SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) DECEMBER 11, 2002
INVESTMENT AGENTS, INC.
(Exact name of Registrant as Specified in its Charter Post-merger)
NEVADA 333-61286 88-0467944
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation pre-merger) File Number) Identification No. pre-merger)
#13F., NO. 77, HSIN TAI WU ROAD, SEC. 1, HIS-CHIH, TAIPEI COUNTY, TAIWAN ROC
(New Address)
Registrant's telephone number, including area code (011) 886-2-2698-8588
ITEM 1. CHANGES IN CONTROL OF THE REGISTRANT.
On December 11, 2002, Investment Agents, Inc. (d/b/a City Network, Inc.)
acquired all of the issued and outstanding stock of City Network Technology,
Inc. (formerly Gelchrest Investments Limited), a BVI company ("CNT") pursuant to
an Amended Exchange Agreement dated as of December 11, 2002, by and among CNT,
the shareholders of CNT, Pamela Ray Stinson, Raymond Robert Acha, Joseph H.
Panganiban and Investment Agents (the "Exchange Agreement"). CNT based in the
British Virgin Islands, is the parent company of City Network Inc. (Taiwan).
Pursuant to the Exchange Agreement, CNT became a wholly-owned subsidiary
of Investment Agents, and in exchange for the CNT shares, Investment Agents
issued 12,000,000 shares of its common stock to the shareholders of CNT,
representing 49% of Investment Agents' outstanding stock at that time. In
connection with the exchange and change in control, the current officers and
directors of Investment Agents resigned and the following five persons were
appointed as officers and directors: Tiao-Tsan Lai, Hsin-Nan Lin, Alice Chen,
Chin Yuan Liao and I-Min Ou.
OVERVIEW
Investment Agents, Inc. (together with its operating subsidiary, "City
Network") is a provider of internet broadband and wireless infrastructure
equipment and services for the rapidly expanding broadband marketplace. We are
dedicated to delivering the most user-friendly, cost-effective, and
customer-tailored, high-speed internet broadband access equipment to meet the
growing business needs of the hospitality, residential property,
telecommunication and SME (Small & Medium Enterprises) marketplace worldwide.
With the continuous expansion of the internet worldwide, we believe that
City Network is uniquely positioned to capitalize on what we believe to be vast
underdeveloped and overlooked new and emerging growth internet markets. Together
with a combination of superior technical, sales, design and manufacturing
experience, our company is poised to tap the potential of countless new clients
throughout the globe. For the first time, our customers have the choice to
source one of the most convenient, low-cost and diverse product packages
combined with the best personal service to make up a truly comprehensive
business solution.
Founded in Taipei, Taiwan in 1994, City Network designs, manufactures and
markets a comprehensive line of broadband and wireless internet access
solutions. The company's product line ranges from the City Network HPNA device
for the blooming worldwide residential building and hospitality market to the
simple DSL bridge/modem for the home and small business user. All City Network
broadband access equipment includes easy-to-use GUI-based remote management and
sophisticated routing technology software packages for simplified setup,
extensive network management and global network connectivity capabilities.
Currently, City Network Home PNA and xDSL broadband access equipment is widely
deployed by major telecommunication carriers, ISPs, and System Integrators
worldwide.
With the development and production of the company's complete series of
internet
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products, City Network is able to provide a `total solution' for any customers
needs. In addition, we believe that key advantages in price, flexibility and
core market sales experience make City Network a truly superior competitor. From
Home PNA, high-speed xDSL communications, to wireless networking products, City
Network can take the broadband super-highway to wherever you are.
PRODUCT AREAS
The City Network product repertoire contains items compatible with all
major distribution platforms. This gives clients a one-stop shop for all their
broadband internet needs.
ADSL/VDSL ACCESS DEVICES
City Network ADSL/VDSL devices provide broadband access based on the
world's leading internet technologies. The 20Mbps VDSL over Ethernet equipment
will allow both developing businesses as well as home users to meet their media
and communication needs quickly and in a cost-effective manner. It can also
provide high speed internet without influencing quality over a larger distance
for a cost-effective and efficient method of broadband access. We believe that
the low level of maintenance required and high level of connectivity should be
able to meet market demand for many years into the future.
HPNA ACCESS DEVICES
HPNA is a broadband network access system based on the HomePNA technology
originally invented in the U.S. This system can provide 1M/10Mbps broadband data
access through existing telephone lines. This technology allows both voice and
data to be shared by the same telephone line. Furthermore, City Network HPNA
technology extends internet transmission distance, allows for multiple
single-line users (up to 25), and is compatible with cable, fiber, wireless and
xDSL. Combined with City Network ADSL of VDSL access devices, HomePNA is a great
solution to "the last mile problem." We believe that the quality and
affordability makes the product ideal for residences, schools, cafes and hotel
resorts.
WIRELESS COMMUNICATION PRODUCTS
City Network wireless networking products allow computers and appliances
to communicate through radio signals, providing added mobility and convenience.
With the development of the City Network IEEE802.11 and IEEE802.1x wireless
solutions, both individual and corporate clients can enjoy work environments
free of cords and wires. Furthermore, customers can enjoy the stability and
security of the City Network LAN products. All wireless solutions are equipped
with a user verification function to maximize security and reduce outside
interference.
FIBER AND OTHER IMPORTANT ACCESS EQUIPMENT
With City Network's access equipment, bandwidth can be distributed
efficiently to multiple end users. For developing countries such as China, the
City Network solution of integrating wireless with existing telephone lines or
cable is often much more attractive than
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building new infrastructure. From routers and hubs, to PCMCIA cards and USB
adapters, City Network provides customers with a wide range of networking
products to meet all customer needs.
CORPORATE PROFILE
City Network simplifies how people access the internet through easy-to-use
broadband connectivity products and solutions. Its' product offerings and
development efforts are focused on increasing the speed and efficiency of the
`last mile' portion of communications networks. Through a combination of
fixed-wire and wireless products, the company's network equipment connects
internet service providers to their end users.
A fast growing, leading technology developer of broadband and wireless
networking products, City Network has gained industry recognition for developing
high performance broadband access solutions. The company's range of products
provide a complete solution for providing high speed broadband internet access
in homes, airports, convention centers, hotels and other public establishments.
Simplicity of use, ease of implementation and cost-effectiveness are the
cornerstones of the City Network solution.
We believe that City Network delivers the most comprehensive solution in
the market for broadband qualification, installation and support. Since its
inception, City Network has operated with the vision of "bringing the broadband
superhighway to you, anytime and anywhere." The company has quickly evolved into
a global company with rapid expansion of its' distribution network and marketing
offices in North and South America, Europe, Japan and the entire Asia Pacific
region.
KEY SUCCESS FACTOR: QUALITY CONTROL
City Network's goal is to provide customers with superior quality,
defect-free products. Working with primary manufacturers and manufacturers of
component parts, the company has instituted quality control measures at all
stages throughout the manufacturing process. At the first stage, the company
works with its' primary manufacturers to institute a general quality control
check upon the entry of the various component parts into the primary
manufacturer's factory (a.k.a., the incoming inspection). At the second stage,
the primary manufacturer checks to ensure that the contacts which are being
fitted with connectors function properly. The third and fourth stages of quality
control occur after each molding process, with the final product being subject
to quality control upon shipment to City Network. Finally, City Network performs
tests on a certain percentage of each shipment it receives to ensure the
products meet total quality standards.
PRODUCTS
At the core of today's communications networks are components that enhance
the speed, bandwidth and quality of internet/data, video and voice
transmissions. City Network's fiber, copper, and wireless connectivity
components serve as the critical junction and connection points that link one
network to another.
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We have both the agility and depth to deliver tailored and exact solutions
to meet customers' needs. City Network offers products for several technology
platforms. Combined we have the capability of delivering high speed broadband
access to the end user whether they are at home, in the office or on the road.
Cable/Optical Networking Products
- City Network's cable and optical products multiplexes bandwidth
among all users over tree-based topology coax or optical cables.
- Custom designs to meet large systems integrators and
telecommunications companies' needs.
- Ease of set-up, integration and maintenance allow City Network to
meet the needs of multi-dwelling unit buildings and large office
complexes quickly and thoroughly.
xDSL Products
- xDSL is an alternate and lower cost technology to connect to the
internet. xDSL is substantially cheaper than a T1 line which can
cost from $1,500 to $3,000 for installation and equipment.
- xDSL does not require a high-level technical support structure. xDSL
can often cost under $500 to install and implement making it most
suitable to small businesses and telecommuters who cannot afford a
T1 line.
- City Network is positioned to take advantage of the impending growth
in the broadband xDSL industry due to the superior quality and
affordability of the Company's xDSL equipment and service packages.
The product offerings are on the cutting-edge of xDSL technology and
we believe will meet market requirements for many years to come.
Home Phone Line Wiring (HPNA)
- City Network's HPNA products allow for networking a home using the
existing phone wiring.
- City Network's HPNA 2.0 standard can achieve 10-16Mbps and higher
rates of data transfer.
- HPNA technology allows up to twenty-five computers to connect
simultaneously using the same internet source.
- Compatible with POTS telephony and ADSL signaling on the same wire.
Wireless
- Wireless broadband eliminates the need for phone lines, cables and
electrical outlets.
- Supports bandwidth-intensive applications such as graphic rich
media, animation, internet phone calls and video conferencing
(without breaking up), sending and receiving of large email messages
or files, online banking, investing or online shopping. City
Network's family of wireless access devices allow users to access
their LAN or VPN, as if the remote office was connected directly to
the company's backbone network. It also lets business customers
raise the level of worker
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productivity and allow companies to offer highly efficient
work-at-home programs to their employees.
- Using authentication and verification technology, City Network is
able to ensure the security of a wireless network. Multi-national
businesses in information sensitive industries such as insurance and
financial services have been convinced that with City Network's
wireless products their information is safe.
MARKET OVERVIEW
Information is proliferating worldwide, and demand for that information,
by businesses, governments, universities and individuals is exploding, driven
primarily by the exponential increase in use of the internet for communications,
information gathering and electronic commerce.
As business becomes more complex and geographically diverse, the demand
for information, delivered to the "transaction point," wherever in the world
that point might be, has fueled the increase in networks and computer
connectivity systems. These trends have created an ever-increasing demand for
bandwidth, to accommodate both internet and network traffic. However, the growth
and technological advancement of the hardware backbone for networking and
computer connectivity has not kept pace with that demand. The worldwide struggle
to bring networking and computer connectivity hardware up to the level of demand
represents a business opportunity for City Network. The company's strategic
objective is to become a leading designer and manufacturer in the networking and
computer connectivity equipment industry.
BUSINESS STRATEGY
The networking and computer connectivity industry is characterized by
rapid technological change. To maintain and enhance the company's competitive
position, City Network constantly adapts to technological changes, upgrading and
expanding its' product line, and eliminating obsolete products within that line.
The networking and computer connectivity industry is also characterized by
inevitable price erosion across the life cycle of products and technologies. To
maintain profitability in the face of constantly shrinking gross margins, City
Network's strategy is to seek out low cost producers without sacrificing quality
and to develop and maintain efficient internal operations allowing the company
to control its' expenses.
The company is constantly expanding and changing product lines to increase
the total number of products offered to attract new customers, to penetrate new
geographic and vertical markets and to increase gross sales. By expanding the
product line to include products for different technologies, frequencies and
connection configuration, City Network has successfully expanded sales
activities into a number of new markets.
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INDUSTRY GROWTH DRIVERS
GROWING NEED FOR ADDITIONAL BANDWIDTH
The computer networking industry is witnessing a growing demand for
additional bandwidth as a result of the popularity of the internet and global
need for rapid, current information. Many people who use the internet cannot
access information/download pages quickly because their ISP's hardware is
out-dated or low-quality and therefore unable to process hundreds of thousands
of requests simultaneously. This is a particularly acute problem during peak
hours and in markets with little infrastructure. Therefore, City Network is
focused on improving the quality of internet connectivity in systems worldwide.
IN-HOME NETWORKING SYSTEMS
An emerging market opportunity exists in connecting household appliances
and computers in homes. With City Network's HPNA networking products, numerous
applications can be developed to program, control and interact with home
heating, lighting, security, and appliances. Advances such as these will
undoubtedly spur growth and encourage innovation worldwide and City Network will
help to make these technologies accessible.
PROLIFERATION OF HANDHELD/COMMUNICATION DEVICES
The cornerstone on which the new economy is built is the timely delivery
and access to information at any location. The growth and productivity of
today's business economy is reliant upon the accuracy, efficiency and
accessibility to data and communication. With the growth in popularity of
handheld/communication devices and their great functional complexity, consumers
will be able to access a wide array of multimedia content wherever they may be
located. In the future, mobile phones and PDA's will enjoy unhindered access to
rich multimedia content via the internet and City Network will play a role in
this transaction.
EXPANSION OF PC'S INTO DEVELOPING COUNTRIES
As PC's become ubiquitous throughout the world's emerging economies, we
believe the number of high capacity PC's with added features and better
voice/image quality will increase exponentially. The spread of the information
economy will continue to drive and enable developing countries to utilize
internet technology. Throughout the world, countries previously without even
phone lines can access the internet via City Network's wireless networks on
their notebook computers.
GROWTH OF THE INTERNET
The growth of the internet has forced many telecommunication service
providers to replace their voice networks with more efficient, data-oriented
packet networks. The increased demand for services and data over the internet
will require companies to upgrade their infrastructure to meet demand. City
Network has worked tirelessly partnering with local telecommunications companies
in developing new, cost effective and complete solutions for
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broadband internet access in new markets. No matter how and where the internet
moves, City Network will have a solution to the problem.
GROWTH/EXPANSION STRATEGY
City Network's strategic objective is to become a leader in the computer
and network connectivity equipment market, and to make the City Network name
synonymous with excellence and state-of-the-art hardware in this segment.
PROVIDING INTEGRATED SOLUTIONS
Convergences of voice, data and internet into one seamless IP-based
communications network to cost effectively connect an unlimited variety of
applications and services, enabling broader choice of devices for customer
services provided over a common platform. Choice and freedom have long been the
foremost in the City Network business development strategy.
EXPLORE ADDITIONAL REVENUE GENERATING SERVICES
Unlocking content (voice, data, video, text, commerce, etc.) so it can
flow unfettered among applications will present significant potential as a
future revenue source. The creation of content and the precision delivery to
targeted clients and markets will also become increasingly important. Some
examples include news, online shopping, gaming, video, security and other
relevant content. This can create unprecedented new revenue and client sources
for City Network.
BUILDING INTERNATIONAL PRESENCE
The low penetration rate of broadband internet in developing countries has
created an enormous opportunity for City Network. The demand for internet
throughout the world creates opportunity in otherwise unexpected venues.
Particularly in new and emerging growth markets, City Network will continue to
partner with individuals, companies and governments in these areas as part of
the company's growth strategy.
PARTNERING, ACQUIRING AND COOPERATING WITH THIRD PARTIES
City Network's success has been largely due to the fact that the company
has established long term relationships with system integrators, electronics
manufacturers and telecommunication companies. Joint ventures and cooperative
efforts have been the hallmark of City Network's development into new areas. In
the future, City Network will continue to expand through mergers and other
cooperative synergies. The blending of manufacturing expertise, market savvy and
local know-how will continue to be a winning combination for City Network.
EMPLOYEES
As of December 11, 2002, we employed thirty-four (34) persons. Of these,
7 are in administration, 4 are in finance, fourteen (14) are in research and
development and 9 are in sales
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and marketing. None of our employees are covered by any collective bargaining
agreement. We generally consider our relationship with our employees to be
satisfactory and have never experienced a work stoppage.
REGULATION
We have not been materially impacted by existing government regulation and
are not aware of any potential government regulation that would materially
effect our operations.
INTELLECTUAL PROPERTY AND PROPERTY RIGHTS
Our copyrights, trademarks, service marks, trade secrets, proprietary
technology and other intellectual property rights distinguish our products and
services from those of our competitors, and contribute to our competitive
advantage in our target markets. To protect our brand, products and services and
the systems that deliver those products and services to our customers we rely on
a combination of copyright, trademark and trade secret laws as well as
confidentiality agreements and licensing arrangements with our employees,
customers, independent contractors, sponsors and others.
We strategically pursue the registration of our intellectual property
rights. However, effective patent, trademark, service mark, copyright and trade
secret protection may not always be available. Existing laws do not provide
complete protection, and monitoring the unauthorized use of our intellectual
property requires significant resources. We cannot be sure that our efforts to
protect our intellectual property rights will be adequate or that third parties
will not infringe or misappropriate these rights. In addition, there can be no
assurance that competitors will not independently develop similar intellectual
property. If others are able to copy and use our products and delivery systems,
we may not be able to maintain our competitive position. If litigation is
necessary to enforce our intellectual property rights or determine the scope of
the proprietary rights of others, we may have to incur substantial costs or
divert other resources, which could harm our business.
In addition, competitors and others may claim that we have infringed their
intellectual property rights. Defending any such lawsuit, whether with or
without merit, could be time-consuming, result in costly litigation or prevent
us from offering our products and services, which could harm our business. If a
lawsuit against us is successful, we may lose the rights to use our products or
be required to modify them, or we may have to pay financial damages.
In order to develop, improve, market and deliver new products and
services, we may be required to obtain licenses from others. There can be no
assurance that we will be able to obtain licenses on commercially reasonable
terms or at all or that rights granted under any licenses will be valid and
enforceable.
MANAGEMENT
Our directors, executive officers and other significant employees and
their ages and positions are as follows:
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Name of Individual Age Position with company and subsidiaries
------------------ --- --------------------------------------
Andy Lai 40 President, Director and Chief Executive Officer
Hsin Nan Lin 42 Chief Financial Officer and Director
Alice Chen 39 Vice President and Director
Chin-Yuan Liao 30 Manager and Director
I-Min Ou 33 Director
Set forth below is a description of the backgrounds of each of the
officers and directors of the Company:
ANDY T.T. LAI holds an MBA degree from St. Thomas University in Minnesota,
USA. Mr. Lai has been Chairman, President and Director of City Network since
October 2002. Mr. Lai has been Chairman, President and Director of City Network
(Taiwan) since June, 1997. As a pioneer in the network equipment market he was
the first entrepreneur to bring the Home PNA solution to Taiwan, China and Asia.
With Mr. Lai's guidance, City Network implemented Home PNA in a winning design
for an Internet Service Model for the Taipei city government in 1998. In 1999,
Mr. Lai also procured an open tender for a Home PNA project with Korea Telecom.
From 1999 to the present, under Mr. Lai's capable management, City Network has
had its products approved for purchase and sale by China Telecom, Taiwan's
HiNet, Japan OCC and Finland Telecom. In addition, Mr. Lai established business
projects with Shanghai Telecom, Fujian Telecom and Guang Dong Telecom. In
October, 2000, Mr. Lai was presented the "Excellent Manager" industry award in
Taiwan for outstanding service as Chairman of City Network. In June, 2002, Mr.
Lai was also awarded the "The Excellent Alumnus" award for his success in
business beyond graduation from the Taiwan National Military Academy.
HSIN NAN LIN holds an EMBA degree from Chiai University in the Republic of
China. He has been Vice President and a Director of City Network since October
2002. He has been Vice President and a Director of City Network (Taiwan) since
June, 2002. In addition, he serves on the board of directors for a large
Taiwanese investment company called Chief Financial Consultants, Inc. Before
joining these groups, Mr. Lin served ten years as the general manager of
manufacturing for a company with gross sales of over 3.5 million US dollars per
year. From 1990 through to the present, Mr. Lin has had twelve years service as
financial consultant for several public companies in Asia and has served as Vice
President of Chei-Hwa Financial and Investment Consulting Co., Ltd.
ALICE CHEN possesses a degree in Legal Policy from a government university
in the Republic of China. Ms. Chen has been Vice President and a Director of
City Network since October 2002. Ms. Chen has been Vice General Manager of Sales
and Marketing and a Director of City Network (Taiwan) since January, 1999. Ms.
Chen's duty is to implement and develop the company's worldwide sales and
marketing plan. Before joining the company, Ms. Chen had ten years experience
working for the Taiwanese National Security Agency as a national policy analyst.
Additionally, Ms. Chen spent three years working as head of sales and marketing
for a Taiwanese public company.
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I-MIN OU has been Manager of the Technology Department and a Director of
City Network since October 2002. From February 2001 to October 2002, Mr. Ou
served as a Manager of the Tongnan Technology Company. From June 1999 to January
2001, he served as a Manager of the Gulite Technology Company. From February
1998 to May 1999, Mr. Ou was a Manager for the Hueng Kwuo Technology Company.
From 1991 to 1997, he served as a Manager of the Ikuani Technology Company.
Since graduating from Tongnan Industry Technology College in July 1991, I-Min
Ou has been primarily engaged in electronic engineering and computer automation
industry. He has 11 years of experience in engineering.
CHIN-YUAN, LIAO has been a Director and Manager of the Engineering
Department since October 2002. From January 2000 to October 2002, Mr. Liao
served as Manager of the Engineering Department for City Network (Taiwan). From
February 1997 to November 2001, he served as Manager of Ikuan Engineering, Inc.
From 1990 to 1996, Mr. Liao served as Manager of Taiwuang Engineering, Inc.
The directors named above will serve until the next annual meeting of the
Company's stockholders or until their successors are duly elected and have
qualified. Directors will be elected for one-year terms at the annual
stockholders meeting. Officers will hold their positions at the pleasure of the
board of directors, absent any employment agreement, of which none currently
exists. There is no arrangement or understanding between any of the directors or
officers of the Company and any other person pursuant to which any director or
officer was or is to be selected as a director or officer, and there is no
arrangement, plan or understanding as to whether non-management shareholders
will exercise their voting rights to continue to elect the current directors to
the Company's board. There are also no arrangements, agreements or
understandings between non-management shareholders that may directly or
indirectly participate in or influence the management of the Company's affairs.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCK
HOLDER MATTERS
(a) The following table sets forth as of January 10, 2002, the
number and percentage of the 24,500,000 outstanding shares of common stock that
were beneficially owned by (i) each person who is currently a director, (ii)
each executive officer, (iii) all current directors and executive officers as a
group and (iv) each person who, to the knowledge of the Company is the
beneficial owner of more than 5% of the outstanding common stock.
Name and Address Common Shares Percent of Class
---------------- ------------- ----------------
Tiao-Tsan Lai 2,000,000 8%
13 F, No. 77, Hsin Tai Wu Road, Sec. 1 His-Chih
Taipei, Taiwan, R.O.C.
Hsin-Nan Lin 0 0%
13 F, No. 77, Hsin Tai Wu Road, Sec. 1 His-Chih,
Taipei, Taiwan, R.O.C.
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Name and Address Common Shares Percent of Class
---------------- ------------- ----------------
Alice Chen 61,000 *%
13 F, No. 77, Hsin Tai Wu Road, Sec. 1 His-Chih
Taipei, Taiwan, R.O.C.
I-Min Ou 20,000 *%
13 F, No. 77, Hsin Tai Wu Road, Sec. 1 His-Chih,
Taipei, Taiwan, R.O.C.
Chin-Yuan Liao 45,000 *%
13 F, No. 77, Hsin Tai Wu Road, Sec. 1 His-Chih
Chang Hua Hsien, Taiwan
All officers and directors as a Group (5 persons) 2,126,000 8.67%
* Less than 1%.
RISK FACTORS
Prospective investors should carefully consider the following risk
factors, in evaluating us and our business. The factors listed below represent
certain important factors which we believe could cause such results to differ.
These factors are not intended to represent a complete list of the general or
specific risks that may affect us. It should be recognized that other risks may
be significant, presently or in the future, and the risks set forth below may
affect us to a greater extent than indicated.
LIMITED OPERATING HISTORY
City Network has a limited operating history upon which potential
investors may base an evaluation of its prospects and there can be no assurance
that City Network will achieve its objectives. City Network's prospects must be
considered in light of the risks, expenses and difficulties frequently
encountered by companies in their early stages of development, particularly
companies in a rapidly evolving market such as the market for internet broadband
and wireless infrastructure equipment and services. Such risks include, but are
not limited to: City Network's ability to obtain and retain customers and
attract a significant number of new customers, the growth of the satellite,
wireless, broadband and Internet markets, City Network's ability to implement
its growth strategy, especially the sales and marketing efforts, and the
introduction of new devices and computer networks technologies in broadband and
Internet services by City Network's competitors and by City Network.
FUTURE CAPITAL NEEDS, UNCERTAINTY OF FUTURE ADDITIONAL FINANCING
City Network currently anticipates that its available funds and resources,
including product sales will be sufficient to meet its anticipated needs for
working capital and capital expenditures for the next twelve months. City
Network will need to raise additional funds in the
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future in order to fund more aggressive brand promotion and more rapid
expansion, to develop new or enhanced products, to respond to competitive
pressures or to acquire complementary businesses or technologies. If additional
funds are raised through the issuance of equity or convertible debt securities,
the current stockholders may experience dilution and any such securities may
have rights, preferences or privileges senior to those of the rights of City
Network's Common Stock. There can be no assurance that additional financing will
be available on terms favorable to City Network, or at all. If adequate funds
are not available or not available on acceptable terms, City Network may not be
able to fund its expansion, promote its brand names as City Network desires,
take advantage of unanticipated acquisition opportunities, develop or enhance
products or respond to competitive pressures. Any such inability could have a
material adverse effect on City Network's business, results of operations and
financial condition.
FLUCTUATIONS IN QUARTERLY OPERATING RESULTS
City Network expects to experience significant fluctuations in future
quarterly operating results that may be caused by many factors, including, among
others: delays in introduction of products or product enhancements by City
Network, its competitors or other providers of broadband and wireless internet
access and equipment; costs associated with product or technology acquisitions;
the size and timing of individual orders; competition and pricing in the
broadband internet access industry; seasonality of revenues; customer order
deferrals in anticipation of new products; market acceptance of new products;
reductions in demand for existing products and shortening of product life cycles
as a result of new product introductions; changes in operating expenses; changes
in City Network's personnel; changes in regulatory requirements; mix of products
sold; and general economic conditions. As a result, City Network believes that
period-to-period comparisons of its results of operations are not necessarily
meaningful and should not be relied upon as indications of future performance.
FAILURE TO MANAGE GROWTH WILL ADVERSELY AFFECT OPERATIONS
City Network plans to significantly expand its sales, marketing, research
and development activities, hire a number of additional employees, expand
internal information, accounting and billing systems and establish additional
distribution outlets throughout the world. In addition, City Network plans to
expand its infrastructure by investing in additional research and development
talent. In order to successfully manage growth, management must identify,
attract, motivate, train and retain highly skilled managerial, financial,
engineering, business development, sales and marketing and other personnel.
Competition for this type of personnel is intense. If management fails to
effectively manage City Network's growth, City Network's business and viability
will be materially and adversely impacted.
CITY NETWORK MAY FAIL TO KEEP PACE WITH RAPIDLY CHANGING TECHNOLOGIES
The market segments City Network is targeting are characterized by rapidly
changing technology, evolving industry standards and frequent new product and
service introductions. These factors require management to continually improve
the performance, features and reliability of the array of City Network products.
Management may not successfully respond quickly enough or on a cost-effective
basis to these developments. City Network may not
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achieve widespread acceptance of its services before its competitors offer
products and services with speed, performance, features and quality similar to
or better than City Network products or that are more cost-effective than City
Network's services.
WE MAY NOT BE ABLE TO COMPETE EFFECTIVELY
The market for internet broadband and wireless infrastructure equipment
and services is rapidly evolving and highly competitive. Many of City Network's
competitors and potential competitors have substantially greater financial,
technical, and managerial and marketing resources, longer operating histories,
greater name recognition and more established relationships than City Network.
Since City Network's business is partially dependent on the overall success of
the Internet as a communication medium, it also competes with traditional
hardware based access and equipment providers. Management expects competition
from these and other types of competitors to increase significantly.
CITY NETWORK MAY EXPERIENCE DIFFICULTIES IN INTEGRATING BUSINESSES, PRODUCTS AND
TECHNOLOGIES IT MAY ACQUIRE INTO ITS BUSINESS
City Network may acquire businesses, products and technologies and enter
into joint ventures and strategic relationships with other companies. Any of
these transactions exposes City Network to additional risks, including: the
difficulty of assimilating and integrating the operations of the combined
companies; retaining key personnel; the potential disruption of City Network's
core business; and the potential additional expenses associated with
amortization of acquired intangible assets, integration costs and unanticipated
liabilities or contingencies.
LOSS OF KEY PERSONNEL COULD HARM OUR BUSINESS
Given the early stage of development of City Network's business, it
depends highly on the performance and efforts of its CEO, Mr. Andy Lai, its CFO,
Mr. Hsin-Nan Lin, staff and the Board of Directors. If City Network should
lose the service of any members of its management team or other key personnel,
its business prospects will be materially impacted.
ENACTMENT OF NEW LAWS OR CHANGES IN GOVERNMENT REGULATIONS COULD ADVERSELY
AFFECT CITY NETWORK'S BUSINESS
City Network is not currently required to comply with direct regulation by
any domestic or foreign governmental agency, other than regulations applicable
to businesses generally and laws or regulations directly applicable to the
Internet. However, due to the increasing popularity of the Internet, it is
possible that additional laws may be adopted regarding the Internet, any of
which could materially harm our business. The adoption of any additional laws
may decrease the growth of Internet use, which could lead to a decrease in the
demand for our services or increase the cost of doing business.
- 14 -
THE INABILITY TO OBTAIN PATENT AND COPYRIGHT PROTECTION FOR CITY NETWORK'S
TECHNOLOGY OR MISAPPROPRIATION OF CITY NETWORK'S INTELLECTUAL PROPERTY COULD
ADVERSELY AFFECT CITY NETWORK'S COMPETITIVE POSITION
City Network's success depends on internally developed technologies,
know-how, trademarks and related intellectual properties. Management regards the
technology as proprietary and will attempt to protect it by seeking patents,
copyrights or trademarks, and by invoking trade secret laws and confidentiality
and nondisclosure agreements. Despite these precautions, it may be possible for
a third party to obtain and use our services or technology without
authorization.
City Network intends to apply for registration of certain copyrights and a
number of key trademarks and service marks and intends to introduce new
trademarks and service marks. Management may not be successful in obtaining
registration for one or more of these trademarks. Management may need to resort
to litigation in the future to enforce or to protect intellectual property
rights, including patent and trademark rights. In addition, City Network's
technologies and trademarks may be claimed to conflict with or infringe upon the
patent, trademark or other proprietary rights of third parties. If this
occurred, City Network would have to defend itself against such challenges,
which could result in substantial costs and the diversion of resources. Any of
these events could materially harm City Network's business.
ITEM 5. OTHER EVENTS.
On August 15, 2002, the Board of Directors of Investment Agents approved a
reverse split of Investment Agents' common stock of one share for every fifty
issued and outstanding shares. The reverse split was effectuated on August 22,
2002.
On December 10, 2002, we filed a fictitious business name statement in
Clark County, Nevada for use of the name City Network, Inc.
On December 18, 2002, the OTCBB began quoting our common stock under the
new ticker symbol "CYNW".
ITEM 7. FINANCIAL STATEMENTS, PRO FORM FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial Statements
The audited financial statements of Investment Agents for the fiscal years
ended December 31, 2001 and 2000, the pro forma combined interim period ending
November 30, 2002, and the unaudited balance sheet and income statement for the
period ended November 30, 2002, and the pro forma combined for the fiscal year
end December 31, 2001, are filed herewith.
- 15 -
(b) Exhibits
Exhibit No. Description
----------- -----------
10.1 Exchange Agreement
[ SIGNATURE PAGE FOLLOWS ]
- 16 -
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
INVESTMENT AGENTS, INC.
d/b/a CITY NETWORK INC.
Date: March 4, 2003 By: /s/ Tiao-Tsan Lai
------------------------ ---------------------------
Tiao-Tsan Lai
- 17 -
REPORT OF INDEPENDENT ACCOUNTANTS
To the board of Directors
City Network, Inc.
Taipel, Taiwan
We have audited the accompanying balance sheet of City Network, Inc. ("the
Company") as of December 31, 2001 and 2000, and the related consolidated
statements of income, changes in stockholders' equity, and cash flows for the
years then ended. These financial statements are the responsibility of 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 generally accepted auditing standards
of the United States. Those standards require that we plan and perform the
audits 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, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of the Company as of
December 31, 2001 and 2000, and the results of its operations and its cash flows
for the years ended December 31, 2001 and 2000 in conformity with generally
accepted accounting principles of the United States.
/s/ Chen Chun Chih [LOGO]
April 4, 2002
CITY NETWORK INC.
(FORMERLY CITY ENGINEERING INC.)
FINANCIAL STATEMENTS
DECEMBER 31, 2000 AND 2001
City Network Inc.
(Formerly City Engineering Inc.)
Balance Sheets
(in thousands, except par value and share amounts)
December 31,
---------------------------------------
2000 2001
--------- ------------------------
NT$ NT$ US$
--------- --------- ---------
(Note 1)
ASSETS
Current assets:
Cash $ 13,817 $ 24,549 $ 701
Notes and accounts receivable, net 14,781 8,857 253
Accounts receivable-construction 26,900 19,070 545
Inventories 1,674 2,042 58
Prepaid expenses and other current assets, net 302 2,353 67
--------- --------- ---------
Total current assets 57,474 56,871 1,624
Property, plant and equipment, net 4,090 19,867 568
Prepayments for land 28,500 -- --
Idle assets -- 51,796 1,480
Other assets 5 139 4
--------- --------- ---------
Total assets $ 90,069 $ 128,673 $ 3,676
========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term loans $ 6,000 $ 6,000 $ 171
Notes and accounts payable 30,533 11,742 336
Income tax payable 177 1,406 41
Accrued liabilities 2,282 6,445 184
Payables for land -- 28,500 814
Partial construction billings 18,000 2,138 61
Less: construction in progress (4,286) (1,200) (34)
Deferred tax liabilities-current -- 17 1
Current portion of long-term loans 3,524 4,837 138
--------- --------- ---------
Total current liabilities 56,230 59,885 1,712
--------- --------- ---------
Long-term liabilities:
Long-term loans 12,067 16,797 480
--------- --------- ---------
Total long-term liabilities 12,067 16,797 480
--------- --------- ---------
Other liabilities:
Common stock received in advance 10,000 -- --
Accrued pension liabilities 121 333 9
--------- --------- ---------
Total other liabilities 10,121 333 9
--------- --------- ---------
Total liabilities 78,418 77,015 2,201
--------- --------- ---------
Commitments and contingencies (Note 13)
Stockholders' equity:
Common Stock: $10 par value; 1,500,000 shares and
6,000,000 shares authorized, issued and outstanding at
December 31, 2000 and 2001, respectively 15,000 60,000 1,714
Capital reserve 537 537 15
Accumulated deficit (3,886) (8,879) (254)
--------- --------- ---------
Total stockholders' equity 11,651 51,658 1,475
--------- --------- ---------
Total liabilities and stockholders' equity $ 90,069 $ 128,673 $ 3,676
========= ========= =========
The accompanying notes are an integral part of these statements.
- 1 -
City Network Inc.
(Formerly City Engineering Inc.)
Statements of Operations
(in thousands, except per share data)
For the years ended December 31,
---------------------------------------
2000 2001
--------- ------------------------
NT$ NT$ US$
--------- --------- ---------
(Note 1)
Revenues
Product sales $ 72,758 $ 85,967 $ 2,456
Construction revenue 25,500 19,019 544
--------- --------- ---------
98,258 104,986 3,000
--------- --------- ---------
Cost of revenues
Cost of goods sold 61,779 64,527 1,844
Construction costs 20,497 16,906 483
--------- --------- ---------
82,276 81,433 2,327
--------- --------- ---------
Gross profit 15,982 23,553 673
--------- --------- ---------
Operating expenses:
Selling, general and administrative 19,270 20,272 579
--------- --------- ---------
Total operating expenses 19,270 20,272 579
--------- --------- ---------
Income (loss) from operations (3,288) 3,281 94
Impairment losses on idle assets -- (5,204) (149)
Interest and other losses, net (37) (1,611) (46)
--------- --------- ---------
Loss before provision for income taxes (3,325) (3,534) (101)
Provision for income taxes 199 1,459 42
--------- --------- ---------
Net loss ($ 3,524) ($ 4,993) ($ 143)
========= ========= =========
Net loss per share:
Basic and dilutive ($ 2.56) ($ 1.52) ($ 0.04)
========= ========= =========
Weighted average outstanding common stock:
Basic and dilutive 1,375 3,292 3,292
========= ========= =========
The accompanying notes are an integral part of these statements.
- 2 -
City Network Inc.
(Formerly City Engineering Inc.)
Statements of Stockholders' Equity
For the Years ended December 31, 2000 and 2001
(in thousands, except par value and share amounts)
Common Stock Issued Total
----------------------- Capital Accumulated Stockholders'
Shares Amount Reserve Deficit Equity
--------- --------- --------- --------- ---------
NT$ NT$ NT$ NT$
--------- --------- --------- ---------
Balance at December 31, 1999 1,000,000 $ 10,000 $ 537 ($ 362) $ 10,175
Issuance of Common Stock at NT$10 per share for cash 500,000 5,000 -- -- 5,000
Net loss -- -- -- (3,524) (3,524)
--------- --------- --------- --------- ---------
Balance at December 31, 2000 1,500,000 15,000 537 (3,886) 11,651
Issuance of Common Stock at NT$10 per share for cash 4,500,000 45,000 -- -- 45,000
Net loss -- -- -- (4,993) (4,993)
--------- --------- --------- --------- ---------
Balance at December 31, 2001 6,000,000 $ 60,000 $ 537 ($ 8,879) $ 51,658
========= ========= ========= ========= =========
The accompanying notes are an integral part of these statements.
- 3 -
City Network Inc.
(Formerly City Engineering Inc.)
Statements of Cash Flows
(in thousands)
For the years ended December 31,
------------------------------------
2000 2001
-------- ----------------------
NT$ NT$ US$
-------- -------- --------
(Note 1)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ($ 3,524) ($ 4,993) ($ 143)
Adjustments to reconcile net loss to net cash provided by (used in)
operating activities:
Depreciation and amortization 744 1,044 30
Bad debts expenses 69 828 24
(Reversal of) allowance for sales returns 2,949 (1,547) (44)
Provision for loss on inventory obsolescence 94 -- --
Deferred income tax -- 17 1
Impairment losses on idle assets -- 5,204 149
Loss on disposal of property, plant and equipment 323 -- --
Changes in assets and liabilities:
Notes and accounts receivable (17,799) 6,643 190
Accounts receivable-construction (15,876) 7,830 224
Inventories (1,768) (368) (11)
Prepaid expenses and other current assets (273) (2,051) (59)
Other assets -- (168) (5)
Notes and accounts payable 27,943 (18,791) (537)
Income tax payable 131 1,229 35
Accrued liabilities 1,447 4,163 119
Excess of construction billings over construction costs 15,514 (12,776) (365)
Accrued pension liabilities 118 215 6
Other liabilities -- -- --
-------- -------- --------
Net cash provided by (used in) operating activities 10,092 (13,521) (386)
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment (3,293) (16,790) (480)
Prepayments for land (28,500) -- --
Proceeds from disposal of property, plant and equipment 625 -- --
-------- -------- --------
Net cash used in investing activities (31,168) (16,790) (480)
-------- -------- --------
(Continued)
- 4 -
City Network Inc.
(Formerly City Engineering Inc.)
Statements of Cash Flows
(in thousands)
For the years ended December 31,
------------------------------------
2000 2001
-------- ----------------------
NT$ NT$ US$
-------- -------- --------
(Note 1)
CASH FLOWS FROM FINANCING ACTIVITIES:
Decrease in short-term loans ($ 2,000) $ -- $ --
Increase in long-term loans 15,591 6,043 172
Common stock received in advance 10,000 -- --
Issuance of Common Stock for cash 5,000 35,000 1,000
-------- -------- --------
Net cash provided by financing activities 28,591 41,043 1,172
-------- -------- --------
Net increase in cash 7,515 10,732 306
Cash at beginning of year 6,302 13,817 395
-------- -------- --------
Cash at end of year $ 13,817 $ 24,549 $ 701
======== ======== ========
SUPPLEMENTARY DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest $ 1,434 $ 1,932 $ 55
======== ======== ========
Cash paid for income tax $ 25 $ 81 $ 2
======== ======== ========
The accompanying notes are an integral part of these statements.
- 5 -
City Network Inc.
(Formerly City Engineering Inc.)
Notes to Financial Statements
1. THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
THE COMPANY
City Engineering Inc. ("City Engineering") was incorporated in September
1994 under the Company Law of the Republic of China. In February 2000,
City Engineering changed its name to City Network Inc. (the "Company")
The Company is mainly engaged in the sales of broadband products,
including wire and wireless solutions. The Company is also engaged in the
construction and installation of network communication system.
The Company operates in an industry segment characterized by significant
competition and rapid technological change. The Company will need
additional funding in order to complete the development and upgrade of its
products and expand its planned operations.
CONVENIENCE TRANSLATION INTO US DOLLARS
The Company maintains its accounting records and prepares its financial
statements in New Taiwan ("NT") dollars. The United States ("US") dollar
amounts disclosed in the 2001 financial statements are presented solely
for the convenience of the reader and were translated at the rate of
NT$35.00 to US$1.00, the U.S. Federal Reserve Bank of New York noon buying
exchange rate on December 31, 2001. Such translation amounts should not be
construed that the NT dollar amounts represent, or have been, or could be,
converted into US dollars at that or any other rate.
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
TRANSLATION OF FOREIGN CURRENCY TRANSACTIONS
The Company maintains its accounting records in New Taiwan dollars.
Transactions arising in foreign currencies during the year are converted
at the rates of exchange
-6-
prevailing on the transaction dates. Receivables, other monetary assets
and liabilities denominated in foreign currencies at year-end are
translated at the rates of exchange prevailing at the balance sheets date.
All exchange gains or losses are included in the current year's results.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments, including cash, notes and accounts
receivable, notes and accounts payable and accrued liabilities, are
carried at cost, which approximates their fair value due to the short-term
maturity of these instruments.
INVENTORIES
Inventories are recorded at cost when acquired and are stated at the lower
of aggregate cost, based on the first-in-first-out method, or market value
at the balance sheet date. The market value for merchandise is determined
on the basis of net realizable value. An allowance for loss on
obsolescence and decline in market value is provided, when necessary.
ALLOWANCE FOR DOUBTFUL ACCOUNTS
An allowance for doubtful accounts is provided based on the evaluation of
collectibility and aging analysis of notes and accounts receivables.
REVENUE RECOGNITION
The Company's revenues consist of product sales and construction revenue.
Product sales are recognized when products are shipped, which is when
title passes to the Company's customers, provided that the Company has
received a signed purchase order, the price is fixed and collection of
resulting receivable is probable. A reserve for product returns is accrued
based on historical experience.
The Company adopts completed-contract method to account for construction
revenues and costs as the Company primarily has short-term contracts.
Accordingly, income is only recognized when the contract is completed, or
substantially completed, and all costs and related revenues are reported
as deferred items in the balance sheet until completion.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. Interest incurred
relating to the acquisition and construction of property, plant and
equipment is capitalized and depreciated accordingly.
-7-
Depreciation is provided using the straight-line method over the following
estimated useful lives:
Buildings........................................... 25 years
Transportation equipment............................ 6 years
Furniture and fixtures.............................. 4~6 years
Maintenance and repairs are charged to expense as incurred. Significant
renewals and improvements are treated as capital expenditures and are
depreciated accordingly. When fixed assets are disposed of, their original
cost and accumulated depreciation are written-off. Gain or loss on
disposal of fixed assets is recorded as non-operating income or loss.
LONG-LIVED ASSETS
Long-lived assets and certain indentifiable intangible assets to be held
and used are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of such assets may not be
recoverable. Determination of recoverability is based on an estimate of
undiscounted future cash flows resulting from the use of the asset and its
eventual disposition. Measurement of an impairment loss for long-lived
assets and certain identifiable intangible assets that management expects
to hold and use is based on the fair value of the asset. Long-lived assets
and certain identifiable intangible assets to be disposed of are reported
at the lower of carrying amount or fair value less costs to sell.
PENSION
The Company has adopted statement of Financial Accounting Standard No. 87
("SFAS No. 87"), "Employers' Accounting for Pensions". The net pension
cost is computed based on an actuarial valuation and includes service
cost, interest cost, expected return on plan assets and amortization of
net asset/obligation at transition. The unrecognized net asset or
obligation at transition is amortized equally over 15 years.
ACCOUNTING FOR INCOME TAXES
The Company has adopted Statement of Financial Accounting Standards No.
109 ("SFAS No. 109"), "Accounting for Income Taxes". Under SFAS No. 109,
the liability method is used in accounting for income taxes. Under this
method, deferred tax assets and liabilities are determined based on the
differences between financial reporting and tax bases of assets and
liabilities and are measured using the enacted tax rate and laws that will
be in effect when the differences are expected to reverse. Valuation
allowances are established when necessary to reduce deferred tax assets to
the amount expected to be realized.
-8-
NET LOSS PER SHARE
The Company computes losses per share under Statement of Financial
Accounting Standards No.128 ("SFAS No.128"), "Earnings per Share". SFAS
No.128 specifies the computation, presentation and disclosure requirements
for earnings per share data. SFAS No.128 also requires the presentation of
both basic and diluted earnings per share data for entities with complex
capital structures. Diluted earnings per share data gives effect to all
dilutive potential common shares that were outstanding during the period
presented.
COMPREHENSIVE INCOME (LOSS)
Comprehensive income (loss) is defined as the change in equity of a
company from transactions and other events and circumstances excluding
transactions resulting from investments from owners and distributions to
owners. Comprehensive income (loss) is recorded as a component of
stockholders' equity. For the years ended December 31, 2000 and 2001,
there were no differences between the Company's net loss and its total
comprehensive income (loss).
RECENT ACCOUNTING PRONOUNCEMENTS
In July 2001, the Financial Accounting Standard Board (FASB) issued
Statement of Financial Accounting Standards No. 141 ("SFAS 141"),
"Business Combinations", and SFAS No. 142, "Goodwill and Other Intangible
Assets". SFAS No. 141 requires that the purchase method of accounting be
used for all business combinations initiated after June 30, 2001. SFAS No.
141 also specifies criteria for intangible assets acquired in a purchase
business combination to be recognized and reported apart from goodwill.
SFAS No. 142 requires that goodwill and intangible assets with indefinite
useful lives no longer be amortized, but instead be tested for impairment
at least annually. SFAS No. 142 also requires that intangible assets with
finite useful lives be amortized over their respective estimated useful
lives to their estimated residual values, and reviewed for impairment in
accordance with SFAS No. 144, "Accounting for the Impairment of Disposal
of Long-lived Assets". The adoption of SFAS No. 141 and SFAS No. 142 did
not have a significant effect on the Company's financial position and
results of operations.
In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations", which addresses financial accounting and
reporting for obligations associated with the retirement of tangible
long-lived assets and the associated asset retirement costs. The standard
applies to legal obligations associated with the retirement of long-lived
assets that result from the acquisition, construction, development and
(or) normal use of the asset.
-9-
SFAS No. 143 requires that the fair value of a liability for an asset
retirement obligation be recognized in the period in which it is incurred
if a reasonable estimate of fair value can be made. The fair value of the
liability is added to the carrying amount of the associated asset and this
additional carrying amount is depreciated over the life of the asset. The
liability is accreted at the end of each period through charges to
operating expense. If the obligation is settled for other than the
carrying amount of the liability, the Company will recognize a gain or
loss on settlement. The adoption of this statement is not expected to have
a material effect on the Company's financial position and results of
operations.
In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets", which supersedes SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of". SFAS No. 144 retains the fundamental
provisions of SFAS No. 121 for recognition and measurement of the
impairment of long-lived assets to be held and used and measurement of
long-lived assets to be disposed of by sale. SFAS No. 144 addresses
certain implementation issues related to SFAS No. 121. This Statement also
supersedes the accounting and reporting provisions of APB Opinion No. 30,
"Reporting the Results of Operations - Reporting the Effects of Disposal
of a Segment of a Business, and Extraordinary, Unusual and Infrequently
Occurring Events and Transactions", for segments of a business to be
disposed of. SFAS No. 144 retains the basic provisions of APB Opinion No.
30 for the presentation of discontinued operations in the income statement
but broadens that presentation to include a component of an entity, rather
than a segment of a business. The adoption of this statement is not
expected to have a material effect on the Company's financial position and
results of operations.
In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB
Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13 and
Technical Corrections as of April 2002". For most companies, SFAS No. 145
requires gains and losses on extinguishments of debt to be classified as
income or loss from continuing operations rather that as extraordinary
items as previously required under SFAS No. 4. Extraordinary treatment
will be required for certain extinguishments as provided in APB Opinion
No. 30. The statement also amended SFAS No. 13 for certain sales-leaseback
and sublease accounting. The Company is required to adopt the provisions
of SFAS No. 145 effective January 1, 2003. The adoption of this statement
is not expected to have a material effect on the Company's financial
position and results of operations.
In June 2002, the FASB issued SFAS No. 146, "Accounting for Exit or
Disposal Activities" ("SFAS NO. 146"). SFAS No. 146 addresses significant
issues regarding the recognition, measurement, and reporting of costs that
are associated with exit and disposal activities, including restructuring
activities that are currently accounted for under EITF No. 94-3,
"Liability Recognition for Certain Employee Termination Benefits and Other
Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring)." The scope of SFAS No. 146 also includes costs related to
terminating a contract that is not a
-10-
capital lease and termination benefits that employees who are
involuntarily terminated receive under the terms of a one-time benefit
arrangement that is not an ongoing benefit arrangement or an individual
deferred-compensation contract. SFAS No. 146 will be effective for exit or
disposal activities that are initiated after December 31, 2002 and early
application is encouraged. The adoption of this statement is not expected
to have a material impact on the Company's financial position and results
of operations.
2. RELATED PARTY TRANSACTIONS
PURCHASE OF LAND
In July 2000, the Company entered into an agreement with an individual,
who is an immediate family member of the Company's CEO, to purchase a
parcel of land in an amount of NT$ 57,000 thousand for the construction of
a research and development center and an assembling plant. In accordance
with the agreement, the Company prepaid $28,500 in 2000 and the title of
the land was transferred to the Company in 2001. The outstanding balance
of the purchase price, or NT$ 28,500 thousand, was accrued in the balance
sheet as of December 31, 2001. As the land has not been used as planned,
accordingly, the Company reclassified the land to idle assets and revalued
at the net realizable value with an impairment loss of NT$ 5,204 thousand
recognized for the year ended December 31, 2001.
SALES AND ACCOUNTS RECEIVABLE
For the year ended December 31, 2000 and 2001, sales to related parties
amounted to NT$ 954 thousand and NT$ 2,297 thousand, respectively. As of
December 31, 2000 and 2001, the balance of accounts receivable from
related parties were NT$ 687 thousand and NT$ 2,991 thousand,
respectively.
PURCHASES AND NOTES AND ACCOUNTS PAYABLE
For the year ended December 31, 2000 and 2001, purchases from related
parties amounted to NT$ 57,028 thousand and NT$ 61,579 thousand,
respectively. As of December 31, 2000 and 2001, the balance of notes and
accounts payable to related parties were NT$ 27,084 thousand and NT$ 8,198
thousand, respectively.
COMMISSION EXPENSE
Commencing from 2001, the Company pays commission to a related party as it
assists the Company in the expansion of its sales channel. For the year
ended December 31, 2001, the Company recognized commission expenses of NT$
5,128 thousand, and as of December 31, 2001, the outstanding balance of
accrued commission expenses was NT$ 5,108 thousand.
-11-
3. BALANCE SHEET COMPONENTS (IN THOUSANDS)
December 31,
-----------------------------------
2000 2001
--------------- ---------------
NT$ NT$
--------------- ---------------
NOTES AND ACCOUNTS RECEIVABLE, NET:
Notes receivable $ 2,458 $ 3,060
Accounts receivable 15,341 8,096
Less: Allowance for doubtful accounts (69) (897)
Allowance for sales returns (2,949) (1,402)
--------------- ---------------
$ 14,781 $ 8,857
=============== ===============
PROPERTY, PLANT AND EQUIPMENT, NET:
Land and land improvements $ 1,620 $ 6,120
Buildings 690 10,690
Transportation equipment 1,071 1,071
Furniture and fixtures 1,888 4,179
--------------- ---------------
5,269 22,060
Less: Accumulated depreciation (1,179) (2,193)
--------------- ---------------
$ 4,090 $ 19,867
=============== ===============
Depreciation expense for the years ended December 31, 2000 and 2001 was
NT$744 thousand and NT$1,014 thousand, respectively.
December 31,
-----------------------------------
2000 2001
--------------- ---------------
NT$ NT$
--------------- ---------------
ACCRUED LIABILITIES:
Accrued compensation costs $ 883 $ 877
Accrued commission -- 5,108
Value-add-in tax payable 1,000 --
Accrued professional expenses 200 300
Other 199 160
--------------- ---------------
$ 2,282 $ 6,445
=============== ===============
December 31,
-----------------------------------
2000 2001
--------------- ---------------
NT$ NT$
--------------- ---------------
PARTIAL CONSTRUCTION BILLINGS:
Project A $ 10,000 $ --
Project B 8,000 --
Project C -- 2,138
--------------- ---------------
18,000 2,138
--------------- ---------------
CONSTRUCTION IN PROGRESS:
Project A (4,286) --
Project C -- (1,200)
--------------- ---------------
(4,286) (1,200)
--------------- ---------------
$ 13,714 $ 938
=============== ===============
-12-
4. SHORT-TERM LOANS (IN THOUSANDS)
December 31,
---------------------------------
2000 2001
------------- -------------
Nature NT$ NT$
------------------ ------------- -------------
Unsecured loans $ 6,000 $ 6,000
============= =============
Range of interest rates 9.25% 8.47%
============= =============
Available line of credit $ 6,000 $ 6,000
============= =============
5. LONG-TERM LOANS (IN THOUSANDS)
December 31,
------------------------------
2000 2001
------------- -------------
Nature Pledged assets NT$ NT$
------------------ ---------------------- ------------- -------------
Secured loans Land and buildings $ 15,501 $ 21,564
Unsecured loans - 90 70
------------- -------------
15,591 21,634
Less: current portion (3,524) (4,837)
------------- -------------
$ 12,067 $ 16,797
============= =============
Interest rate 6.85%~8.5% 4.5%~8.5%
============= =============
Last repayment date June 12, 2005 May 29, 2016
============= =============
6. PENSION
A. The following tables set forth the actuarial assumptions, funded
status and amounts recognized for the Company's defined benefit
pension plan (in thousands):
2000 2001
-------------- -------------
Assumptions used in actuarial calculations
as of December 31,
Discount rate 5.75% 4.25%
Long-term rate of compensation increase 3.75% 3.00%
Expected return on plan assets 5.75% 4.00%
2000 2001
--------------- ---------------
NT$ NT$
--------------- ---------------
Vested benefit obligation $ -- $ --
=============== ===============
Accumulated benefit obligation $ (121) $ (268)
=============== ===============
-13-
2000 2001
--------------- ---------------
NT$ NT$
--------------- ---------------
Changes in benefit obligation during the
period to December 31,
Projected benefit obligation at January 1, $ 89 $ 248
Service cost 107 193
Interest cost 5 14
Loss on projected benefit obligation 47 5
--------------- ---------------
Projected benefit obligation at December 31, $ 248 $ 460
=============== ===============
2000 2001
--------------- ---------------
NT$ NT$
--------------- ---------------
Funded Status at December 31,
Fair value of plan assets $ -- $ --
Projected benefit obligation (248) (460)
--------------- ---------------
Funded status (248) (460)
Unrecognized transition obligations 83 77
Unrecognized net actuarial loss 47 50
--------------- ---------------
Accrued pension liabilities (118) (333)
Additional liabilities (3) --
--------------- ---------------
Minimum liabilities $ (121) $ (333)
=============== ===============
2000 2001
--------------- ---------------
NT$ NT$
--------------- ---------------
Components of net periodic cost for the
period ended December 31,
Service cost $ 107 $ 193
Interest cost 5 14
Recognition of transition obligations 6 6
Recognition of loss -- 2
--------------- ---------------
Net periodic cost $ 118 $ 215
=============== ===============
7. NET LOSS PER SHARE (IN THOUSANDS, EXCEPT PER SHARE DATA)
For the years ended December 31,
----------------------------------
2000 2001
--------------- ---------------
Net loss (A) NT$ (3,524) NT$ (4,993)
=============== ===============
Weighted average outstanding common stock 1,375 3,292
=============== ===============
Basic and diluted net loss per share (A/B) NT$ (2.56) NT$ (1.52)
=============== ===============
The Company did not have any potentially dilutive common shares issued and
outstanding during the years ended December 31, 2000 and 2001.
Accordingly, there was no difference between basic and dilutive net loss
per share in the years presented.
-14-
8. INCOME TAXES
The provision for income taxes consists of the following (in thousands):
For the years ended December 31,
--------------------------------
2000 2001
------ ------
NT$ NT$
------ ------
Current income tax expense $ 199 $1,442
Deferred income tax expense -- 17
------ ------
Total provision for income taxes $ (199) $1,459
====== ======
The Company's net deferred tax asset (liabilities) is comprised of as
follows (in thousands):
December 31,
--------------------
2000 2001
------- -------
NT$ NT$
------- -------
Deferred tax assets:
Current
Allowance for doubtful accounts $ 22 $ 285
Allowance for sales returns 936 445
Provision for loss on inventory obsolescence 30 30
------- -------
Total deferred tax assets-current 988 760
------- -------
Noncurrent:
Depreciation 3 50
Unrealized impairment loss on idle assets -- 1,652
------- -------
Total deferred tax assets-noncurrent 3 1,702
------- -------
Gross deferred tax assets 991 2,462
Valuation allowance (991) (2,462)
------- -------
Total deferred tax assets -- --
------- -------
Deferred tax liabilities:
Current:
Unrealized gain on foreign currency exchange -- (17)
------- -------
Total deferred tax liabilities-current -- (17)
------- -------
Net deferred tax liabilities $ -- $ (17)
======= =======
Management believes that, based upon the weight of available evidence,
which includes the historical operating performance and the accumulated
deficit, it is more likely than not that the deferred tax assets will not
be utilized, and as a result a full valuation allowance has been recorded.
-15-
9. COMMON STOCK
As of December 31, 2001, the authorized capital of the Company was
NT$60,000,000 represented by 6,000,000 common shares with par value of
NT$10 per share. As of December 31, 2001, 6,000,000 shares of Common Stock
were issued and outstanding.
10. CAPITAL RESERVE
A. According to the ROC Company Law, the capital reserve arising from
paid-in capital in excess of par on the issuance of stocks, from
merger, from the conversion of convertible bonds and from donation
shall be exclusively used to cover accumulated deficit or be
transferred to capital, subject to certain limitations.
Other capital reserve shall be exclusively used to cover accumulated
deficit. The capital reserve can only be used to cover accumulated
deficit when the legal reserve is insufficient to cover the
deficits.
B. According to the ROC Company Law, the capital reserve arising from
paid-in capital in excess of par on the issuance of stocks can only
be transferred to capital once every year. This capital reserve
transferred to capital can not be made in the year the company
issued the new shares and amount to be capitalized is subject to
certain limitation.
11. CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to a
concentration of credit risk consist of cash, notes receivable and
accounts receivable. The Company's cash is deposited with Taiwanese
financial institutions. The Company's notes and accounts receivable are
mainly derived from revenue earned from customers located in Taiwan and
Korea. The Company performs ongoing credit evaluations of its customers'
financial condition and, generally, requires no collateral from its
customers. The Company maintains an allowance for doubtful accounts based
upon the expected collectibility of notes and accounts receivable and
other receivable.
During the year ended December 31, 2000, three customers accounted for
39%, 11% and 10% of the Company's product sales, respectively. As of
December 31, 2000, three customer accounted for 22%, 20% and 10% of the
Company's notes and accounts receivable related to product sales,
respectively.
During the year ended December 31, 2001, two customers accounted for 55%
and 12% of the Company's product sales, respectively. As of December 31,
2001, two customers accounted for 32% and 24% of the Company's notes and
accounts receivable related to product sales, respectively.
-16-
12. ASSETS PLEDGED AS COLLATERAL
As of December 31, 2000 and 2001, the following assets have been pledged as
collateral against certain obligations of the Company (in thousands):
Book Value
----------
Assets 2000 2001 Subject of collateral
------------ ------- -------- ------------------------
NT$ NT$
Land $ 1,620 $ 6,120 Long-term loans
Buildings-net 690 10,690 Long-term loans
------- --------
$ 2,310 $ 16,810
======= ========
13. COMMITMENTS AND CONTINGENCIES
A. PRODUCT PATENTS
In June 2001, the Company entered into agreements with its major
vendor, also a related party, to purchase the certification and
sales channels of HomePNA and VDSL products with an acquisition cost
of NT$24,000,000 and NT$11,000,000, respectively. The Company made
the payments subsequent to December 31, 2001.
B. LONG-TERM INVESTMENT
In December 2001, the Company entered into agreements to purchase
417,245 shares and 117,245 shares of a software company from the
Company's CEO and a third party, respectively, at a price of NT$20
per share with a total acquisition cost of NT$10,690,000. The
Company is to acquire approximately 25% ownership in this investee
company. The payment to purchase this investment was made subsequent
to December 31, 2001.
14. SUBSEQUENT EVENT
COMMON STOCK FINANCING
In April, 2002, the Company issued 6,000,000 shares of common stock at a
price of NT$10 per share for total proceeds of NT$60,000,000 to certain
existing and new investors.
-17-
UNAUDITED PRO FORMA FINANCIAL INFORMATION
CITY NETWORK, INC.
The accompanying condensed financial statements illustrate the effect of the
stock exchange agreement between Investment Agents, Inc. and City Network, Inc.,
on the Company's financial position and results of operations. The pro forma
condensed consolidated balance sheet as of November 30, 2002 is based on the
historical balance sheets of Investment Agents, Inc. and City Network, Inc. as
of that date. The pro forma condensed combined balance sheet assumes the
acquisition took place on November 30, 2002.
The pro forma condensed combined statements of operations for the year ended
December 31, 2001 is based on the historical statements of operations of
Investment Agents, Inc. and City Network, Inc. and assumes the acquisition took
place on January 1, 2001. The pro forma condensed combined statement of
operations for the eleven months ended November 30, 2002 is based on the
historical statements of operations of Investment Agents, Inc. and City Network,
Inc. and assumes the acquisition took place on January 1, 2001.
The pro forma condensed combined financial statements may not be indicative of
the actual results of the acquisition and there can be no assurance that the
foregoing results will be obtained. In particular, the pro form condensed
combined financial statements are based on management's current estimates of the
exchange agreement. The actual may differ.
The accompanying pro forma condensed combined financial statements should be
read in conjunction with the historical financial statements of Investment
Agents, Inc. and City Network, Inc.
INVESTMENT AGENTS, INC. AND CITY NETWORK, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 2001
Historical
----------
Investment City Pro Forma
Agents Network Adjustments Pro Forma
------ -------- ----------- ---------
Sales revenue $ 49 $ 2,456,000 $ 2,456,049
Construction revenue -- 544,000 544,000
------------ ------------ ------------
49 3,000,000 3,000,049
Cost of goods sold 825 1,844,000 1,844,825
Construction costs -- 483,000 483,000
------------ ------------ ------------
825 2,327,000 2,327,825
Gross Profit (776) 673,000 672,224
------------ ------------ ------------
General, selling and
administrative expenses 30,339 579,000 609,339
------------ ------------ ------------
Operating income (loss) (31,115) 94,000 62,885
------------ ------------ ------------
Nonoperating income (expense)
Interest income -- -- 0
Impairment loss -- (149,000) (149,000)
Interest and other losses, net -- (46,000) (46,000)
------------ ------------ ------------
Total nonoperating income (expenses) -- (195,000) (195,000)
------------ ------------ ------------
Income (loss) before provision for income tax (31,115) (101,000) (132,115)
Provision for income taxes -- 42,000 42,000
------------ ------------ ------------
Net income (loss) $ (31,115) $ (143,000) $ (174,115)
============ ============ ============
Net income (loss) per share
Basic $ (0.02) $ (0.01) $ (0.01)
Diluted $ (0.02) $ (0.01) $ (0.01)
Weighted Average number of shares
Basic 1,970,000 12,000,000 12,000,000
Diluted 1,970,000 12,000,000 12,000,000
INVESTMENT AGENTS, INC. AND CITY NETWORK, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
NOVEMBER 30, 2002
Historical
----------
Investment City Pro Forma
Assets Agents Network Adjustments Pro Forma
------ -------- ----------- ---------
Current Assets
Cash and cash equivalents $ 206,274 $ 206,274
Accounts receivable 49 1,254,752 1,254,801
Other receivables 73,266 73,266
Prepaid expenses 9,000 180,906 189,906
Inventory 58,349 58,349
----------- ----------- -----------
Total Current Assets 9,049 1,773,547 1,782,596
Fixed assets, net 2,448,632 2,448,632
Investment 108,618 108,618
Patents 1,000,000 1,000,000
Other assets 20,227 20,227
----------- ----------- -----------
Total Assets $ 9,049 $ 5,351,024 $ 5,360,073
=========== =========== ===========
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable $ 319 $ 587,991 $ 588,310
Loans payable 194,080 194,080
Accrued expenses 177,378(3) 30,000 230,878
(4) 23,500
Current portion, long term debt 171,429 171,429
Officer advances 33,745 241,809(1) (33,745) 241,809
----------- ----------- -----------
Total Current Liabilities 34,064 1,372,687 1,426,506
Notes payable, net of current portion -- 492,083 492,083
Other liabilities -- 0
----------- ----------- -----------
Total Liabilities 34,064 1,864,770 1,918,589
Stockholders' Equity
Common stock 1,970 3,428,571(2) (1,970) 3,428,571
Additional paid in capital 13,500 15,331(2) (13,500) 15,331
Retained earnings (40,485) 42,352(1) 33,745 (2,418)
(2) 15,470
(3) (30,000)
(4) (23,500)
Total Stockholders' Equity (25,015) 3,486,254 3,441,484
----------- ----------- -----------
Total Liabilities and
Stockholders' Equity $ 9,049 $ 5,351,024 $ 5,360,073
=========== =========== ===========
INVESTMENT AGENTS, INC. AND CITY NETWORK, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED INCOME STATEMENT
FOR THE NINE MONTHS ENDED NOVEMBER 30, 2002
Historical Investment
----------
Investment City Pro Forma Agents
Agents Network Adjustments Pro Forma
------------ ------------ ----------- ------------
Sales revenue $ 0 $ 5,253,787 $ 5,253,787
Construction revenue -- 247,036 247,036
------------ ------------ ------------
-- 5,500,823 5,500,823
------------ ------------ ------------
Cost of goods sold 675 4,832,469 4,833,144
------------ ------------ ------------
675 4,832,469 4,833,144
------------ ------------ ------------
Gross Profit (675) 668,354 667,679
------------ ------------ ------------
General, selling and
administrative expenses 6,725 403,313(3) 30,000 440,038
------------ ------------ ------------
Operating income (loss ) (7,400) 265,041 227,641
------------ ------------ ------------
Nonoperating income (expense )
Interest income -- 847 847
Other revenue -- 26,868 26,868
Interest and other losses, net -- (58,216) (58,216)
------------ ------------ ------------
Total nonoperating income (expenses ) -- (30,501) (30,501)
------------ ------------ ------------
Income (loss ) before provision
for income taxes (7,400) 234,540 197,140
Provision for income taxes -- --(4) 23,500 23,500
------------ ------------ ------------
Net income (loss ) $ (7,400) $ 234,540 $ 173,640
============ ============ ============
Net income (loss ) per share
Basic $ (0.00) $ 0.02 $ 0.01
Diluted $ (0.00) $ 0.02 $ 0.01
Weighted Average number of shares
Basic 1,970,000 12,000,000 12,000,000
Diluted 1,970,000 12,000,000 12,000,000
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
1. Basis for Pro Forma Presentation
The unaudited pro forma combined condensed financial statements of City
Network, Inc. have been prepared on the basis of assumptions relating to the
stock exchange agreement between Investment Agents, Inc. and City Network, Inc.
and management's best estimates.
2. Pro Forma Adjustments
Certain adjustments have been made to the historical financial statements in
order to prepare the pro forma financial information as if the transaction had
occurred at the beginning of the fiscal period presented.
The adjustments are as follows:
(1) To eliminate liability to officer and contribute to additional paid
in capital.
(2) To eliminate the equity of Investment Agents, Inc.
(3) To accrue costs to consummate the transaction.
(4) To record estimated income tax provision.
City Network, Inc.
Balance Sheet
November 30, 2002
ITEM BALANCE
---- -------
ASSETS
(11)Quick Assets
1101000 Cash on Hand $ 597
1102000 Deposits in Bank 205,512
1103000 Petty Cash 165
1141000 Notes Receivable 118,929
1144000 Accounts Receivable 1,083,796
1146000 Construction Receivable 52,027
1148000 Tax Refund Receivable 38,333
1149000 Excess Vat Paid 23,482
1178000 Other Receivable 11,451
-----------
(11) Total of Quick Assets 1,534,293
-----------
(12) Current Assets:
1201000 Merchandise & Inventory 58,349
1251000 Prepaid for Purchases 53,764
1253000 Prepaid Expenses 11,253
1254000 Payment on Behalf of others 2,913
1257000 Prepaid Taxes 82
1270000 Prepaid for Construction 5,923
1281000 Taxes on Sales 69,958
1289000 Other Assets 37,013
-----------
(12) Total Current Assets: 239,255
-----------
(14) Fund and Long-term Investment:
1402000 Employee Benefit 49
1404000 Pension Fund 629
1441000 Long-term Investments 108,618
-----------
(14) Total of Fund and Long-term Investment: 109,296
-----------
(15) Fixed Assets:
1501000 Land 1,818,008
1521000 Buildings 305,429
1522000 Accumulated Depreciation - buildings (8,868)
1541000 Transportation Vehicles 30,600
1542000 Accumulated Depreciation - Transportation Vehicles (25,325)
1551000 Other Equipments 100,094
1552000 Accumulated Depreciation - Other Equipments (18,025)
1561000 Equipments 10,433
1571000 Constructions in Progress 227,777
-----------
(15) Total of Fixed Assets: 2,440,124
-----------
(16) Depletable Assets:
1605000 Undepleted Expenses: (Leasehold Improvements) 8,508
-----------
(16) Total of Depletable Assets: 8,508
-----------
(17) Intangible Assets: 0
-----------
(17) Total of Intangible Assets: 0
-----------
(18) Other Assets:
1821000 Refundable Deposits 183
1825000 Temporary Payment (Prepaid Income Tax) 15,804
1829000 Other Miscellaneous Assets 2,721
1830000 Miscellaneous Purchases 841
1854000 Premiums 1,000,000
-----------
(18) Total of Other Assets: 1,019,549
-----------
The Total of Property Sort 5,351,024
-----------
TOTAL ASSETS: $ 5,351,024
===========
LIABILITIES
(21) Quick Liabilities
2109000 Short-term borrowings $ 171,429
2141000 Notes Payable 194,080
2144000 Accounts Payable 587,991
2147000 Accrued Expenses 84,841
2177000 Construction Payable 3,409
-----------
(21) Total of Quick Liabilities: 1,041,750
-----------
(22) Current Liabilities
2251000 Advance Receipts 79,603
2281000 Taxes on Purchases 5,317
-----------
(22) Total of Current Liabilities: 84,920
-----------
(25) Long-term Liabilities
2504000 Long-term borrowings 171,983
2507000 Loans on Mortgage 320,100
-----------
(25) Long-term Liabilities: 492,083
-----------
(28) Other Liabilities
2824000 Temporary Collection 4,207
2826000 Stockholder Dealings 241,809
-----------
(28) Total of Other Liabilities: 246,016
-----------
TOTAL LIABILITIES: 1,864,769
===========
OWNER'S EQUITY
(31) Capital Stock
3101000 Stock 3,428,571
-----------
(31) Total of Capital Stock: 3,428,571
-----------
(32) Additional Paid-in Capital:
3209000 Other Additional Paid-in Capital 15,331
-----------
(32) Additional Paid-in Capital: 15,331
-----------
(33) Retained Earnings:
3301000 Legal Surplus (0)
3311000 Accumulated Profit or Loss (192,189)
3319000 Net Income or Loss for Current Period 234,541
-----------
(33) Total of Retained Earnings: 42,352
-----------
TOTAL OWNER'S EQUITY 3,486,255
-----------
TOTAL OF LIABILITIES AND OWNER'S EQUITY $ 5,351,025
===========
City Network, Inc.
Income Statement
01/2002 - 11/2002
ITEM BALANCE
---- -------
OPERATING REVENUE
(41) Operating Revenue
4101000 Sales Revenue $ 5,255,530
4102000 Sales Return (1,743)
-----------
(41) Total of Operating Revenue: 5,253,787
-----------
(46) Other Operating Revenue:
4608000 Construction Revenue 247,036
-----------
(46) Total of Other Operating Revenue: 247,036
-----------
Total Operating Revenue: 5,500,823
-----------
Total Operating Costs: 4,832,469
-----------
Gross Profit 668,354
-----------
OPERATING EXPENSES:
(62) General & Administrative Expenses
6201000 Payroll Expenses 181,968
6202000 Rent Expenses 119
6203000 Office Supplies 2,736
6204000 Traveling Expenses 18,585
6205000 Shipping Expenses 3,252
6206000 Postage 9,928
6207000 Repairs and Maintenance 1,385
6208000 Advertisement 4,642
6209000 Utilities 2,624
6210000 Insurance 5,602
6211000 Entertainment 10,508
6212000 Donation 2,857
6213000 Tax 1,832
6219000 Employee Benefits 683
6221000 Commission 72,173
6223000 Professional Service Fees 28,481
6226000 Magazines and Books 248
6228000 Printing Expenses 5,575
6230000 Service Charges 1
6238000 Export Fees 19,798
6239000 Duty 34
6246000 Transportation Expenses 4,748
6247000 Import Fees 2,184
6248000 Miscellaneous Expenses 10,864
6249000 Other Expenses 10,366
6250000 Miscellaneous Purchases 2,120
-----------
(62) Total of Operating Expenses 403,313
-----------
The Total of Operating Revenue 403,313
-----------
Net Income 265,041
===========
NON-OPERATING EXPENSES:
(71) Non-operating Revenue
7101000 Interest Revenue 847
7102000 Foreign Exchange Gain 22,449
7130000 Other Revenue 4,419
-----------
(71) Total of Non-operating Revenue 27,715
-----------
(73) Non-operating Expenses
7301000 Interest Expenses 50,575
7302000 Foreign Exchange Losses 7,603
7323000 Other Losses 6
7329000 Miscellaneous 32
-----------
(73) Total of Non-operating Expenses: 58,216
NON-OPERATING REVENUE AND EXPENSES: (30,501)
-----------
PROFIT AND LOSS BEFORE TAX $ 234,540
===========