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EX-32.1 - CERTIFICATION - Alternative Investment Corpcdvv_10q-ex3201.htm


 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 

 
FORM 10-Q
 

 
x     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended June 30, 2011

OR
 
o      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

  For the transition period from ______ to ______.
 
Commission File Number: 001-34858
 


CHINA DIGITAL VENTURES CORPORATION
 (Exact name of registrant as specified in its charter)
 

 
Nevada
 
98-0568076
(State or other jurisdiction of
incorporation or organization)
 
(IRS Employer Identification No.)
     
13520 Oriental St.
Rockville, MD
 
20853
(Address of principal executive offices)
 
(Zip Code)

(202) 536-5191
 (Registrant’s telephone number, including area code)

 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the issuer was required to file such reports), and (2)has been subject to such filing requirements for the past 90 days.Yes  x  No  o
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes  o  No  x
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company filer.  See definition of “accelerated filer” and “large accelerated filer” in Rule 12b-2 of the Exchange Act:

Large Accelerated Filer  o
Accelerated Filer  o
Non-Accelerated Filer  o
Smaller Reporting Company  x
 
Indicate by check mark whether the registrant is a shell company as defined in Rule 12b-2 of the Exchange Act.Yes x  No  o
 
As of August 5, 2011 the registrant had 15,228,000 shares of its Common Stock, $0.001 par value, outstanding.  
  
 


 
 

 


CHINA DIGITAL VENTURES CORPORATION
FORM 10-Q
JUNE 30, 2011
INDEX

PART I -- FINANCIAL INFORMATION
Page
     
Item 1.
Financial Statements
1
     
 
Balance Sheets as of June 30, 2011 (unaudited) and September 30, 2010
1
     
 
Statements of Operations for the Three Months and Nine Months Ended June 30, 2011 and 2010 and for the Period March 26, 2007 (Inception) to June 30, 2011 (unaudited)
2
     
 
Statement of Stockholders’ Deficit for the Period March 26, 2007 (Inception) to June 30, 2011 (unaudited)
3
     
 
Statements of Cash Flows for the Nine Months Ended June 30, 2011 and 2010 and for the Period March 26, 2007 (Inception) to June 30, 2011 (unaudited)
4
     
 
Notes to Financial Statements (unaudited)
6
     
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
16
     
Item 3
Quantitative and Qualitative Disclosures About Market Risk
19
     
Item 4.
Controls and Procedures
20
     
PART II -- OTHER INFORMATION
 
     
Item 1.
Legal Proceedings
21
     
Item 1.A.
Risk Factors
21
     
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
21
     
Item 3.
Defaults Upon Senior Securities
21
     
Item 4.
(Removed & Reserved)
21
     
Item 5.
Other Information
21
     
Item 6.
Exhibits
22
     
SIGNATURE
22

 

 


 
i

 

PART I – FINANCIAL INFORMATION

Item 1.    Financial Statements
 
CHINA DIGITAL VENTURES CORPORATION
(A Development Stage Company)
Consolidated Balance Sheets

   
June 30,
   
September 30,
 
   
2011
   
2010
 
   
(unaudited)
   
Restated
 
ASSETS
 
             
Current assets:
           
Cash and cash equivalents
  $ -     $ -  
                 
Total assets
  $ -     $ -  
                 
LIABILITIES AND STOCKHOLDERS' DEFICIT
 
                 
Current liabilities:
               
Accounts payable
  $ 14,629     $ -  
Accrued expenses
    500       2,500  
Amount due to shareholder
    40,353       19,103  
Amount due to director
    180       180  
Total liabilities
    55,662       21,783  
                 
Stockholders' deficit:
               
Common stock, $.001 par value, 75,000,000 shares authorized, 15,228,000 shares issued and outstanding
    15,228       15,228  
Additional paid-in capital
    69,332       69,332  
Deficit accumulated during the development stage
    (140,222 )     (106,343 )
Total stockholders' deficit
    (55,662 )     (21,783 )
                 
Total liabilities and stockholders' deficit
  $ -     $ -  


 
 
See accompanying notes to financial statements.


 
1

 

CHINA DIGITAL VENTURES CORPORATION
(A Development Stage Company)
Statements of Operations
(unaudited)

           
For the Period
 
                           
March 26, 2007
 
   
For the Three Months Ended
   
For the Nine Months Ended
   
(Inception) to
 
   
June 30,
   
June 30,
   
June 30,
   
June 30,
   
June 30,
 
   
2011
   
2010
   
2011
   
2010
   
2011
 
                               
Net revenue
  $ -     $ -     $ -     $ 1,127     $ 31,912  
                                         
Cost of revenue
    -       -       -       320       15,731  
                                         
Gross profit
    -       -       -       807       16,181  
                                         
General and administrative expenses
    13,604       1,853       33,879       84,959       299,080  
                                         
Loss from operations
    (13,604 )     (1,853 )     (33,879 )     (84,152 )     (282,899 )
                                         
Other income (expense):
                                       
Gain on disposal of subsidiaries
    -       118,193       -       118,193       118,193  
Exchange gain
    -       1,028       -       1,028       1,028  
Interest income
    -       -       -       141       293  
Other income
    -       -       -       -       903  
Interest expense
    -       (118 )     -       (1,319 )     (2,170 )
Total other income (expense)
    -       119,103       -       118,043       118,247  
                                         
Income (Loss) before income taxes
    (13,604 )     117,250       (33,879 )     33,891       (164,652 )
Provision for income taxes
    -       -       -       -       -  
                                         
Net income (loss)
    (13,604 )     117,250       (33,879 )     33,891       (164,652 )
                                         
Net loss attributable to noncontrolling interest
    -       -       -       14,455       24,430  
                                         
Net income (loss) attibutable to China Digital Ventures Corporation
  $ (13,604 )   $ 117,250     $ (33,879 )   $ 48,346     $ (140,222 )
                                         
Net income (loss) per share - basic and diluted
  $ (0.00 )   $ 0.01     $ (0.00 )   $ 0.00          
                                         
Weighted average number of shares outstanding - Basic and Diluted
    15,228,000       15,228,000       15,228,000       15,228,000          
                                         
Net income (loss) attibutable to China Digital Ventures Corporation
  $ (13,604 )   $ 117,250     $ (33,879 )   $ 48,346     $ (140,222 )
                                         
Foreign currency translation gain (loss)
    -       1,072       -       920       -  
                                         
Comprehensive income (loss)
  $ (13,604 )   $ 118,322     $ (33,879 )   $ 49,266     $ (140,222 )


See accompanying notes to financial statements.

 
2

 

CHINA DIGITAL VENTURES CORPORATION
(A Development Stage Company)
Statement of Stockholders' Deficit
For the period March 26, 2007 (Inception) through June 30, 2011
(unaudited)

                     
Deficit
                   
                     
accumulated
   
Accumulated
             
   
Common stock
   
Additional
   
during the
   
other
         
Total
 
               
paid-in
   
development
   
comprehensive
   
Noncontrolling
   
stockholders'
 
   
Shares
   
Amount
   
capital
   
stage
   
income (loss)
   
interest
   
deficit
 
                                           
Common stock issued to founders for cash at $.001 per share
    10,000,000     $ 10,000     $ -     $ -     $ -     $ -     $ 10,000  
                                                         
Common stock issued for cash at $0.01 per share
    3,000,000       3,000       27,000       -       -       -       30,000  
                                                         
Net loss for the period March 26, 2007 (inception) to September 30, 2007
    -       -       -       (38,799 )     -       -       (38,799 )
                                                         
Balance, September 30, 2007
    13,000,000       13,000       27,000       (38,799 )     -       -       1,201  
                                                         
Common stock issued for cash at $0.02 per share
    208,000       208       3,952       -       -       -       4,160  
                                                         
Common stock issued for services at $0.02 per share
    20,000       20       380       -       -       -       400  
                                                         
Net loss for the year ended September 30, 2008
    -       -       -       (49,952 )     -       -       (49,952 )
                                                         
Balance, September 30, 2008
    13,228,000       13,228       31,332       (88,751 )     -       -       (44,191 )
                                                         
Shares issued for acquisition of subsidiary
    2,000,000       2,000       38,000       -       -       -       40,000  
                                                         
Foreign currency translation adjustment
    -       -       -       -       (920 )     -       (920 )
                                                         
Net loss for the year ended September 30, 2009
    -       -       -       (63,258 )     -       (2,091 )     (65,349 )
                                                         
Balance, September 30, 2009
    15,228,000       15,228       69,332       (152,009 )     (920 )     (2,091 )     (70,460 )
                                                         
Foreign currency translation adjustment
    -       -       -       -       920       -       920  
                                                         
Disposal of subsidiary
    -       -       -       -       -       16,546       16,546  
                                                         
Net income for year ended September 30, 2010
    -       -       -       45,666       -       (14,455 )     31,211  
                                                         
Balance, September 30, 2010
    15,228,000       15,228       69,332       (106,343 )     -       -       (21,783 )
                                                         
Net loss for the nine months ended June 30, 2011 (unaudited)
    -       -       -       (33,879 )     -       -       (33,879 )
                                                         
Balance, June 30, 2011 (unaudited)
    15,228,000     $ 15,228     $ 69,332     $ (140,222 )   $ -     $ -     $ (55,662 )
 
 
See accompanying notes to financial statements.

 
3

 

CHINA DIGITAL VENTURES CORPORATION
(A Development Stage Company)
Statements of Cash Flows
(unaudited)

               
For the Period
 
               
March 26, 2007
 
   
For the Nine Months Ended
   
(Inception) to
 
   
June 30,
   
June 30,
   
June 30,
 
   
2011
   
2010
   
2011
 
Cash flows from operating activities:
                 
Net income (loss)
  $ (33,879 )   $ 48,346     $ (140,222 )
Adjustments to reconcile net income (loss) to net cash used in operations:
 
 
                 
Depreciation
    -       2,115       2,914  
Noncontrolling interest
    -       (14,455 )     (24,430 )
Gain on disposal of subsidiaries
    -       (118,193 )     (118,193 )
Common stock issued for services
    -       -       400  
Changes in operating assets and liabilities:
                       
Accounts receivable
    -       (705 )     (859 )
Other receivable
    -       1,328       1,812  
Loan receivable
    -       14,049       12,822  
Due from related party
    -       -       (19,443 )
Deposit
    -       (5,784 )     (5,871 )
Inventory
    -       (658 )     (1,897 )
Accounts payable
    14,629       50,254       97,370  
Accrued expenses
    -       (39,729 )     2,460  
Net cash used in operating activities
    (19,250 )     (63,432 )     (193,137 )
                         
Cash flows from investing activities:
                       
Acquisition of subsidiary, net of cash
    -       -       75,650  
Disposal of subsidiary, net of cash
    -       39,742       39,742  
Capital expenditures
    -       (2,236 )     (12,511 )
Net cash provided by investing activities
    -       37,506       102,881  
                         
Cash flows from financing activities:
                       
Proceeds from loan payable
    -       3,300       6,793  
Amounts due shareholder
    19,250       19,103       38,353  
Amounts due directors
    -       (29,714 )     4,860  
Proceeds from sale of common stock
    -       -       44,160  
Net cash provided by (used in) financing activities
    19,250       (7,311 )     94,166  
                         
Effect of exchange rate fluctuations on cash
    -       (2,990 )     (3,910 )
                         
Net increase (decrease) in cash
    -       (36,227 )     -  
                         
Cash and cash equivalents at beginning of period
    -       36,227       -  
                         
Cash and cash equivalents at end of period
  $ -     $ -     $ -  


See accompanying notes to financial statements.
 
 
4

 
 

CHINA DIGITAL VENTURES CORPORATION
(A Development Stage Company)
Statements of Cash Flows (Continued)
(unaudited)

               
For the Period
 
               
March 26, 2007
 
   
For the Nine Months Ended
   
(Inception) to
 
   
June 30,
   
June 30,
   
June 30,
 
   
2011
   
2010
   
2011
 
Supplemental disclosure of cash flow information:
                 
                   
Cash paid for interest
  $ -     $ 1,319     $ 2,170  
                         
Cash paid for taxes
  $ -     $ -     $ -  
                         
Supplemental disclosure of non-cash financing activities:
                       
                         
Accrued expenses paid by shareholder
  $ 2,000     $ -     $ 2,000  

 
 
 
See accompanying notes to financial statements.
 


 
5

 
 
CHINA DIGITAL VENTURES CORPORATION
 (A Development Stage Company)
 Notes to Financial Statements
June 30, 2011
(unaudited)

Note 1 - Restatement of Prior Period Consolidated Financial Statements

The Company restated its previously issued consolidated financial statements included in the original Annual Report on Form 10-K for the year ended September 30, 2010 to reflect the effect of an accounting and reporting error resulting from a deficiency in its accounting and financial statement preparation process.  This error and the related adjustments resulted in an understatement of general and administrative expenses of $500 for the three and twelve months ended September 30, 2010 and the understatement of $2,680 of deficits accumulated during the development stage.  The revisions applied to the affected individual line items in the consolidated financial statements are as follows:
 
Consolidated Balance Sheet
                   
   
September 30, 2010
 
   
As previously
         
As
 
   
reported
   
Adjustments
   
restated
 
ASSETS
                 
Current assets:
                 
Cash and cash equivalents
  $ -     $ -     $ -  
                         
Total assets
  $ -     $ -     $ -  
                         
LIABILITIES AND STOCKHOLDERS' DEFICIT
                       
                         
Current liabilities:
                       
Accounts payable
  $ -     $ -     $ -  
Accrued expenses
    -       2,500       2,500  
Amount due to shareholder
    19,103       -       19,103  
Amount due to director
    -       180       180  
Total liabilities
    19,103       2,680       21,783  
                         
Stockholders' deficit:
                       
Common stock
    15,228       -       15,228  
Additional paid-in capital
    69,332       -       69,332  
Deficit accumulated during the development stage
    (103,663 )     (2,680 )     (106,343 )
Total stockholders' deficit
    (19,103 )     (2,680 )     (21,783 )
                         
Total liabilities and stockholders' deficit
  $ -     $ -     $ -  



 
6

 

CHINA DIGITAL VENTURES CORPORATION
 (A Development Stage Company)
 Notes to Financial Statements
June 30, 2011
(unaudited)

Note 1 - Restatement of Prior Period Consolidated Financial Statements (Continued)
 
Consolidated Statement of Operations
                   
   
For the Year Ended September 30, 2010
 
   
As previously
         
As
 
   
reported
   
Adjustments
   
restated
 
                   
Net revenue
  $ 1,127     $ -     $ 1,127  
                         
Cost of revenue
    320       -       320  
                         
Gross profit
    807       -       807  
                         
General and administrative expenses
    87,139       500       87,639  
                         
Loss from operations
    (86,332 )     (500 )     (86,832 )
                         
Other income (expense):
                       
Gain on disposal of subsidiaries
    118,193       -       118,193  
Exchange gain
    1,028       -       1,028  
Interest income
    141       -       141  
Other income
    -       -       -  
Interest expense
    (1,319 )     -       (1,319 )
Total other income (expense)
    118,043       -       118,043  
                         
Net income (loss)
    31,711       (500 )     31,211  
                         
Net loss attributable to noncontrolling interest
    14,455       -       14,455  
                         
Net income (loss) attributable to China Digital Ventures Corporation
  $ 46,166     $ (500 )   $ 45,666  
 
 

 
7

 

CHINA DIGITAL VENTURES CORPORATION
 (A Development Stage Company)
 Notes to Financial Statements
June 30, 2011
(unaudited)

Note 1 - Restatement of Prior Period Consolidated Financial Statements (Continued)

Consolidated Statement of Cash Flows
                 
   
For the Year Ended September 30, 2010
 
   
As previously
         
As
 
   
reported
   
Adjustments
   
restated
 
                   
Cash flows used in operating activities:
                 
Net loss
  $ 46,166     $ (500 )   $ 45,666  
Adjustments to reconcile net loss to net cash used in operations:
                       
Depreciation
    2,115       -       2,115  
Noncontrolling interest
    (14,455 )     -       (14,455 )
Gain on disposal of subsidiaries
    (118,193 )     -       (118,193 )
Changes in operating assets and liabilities:
                       
Accounts receivable
    (705 )     -       (705 )
Other receivable
    1,328       -       1,328  
Loan receivable
    14,049       -       14,049  
Due from related party
    (12,339 )     -       (12,339 )
Deposit
    (5,784 )     -       (5,784 )
Inventory
    (658 )     -       (658 )
Other payables
    50,254       -       50,254  
Loan payable
    3,300       -       3,300  
Accrued expenses
    (37,729 )     500       (37,229 )
Amount due to directors
    1,908       -       1,908  
Net cash used in operating activities
    (70,743 )     -       (70,743 )
                         
Cash flows from investing activities:
                       
Acquisition of subsidiary, net of cash
    -       -       -  
Disposal of subsidiary, net of cash
    39,742       -       39,742  
Capital expenditures
    (2,236 )     -       (2,236 )
Net cash from investing activities
    37,506       -       37,506  
                         
Cash flows from financing activities:
                       
Proceeds from sale of common stock
    -       -       -  
Net cash from financing activities
    -       -       -  
                         
Effect of exchange rate fluctuations on cash
    (2,990 )     -       (2,990 )
                         
Net increase (decrease) in cash
    (36,227 )     -       (36,227 )
                         
Cash and cash equivalents at beginning of period
    36,227       -       36,227  
                         
Cash and cash equivalents at end of period
  $ -     $ -     $ -  
 
 
 
8

 

CHINA DIGITAL VENTURES CORPORATION
 (A Development Stage Company)
 Notes to Financial Statements
June 30, 2011
(unaudited)

Note 2 – Organization and Going Concern

Organization

China Digital Ventures Corporation (the "Company") was incorporated in Nevada on March 26, 2007.  The principal business of the Company was its web based telecom and IPTV businesses, both of which were disposed of during the year ended September 30, 2010. As of the date hereof, the Company has no operations.

On July 23, 2010, the Company experienced a change in control.  Canton Investments Ltd (“CIL”) acquired a majority of the issued and outstanding common stock of the Company in accordance with stock purchase agreements by and between CIL and Wireless One International Limited (“Wireless One”), Bing HE and Ning HE, the Company’s former directors, and other various shareholders.  On the closing date, July 23, 2010, pursuant to the terms of the Stock Purchase Agreement, CIL purchased from Wireless One and Bing HE and Ning HE 11,500,000 shares of the Company’s outstanding common stock for $205,750.  Also on July 23, 2010, CIL purchased 2,440,000 shares of the Company’s outstanding common stock for $36,600 from various shareholders.  As a result of the change in control, CIL owns a total of 13,940,000 shares of the Company’s common stock representing 91.54%.

Going Concern

The accompanying unaudited financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.  The Company has incurred a net loss of $33,879 for the nine months ended June 30, 2011 and has incurred cumulative losses since inception of $140,222.  The Company has a stockholders’ deficit of $55,662 at June 30, 2011.  These conditions raise substantial doubt about the ability of the Company to continue as a going concern.

The ability of the Company to continue as a going concern is dependent upon its abilities to generate revenues, to continue to raise investment capital, and develop and implement its business plan.  No assurance can be given that the Company will be successful in these efforts.

The unaudited financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.  Management believes that actions presently being taken to obtain additional funding and implement its strategic plans provide the opportunity for the Company to continue as a going concern.  No assurance can be given that the Company will be successful in these efforts.

Note 3 – Summary of Significant Accounting Policies
 
Basis of Presentation

The accompanying unaudited financial statements have been prepared in accordance with U.S. Generally Accepted Accounting Principles (U.S. GAAP”) for interim financial statement presentation and in accordance with Form 10-Q.  Accordingly, they do not include all of the information and footnotes required in annual financial statements.  In the opinion of management, the unaudited financial statements contain all adjustments (consisting only of normal recurring accruals) necessary to present fairly the financial position and results of operations and cash flows.  The results of operations presented are not necessarily indicative of the results to be expected for any other interim period or for the entire year.

These unaudited financial statements should be read in conjunction with our 2010 annual consolidated financial statements included in our Form 10-K, filed with the U.S. Securities and Exchange Commission (“SEC”) on February 18, 2011.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, 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 those estimates.

 
9

 

CHINA DIGITAL VENTURES CORPORATION
 (A Development Stage Company)
 Notes to Financial Statements
June 30, 2011
(unaudited)

Note 3 – Summary of Significant Accounting Policies (Continued)

Principles of Consolidation

The unaudited financial statements include the accounts of the Company and its former wholly-owned and majority-owned subsidiaries.  The results of the subsidiaries acquired or disposed of during the period are consolidated from their effective dates of acquisition and through their effective dates of disposition.  All significant inter-company balances and transactions have been eliminated in consolidation.

Reclassifications

Certain items on the 2010 consolidated statement of operations and statement of cash flows have been reclassified to conform to the current period presentation.

Cash and Cash Equivalents
 
The Company considers all highly liquid temporary cash investments with an original maturity of three months or less to be cash equivalents. At June 30, 2011 and September 30, 2010, respectively, the Company had no cash equivalents.

Revenue Recognition

The Company recognized revenue on arrangements in accordance with the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 605, “Revenue Recognition” (“ASC 605”).  Under ASC 605, revenue is recognized only when the price is fixed and determinable, persuasive evidence of an arrangement exists, the service is performed and collectability of the resulting receivable is reasonably assured.  Revenue is recognized when products are received and accepted by the customer and is recorded net of estimated product returns, which is based upon the Company's return policy, sales agreements, management estimates of potential future product returns related to current period revenue, current economic trends, changes in customer composition and historical experience.

Equity Based Compensation

The Company accounts for equity-based compensation transactions with employees under the provisions of ASC Topic 718, “Compensation, Stock Compensation” (“Topic No. 718”).   Topic No. 718 requires the recognition of the fair value of equity-based compensation in net earnings.  The fair value of common stock issued for compensation is measured at the market price on the date of grant.  The fair value of our equity instruments, other than common stock, is estimated using the Black-Scholes option valuation model.  This model requires the input of highly subjective assumptions and elections including expected stock price volatility and the estimated life of each award.  In addition, the calculation of equity-based compensation costs requires that we estimate the number of awards that will be forfeited during the vesting period.  The fair value of equity-based awards granted to employees is amortized over the vesting period of the award and we elected to use the straight-line method for awards granted after the adoption of Topic No. 718.

The Company accounts for equity-based transactions with non-employees under the provisions of ASC Topic No. 505-50, “Equity-Based Payments to Non-Employees” (“Topic No. 505-50”).  Topic No. 505-50 establishes that equity-based payment transactions with non-employees shall be measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable.  When the equity instrument is utilized for measurement, the fair value of (i) common stock issued for payments to non-employees is measured at the market price on the date of grant; (ii) equity instruments, other than common stock, is estimated using the Black-Scholes option valuation model.  In general, we recognize an asset or expense in the same manner as if it is to receive cash for the goods or services instead of paying with or using the equity instrument.


 
10

 

CHINA DIGITAL VENTURES CORPORATION
 (A Development Stage Company)
 Notes to Financial Statements
June 30, 2011
(unaudited)

Note 3 – Summary of Significant Accounting Policies (Continued)

Income Taxes

Income taxes are accounted for under the liability method of accounting for income taxes.  Under the liability method, future tax liabilities and assets are recognized for the estimated future tax consequences attributable to differences between the amounts reported in the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.  Future tax assets and liabilities are measured using enacted or substantially enacted income tax rates expected to apply when the asset is realized or the liability settled.  The effect of a change in income tax rates on future income tax liabilities and assets is recognized in income in the period that the change occurs.  Future income tax assets are recognized to the extent that they are considered more likely than not to be realized.

The FASB has issued ASC 740 “Income Taxes” (formerly, Financial Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” – An Interpretation of FASB Statement No. 109 (FIN 48)).  ASC 740 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with prior literature FASB Statement No. 109, Accounting for Income Taxes.  This standard requires a company to determine whether it is more likely than not that a tax position will be sustained upon examination based upon the technical merits of the position. If the more-likely-than-not threshold is met, a company must measure the tax position to determine the amount to recognize in the financial statements.

As a result of the implementation of this standard, the Company performed a review of its material tax positions in accordance with recognition and measurement standards established by FASB ASC 740.  As a conclusion, the tax position of the Company has not met the more-likely-than-not threshold as of June 30, 2011.

Basic and Diluted Earnings / (Loss) Per Share

The Company computes income (loss) per share in accordance with ASC 260, "Earnings per Share", which requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the statement of operations.  Basic EPS is computed by dividing income (loss) available to common shareholders by the weighted average number of shares outstanding during the period.  Diluted EPS gives effect to all dilutive potential shares of common stock outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method.  In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants.  Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive.  Dilutive loss per share has not been presented because as of June 30, 2011 and 2010, respectively, there were no common share equivalents outstanding.

Foreign Currency Translation

The accounts of the Company's Hong Kong and China subsidiaries were maintained in Hong Kong dollars (HK) and Chinese Renminbi, respectively. Such financial statements are translated into U.S. Dollars (USD) in accordance with ASC 830 "Foreign Currency Translation" which codified Statement of Financial Accounts Standards ("SFAS") No. 52, "Foreign Currency Translation," with the respective currency as the functional currency. According to ASC 830, all assets and liabilities are translated at the exchange rate on the balance sheet date, stockholder's equity are translated at the historical rates, and statements of operations items are translated at the weighted average exchange rate for the year. The resulting translation adjustments are reported under accumulated other comprehensive income (loss) in accordance with Accounting Standard Codification ASC 220 that codified SFAS No. 130, "Reporting Comprehensive Income”.


 
11

 

CHINA DIGITAL VENTURES CORPORATION
 (A Development Stage Company)
 Notes to Financial Statements
June 30, 2011
(unaudited)

Note 3 – Summary of Significant Accounting Policies (Continued)

Development Stage Enterprise

The Company is a development stage enterprise, as defined in ASC Topic 915 “Development Stage Entities”.  The Company's planned principal operations have not fully commenced.

Accounting Standards Codification

The Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) became effective on September 15, 2009.  At that date, the ASC became FASB’s officially recognized source of authoritative generally accepted accounting principles (“GAAP”) applicable to all public and non-public non-governmental entities, superseding existing FASB, American Institute of Certified Public Accountants (“AICPA”), Emerging Issues Task Force (“EITF”) and related literature.  All other accounting literature is considered non-authoritative.  The switch to the ASC affects the way companies refer to U.S. GAAP in financial statements and accounting policies.  Citing particular content in the ASC involves specifying the unique numeric path to the content through the Topic, Subtopic, Section and Paragraph structure.

Recent Accounting Pronouncements

Management does not believe any recently issued but not yet effective accounting pronouncements, if adopted, would have a material effect on the Company’s present or future financial statements.
 
Subsequent Events

The Company has evaluated subsequent events through the date the financial statements were issued and filed with the Securities and Exchange Commission. The Company has determined that there are no other such events that warrant disclosure or recognition in the consolidated financial statements.

Note 4 – Related Party Transactions

As of June 30, 2011 and September 30, 2010, the amount due from the Company’s director was $180. The amount due from the director is unsecured, non-interest bearing and payable on demand.

In connection with the change in control which occurred on July 23, 2010, Canton Investments Ltd (“Canton”), the Company’s principal shareholder, assumed an outstanding loan from the former shareholders of the Company of $19,103.  During the nine months ended June 30, 2011, Canton paid an additional $21,250 of expenses in connection with the Company’s operations, resulting in an amount due to Canton of $40,353 at June 30, 2011.   The loan is unsecured, non-interest bearing and there is no repayment date.


 
12

 

CHINA DIGITAL VENTURES CORPORATION
 (A Development Stage Company)
 Notes to Financial Statements
June 30, 2011
(unaudited)
 
Note 5 – Stockholders’ Deficit

During the period from March 26, 2007 (date of inception) to September 30, 2007, the Company issued 10,000,000 shares of its common stock to founders of the Company for $10,000 cash or $0.001 per share.

During the period from March 26, 2007 (date of inception) to September 30, 2007, the Company issued 3,000,000 shares of its common stock for $30,000 cash or $0.01 per share.

During the year ended September 30, 2008, the Company issued 208,000 restricted shares of its common stock for $4,160 cash or $0.02 per share.

During the year ended September 30, 2008, the Company issued 20,000 restricted shares of its common stock for services rendered aggregating $400 as stock based compensation.

On July 6, 2009, the Company issued 2,000,000 shares of its Common Stock to the then current major shareholder of the Company for the acquisition of 19,200,000 shares in China Integrated Media Corporation Limited.

Note 6 – Income Taxes

No provision was made for income taxes for the period from March 26, 2007 (Inception) to June 30, 2011 as the Company had cumulative operating losses.  For the nine months ended June 30, 2011 and 2010, the Company realized net income (loss) for tax purposes of $(33,879) and $33,891, respectively.  Total net operating loss carried forward at June 30, 2011 is approximately $37,000.  If not utilized, they will start to expire in 2030.

The income tax expense (benefit) differs from the amount computed by applying the United States Statutory corporate income tax rate as follows:

   
For the Nine Months Ended
 
   
June 30,
 
   
2011
   
2010
 
             
United States statutory corporate income tax rate
    34.0%       34.0%  
Change in valuation allowance on deferred tax assets
    -34.0%       -34.0%  
                 
Provision for income tax
    -%       -%  
 
 
13

 

CHINA DIGITAL VENTURES CORPORATION
 (A Development Stage Company)
 Notes to Financial Statements
June 30, 2011
(unaudited)
 
Note 6 – Income Taxes (Continued)

Deferred income taxes reflect the tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for tax purposes. The components of the net deferred income tax assets are approximately as follows:

   
June 30,
   
September 30,
 
   
2011
   
2010
 
Deferred income tax assets:
           
             
Net operating loss carry forwards
  $ 12,430     $ 910  
Valuation allowance
    (12,430 )     (910 )
                 
Net deferred income tax assets
  $ -     $ -  

The Company has established a full valuation allowance on our deferred tax asset because of a lack of sufficient positive evidence to support its realization.  The valuation allowance increased by $11,520 for the nine months ended June 30, 2011 and decreased by $14,985 for the year ended September 30, 2010.

Note 7 – Disposal of Subsidiaries

On April 30, 2010, the Company disposed of its subsidiary China Integrated Media Corporation Limited, an Australian public company, for $50,000. The Company realized a gain of $92,975 from the sale of this investment.

On June 20, 2010, the Company disposed of its subsidiary Lead Concept Limited, a Hong Kong corporation, for HK$1.00 and the Company realized a gain of US$25,218.  After the disposals and as of the date of this report, the Company had no operations.


 
14

 

CHINA DIGITAL VENTURES CORPORATION
 (A Development Stage Company)
 Notes to Financial Statements
June 30, 2011
(unaudited)
 
The following table summarized the assets and liabilities disposed of and the resulting gains from their disposal:

   
Disposal of China
   
Disposal of
       
   
Integrated Media
   
Lead
   
Total for
 
   
Corporation Ltd
   
Concept Ltd
   
Year Ended
 
   
at April 30,
2010
   
at June 20,
2010
   
September 30,
2010
 
Net assets disposed of:
                 
Cash
  $ 10,086     $ 172     $ 10,258  
Accounts and other receivables
    1,556       859       2,415  
Due from related parties
    19,257       7,770       27,027  
Deposits
    130,585       -       130,585  
Inventory
    1,964       279       2,243  
Property and equipment
    12,081       -       12,081  
Goodwill
    13,902       -       13,902  
Other payables and accrued expenses
    (195,687 )     (34,652 )     (230,339 )
Loan payable
    (40,114 )     -       (40,114 )
Due to related parties
    (16,033 )     (674 )     (16,707 )
Noncontrolling interest
    16,546       -       16,546  
Foreign currency translation adjustment
    2,882       1,028       3,910  
                         
Net liabilities disposed
    (42,975 )     (25,218 )     (68,193 )
Consideration - cash
    50,000       -       50,000  
                         
Gain on disposal of subsidiaries
  $ 92,975     $ 25,218     $ 118,193  
                         
                         
Supplemental discolsure of cash flow information:
                       
Net cash from disposal of subsidiaries:
                       
Cash outflow of subsidiary disposed
  $ (10,086 )   $ (172 )   $ (10,258 )
Condideration - cash
    50,000       -       50,000  
                         
Total, net
  $ 39,914     $ (172 )   $ 39,742  


 
15

 


Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations.
 
SPECIAL NOTE CONCERNING FORWARD-LOOKING STATEMENTS
 
We believe that it is important to communicate our future expectations to our security holders and to the public.  This report, therefore, contains statements about future events and expectations which are “forward-looking statements” within the meaning of Sections 27A of the Securities Act of 1933 and 21E of the Securities Exchange Act of 1934, including the statements about our plans, objectives, expectations and prospects under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”  You can expect to identify these statements by forward-looking words such as “may,” “might,” “could,” “would,” ”will,” “anticipate,” “believe,” “plan,” “estimate,” “project,” “expect,” “intend,” “seek” and other similar expressions.  Any statement contained in this report that is not a statement of historical fact may be deemed to be a forward-looking statement.  Although we believe that the plans, objectives, expectations and prospects reflected in or suggested by our forward-looking statements are reasonable, those statements involve risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements, and we can give no assurance that our plans, objectives, expectations and prospects will be achieved.
 
Important factors that might cause our actual results to differ materially from the results contemplated by the forward-looking statements are contained in the “Risk Factors” section of and elsewhere in our Annual Report on Form 10-K for the fiscal year ended September 30, 2010 and in our subsequent filings with the Securities and Exchange Commission.  The following discussion of our results of operations should be read together with our financial statements and related notes included elsewhere in this report.

Company Overview

The Company was incorporated in Nevada on March 26, 2007 and was in the web based telecom services business in China. The Company's mission was to acquire, own and manage a portfolio of "technology", "media" and "telecommunication" assets in China. During the periods under review all revenue was derived from the telecom business sector.

In July 2009, the Company acquired a 76.8% interest in China Integrated Media Corporation Limited ("CIMC"), a public company in Australia.
 
In February 2010, the Company decided to divest from its investment in CIMC due to its inability to raise the capital necessary to pursue this investment on a timely manner and concerns on its internal liquidity. On April 30, 2010 the Company disposed of CIMC.
 
On June 20, 2010, the Company disposed of its subsidiary company, Lead Concept Limited, which operated its web based VOIP business as the Company was no longer competitive in this market segment. After the disposal, the Company had no operations.  The Company is currently a development stage enterprise.


 
16

 


On July 23, 2010, the Company experienced a change in control.  Canton Investments Ltd (“CIL”) acquired a majority of the issued and outstanding common stock of the Company in accordance with stock purchase agreements by and between CIL and Wireless One International Limited (“Wireless One”), Bing HE and Ning HE, the Company’s former directors, and other various shareholders.  On the closing date, July 23, 2010, pursuant to the terms of the Stock Purchase Agreement, CIL purchased from Wireless One and Bing HE and Ning HE 11,500,000 shares of Company’s outstanding common stock for $205,750.  Also on July 23, 2010, CIL purchased 2,440,000 shares of the Company’s outstanding common stock for $36,600 from various shareholders.  As a result of the change in control, CIL owns a total of 13,940,000 shares of the Company’s common stock representing 91.54%.

Management is currently assessing and evaluating new strategic opportunities as it remains in its development stage.

Results of Operations

For the Three Months and Nine Months Ended June 30, 2011 and 2010 and For the Period March 26, 2007 (Inception) to June 30, 2011

Revenues

The Company had no revenue for the three months ended June 30, 2011and 2010.

The Company had no revenue for the nine months ended June 30, 2011 compared to $1,127 for the nine months ended June 30, 2010. The Company incurred a cost of revenue of $0 and $320, achieving a gross profit of $0 and $807 for the nine months ended June 30, 2011 and 2010, respectively. All revenue was derived from the telecom business and reflects the disposal of the Company’s operating subsidiaries during the year ended September 30, 2010.

For the period from March 26, 2007 (date of inception) to June 30, 2011, the Company realized revenue of $31,912, incurred a cost of revenue of $15,731 and achieved a gross profit of $16,181

Operating Expenses

For the three months ended June 30, 2011 our total operating expenses were $13,604 compared to $1,853 for the three months ended June 30, 2010 resulting in an increase of $11,751.  The increase is attributable to the increased costs in accounting and consulting fees.

For the nine months ended June 30, 2011 our total operating expenses were $33,879 compared to $84,959 for the nine months ended June 30, 2010 resulting in a decrease of $51,080.  The decrease is attributable to the disposal of our operating subsidiaries during the year ended September 30, 2010.

For the period from March 26, 2007 (date of inception) to June 30, 2011, the accumulated gross profit was $16,181, the total operating expenses were $299,080 which was all selling, general and administrative expenses, had $118,193 in gain on disposal of subsidiaries, $1,028 in exchange gain, $2,170 in interest expense, $1,196 in interest income and other income and loss attributable to minority interest of $24,430, resulting in an accumulated net loss to our shareholders of $140,222.


 
17

 


Liquidity and Capital Resources

Overview

As of June 30, 2011, the Company had no cash and a deficit in working capital of $55,662.

We do not have sufficient resources to effectuate our business. As of June 30, 2011, we had no cash. We expect to incur a minimum of $50,000 in expenses during the next twelve months of operations. We estimate that this will be comprised of the following expenses: $25,000 for business planning and development, and $25,000 will be needed for general overhead expenses such as legal and accounting fees, office overhead and general expenses.

Liquidity and Capital Resources during the Nine Months Ended June 30, 2011 compared to the Nine Months ended June 30, 2010

We used cash for operating activities of $19,250 and $63,432 for the nine months ended June 30, 2011, and 2010, respectively.  The principal elements of cash flow used in operations for the nine months ended June 30, 2011 included a net loss of $33,879, offset by an increase in accounts payable of $14,629.

Cash used in investing activities during the nine months ended June 30, 2011 was $0 compared to cash provided by investing activities of $37,506 during the same period in 2010.

Cash generated in our financing activities was $19,250 for the nine months ended June 30, 2011, compared to cash used of $7,311 during the comparable period in 2010. This increase was primarily attributed to amounts due to our principal shareholder for expenses paid on our behalf by the shareholder.

We will have to raise funds to pay for our expenses. We may have to borrow money from shareholders or issue debt or equity or enter into a strategic arrangement with a third party. There can be no assurance that additional capital will be available to us. We currently have no arrangements or understandings with any person to obtain funds through bank loans, lines of credit or any other sources. Since we have no such arrangements or plans currently in effect, our inability to raise funds for our operations will have a severe negative impact on our ability to remain a viable company.

Going Concern

Due to the uncertainty of our ability to meet our current operating and capital expenses, our independent auditors included an explanatory paragraph in their report on the consolidated financial statements for the year ended September 30, 2010 regarding concerns about our ability to continue as a going concern. Our consolidated financial statements contain additional note disclosures describing the circumstances that lead to this disclosure by our independent auditors.

Our unaudited financial statements have been prepared on a going concern basis, which assumes the realization of assets and settlement of liabilities in the normal course of business. Our ability to continue as a going concern is dependent upon our ability to generate profitable operations in the future and/or to obtain the necessary financing to meet our obligations and repay our liabilities arising from normal business operations when they become due. The outcome of these matters cannot be predicted with any certainty at this time and raise substantial doubt that we will be able to continue as a going concern. Our unaudited financial statements do not include any adjustments to the amount and classification of assets and liabilities that may be necessary should we be unable to continue as a going concern.


 
18

 


There is no assurance that our operations will be profitable. Our continued existence and plans for future growth depend on our ability to obtain the additional capital necessary to operate either through the generation of revenue or the issuance of additional debt or equity.

Off-Balance Sheet Arrangements

We currently have no off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Critical Accounting Policies
   
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make a number of 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. Such estimates and assumptions affect the reported amounts of revenues and expenses during the reporting period. We base our estimates on historical experiences and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions and conditions. We continue to monitor significant estimates made during the preparation of our financial statements. On an ongoing basis, we evaluate estimates and assumptions based upon historical experience and various other factors and circumstances. We believe our estimates and assumptions are reasonable in the circumstances; however, actual results may differ from these estimates under different future conditions.

Our significant accounting policies are summarized in Note 3 of our unaudited financial statements. While all of these significant accounting policies impact the Company’s financial condition and results of operations, we view certain of these policies as critical. Policies determined to be critical are those policies that have the most significant impact on the Company and require management to use a greater degree of judgment and estimates. Actual results may differ from those estimates. Our management believes that given current facts and circumstances, it
is unlikely that applying any other reasonable judgments or estimate methodologies would cause effect on our financial position or liquidity,
results of operations or cash flows for the periods presented. We suggest that our significant accounting policies be read in conjunction with this Management's Discussion and Analysis of Financial Condition.

Additional Information

We file reports and other materials with the Securities and Exchange Commission. These documents may be inspected and copied at the Commission's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C., 20549. You can obtain information on the operation of the Public Reference Room by calling the Commission at 1-800-SEC-0330. You can also get copies of documents that the Company files with the Commission through the Commission's Internet site at www.sec.gov.
  
Item 3.  Quantitative and Qualitative Disclosures About Market Risk.

The disclosure required under this item is not required to be reported by smaller reporting companies; as such term is defined by Item 503(e) of Regulation S-K.
 

 
19

 


Item 4.  Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

The Securities and Exchange Commission defines the term “disclosure controls and procedures” to mean a company's controls and other procedures of an issuer that are designed to ensure that information required to be disclosed in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Securities Exchange Act of 1934 is accumulated and communicated to the issuer’s management, including its chief executive and chief financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. The Company maintains such a system of controls and procedures in an effort to ensure that all information which it is required to disclose in the reports it files under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified under the SEC's rules and forms and that information required to be disclosed is accumulated and communicated to the chief executive and chief financial officers to allow timely decisions regarding disclosure.

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our chief executive officer and interim chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on this evaluation, the Chief Executive Officer and Interim Chief Financial Officer has concluded that the Company’s disclosure controls and procedures are not effective as of such date.  The Chief Executive Officer and Interim Chief Financial Officer has determined that the Company continues to have the following deficiencies which represent a material weakness:

 
·
Lack of functioning independent directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures;

 
·
Lack of segregation of duties over financial transaction processing and reporting;

 
·
Ineffective controls and insufficient written policies and procedures over period end financial disclosure and reporting processes.

To the extent reasonably possible, given our limited resources, our goal is to separate the responsibilities of the Principal Executive Officer and Principal Financial Officer, intending to rely on two or more individuals. We will also seek to expand our current board of directors to include additional independent individuals willing to perform directorial functions. Since the recited remedial actions will require that we hire or engage additional personnel, this material weakness may not be overcome in the near term due to our limited financial resources. Until such remedial actions can be realized, we will continue to rely on the advice of outside professionals and consultants.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the last fiscal quarter, which has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 
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PART II - OTHER INFORMATION
 
Item 1.  Legal Proceedings

There are no pending legal proceedings to which the Company is a party or in 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 security holder is a party adverse to the Company or has a material interest adverse to the Company. The Company's property is not the subject of any pending legal proceedings.
 
Item 1A.  Risk Factors
 
The disclosure required under this item is not required to be reported by smaller reporting companies; as such term is defined by Item 503(e) of Regulation S-K.  Please refer to our Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 18, 2011.

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds.

None

Item 3.  Defaults Upon Senior Securities.

None.
 
Item 4.  (Removed and Reserved).
 
Item 5.  Other Information.

None.
 

 
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Item 6.  Exhibits

Exhibit 3.1
Articles of Incorporation (1)
   
Exhibit 3.2
Bylaws (1)
   
Exhibit 10.1
A letter agreement for the Loan Advance dated September 30, 2009 from Mr. Bing HE (2)
   
Exhibit 31.1
Rule 13a-14(a) Certification by the Principal Executive Officer and Principal Financial Officer (3)
   
Exhibit 32.1
Certification by the Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (3)
   
101.INS
XBRL Instance Document
101.SCH
XBRL Schema Document
101.CAL
XBRL Calculation Linkbase Document
101.DEF
XBRL Definition Linkbase Document
101.LAB
XBRL Label Linkbase Document
101.PRE
XBRL Presentation Linkbase Document
 

(1)
Incorporated by reference from Registrant’s Form SB-2 filed with the Securities and Exchange Commission on October 16, 2007.
(2)
Incorporated by reference from Registrant’s Amendment No. 2 to Form 10-K/A filed with the Securities and Exchange Commission on November 20, 2009.
(3)
Filed herewith.

SIGNATURES
 
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934 the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 

Date:  August 15, 2011
 
By:  /s/ Robert M. Price
   
Robert M. Price
   
Director, Chief Executive Officer, Interim Chief Financial Officer
(Principal Executive and Financial Officer)
 
 

 
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