<TABLE>
<CAPTION>
% of Outstanding Shares
Name and Address Number of Shares of Common stock
of Beneficial Owner (1) Beneficially Owned (1) Beneficially Owned (1)
---------------------- --------------------- -----------------------
<S> <C> <C>
SAR Trading Limited ............................. 666,667 56.07%
Bank of Communications Tower
10th Floor
231-235 Gloucester Road
Wanchai, Hong Kong 040
Fai H. Chan ..................................... 869,884(2)(4) 73.16%
Bank of Communications Tower
10th Floor
231-235 Gloucester Road
Wanchai, Hong Kong 040
Robert H. Trapp ................................. 3,334 **
1700 Lincoln Street
32nd Floor
Denver, Colorado 80203
Keow Y. Chan .................................... 749,216(3)(4) 63.01%
Unit B, 13th Floor
Lippo, Leighton Tower
103-109 Leigton Road
Causeway Bay, Hong Kong
All Executive Officers & Directors
As a Group (2 Persons)(5) .................... 873,218 73.44%
</TABLE>
- -----------------------------
** Less than 1%
(1) Unless otherwise noted, the Company believes that all of such shares are
owned of record by each individual named as beneficial owner and that such
individual has sole voting and dispositive power with respect to the shares
of common stock owned by each of them. Such person's percentage ownership
is determined by assuming that the options or convertible securities that
15
<PAGE>
are held by such person which are exercisable within 60 days have been
exercised or converted, as the case may be.
(2) Includes 193,335 shares owned of record by Mr. Chan. Also includes (i)
1,250 shares of common stock held by Inter-Asia Equities, Inc.
("Inter-Asia"); (ii) 8,632 shares of common stock held by Excess Pension
Fund, Inc. (Fund) and (iii) 666,667 shares of common stock held by SAR. Mr.
Chan owns 100% of SAR. Mr. Chan is an officer, director and stockholder of
Inter-Asia, and a beneficial owner of the Fund. Excludes the 72,667 shares
owned of record by Mr. Chan's wife. See Footnote (3) below.
(3) Includes (i) 8,632 shares of common stock held by the Fund and 1,250 shares
of common stock held by Inter-Asia. Ms. Chan is the president and a
director of Inter-Asia, and a beneficial owner of the Fund. Excludes
193,335 shares owned of record by Ms. Chan's husband, Fai H. Chan. See
Footnote (2) above.
(4) In the event that Mr. Chan is deemed to beneficially own all of the shares
owned of record by his spouse, Mr. Chan would be deemed to beneficially own
942,551 shares or approximately 79.27% of the outstanding common stock of
the Company.
On February 5, 1999, 13,700,000 shares of common stock of the Company were
issued erroneously to SAR in exchange for a portion of the debt that is to be
issued pursuant to the agreements with SAR. Because the agreements had not yet
been approved by the Company's shareholders, the 13,700,000 shares of common
stock were canceled.
There are no agreements or other arrangements or understandings known to the
Company concerning the voting of the Common Stock of the Company or otherwise
concerning control of the Company which are not disclosed herein. There are no
preemptive rights applicable to the Company's securities.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company maintains deposits in accounts at American Pacific Bank. Fai H. Chan
(an officer, director and stockholder of the Company) is an officer and/or
director of such bank.
The Company owned 48,535,276 shares of common stock of Heng Fung Holdings
Company Limited. Messrs. Chan, and Trapp (officers, directors and/or
stockholders of the Company) are officers, directors and /or stockholders of
such company.
At December 31, 1999, 1998 and 1997, the second mortgage of $77,579 and related
interest payable of $25,368 and $38,623, respectively, were payable to the
Silverstein Foundation, Inc., a Panama company, in which Mr. Fai H. Chan's
children have beneficial ownership interests. The related interest expense was
$8,258 in 1999, $8,269 in 1998, $7,774 in 1997 and $8,947 in 1996.
On January 18, 1999, the Company entered into an agreement with SAR Trading
Limited ("SAR") wherein SAR agreed to buy and the Company agreed to sell all of
its interests in the majority of its subsidiaries for approximately $4,838,000
in the form of the assumption of certain liabilities. In consideration of the
assumption of liabilities, the Company issued two notes payable to SAR in the
amounts of $1,000,000 and $3,838,000. The $1,000,000 note was converted into
666,667 common shares of the Company. The $3,838,000 note is convertible into
shares of common stock of the Company, in minimum increments of $250,000 each,
at the average 15 day trading price at the option of the Company by giving seven
trading days notice in writing to SAR. SAR is owned 100% by Fai H. Chan. On June
16
<PAGE>
18, 1999, the Company agreed to offset the amount due from a related party
resulting from the sale, of $1,365,278 with the $3,838,000 note payable. The
agreements were subject to shareholder approval.
On February 5, 1999, 13,700,000 shares of common stock of the Company were
issued erroneously to SAR in exchange for a portion of the debt that was to be
issued pursuant to the agreements with SAR. Because the agreements had not yet
been approved by the Company's shareholders, the 13,700,000 shares of common
stock were canceled.
Heng Fai Management, Inc., a wholly owned subsidiary of the Company, entered
into a consultation and management agreement with Tight Hold Investment Limited,
a company wholly owned by Fai H. Chan, president and chief executive officer of
the Company. The term of this agreement is for ten years having commenced
November 1, 1996 and ending October 31, 2006. The remuneration the Company shall
pay for services rendered pursuant to this agreement is as follows: (i) the sum
of $500,000 per year for the duration of the agreement, a rate of $41,667 per
month; and (ii) upon the Company meeting NASDAQ National Market System
("NASDAQ") requirements of having $4,000,000 in net tangible assets, and
obtaining the other requirements which allow the Company's stock to be marginal
on NASDAQ and having declared at least a minimum $0.10 per share earning and
$0.05 dividend to common shareholders, the fee shall increase to $1,000,000 per
year for the duration of the agreement, a rate of $83,333 per month. This
agreement was terminated during June 1999. During 1999, Tight Hold Investment
was paid $250,000.
PART IV
ITEM 14. EXHIBITS AND REPORTS ON FORM 8-K
(a)(1) Financial Statements and Financial Statement Schedules
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
Page
Independent Auditors' Report F-1
Consolidated Balance Sheets as of December 31, 1999 and 1998 F-2
Consolidated Statements of Income and Comprehensive Income for
each of the three years in the period ended December 31, 1999 F-4
Consolidated Statements of Stockholders' Equity (Deficit) for each
of the three years in the period ended December 31, 1999 F-6
Consolidated Statements of Cash Flows for each of the three years
in the period ended December 31, 1999 F-7
Notes to Consolidated Financial Statements F-9
All schedules are omitted because the required information is not present in
amounts sufficient to require submission of the schedule or because the
information required is included in the Consolidated Financial Statements and
Notes thereto.
17
<PAGE>
(a)(2) Financial Statement Schedules. None.
(a)(3) Exhibits. See "EXHIBIT INDEX" on page 19.
(b) Current Reports on Form 8-K
On December 13, 1999, the Company filed a Current Report on Form 8-K dated
December 9, 1999, under Items 2 and 7, to report the sale of all of the
Company's interests in the majority of its subsidiaries to SAR Trading Limited.
On January 5, 2000, the Company filed a Current Report on Form 8-K dated
December 22, 1999, under Item 5 to report the re-incorporation of Powersoft
Technologies Inc. under the laws of Colorado pursuant to an Agreement and Plan
of Merger between Powersoft Technologies Inc. and Asia SuperNet Corporation.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ASIA SUPERNET CORPORATION,
a Colorado corporation.
By: /s/ Fai H. Chan
--------------------------------------
Fai H. Chan, President
Date: May 24, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
Date: May 24, 2000 By: /s/ Fai H. Chan
----------------------------------------
Fai H. Chan, President, CEO and Director
Date: May 24, 2000 By: /s/ Robert H. Trapp
----------------------------------------
Robert H. Trapp, Secretary, Treasurer
and Director
18
<PAGE>
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF
ASIA SUPERNET CORPORATION
(Formerly known as Powersoft Technologies, Inc.)
We have audited the accompanying consolidated balance sheets of Asia SuperNet
Corporation (the "Company") and its subsidiaries as of December 31, 1999 and
1998, and the related consolidated statements of income and comprehensive
income, shareholders' deficit and cash flows for each of the three years in the
period ended December 31, 1999. 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 audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Asia SuperNet Corporation and its
subsidiaries as of December 31, 1999 and 1998, and the results of their
operations and cash flows for each of the three years in the period ended
December 31, 1999 in conformity with accounting principles generally accepted in
the United States of America.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company's recurring losses from operations, negative
working capital and shareholders' capital deficiency raise substantial doubt as
to its ability to continue as a going concern. Management plans concerning these
matters are also described in Note 2. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
/s/ DELOITTE TOUCHE TOHMATSU
DELOITTE TOUCHE TOHMATSU
Hong Kong
May 23, 2000
F - 1
<PAGE>
<TABLE>
<CAPTION>
ASIA SUPERNET CORPORATION
(Formerly known as Powersoft Technologies Inc.)
CONSOLIDATED BALANCE SHEETS
(United States Dollars)
As of December 31,
----------------------------
ASSETS 1999 1998
- ------ ---- ----
<S> <C> <C>
Current assets:
Cash and cash equivalents ...................................... $ 9,176 $ 44,949
Available-for-sale securities (Note 5) ......................... -- 439,290
Accounts receivable, trade, net of allowance for
doubtful accounts of $0 in 1999 and 1998 ..................... -- 29,830
Prepaid and other current assets ............................... 21,301 24,260
Amounts receivable from related parties (Note 9) ............... -- 15,632
---------- ----------
Total current assets ........................................... 30,477 553,961
Property, plant and equipment, net (Note 6) ....................... 3,194 661,805
---------- ----------
Total assets ...................................................... $ 33,671 $1,215,766
========== ==========
See accompanying notes to the consolidated financial statements.
F - 2
<PAGE>
<CAPTION>
ASIA SUPERNET CORPORATION
(Formerly known as Powersoft Technologies Inc.)
CONSOLIDATED BALANCE SHEETS-continued
(United States Dollars)
As of December 31,
----------------------------
LIABILITIES AND SHAREHOLDERS' DEFICIT 1999 1998
- ------------------------------------- ---- ----
<S> <C> <C>
Current liabilities:
Mortgage loans payable - current portion (Note 11) ............. $ -- $ 109,159
Accounts payable ............................................... 123,821 96,967
Margin loan payable (Note 8) ................................... -- 3,136,264
Promissory notes payable to a related party (Note 10) .......... 2,472,722 --
Accrued expenses and other liabilities ......................... 82,182 80,091
Amounts payable to related parties (Note 9) .................... 72,738 1,861,216
----------- -----------
Total current liabilities: ..................................... 2,751,463 5,283,697
----------- -----------
Long-term liabilities:
Mortgage loans payable (Note 11) ............................... -- 710,277
----------- -----------
Shareholders' deficit:
Preferred stock, $0.001 par value, 300,000,000 shares
authorized; unissued ......................................... -- --
Common stock, $0.001 par value, 900,000,000 shares
authorized; 1,189,005 shares issued and outstanding .......... 1,189 --
Common stock, $0.01 par value, 30,000,000 shares
authorized; 15,559,542 issued and outstanding (Note 12) ...... -- 155,595
Additional paid-in capital ..................................... 6,539,702 5,385,296
Accumulated deficit ............................................ (9,258,683) (6,981,436)
Unrealized loss on available-for-sale securities (Note 5) ...... -- (3,356,080)
Cumulative exchange adjustments ................................ -- 18,417
----------- -----------
Total shareholders' deficit ....................................... (2,717,792) (4,778,208)
----------- -----------
Total liabilities and shareholders' deficit ....................... $ 33,671 $ 1,215,766
=========== ===========
</TABLE>
See accompanying notes to the consolidated financial statements.
F - 3
<PAGE>
<TABLE>
<CAPTION>
ASIA SUPERNET CORPORATION
(Formerly known as Powersoft Technologies Inc.)
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(United States Dollars)
Year ended December 31,
----------------------------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Revenues:
Interest ................................................ $ 411 $ 236 $ 301
Rental income ........................................... -- 7,500 7,500
----------- ----------- -----------
Total revenues ................................................ 411 7,736 7,801
----------- ----------- -----------
Expenses:
Depreciation ............................................... 4,790 -- --
Legal and professional fees ................................ 153,675 24,787 120,855
Consulting fees (Note 7) ................................... -- 62,500 272,250
Investment banking fees .................................... -- -- 164,252
Traveling .................................................. -- -- 2,227
Other operating and administrative expenses ................ 14,215 21,508 49,231
----------- ----------- -----------
Total expenses ................................................ 172,680 108,795 608,815
----------- ----------- -----------
Loss from continuing operations ............................... (172,269) (101,059) (601,014)
----------- ----------- -----------
(Continued)
See accompanying notes to the consolidated financial statements.
F - 4
<PAGE>
<CAPTION>
ASIA SUPERNET CORPORATION
(Formerly known as Powersoft Technologies Inc.)
CONSOLIDATED STATEMENTS OF INCOME AND
COMPREHENSIVE INCOME-continued
(United States Dollars)
Year ended December 31,
----------------------------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Discontinued operations (Note 3)
Loss from discontinued operations .......................... $ (572,231) $ (976,074) $ (616,404)
Loss on disposal of discontinued operations ................ (1,532,747) -- --
Loss from Cangzhou cement .................................. -- -- (157,117)
Gain on disposal of Cangzhou cement ........................ -- -- 148,775
Loss from Wuhan ............................................ -- -- (248,210)
Gain on reversal of Wuhan acquisition ...................... -- -- 307,442
Share of loss for the investment in Duck Farm .............. -- -- (107,229)
Loss on disposal of the investment in Duck Farm ............ -- -- (194,095)
----------- ----------- -----------
Loss from discontinued operations ............................. (2,104,978) (976,074) (866,838)
----------- ----------- -----------
Loss before income taxes ...................................... (2,277,247) (1,077,133) (1,467,852)
Provision for income taxes (Note 13) .......................... -- -- --
----------- ----------- -----------
Loss before minority interest ................................. (2,277,247) (1,077,133) (1,467,852)
Minority interest from discontinued operations ................ -- -- 74,463
----------- ----------- -----------
Net loss ...................................................... (2,277,247) (1,077,133) (1,393,389)
----------- ----------- -----------
Other comprehensive income (loss), net of tax:
Foreign exchange adjustments ............................... -- 16,901 (5,452)
Unrealized loss on available-for-sale securities ........... -- (1,048,813) (2,228,442)
----------- ----------- -----------
Other comprehensive loss ...................................... -- (1,031,912) (2,233,894)
----------- ----------- -----------
Comprehensive loss ............................................ $(2,277,247) $(2,109,045) $(3,627,283)
=========== =========== ===========
Loss per share (basic and diluted):
From continuing operations ................................. $ (0.33) $ (0.19) $ (1.21)
Effect of discontinued operations .......................... (3.97) (1.87) (1.60)
----------- ----------- -----------
Net loss per share ......................................... $ (4.30) $ (2.06) $ (2.81)
=========== =========== ===========
Weighted average number of shares of
common stock outstanding ................................... 529,644 522,338 495,770
=========== =========== ===========
</TABLE>
See accompanying notes to the consolidated financial statements
F - 5
<PAGE>
<TABLE>
<CAPTION>
ASIA SUPERNET CORPORATION.
(Formerly known as Powersoft Technologies Inc.)
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' DEFICIT
(United States Dollars)
Common stock
------------------------ Additional
Number paid-in Accumulated
of shares Amount capital deficit
--------- ------ ---------- -----------
<S> <C> <C> <C> <C>
At December 31, 1996 ............. 11,986,814 $ 119,868 $ 4,701,023 $ (4,510,914)
Private placements
(Note 12) ..................... 1,700,000 17,000 1,003,000 --
Private placements
(Note 12) ..................... 2,500,000 25,000 575,000 --
Issue to effect a
consulting
agreement (Note 12) ........... 100,000 1,000 99,000 --
Amortization of
consulting fees ............... -- -- -- --
Redemption to reverse
the purchase
of a subsidiary
(Note 12) ..................... (727,272) (7,273) (992,727) --
Net loss ......................... -- -- -- (1,393,389)
Other comprehensive loss:
Unrealized loss on
securities available-
for-sale ..................... -- -- -- --
------------ ------------ ------------ ------------
At December 31, 1997 ............. 15,559,542 155,595 5,385,296 (5,904,303)
Amortization of .................. -- -- -- --
consulting fees
Net loss ......................... -- -- -- (1,077,133)
Other comprehensive income (loss):
Unrealized loss
on securities
available-for-sale ........... -- -- -- --
Foreign exchange
translation
adjustment ................... -- -- -- --
------------ ------------ ------------ ------------
At December 31, 1998 ............. 15,559,542 155,595 5,385,296 (6,981,436)
Reverse stock split (Note 12) .... (15,037,204) (155,072) 155,072 --
Conversion of promissory
note ........................... 666,667 666 999,334 --
Net loss ......................... -- -- -- (2,277,247)
Other comprehensive income (loss):
Unrealized loss on
securities available
for sale ..................... -- -- -- --
Foreign exchange
translation adjustment ....... -- -- -- --
------------ ------------ ------------ ------------
At December 31, 1999 ............. 1,189,005 $ 1,189 $ 6,539,702 $ (9,258,683)
============ ============ ============ ============
See accompanying notes to the consolidated financial statements.
F - 6(a)
<PAGE>
<CAPTION>
Accumulated other
comprehensive income (loss)
---------------------------
Unrealized Common stock
loss on issued for
available for Cumulative consulting
sale exchange services to be
securities adjustments received Total
------------- ------------ -------------- -----
<S> <C> <C> <C> <C>
At December 31, 1996 ............. $ (78,825) $ 6,968 $ (234,750) $ 3,370
Private placements
(Note 12) ..................... -- -- -- 1,020,000
Private placements
(Note 12) ..................... -- -- -- 600,000
Issue to effect a
consulting
agreement (Note 12) ........... -- -- 100,000 --
Amortization of
consulting fees ............... -- -- 272,250 272,250
Redemption to reverse
the purchase
of a subsidiary
(Note 12) ..................... -- (5,452) -- (1,005,452)
Net loss ......................... -- -- -- (1,393,389)
Other comprehensive loss:
Unrealized loss on
securities available-
for-sale ..................... (2,228,442) -- -- (2,228,442)
------------ ------------ ------------ ------------
At December 31, 1997 ............. (2,307,267) 1,516 (62,500) (2,731,663)
Amortization of .................. -- -- 62,500 62,500
consulting fees
Net loss ......................... -- -- -- (1,077,133)
Other comprehensive income (loss):
Unrealized loss
on securities
available-for-sale ........... (1,048,813) -- -- (1,048,813)
Foreign exchange
translation
adjustment ................... -- 16,901 -- 16,901
------------ ------------ ------------ ------------
At December 31, 1998 ............. (3,356,080) 18,417 -- (4,778,208)
Reverse stock split (Note 12) .... -- -- -- --
Conversion of promissory
note ........................... -- -- -- 1,000,000
Net loss ......................... -- -- -- (2,277,247)
Other comprehensive income (loss):
Unrealized loss on
securities available
for sale ..................... 3,356,080 -- -- 3,356,080
Foreign exchange
translation adjustment ....... -- (18,417) -- (18,417)
------------ ------------ ------------ ------------
At December 31, 1999 ............. $ -- $ -- $ -- $ (2,717,792)
============ ============ ============ ============
</TABLE>
See accompanying notes to the consolidated financial statements.
F - 6(b)
<PAGE>
<TABLE>
<CAPTION>
ASIA SUPERNET CORPORATION
(Formerly known as Powersoft Technologies Inc.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(United States Dollars)
Year ended December 31,
----------------------------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Cash flow from operating activities:
Net loss ......................................................... $(2,277,247) $(1,077,133) $(1,393,389)
Adjustments to reconcile net loss to net
cash used in operating activities:
Minority interest ............................................ -- -- (74,463)
Depreciation and amortization ................................ 39,563 35,186 208,214
Consulting fees .............................................. 377,079 562,500 772,250
Available-for-sale securities written off .................... -- 19,242 --
Provision for stock obsolescence ............................. -- -- --
Loss (gain) on disposal of a subsidiary ...................... 1,532,747 -- (148,775)
Gain on the reversal of the purchase
of a subsidiary ............................................ -- -- (307,442)
Loss on investment in Duck Farm .............................. -- -- 301,324
Changes in working capital components:
Accounts receivable ........................................ (703) (22,309) (3,033,177)
Inventories ................................................ -- -- 2,364,197
Prepaid and other current assets ........................... 1,004 7,893 (799,162)
Amounts receivable from related parties .................... (5,392) 3,318 (1,653,988)
Value added taxes recoverable .............................. -- -- (177,674)
Accounts payable ........................................... 47,824 48,266 649,881
Bills payable .............................................. -- -- (481,928)
Accrued expenses and other liabilities ..................... 36,267 (74,665) 414,288
Foreign exchange difference ................................ (6,071) (6,664) --
Amounts payable to related parties ......................... 354,950 456,460 (703,752)
Prepaid rental ............................................. -- -- 28,916
----------- ----------- -----------
Net cash provided by (used in) operating activities ................. 100,021 (47,906) (4,034,680)
----------- ----------- -----------
Cash flow from investing activities:
Purchase of available-for-sale securities ........................ -- -- (6,098,426)
Proceeds from sale of available-for-sale securities .............. -- -- 3,044,970
Purchase of property, plant and equipment ........................ -- -- (91,414)
Cash given up on the reversal of the purchase
of a subsidiary ................................................ -- -- (142,973)
Proceeds from disposal of a subsidiary ........................... -- -- 8,657
Cash of subsidiary disposed of (Note 4) .......................... (26,645) -- --
----------- ----------- -----------
Net cash used in investing activities ............................... (26,645) -- (3,279,186)
----------- ----------- -----------
(Continued)
See accompanying notes to the consolidated financial statements.
F - 7
<PAGE>
<CAPTION>
ASIA SUPERNET CORPORATION
(Formerly known as Powersoft Technologies Inc.)
CONSOLIDATED STATEMENTS OF CASH FLOWS-continued
(United States Dollars)
Year ended December 31,
----------------------------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Cash flow from financing activities:
Common stock issued for cash ..................................... $ -- $ -- $ 1,620,000
Increase in margin loan payable .................................. -- 77,969 2,569,102
Repayment of margin loan ......................................... (75,493) -- --
Increase in short-term borrowings ................................ -- -- 3,056,287
Repayment of mortgage loans ...................................... (33,656) (21,287) (20,446)
Repayment of long-term payable ................................... -- -- (45,163)
----------- ----------- -----------
Net cash provided by (used in) financing activities ................. (109,149) 56,682 7,179,780
----------- ----------- -----------
Net increase (decrease) in cash and cash equivalents ................ (35,773) 8,776 (134,086)
Cash and cash equivalents at beginning of year ...................... 44,949 36,173 170,259
----------- ----------- -----------
Cash and cash equivalents at end of the year ........................ $ 9,176 $ 44,949 $ 36,173
=========== =========== ===========
Cash paid during the year for:
Interest ......................................................... $ 352,463 $ 458,171 $ 301,972
=========== =========== ===========
Non-cash financing activities:
Advances from a related party for investment
in Duck Farm (Note 3) .......................................... $ -- $ -- $ 301,324
=========== =========== ===========
Issuance of common stock for consulting services ................. $ -- $ -- $ 100,000
=========== =========== ===========
Issuance of common stock for convertible
promissory note (Note 10) ...................................... $ 1,000,000 $ -- $ --
=========== =========== ===========
Issuance of convertible promissory notes (Note 12) ............... $ 3,472,722 $ -- $ --
=========== =========== ===========
Assignment of amount due from a related party (Note 3) .............. $ 1,365,278 $ -- $ --
=========== =========== ===========
</TABLE>
See accompanying notes to the consolidated financial statements.
F - 8
<PAGE>
ASIA SUPERNET CORPORATION.
(Formerly known as Powersoft Technologies Inc.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(United States Dollars)
1. ORGANIZATION AND BASIS OF FINANCIAL STATEMENTS
On March 23, 1998, the Company changed its name from Heng Fai China
Industries, Inc. to Powersoft Technologies Inc. (Powersoft).
Reincorporation Merger
On November 10, 1999, the shareholders of Powersoft approved the
reincorporation of Powersoft by changing the state of incorporation from
Delaware to Colorado by adoption of an Agreement and Plan of Merger
pursuant to which Powersoft has merged with and into Asia SuperNet
Corporation (Asia SuperNet), a Colorado Corporation. The shareholders of
Asia SuperNet approved the respective Agreement and Plan of Merger on
October 1, 1999 (the Reincorporation Merger). The Reincorporation Merger
was effective as of December 22, 1999.
Following the Reincorporation Merger, Powersoft ceased to exist and Asia
SuperNet became the surviving corporation. By operation of law, all the
assets and liabilities of Powersoft were vested in Asia SuperNet and Asia
SuperNet acquired all of the assets and liabilities of Powersoft. As a
result of the Reincorporation Merger, each thirty issued and outstanding
shares of Powersoft common stock were converted into one share of Asia
SuperNet common stock (See Note 12).
At December 31, 1999, Asia SuperNet became inactive following the disposal
of all of its equity interests in its subsidiaries to SAR Trading Limited
(SAR). (See Note 3). In consideration of the assumption of liabilities, by
SAR, the Company issued $3,472,722 in the form of promissory notes and
assigned a debt of $1,365,278 to SAR. (See Note 10).
Prior to the disposal in 1999, the Company and its subsidiaries principal
activity was the operation of a rental property in North Vancouver, British
Columbia in Canada. See Note 14 for information on the geographic location
of the Company's assets.
F - 9
<PAGE>
ASIA SUPERNET CORPORATION.
(Formerly known as Powersoft Technologies Inc.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(United States Dollars)
The following identifies the wholly owned subsidiaries which were disposed
of in the sale of SAR:
<TABLE>
<CAPTION>
Place of
Incorporation/
Name of subsidiary Establishment Principal activities
------------------ ------------- --------------------
<S> <C> <C>
Heng Fai China & Asia Industries Limited Hong Kong Investment holding
Heng Fai China Industries Acquisition Limited Hong Kong Inactive
Heng Fai China Industries Limited Hong Kong Investment holding
Greatly Hong Kong Limited Hong Kong Investment holding
Worldwide Container Company Limited Hong Kong Investment holding trading
Vancouver Hong Kong Properties Ltd. Canada Property investment
and management
America & China Business Development Inc. Canada Inactive
Heng Fai Management Inc. British Virgin Provision of management
Islands services
</TABLE>
2. GOING CONCERN AND MANAGEMENT'S PLANS
These consolidated financial statements have been prepared on the going
concern basis of accounting which assumes the Company will realize its
assets and discharge its liabilities in the normal course of business. The
Company is currently operating at a loss and has negative working capital
and deficiency of stockhiolders' capital. Should the Company be unable to
continue as a going concern it may be required to realize its assets and
settle its liabilities at amounts substantially different from the current
carrying values.
The Company's ability to continue as a going concern is dependent on the
continued financial support of its principal shareholder, Fai H. Chan, who
has signed a letter of financial support to the Company to provide adequate
funds to meet the Company's liabilities as they fall due.
The Company is currently developing a business plan and intends to focus
its future operations on the acquisition of companies operating in the
fields of computer technology and the internet, and telecommunications and
financial software applications for the securities industry. The Company is
currently seeking appropriate investment and fundraising opportunities.
F - 10
<PAGE>
ASIA SUPERNET CORPORATION.
(Formerly known as Powersoft Technologies Inc.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(United States Dollars)
3. ACQUISITIONS, REVERSAL AND DISPOSAL
On September 4, 1996, through a wholly-owned subsidiary, the Company
acquired a 70% interest in Wuhan Monkey King Container Co., Ltd. (Wuhan) in
exchange for 727,272 shares of the Company's restricted common stock. Wuhan
is a joint venture incorporated in the People's Republic of China (PRC).
As a result of the unsatisfactory performance of Wuhan in both 1996 and
1997, the Company effected an agreement on December 29, 1997 to reverse the
acquisition by returning a 70% interest in Wuhan to redeem the 727,272
shares of restricted common stock previously issued for the acquisition.
The 1997 results of Wuhan have been disclosed under discontinued operations
and the comparative financial statements have been restated accordingly. In
1998, the change in ownership in Wuhan was approved by the relevant
government authorities in PRC. Revenues from the discontinued operations in
Wuhan were $2,934,871 in 1997.
Heng Fai Asia, through its wholly-owned subsidiary, Cangzhou Min You Cement
Co., Ltd. (the Cangzhou Cement) formed in January 1995 exercised its option
to enter into a lease, for a period of five years commencing January 1,
1995, of a production line at the Hebei Cangzhou City Chemical Corporation
Factory (the Cangzhou Factory). Cangzhou Cement was entitled to lease the
production line for five years.
On December 10, 1997, the Company disposed of a 75% and a 6% interest in
the Cangzhou Cement to the Chinese joint venture partner and an
unaffiliated company for a total consideration of $8,657. At December 31,
1997, the Company's interest in Cangzhou Cement had been reduced from 100%
to 19% and full provision was made against the remaining cost of investment
in the Cangzhou Cement. The change in ownership in Cangzhou Cement has been
approved by the relevant government authorities in PRC. Revenues from the
discontinued operation in Cangzhou Cement were $306,398 in 1997.
In January 1997, the Company acquired from Fai H. Chan, an officer,
director and shareholder of the Company, 100% of the issued ordinary share
capital of Greatly Hong Kong Limited (Greatly HK) in exchange for nominal
consideration. Greatly HK had a 25% interest in Hebei Cherry Valley Duck
Ltd. (Duck Farm), a cooperative joint venture established in the PRC which
was engaged in the management and operation of a duck farm in PRC. The
investment was wholly financed by an interest free, short-term advance from
Fai H. Chan. Other than the investment in the Duck Farm and the advance
from Fai H. Chan, Greatly HK had no other material assets and liabilities
or operations at the time of acquisition.
F - 11
<PAGE>
ASIA SUPERNET CORPORATION.
(Formerly known as Powersoft Technologies Inc.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(United States Dollars)
As a result of the unsatisfactory performance of the Duck Farm, Greatly HK
effected an agreement in December 1997 to dispose of its 25% interest in
the Duck Farm. In 1998, the change in ownership in the Duck Farm was
approved by the relevant government authorities in PRC. The share of 1997
results and the loss on disposal of the Duck Farm have been disclosed under
discontinued operations.
On March 3, 1997, the Company acquired from Fai H. Chan, an officer,
director and shareholder of the Company, 100% of the issued ordinary share
capital of Heng Fai China Industries Acquisition Limited (Heng Fai
Acquisition) in exchange for nominal consideration. Heng Fai Acquisition
had an option to form a cooperative joint venture in the PRC, but otherwise
had no material assets and liabilities or operations at the time of
acquisition.
Heng Fai Acquisition had entered into a conditional agreement (the
Agreement) with an unaffiliated party in PRC, (the PRC Party) to establish
a joint venture, in Zhangjiagang Free Trade Zone, PRC. However, the
Agreement was not completed and the registration of the joint venture was
canceled during 1997.
On January 18, 1999, the Company entered into an agreement with SAR wherein
SAR agreed to buy and the Company agreed to sell all of its interests in
all of its subsidiaries. In consideration of the assumption of the
liabilities by SAR, the Company issued two notes payable to SAR in the
amounts of $1,000,000 and $3,838,000. The $1,000,000 note was immediately
convertible into 20,000,000 common shares of the Company at a fixed rate of
$0.05 per share (See Note 12). The $3,838,000 note is convertible into
shares of common stock of the Company, in minimum increments of $250,000
each, at the average 15 day trading price at the option of the Company by
giving seven trading days notice in writing to SAR (See Note 10). SAR is
owned 100% by Fai H. Chan. On June 18, 1999, the Company agreed to offset
the $1,365,278 amount due from a related party against the $3,838,000 note
payable. The agreements were subject to shareholder approval, which was
obtained on November 10, 1999. The Company completed the sale on December
9, 1999.
The following supplemental schedule summarizes the disposal of equity
interests in subsidiaries in 1999:
Net liabilities assumed by buyer $ 3,305,253
Promissory notes issued by seller (3,472,722)
Assignment of amount due from a related party (1,365,278)
------------
Loss on disposal of subsidiaries $ 1,532,747
============
Revenues from the discontinued operations of the subsidiaries were
primarily rental income, of $324,917 in 1999, $312,894 in 1998 and $564,120
in 1997. Expenses incurred in 1999 were interest expense on short term debt
of $352,463 and consultancy fees paid to a related party of $250,000. (See
Note 9).
F - 12
<PAGE>
ASIA SUPERNET CORPORATION
(Formerly known as Powersoft Technologies Inc.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(United States Dollars)
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the United
States. The following sets forth the significant accounting principles
utilized in the preparation of the consolidated financial statements:
Principles of consolidation - The consolidated financial statements of Asia
SuperNet include the assets, liabilities, revenues and expenses of the
Company and all its subsidiaries. All material intercompany transactions
and balances have been eliminated.
Cash and cash equivalents - The Company's cash and cash equivalents include
cash on hand and short-term bank deposits, with original maturities of
three months or less.
Investment securities - The Company had classified the marketable equity
securities it held as available-for-sale. Accordingly, pursuant to
Statement of Financial Accounting Standard No. 115 the securities were
measured at fair value, with unrealized gains and losses, net of applicable
taxes, reported as a separate component of equity.
Property, plant and equipment - Properties, plant and equipment are stated
at cost. Depreciation and amortization is based on the respective estimated
useful lives as calculated on the following bases:
Building in Canada 5% declining balance method
Leasehold land Amortized over the term of the lease using
the straight line method
Furniture and equipment 10% to 20% straight line method
Upon sale or retirement, the cost and related accumulated depreciation or
amortization are eliminated from the accounts and any resulting gain or
loss is included in income.
Foreign currency translation - Financial statements of international
subsidiaries are translated into U.S. dollars using the exchange rate at
each balance sheet date for assets and liabilities and a weighted average
exchange rate for each period for revenue and expenses. Where the local
currency is the functional currency, translation adjustments are recorded
as a separate component of shareholders' (deficit) equity.
F - 13
<PAGE>
ASIA SUPERNET CORPORATION.
(Formerly known as Powersoft Technologies Inc.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(United States Dollars)
Revenue recognition - Rental income is recognized on a straight-line basis
over the periods of the leases. Investment income from the sale of
securities is recognized on the transaction date when title of the
securities has passed. Dividend income from investments is recognized when
shareholders' rights to receive payment have been established.
Income taxes - Certain items are treated differently for financial
reporting purposes than for income tax purposes. Pursuant to the provisions
of Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes", deferred tax is provided, under the liability method, for
the resulting temporary differences between the financial reporting and tax
bases of assets and liabilities, using the currently enacted tax rates.
Loss per common share - Basic loss per common share has been calculated
based upon the net loss available to common shareholders divided by the
weighted average number of common shares outstanding during the period.
Diluted loss per common share would not be different than basic loss per
common share due to the fact that including the potential common shares
would result in antidilution as a result of the loss from continuing
operations. As a result of the Reincorporation Merger, all loss per share
information included in these consolidated financial statements have been
retroactively adjusted.
Use of estimates - 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 the disclosures 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
these estimates.
Reclassifications - Certain prior year amounts have been reclassified to
conform to the current year's presentation.
Comprehensive Income - The Company has adopted SFAS No. 130, "Reporting
Comprehensive Income" which establishes standards for reporting and display
of comprehensive income, its components and accumulated balances.
Comprehensive income is defined to include all charges in equity except
those resulting from investments by owners and distributions to owners.
F - 14
<PAGE>
ASIA SUPERNET CORPORATION.
(Formerly known as Powersoft Technologies Inc.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(United States Dollars)
New accounting standards not yet adopted - In June 1998, the Financial
Accounting Standards Board ("FASB") issued Statement of Financial
Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This statement establishes accounting
and reporting standards for derivative instruments. It requires an entity
to recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair
value. This statement was effective for years beginning after June 15,
1999, although early adoption was permitted. In July 1999, the FASB issued
Statement No. 137, "Accounting for Derivative Instruments and Hedging
Activities--Deferral of the Effective Date of FASB Statement No. 133,"
which provides the effective date is for all fiscal quarters of all fiscal
years beginning after June 15, 2000. Management has not yet completed the
analysis of the impact of these statements on the consolidated financial
statements.
5. AVAILABLE-FOR-SALE SECURITIES
The cost and approximate market value of investment securities were as
follows as of December 31, 1998:
Marketable equity securities: 1999 1998
---- ----
Cost $ -- $ 3,795,370
Less: Gross unrealized losses -- (3,356,080)
----------- -----------
Estimated fair value $ -- $ 439,290
=========== ===========
Carrying value $ -- $ 439,290
=========== ===========
Included in the above securities are 48,535,276 shares, at December 31,
1998, representing 3.9% of the outstanding common stock of Online Credit
International Limited, formerly Heng Fung Holdings Company Limited,
("Online International"). These securities were acquired in 1997 at a cost
of $3,814,612 and had a carrying value of $439,290 at December 31, 1998.
Fai H. Chan and Robert H. Trapp, directors of Online International, are
also officers, directors and/or shareholders of the Company. These were
disposed of in the sale of assets to SAR.
F - 15
<PAGE>
ASIA SUPERNET CORPORATION.
(Formerly known as Powersoft Technologies Inc.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(United States Dollars)
6. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following:
December 31,
---------------------
1999 1998
---- ----
Buildings $ -- $ 639,718
Leasehold land -- 514,334
Furniture and equipment 7,984 11,347
-------- -----------
7,984 1,165,399
Less: Accumulated depreciation and amortization (4,790 (503,594)
-------- -----------
$ 3,194 $ 661,805
======== ============
7. DEFERRED EXPENDITURE
During 1998, the unamortized portion of the amount recorded for the 62,500
shares of common stock issued to a consultant pursuant to a consulting
agreement brought forward from 1997 was fully amortized and recognized as
consulting fees.
8. MARGIN LOAN PAYABLE
A December 31, 1998 margin loan payable was collateralized by the Company's
investment securities with a carrying value of $439,290. The loan was
payable on demand and bore interest at the Hong Kong best lending rate
(12.5% at December 31, 1998) plus 3.5% per annum. In December 1999, the
assumption of the margin loan payable by SAR was as a result of the
disposal of subsidiaries (See Notes 1 and 3).
F - 16
<PAGE>
ASIA SUPERNET CORPORATION.
(Formerly known as Powersoft Technologies Inc.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(United States Dollars)
9. RELATED PARTY TRANSACTIONS
The Company had the following balances with related parties, which are
interest-free, payable on demand and unsecured unless otherwise stated:
As of December 31,
-----------------
1999 1998
---- ----
Amounts receivable from:
Parties related to certain directors $ -- $ 15,632
========== ==========
Amounts payable to:
Certain directors $ 40,737 $ 901,097
Parties related to certain directors 32,001 960,119
---------- ----------
$ 72,738 $1,861,216
========== ==========
In addition at December 31, 1998, the second mortgage of $77,579 and
related interest payable of $25,368, were payable to the Silverstein
Foundation, Inc., a Panama company, in which Mr. Fai H. Chan's children
have beneficial ownership interests. The related interest expense was
$8,269 in 1998, and $7,774 in 1997.
On November 1, 1996, the Company entered into a 10 year consulting and
managerial agreement with Tight Hold Investment Limited (Tight Hold), a
company in which Fai H. Chan has a beneficial ownership interest. This
agreement was cancelled effective on June 18, 1999 pursuant to an agreement
entered into by the Company with Tight Hold on September 28, 1999.
Consulting fees paid to Tight Hold during years ended December 31, 1999,
1998 and 1997 were $250,000, $500,000 and $500,000, respectively.
The Company maintains deposits in accounts at American Pacific Bank and Fai
H. Chan is an officer and a director of such bank.
10. PROMISSORY NOTES PAYABLE TO A RELATED PARTY
Two promissory notes in the amounts of $1,000,000 (Promissory Note I) and
$2,472,722 (Promissory Note II) totaling $3,472,722 were issued to SAR (a
company 100% owned by Mr. Fai H. Chan) on December 9, 1999 in consideration
for the assumption of liabilities, on the disposal of all the subsidiaries
of the Company.
F - 17
<PAGE>
ASIA SUPERNET CORPORATION.
(Formerly known as Powersoft Technologies Inc.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(United States Dollars)
On December 28, 1999, Promissory Note I was converted into 666,667 shares
of the Company stock.
Promissory Note II is non-interest bearing and can be converted into the
Company's common stock at minimum increments of $250,000, by giving seven
trading days prior written notice to SAR, at the fifteen days trading
average price (See Notes 1 and 3).
11. MORTGAGE LOANS PAYABLE
As of December 31,
-------------------
1999 1998
---- ----
First mortgage, principal due monthly through
June 15, 2003 with fixed interest at 6.70% $ -- $ 741,857
Second mortgage, principal payable on demand
with interest at Canadian prime (6.00% as at
December 31, 1998) plus 4% -- 77,579
--------- ---------
-- 819,436
Less: current portion -- (109,159)
--------- ---------
$ -- $ 710,277
========= =========
The Company had pledged property with a net book value of $652,560 at
December 31, 1998 to secure the mortgage loans. In December 1999, the
assumption of the mortgage loans payable was a result of the disposal of
subsidiaries (See Notes 1 and 3).
12. CAPITAL STOCK
During the three years ended December 31, 1999 there were several changes
of the Company's capital as set forth below:
In 1997,
(a) The Company issued 1,700,000 shares of common stock to related
parties, principally officers and directors, at $0.60 per share
pursuant to private placements for proceeds of $1,020,000.
(b) The Company issued 2,500,000 shares of common stock to an officer and
director at $0.24 per share pursuant to a private placement for
proceeds of $600,000.
F - 18
<PAGE>
ASIA SUPERNET CORPORATION.
(Formerly known as Powersoft Technologies Inc.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(United States Dollars)
(c) The Company issued 100,000 shares of common stock at $1.00 per share
pursuant to a consulting agreement entered into with a previously
unaffiliated party which performs various investor relations and
financial advisory services.
(d) the Company redeemed 727,272 shares of common stock at $1.375 to
reverse the purchase of a 70% interest in a subsidiary (See Note 3).
There were no transactions in the Company's capital during 1998.
In 1999,
(a) 13,700,000 shares of common stock of the Company were issued
erroneously to SAR in exchange for a portion of the debt that was to
be issued pursuant to the agreements with SAR. As the agreements had
not yet been approved by the Company's shareholders, the 13,700,000
shares of common stock were cancelled.
(b) The Warrants carried forward from a prior year to purchase an
aggregate of 296,443 shares of common stock, at an exercise price of
$3.20 per share lapsed. No warrants were issued or exercised during
1999.
(c) Pursuant to Reincorporation Merger Agreement which was effective as of
December 22, 1999, each thirty outstanding shares of Powersoft common
stock were automatically converted into one share of Asia SuperNet
common stock (See Note 1).
(d) On December 9, 1999, the $1,000,000 promissory note issued to SAR was
converted into 20,000,000 shares of Powersoft common stock at a fixed
rate of $0.05 per share (See Note 1). As a result of the
Reincorporation Merger, these shares were converted into 666,667
shares of common stock of Asia SuperNet at the conversion ratio of
thirty shares to one share.
(e) On December 22, 1999, 15,559,542 outstanding shares of Powersoft
common stock were converted into 522,338 shares of Asia SuperNet
common stock. The number of shares converted into Asia SuperNet common
stock were rounded up to the next whole share of Asia SuperNet common
stock. All loss per share information has been retroactively adjusted
to reflect this effect.
(f) Unrealized loss on securities available-for-sale and foreign exchange
translation adjustment amounted to $3,356,080 and $18,417 were
included in the calculation of the loss on disposal of discontinued
operations. (See Note 3).
F - 19
<PAGE>
ASIA SUPERNET CORPORATION.
(Formerly known as Powersoft Technologies Inc.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(United States Dollars)
13. INCOME TAXES
At December 1999, the Company had aggregate loss carryforwards of
approximately $4.3 million, which consist of a net operating loss
carryforwards ("NOLs") of approximately $2.8 million and capital loss
carryforwards of $1.5 million, with a net deferred tax asset of
approximately $1.5 million. These NOLs are expected to expire between 2003
to 2015.
In assessing the realizability of deferred tax assets, management
considered whether it is more likely than not that the deferred tax asset
would be realized. The ultimate realization of the deferred tax asset is
dependent on the generation of future taxable income in the period in which
the temporary differences become deductible. The Company has established a
valuation allowance for deferred taxes due to the uncertainty that the full
amount of the deferred tax asset will be utilized. In determining the
valuation allowance, management considered factors including the reversal
of existing temporary differences and estimates of future taxable income.
The Company has established a valuation allowance for the entire amount of
these losses. There were no other material temporary differences.
The Company has not filed corporate income tax returns in the United States
for the periods ended June 30, 1996, June 30, 1997, June 30, 1998 and
December 31, 1998. The return for the year ended December 31, 1999 has an
extended due date of October 15, 2000. The returns are in the process of
being completed and will be filed as soon as possible. The Company does not
anticipate significant penalties, taxes or interest.
14. SEGMENT INFORMATION
At December 31, 1999, the Company has only one operating segment. Revenue
is comprised mainly of interest income derived from deposits in financial
institutions in North America. The operating loss represents general
corporate expenses whereas identifiable assets held at year end represent
corporate assets.
15. ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair value amounts have been determined by the Company, using
available market information and appropriate valuation methodologies.
However, considerable judgment is necessarily required in interpreting
market data to develop estimates of fair value. Accordingly, the estimates
presented herein are not necessarily indicative of the amounts that the
Company could realize in a current market exchange.
F - 20
<PAGE>
ASIA SUPERNET CORPORATION.
(Formerly known as Powersoft Technologies Inc.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(United States Dollars)
The carrying amounts of cash and cash equivalents, short-term borrowings,
current portion of mortgage loans payable, margin loan payable and
promissory notes payable to a related party are a reasonable estimate of
their fair value due to the short maturity of the instruments. The fair
value for the available-for-sale securities is based primarily on quoted
market prices and such securities are carried at fair value.
16. COMMITMENTS AND CONTINGENCIES
On February 12, 1999, the Company entered into a Technology License and
Services Agreement (the "Agreement") with Cyber Construction Company, Inc.
("Cyber"). Cyber has developed and continues to develop certain software
applications, methods, operating procedures, Internet infrastructure design
and Internet site template development (collectively the "Technology"). The
Agreement grants a nontransferable license to the Company to use and
execute this Technology developed by Cyber, along with related services,
for the Company's customers. The Company agrees to grant and transfer to
Cyber, as a consideration of the license and related services, preferred
stock with a face value of $10 million, as part of an issuance of up to $50
million of its preferred shares. The Company has agreed that upon the
sooner of (i) the licensing or acquisition of technologies utilizing the
$50 million proceeds from the sale of preferred shares; or (ii) February
13, 2001, the Company will endeavor to meet the listing requirements of
Nasdaq for the registration for the preferred stock. The transaction
contemplated by the Agreement has not yet been consummated and
consequently, has not yet been recorded.
F - 21
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
- ---------- -----------
3.1(a) Certificate of Incorporation of registrant, as amended,
incorporated by reference from Form 10-K for the year ended
December 31, 1996.
3.1(b) Agreement and Plan of Merger, as amended, incorporated by
reference from the Company's Annual Report on Form 10-K for the
Year ended December 31, 1996.
3.2 Bylaws of registrant, as amended, incorporated by reference from
the Company's Annual Report on Form 10K for the year ended
December 31, 1996.
10.1 Wuhan Container Acquisition Agreement incorporated by reference
to Exhibit 2 of the registrant's Current Report on Form 8-K filed
with the SEC on September 20, 1996, as amended.
10.2 Consulting Agreement between registrant and Thomas E. Waite
incorporated by reference to Exhibit 4.1 of the registrant's Form
S-8 filed with the SEC on March 20, 1997.
10.3 Consulting and Management Agreement between Heng Fai Management,
Inc. and Tight Hold Investment Limited dated November 4, 1996
incorporated by reference from the Company's Annual Report on
Form 10-K for the year ended December 31, 1996.
10.4 Agreement between the Company and SAR Trading Limited, dated
January 18, 1999, incorporated by reference from the Company's
Annual Report on Form 10-K, as amended, for the year ended
December 31, 1998.
10.5 Agreement between the Company and Cyber Construction Co., dated
February 12, 1999, incorporated by reference from the Company's
Annual Report on Form 10-K, as amended, for the year ended
December 31, 1998.
10.6 Assignment Agreement between the Company, SAR Trading Limited and
Mr. Fai H. Chan, dated June 18, 1999, incorporated by reference
from the Company's Annual Report on Form 10-K, as amended, for
the year ended December 31, 1998.
10.7 Agreement to Cancel Consulting And Management Agreement between
the Company and Tight Hold Investment Limited, dated September
28, 1999, incorporated by reference from the Company's Annual
Report on Form 10-K, as amended, for the year ended December 31,
1998.
10.8 Amendment to Asset Sale Agreement between the Company and SAR
Trading Limited, dated June 18, 1999, incorporated by reference
from the Company's Annual Report on Form 10-K, as amended, for
the year ended December 31, 1998.
10.9 Letter of Financial Support.
27 Financial Data Schedule.
FAI H. CHAN'S OFFICE
c/o 10th Floor, Bank of Communications Tower,
231-235 Gloucester Road, Wanchai, Hong Kong
Telephone No. (852) 2258 68888 Fax No. (852) 2258 6800
May 17, 2000
Board of Directors
Asia Supernet Corporation
1700 Lincoln Street
Denver
Colorado 80203
U. S. A.
Dear Sirs,
RE : ASIA SUPERNET CORPORATION
LETTER OF FINANCIAL SUPPORT
- --------------------------------------------------------------------------------
This is to inform you that as a major shareholder of the Company, I will
continue to provide adequate funds to the captioned company to meet its
liabilities as they fall due.
Yours faithfully,
/s/ Fai H. Chan
- -----------------------
Fai H. Chan
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