CHWE Chinawe Com Inc (CE)

Item 1.    Financial Statements.

CHINAWE.COM INC.
CONSOLIDATED CONDENSED BALANCE SHEET
(UNAUDITED)

			Note			As of September 30, 2007
						US$
ASSETS
Current assets:
Cash and cash equivalents											225,289
Accounts receivable, net of allowance for doubtful accounts of US$2,215											2,363
Prepayments, deposits and other debtors											50,073
Total current assets											277,725
Property, plant and equipment, net					4						79,371
TOTAL ASSETS											357,096
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Accrued expenses and other current liabilities											401,346
Current portion of long-term debt					5						20,090
Due to related parties					6						546,665
Income tax payable					7						421,146
Surcharge on taxes					8						76,067
Total current liabilities											1,465,314
Long term liabilities:
Non-current portion of long-term debt					5						35,554
Contingencies and commitments					8
Stockholders’ deficit:
Preferred stock, par value US$0.001 per share; authorized 20,000,000 shares; none issued
Common stock, par value US$0.001 per share; authorized 100,000,000 shares; Issued and outstanding 43,800,000 shares											43,800
Capital in excess of par											85,948
Accumulated losses											(1,280,150	)
Accumulated other comprehensive loss											6,630
Total stockholders’ deficit											(1,143,772	)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT											357,096

See notes to the consolidated condensed financial statements.

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CHINAWE.COM INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)

						Three months ended September 30,			Nine months ended September 30,
			N OTE			2007			2006			2007			2006
						US$			US$			US$			US$
OPERATING REVENUES
On-line services income											68						—						940						55
Asset management and related services											193,240						372,821						593,987						1,134,249
											193,308						372,821						594,927						1,134,304
Depreciation											(15,280	)					(12,548	)					(45,224	)					(36,619	)
Administrative and general expenses											(229,151	)					(369,164	)					(758,413	)					(899,875	)
INCOME/(LOSS) FROM OPERATIONS					(51,123	)					(8,891	)					(208,710	)					197,810
NON-OPERATING INCOME (EXPENSE)
Interest											(8,921	)					(8,326	)					(26,824	)					(25,117	)
Surcharge on taxes											(5,876	)					(14,191	)					(17,169	)					(41,465	)
Other income											298						326						914						1,179
INCOME/(LOSS) BEFORE INCOME TAXES											(65,622	)					(31,082	)					(251,789	)					132,407
Income tax expense					7						—						(22,375	)					—						(135,953	)
NET LOSS											(65,622	)					(53,457	)					(251,789	)					(3,546	)
OTHER COMPREHENSIVE (LOSS)/INCOME
Foreign currency translation											(6,560	)					1,988						8,950						4,808
COMPREHENSIVE (LOSS)/INCOME											(72,182	)					(51,469	)					(242,839	)					1,262
Basic and diluted net (loss)/income per share of common stock											(0.002	)					(0.001	)					(0.006	)					(0.000	)
Weighted average number of shares of common stock outstanding											43,800,000						43,800,000						43,800,000						43,800,000

See notes to the consolidated condensed financial statements.

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CHINAWE.COM INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)

			Nine months ended September 30,
			2007			2006
			US$			US$
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss					(251,789	)					(3,546	)
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation					45,224						36,619
Changes in operating assets and liabilities:
Accounts receivable, net					160,331						30,505
Prepayments, deposits and other debtors					378,561						31,484
Customer deposits received					(219,988	)					39,104
Accrued expenses and other current liabilities					31,248						(8,132	)
Surcharge on taxes					17,169						41,465
Income tax payable					(92,944	)					135,953
NET CASH PROVIDED BY OPERATING ACTIVITIES					67,812						303,452
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment					(666	)					(5,724	)
NET CASH USED IN INVESTING ACTIVITIES					(666	)					(5,724	)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of long-term debt					(17,646	)					(9,222	)
Advance from related parties					66,398						207,471
Repayment to related parties					(22,532	)					(456,211	)
Net increase in loan from a director					3,661						(9,194	)
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES					29,881						(267,156	)
NET INCREASE IN CASH AND CASH EQUIVALENTS					97,027						30,572
Cash and cash equivalents, beginning of period					116,102						237,310
Effect of exchange rate changes					12,160						7,709
CASH AND CASH EQUIVALENTS, END OF PERIOD					225,289						275,591
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest					23,034						25,117
Capital value at inception of new capital lease arrangement					33,882						—

See notes to the consolidated condensed financial statements.

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CHINAWE.COM INC.
NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006
(UNAUDITED)

1.    The interim financial statements

The accompanying financial statements have been prepared by Chinawe.com Inc. (‘‘Chinawe’’) and its subsidiaries (collectively referred to as the ‘‘Company’’) and, in the opinion of management, reflect all material adjustments which are necessary for a fair statement of results for the interim periods presented, including normal recurring adjustments. Certain information and footnote disclosures made in the Company’s Annual Report on Form 10-KSB for the year ended December 31, 2006 (the ‘‘10-KSB’’) have been condensed or omitted for the interim statements. It is the Company’s opinion that, when the interim statements are read in conjunction with the 10-KSB, the disclosures are adequate to make the information presented not misleading. The results of operations for the nine months ended September 30, 2007 are not necessarily indicative of the operating results for the full year.

2.    Organization

The consolidated financial statements include the accounts of Chinawe and the following subsidiaries:

Officeway Technology Limited; incorporated in the British Virgin Islands in December 1999, formed for the purpose of acquiring (in March 2000) its wholly-owned subsidiary, Chinawe Asset Management Limited (‘‘CAM (HK)’’).

CAM (HK); a company incorporated in Hong Kong in June 1997, which provides subscriber services for the production of website images and a business-to-business e-marketplace for small-to-medium size businesses.

Chinawe Asset Management (PRC) Limited (‘‘CAM (PRC)’’) was established in the PRC in April 2005 to service the non-performance loans (‘‘NPLs’’) under services agreements with Huizhou One Limited, a subsidiary of Citigroup Financial Products Inc. (‘‘CFP’’).

3.    Summary of significant accounting policies

(a)    Basis of accounting

The financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (‘‘US’’).

(b)    Basis of presentation

The accompanying financial statements present the financial position of the Company as of September 30, 2007, and its results of operations and cash flows for the nine months ended September 30, 2007 and 2006. All inter-company accounts and transactions have been eliminated in consolidation.

(c)    Translation of foreign currencies

The Company’s functional currency is Renminbi (‘‘RMB’’), which is the currency of the primary economic environment in which the Company operates. Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in the statement of operations. For reporting purposes, the amounts shown in the financial statements are presented in US dollars (‘‘reporting currency’’).

For translation of financial statements into the reporting currency, assets and liabilities for each balance sheet presented are translated at the rates of exchange existing at the year end. Income and

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CHINAWE.COM INC.
NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006
(UNAUDITED)

expenses for each income statement presented are translated at the average rates during the year. Resulting exchange differences are recognized in accumulated other comprehensive income within stockholders’ equity.

(d)    Going concern consideration

The Company’s financial statements for the nine months ended September 30, 2007 have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As of September 30, 2007, the Company had a negative working capital and stockholders’ deficit of US$1,187,589 and US$1,143,772, respectively, which raised substantial doubt about its ability to continue as a going concern.

The Company has experienced difficulty in meeting its liquidity needs. However, with the strong economy in China, management is searching for other opportunities to further develop the existing business. Considering the going concern basis, management has also been examining the possibility of entering into different fields of business. Furthermore, management of the Company plans to continue to implement cost-cutting measures to generate sufficient funding for further investment, in order to create various opportunities to attempt to attain profitability. Based on the foregoing, management of the Company is hopeful that the implementation of its cost-cutting plan, the current strategic direction of the Company, the constriction on existing business and the servicing arrangements with a subsidiary of CFP will generate sufficient cash flows for operations in order to gradually improve its financial condition, and eventually erase doubts as to the Company’s operating as a going concern.

4.    Property, plant and equipment, net

Property, plant and equipment are summarized as follows:

			As of September 30, 2007
			US$
Office equipment					10,379
Computer equipment					11,618
Leasehold improvement					57,445
Motor vehicle					133,026
Total cost					212,468
Accumulated depreciation					(135,760	)
Currency translation adjustment					2,663
Net					79,371

5.    Long term debt

Long term debt consists of obligations under capital leases for purchases of vehicles with US$55,644 outstanding as of September 30, 2007. The debt is collateralized by two motor vehicles with

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CHINAWE.COM INC.
NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006
(UNAUDITED)

an aggregate net book value of US$37,127, bearing interest at 3-5% per annum and is repayable by monthly installments of US$2,000 with the final installments due in February 2010 and January 2011, respectively. Maturity of the debt is as follows:

			As of
			September 30,  2007
			US$
Within 1 year					24,011
Over 1 year but not exceeding 2 years					24,011
Over 2 years but not exceeding 3 years					15,376
Over 3 years but not exceeding 4 years					3,069
					66,467
Less: Amount representing interest					(10,823	)
Present value of net minimum lease payments					55,644

6.    Related party transactions

The balances with related parties are as follows:

Note

As of September 30, 2007

US$

At cost:

Loan from a director, including interest

(a

)

141,707

Advances from stockholders

(b

)

404,958

546,665

7.    Income taxes

It is management’s intention to reinvest all the income attributable to the Company earned by its operations outside the US. Accordingly, no US corporate income taxes are provided for in these financial statements.

The Company is subject to income taxes on an entity basis on income arising in or derived from the tax jurisdiction in which each entity is domiciled.

Under the current laws of the British Virgin Islands (the ‘‘BVI’’), dividends and capital gains arising from the Company’s investments in the BVI are not subject to income taxes and no withholding tax is imposed on payments of dividends to the Company.

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CHINAWE.COM INC.
NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006
(UNAUDITED)

Companies that carry on business and derive income in Hong Kong are subject to Hong Kong income tax at 17.5%. Companies that carry on business and derive income in the PRC are subject to a national income tax at 30% and a local income tax at 3%.

No income taxes have been provided for the subsidiary in Hong Kong as it has incurred losses since commencement of its operations.

The Company’s deferred taxation is as follows:

			As of December 31, 2006
			US$
Hong Kong operating loss carry forward					165,833
Deferred tax asset valuation allowance					(165,833	)
Net deferred tax asset					0

In July 2006, the Financial Accounting Standards Board (‘‘FASB’’) issued Interpretation No. 48, ‘‘Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109’’ (‘‘FIN 48’’), which clarifies the accounting and disclosure for uncertainty in tax positions, as defined, and prescribes the measurement process and a minimum recognition threshold for a tax position, taken or expected to be taken in a tax return, that is required to be met before being recognized in the financial statements. Under FIN 48, the Company must recognize the tax benefit from an uncertain position only if it is more likely than not the tax position will be sustained on examination by the taxing authority, based on the technical merits of the position. The tax benefits recognized in the financial statements attributable to such position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon the ultimate resolution of the position.

As of January 1, 2007, the Company is subject to the provisions of FIN 48, and has analyzed its filing positions in all of the federal, state and foreign jurisdictions where it is required to file income tax returns. As of September 30, 2007, the Company has identified the following jurisdictions as ‘‘major’’ tax jurisdictions, as defined, in which it is required to file income tax returns: United States; Hong Kong and China. Based on the evaluations noted above, the Company has concluded that there are no significant uncertain tax positions requiring recognition in its consolidated financial statements. Based on a review of tax positions for all open years, no reserves for uncertain income tax positions have been recorded pursuant to FIN 48 during the nine months ended September 30, 2007, and the Company does not anticipate that it is reasonably possible that any material increase or decrease in its unrecognized tax benefits will occur within twelve months.

Upon adoption of FIN 48 on January 1, 2007, and as of September 30, 2007, the Company had no unrecognized tax benefits or accruals for a potential payment or surcharge. The Company’s policy is to record a surcharge in this connection as a component of the provision for income tax expense. For the nine months ended September 30, 2007, no surcharge was recorded. Further details concerning contingencies in respect of potential penalties is set out in Note 8 to these financial statements.

8.    Contingencies

One of the subsidiaries of Chinawe in the People’s Republic of China (‘‘PRC’’) is subject to the PRC enterprise income tax and business tax. There is no surcharge recorded from income tax for the nine months ended September 30, 2007. The Company was required to pay the business tax for continuity of business. However, up to September, 2007, the Company only submitted tax returns and made payments for a portion of the business tax liabilities, which is not in compliance with the tax laws and regulations in the PRC. For this reason, the Company has made full provision for the

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CHINAWE.COM INC.
NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006
(UNAUDITED)

business tax liabilities in accordance with the relevant tax laws and regulations, together with a surcharge that may be levied on the Company at a daily rate of 0.05% of the underpaid taxes.

Despite the fact that the Company has fully accrued the taxes and related default interest in the financial statements, the Company may be subject to penalties ranging from 50% to 500% of the underpaid tax amounts. The exact amount of the penalty cannot be estimated with any reasonable degree of certainty.

The Company is currently suspended in the State of California due to failure to file tax reports with the Franchise Tax Board. The Company is in the process of preparing the required reports and expects to be back in good standing shortly. The Company does not believe that the amount of taxes and penalties owed will be material.

9.    Stock Plan

On July 25, 2001 the Board of Directors approved the Chinawe.com Inc. 2001 Restricted Stock Plan (the ‘‘Plan’’), under which 5,000,000 shares of the Company’s common stock have been reserved for award under the Plan.

Pursuant to the Plan, stock awards may be granted to eligible officers, directors, employees and consultants of the Company. Through September 30, 2007, no awards have been made under the Plan.

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