CHWE Chinawe Com Inc (CE)

 

 

FORM 10-Q

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

(Mark One)

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

For the quarterly period ended September 30, 2008

OR

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

Commission File Number: 000-26169

Chinawe.com Inc.

(Exact name of registrant as specified in its charter)

California		95-462728
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

Room 1304, Dongbao Tower
767 Dongfeng Road East
Guangzhou, China 510600

(8620) 3821-0119

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes þ  No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (check one):

Large accelerated filer o		Accelerated filer o		Non-accelerated filer o		Smaller reporting company þ
				(Do not check if a smaller reporting company)

Indicate by check whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o  No þ

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practical date:

Class of Common Stock		Outstanding at November 13, 2008
Common Stock, $.001 par value		43,800,000

 

 

CHINAWE.COM INC.

TABLE OF CONTENTS

PART I — FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Condensed Consolidated Statements of Operations for the three months and nine months ended September 30, 2008 and 2007 (Unaudited)			3
Condensed Consolidated Balance Sheets at September 30, 2008 (Unaudited) and December 31, 2007			4
Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2008 and 2007 (Unaudited)			5
Notes to Financial Statements			6
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			12
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			15
ITEM 4. CONTROLS AND PROCEDURES			15
PART II — OTHER INFORMATION
ITEM 6. EXHIBITS			17
SIGNATURES			18
EX-10.4: AMENDED AND RESTATED LOAN AGREEMENT
EX-31.1: CERTIFICATION
EX-31.2: CERTIFICATION
EX-32.1: CERTIFICATION
EX-32.2: CERTIFICATION

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements.

CHINAWE.COM INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

						Three months ended September 30,								Nine months ended September 30,
		Note				2008				2007				2008				2007
						US$				US$				US$				US$
OPERATING REVENUES
On-line services income							—				68				—				940
Asset management and related services							185,075				193,240				592,807				593,987
							185,075				193,308				592,807				594,927
Depreciation							(7,743	)			(15,280	)			(33,398	)			(45,224	)
Administrative and general expenses							(227,745	)			(229,151	)			(719,577	)			(758,413	)
LOSS FROM OPERATIONS							(50,413	)			(51,123	)			(160,168	)			(208,710	)
NON-OPERATING INCOME (EXPENSE)
Interest							(887	)			(8,921	)			(18,451	)			(26,824	)
Surcharge on taxes			8				(24,593	)			(5,876	)			(72,910	)			(17,169	)
Other income							628				298				10,256				914
LOSS BEFORE INCOME TAXES							(75,265	)			(65,622	)			(241,273	)			(251,789	)
Income tax expense			7				—				—				—				—
NET LOSS							(75,265	)			(65,622	)			(241,273	)			(251,789	)
OTHER COMPREHENSIVE INCOME (LOSS)
Foreign currency translation							1,047				(6,560	)			(16,679	)			8,950
COMPREHENSIVE LOSS							(74,218	)			(72,182	)			(257,952	)			(242,839	)
Basic and diluted net income per share of common stock							(0.002	)			(0.002	)			(0.006	)			(0.006	)
Weighted average number of shares of common stock outstanding							43,800,000				43,800,000				43,800,000				43,800,000

The financial statements should be read in conjunction with the accompanying notes.

CHINAWE.COM INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

						As of				As of
		Note				September 30, 2008				December 31, 2007
						(Unaudited)
						US$				US$
ASSETS
Current assets:
Cash and cash equivalents							382,868				301,695
Accounts receivable, net of allowance of doubtful account US$2,215 (2007: US$2,215)							—				2,365
Prepayments, deposits and other debtors							56,313				55,786
Total current assets							439,181				359,846
Property, plant and equipment, net			4				38,334				63,114
TOTAL ASSETS							477,515				422,960
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Accrued expenses and other current liabilities							253,620				310,161
Customer deposits received							202,417				153,995
Current portion of long-term debt			5				19,998				20,100
Due to related parties			6				851,234				624,071
Income tax payable			7				458,582				432,987
Surcharge on taxes			8				226,080				142,973
Total current liabilities							2,011,931				1,684,287
Long term liabilities:
Non-current portion of long-term debt			5				12,184				27,321
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				43,800
Capital in excess of par							85,948				85,948
Accumulated losses							(1,672,223	)			(1,430,950	)
Accumulated other comprehensive (loss) income							(4,125	)			12,554
Total stockholders’ deficit							(1,546,600	)			(1,288,648	)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT							477,515				422,960

The financial statements should be read in conjunction with the accompanying notes.

CHINAWE.COM INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

		Nine months ended September 30,
		2008				2007
		US$				US$
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss			(241,273	)			(251,789	)
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation			33,398				45,224
Gain on disposal on property, plant and equipment			(9,016	)			—
Changes in operating assets and liabilities:
Accounts receivable, net			2,365				160,331
Prepayments, deposits and other debtors			2,093				378,561
Accrued expenses and other current liabilities			(69,077	)			31,248
Customer deposits received			37,439				(219,988	)
Surcharge on taxes			72,910				17,169
Income tax payable			(1,333	)			(92,944	)
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES			(172,494	)			67,812
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from disposal of property, plant and equipment			9,141				—
Purchase of property, plant and equipment			(6,462	)			(666	)
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES			2,679				(666	)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of long-term debt			(15,136	)			(17,646	)
Advance from stockholders			391,181				66,398
Repayment to stockholders			(1,908	)			(22,532	)
Increase in loan from a director			(142,272	)			3,661
NET CASH PROVIDED BY FINANCING ACTIVITIES			231,865				29,881
NET INCREASE IN CASH AND CASH EQUIVALENTS			62,050				97,027
Cash and cash equivalents, beginning of period			301,695				116,102
Effect of exchange rate changes			19,123				12,160
CASH AND CASH EQUIVALENTS, END OF PERIOD			382,868				225,289
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest			18,451				26,675

The financial statements should be read in conjunction with the accompanying notes.

CHINAWE.COM INC. AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

1. Basis Of Presentation

The accompanying financial statements present the financial position of the Company as of September 30, 2008 and December 31, 2007, and its results of operations for the three months and nine months ended September 30, 2008 and 2007 and cash flows for the nine months ended September 30, 2008 and 2007. All inter-company accounts and transactions have been eliminated on consolidation.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal and recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months and nine months ended September 30, 2008 are not necessarily indicative of the results that may be expected for the year ending December 31, 2008.

The balance sheet at December 31, 2007 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. These financial statements should be read in conjunction with the consolidated financial statements included in the Company’s Annual Report on Form 10-KSB for the year ended December 31, 2007.

Adoption and recently issued accounting pronouncements

In 2006, the Financial Accounting Standards Board (the “FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 157, “Fair Value Measurements” (“SFAS 157”), which defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS 157 applies under other existing accounting pronouncements that require or permit fair value measurement, the FASB having previously concluded in those accounting pronouncements that fair value is the relevant measurement attribute. Accordingly, SFAS 157 does not require any new fair value measurements. However, the application of this Statement has changed the current practice for fair value measurements. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. The adoption of SFAS 157 did not have a material impact on the Company’s financial statements.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS 159”), which gives entities the option to measure eligible financial assets, and financial liabilities at fair value under other instrument basis, that are otherwise not permitted to be accounted for at fair value under other accounting standards. The election to use the fair value option is available when an entity first recognizes a financial asset or financial liability. Subsequent changes in fair value must be recorded in earnings. This Statement is effective as of the beginning of a company’s first fiscal year after November 15, 2007. The Company has chosen not to elect the option.

CHINAWE.COM INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS

In December 2007, the FASB issued SFAS No. 141R, “Business Combinations” (“SFAS 141R”), which broadens the guidance of SFAS No. 141, extending its applicability to all transactions and other events in which one entity obtains control over one or more other businesses. It broadens the fair value measurement and recognition of assets acquired, liabilities assumed, and interests transferred as a result of business combinations; and stipulated that acquisition related costs be expensed rather than included as part of the basis of the acquisition. SFAS 141R expands required disclosures to improve the ability to evaluate the nature and financial effects of business combinations. SFAS 141R is effective for all transactions entered into on or after January 1, 2009. Adoption of this Statement by the Company is not expected to have a material effect on the Company’s financial statements.

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements — An Amendment of ARB No. 51” (“SFAS 160”). SFAS 160 requires a noncontrolling interest in a subsidiary to be reported as equity and the amount of consolidated net income specifically attributable to the noncontrolling interest to be identified in the consolidated financial statements. SFAS 160 also calls for consistency in the manner of reporting changes in the parent’s ownership interest and required fair value measurement of any noncontrolling equity investment retained in a deconsolidation. SFAS 160 is effective on January 1, 2009. Adoption of this Statement by the Company is not expected to have a material effect on the Company’s financial statements.

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities — An Amendment of SFAS No. 133” (“SFAS 161”). SFAS 161 expands the disclosure requirements in SFAS 133, regarding an entity’s derivative instruments and hedging activities. SFAS 161 is effective on January 1, 2009. Adoption of this Statement by the Company is not expected to have a material effect on the Company’s financial statements.

In May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles” (“SFAS 162”). The new standard is intended to improve financial reporting by identifying a consistent framework, or hierarchy, for selecting accounting principles to be used in preparing financial statements that are presented in conformity with U.S. generally accepted accounting principles for non-governmental entities. SFAS 162 is effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board amendments to “AU Section 411, The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles.” The Company is currently evaluating the impact of the adoption of SFAS 162 on the Company’s financial statements.

On September 12, 2008, the FASB issued FASB staff position No. 133-1 and FIN 45-4, “Disclosures about Credit Derivatives and Certain Guarantees: An amendment of FASB Statement No. 133 and FASB Interpretation No. 45; and Clarification of the Effective Date of FASB Statement No. 161” (“FSP 133-1”). FSP 13-1 expands the disclosure requirement of credit derivatives and guarantees and are effective for reporting periods (annual or interim) ending after November 15, 2008. Adoption of these Statements by the Company is not expected to have a material effect on the Company’s financial statements.

CHINAWE.COM INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS

On October 10, 2008, the FASB issued FASB Staff Position No. FAS 157-3, “Determining the Fair Value of a Financial Asset When the Market For That Asset Is Not Active” (“FSP 157-3”). FSP 157-3 clarifies the application of SFAS 157 in a market that is not active. In addition, the FASB also issued FASB Staff Position No. FAS 157-2, “Effective Date of FASB Statement No. 157”, amending SFAS 157 for non financial assets and non financial liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis at least annually, until fiscal years beginning after November 15, 2008, and interim periods within these fiscal years. Adoption of these Statements by the Company is not expected to have a material effect on the Company’s financial statements.

2. Organization

Chinawe.com Inc. (''Chinawe’’) was incorporated under the laws of the State of California. Chinawe’s principal business activity is providing professional asset management services relating to non-performing loans (''NPLs’’) in the People’s Republic of China (''PRC’’), as well as other consulting services through its subsidiaries in the PRC.

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 is an investment holding company.

Chinawe Asset Management (PRC) Limited was established in the PRC in April 2005 to service the NPLs under services agreements with Huizhou One Limited, a subsidiary of Citigroup Financial Products Inc., which accounted for 100% of the revenue from assets management and related services for the three months and nine months ended September 30, 2008 and 2007.

3. Going concern consideration

The Company’s financial statements for the period ended September 30, 2008 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, 2008, the Company had negative working capital and stockholders’ deficit of US$1,572,750 and US$1,546,600, respectively, which raise substantial doubt about its ability to continue as a going concern. In assessing the Company’s ability to operate as a going concern, the directors have considered the Company’s implementation of certain cost cutting measures such as reduction of staff costs, employee’s incentive fee and sub-servicer’s consultant fee as well as the cessation of charging interest on a loan from director with effect from July 1, 2008 as disclosed in note 6 to these financial statements. The Company has relied on the private financing by cash inflow from the principal stockholders of the Company, who have agreed not to demand repayment of amounts due them as long as the Company has negative working capital and have indicated to finance the Company in case for a “reasonable” period of time for the Company to continue as a going concern, assuming that in such a period of time the Company would be able to raise additional capital finds to support its continuation. However it is uncertain as to how long or to what extent such a period of time would be “reasonable”, and there can be no assurance that financing from them will be continued. The accompanying financial statements do not include or reflect any adjustments that might result from the outcome of these uncertainties.

CHINAWE.COM INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS

4. Property, plant and equipment, net

Property, plant and equipment are summarized as follows:

		As of
		September 30,				As of
		2008				December 31,
		(Unaudited)				2007
		US$				US$
Office equipment			10,742				10,379
Computer equipment			11,646				11,646
Leasehold improvement			62,934				57,446
Motor vehicles			107,424				130,087
Total Cost			192,746				209,558
Accumulated depreciation			(156,693	)			(150,597	)
Currency translation adjustment			2,281				4,153
Net			38,334				63,114

5. Long term debt

Long term debt consists of obligations under capital leases for purchases of vehicles with US$32,182 and US$47,421 outstanding as of September 30, 2008 and December 31, 2007, respectively. The debt is collateralized by two motor vehicles with an aggregate net book value of US$20,876 and US$27,761 as of September 30, 2008 and December 31, 2007, respectively, bearing interest at 3-5% per annum and is repayable in monthly installments of US$2,002 with the final installments due in 2010. Maturity of the debt is as follows:

		As of
		September 30,				As of
		2008				December 31,
		(Unaudited)				2007
		US$				US$
Within 1 year			23,901				24,023
Over 1 year but not exceeding 2 years			14,542				24,023
Over 2 years but not exceeding 3 years			—				8,610
			38,443				56,656
Less: Amount representing interest			(6,261	)			(9,235	)
Present value of net minimum lease payments			32,182				47,421
Current portion			19,998				20,100
Non-current portion			12,184				27,321
			32,182				47,421

CHINAWE.COM INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS

6. Related party transactions

The balances with related parties are as follows:

				As of
				September 30, 2008				As of
		Note		(Unaudited)				December 31, 2007
				US$				US$
At cost:
Loan from a director, including interest		(a)			-				143,001
Advances from stockholders		(b)			851,234				481,070
					851,234				624,071

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.

Companies that carry on business and derive income in Hong Kong are subject to Hong Kong Profits Tax at 16.5% and 17.5% for the three months and nine months ended September 30, 2008 and 2007, respectively. Companies that carry on business and derive income in the PRC are subject to income tax at 25% and 33% for the three months and nine months ended September 30, 2008 and 2007, respectively.

No income taxes have been provided for the subsidiaries in Hong Kong and the PRC as they have incurred losses for taxation purposes during the three months and nine months period ended 30 September 2008 and 2007.

As required in FASB Interpretation No. 48, ''Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109’’ (''FIN 48’’), the Company 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, 2008, 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 PRC and has concluded that there are no significant uncertain tax positions requiring recognition in its consolidated financial statements except as disclosed in note 8 to these 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 three months and nine months ended September 30, 2008 and 2007, and the Company does not anticipate that it is

CHINAWE.COM INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS

reasonably possible that any material increase or decrease in its unrecognized tax benefits will occur within twelve months.

As of September 30, 2008 and December 31, 2007, the Company had no unrecognized tax benefits or unaccrual of potential payment or surcharge. 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 in the PRC is subject to the PRC enterprise income tax and business tax. However, the Company in previous years only submitted tax returns and made payments for a portion of the total tax liabilities, which was not in compliance with the tax laws and regulations in the PRC. For this reason, the Company has made full provision for all 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 surcharges 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 has currently failed to file tax reports with the Franchise Tax Board in the State of California. 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. The Company is also delinquent in filing its U.S. federal tax returns. The Company is in the process of preparing the relevant returns and does not believe that the amount of taxes 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. As of September 30, 2008, no awards have been made under the Plan.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion should be read in conjunction with the Consolidated Condensed Financial Statements and notes thereto appearing elsewhere in this Form 10-Q. The following discussion contains forward-looking statements. Our actual results may differ significantly from those projected in the forward-looking statements. Factors that might cause future results to differ materially from those projected in the forward-looking statements include, but are not limited to, those discussed elsewhere in this document.

Overview — Results of Operations

The following table sets forth selected income data as a percentage of total operating revenue for the periods indicated.

		Three months ended September 30,								Nine months ended September 30,
		2008				2007				2008				2007
Operating revenues			100				100				100				100	%
Total operating expenses			(127	)			(126	)			(127	)			(135	)%
Operating loss			(27	)			(26	)			(27	)			(35	)%
Loss before income taxes			(41	)			(34	)			(41	)			(42	)%
Income expense			—				—				—				—
Net loss			(41	)			(34	)			(41	)			(42	)%

THREE MONTHS ENDED SEPTEMBER 30, 2008 (UNAUDITED) COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 2007 (UNAUDITED)

OPERATING REVENUES. Operating revenues for the three months ended September 30, 2008 totaled US$185,075 compared to US$193,308 for the three months ended September 30, 2007. This represents a decrease of 4.3% mainly due to the decrease in the scale of business. As the Company has successfully recovered a majority portion of the non-performing loans (“NPLs”) under two of the Company’s portfolios in Huizhou and Shanwei in the People’s Republic of China (“PRC”), revenue from the recovery of NPLs has started to diminish while the Company has not generated new business in this field.

OPERATING EXPENSES. The Company’s operating expenses totaled US$235,488, or 127% of operating revenues, for the three months ended September 30, 2008, compared to US$244,431, or 126% of operating revenues, for the three months ended September 30, 2007. This represents a decrease of US$8,943 or 3.6% mainly due to the reduction in professional fees paid during this period.

NET NON-OPERATING EXPENSES. Total non-operating expenses for the three months ended September 30, 2008 totaled US$24,852 compared to US$14,499 for the three months ended September 30, 2007. This represents an increase of 71.4% mainly due to the increase in the provision for surcharge relating to PRC business tax for the three months ended September 30, 2008.

PROVISION FOR INCOME TAXES. No income tax expense for the three months ended September 30, 2008 and 2007 was incurred because the Company and its subsidiaries incurred losses for taxation purposes.

NET LOSS. The Company recorded a net loss of US$75,265 for the three months ended September 30, 2008, compared to a net loss of US$65,622 for the three months ended September 30, 2007. This represents an increased loss of US$9,643 due to business constriction as well as the increased provision for surcharge during the period.

NINE MONTHS ENDED SEPTEMBER 30, 2008 (UNAUDITED) COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 2007 (UNAUDITED)

OPERATING REVENUES. Operating revenues for the nine months ended September 30, 2008 totaled US$592,807 compared to US$594,927 for the three months ended September 30, 2007. This represents a decrease of 0.36% mainly due to the decrease in the scale of business. As the Company has successfully recovered a majority portion of the NPLs under two of the Company’s portfolios in Huizhou and Shanwei in the PRC, revenue from the recovery of NPLs has started to diminish while the Company has not generated new business in this field.

OPERATING EXPENSES. The Company’s operating expenses totaled US$752,975, or 127% of operating revenues, for the nine months ended September 30, 2008, compared to US$803,637, or 137% of operating revenues, for the nine months ended September 30, 2007. This represents a decrease of US$50,662 or 6.3% mainly due to the reduction in professional fees paid during this period.

NET NON-OPERATING EXPENSES. Total non-operating expenses for the nine months ended September 30, 2008 totaled US$81,105 compared to US$43,079 for the nine months ended September 30, 2007. The increase was mainly due to the increase in the provision for surcharge relating to PRC business tax for the nine months ended September 30, 2008.

PROVISION FOR INCOME TAXES. No income tax expense for the nine months ended September 30, 2008 and 2007 was incurred because the Company and its subsidiaries incurred losses for taxation purposes.

NET LOSS. The Company recorded a net loss of US$241,273 for the nine months ended September 30, 2008, compared to a net loss of US$251,789 for the nine months ended September 30, 2007. This represents a decreased loss of US$10,516 as a result of the cost-saving plans implemented throughout the period.

LIQUIDITY AND CAPITAL RESOURCES

The Company has financed its operations primarily through cash generated from financing activities.

Cash and cash equivalent balances as of September 30, 2008 and September 30, 2007 were US$382,869 and US$225,289, respectively.

Net cash (used in) provided by operating activities was US$ (172,494) and US$67,812 for the nine months ended September 30, 2008 and 2007, respectively.

Net cash provided by (used in) investing activities was US$2,679 and US$(666) for the nine months ended September 30, 2008 and 2007, respectively, which is a result of proceeds from disposal of property, plant and equipment.

Net cash provided by financing activities was US$231,865 and US$29,881 for the nine months ended September 30, 2008 and 2007, respectively. The positive cash flow is a result of the advances from stockholders.

During the nine months ended September 30, 2008, the Company did not enter into any transactions using derivative financial instruments or derivative commodity instruments nor held any marketable equity securities of publicly traded companies. Accordingly, the Company believes its exposure to market interest rate risk and price risk is not material.

During the nine months ended September 30, 2008, the Company made no material purchases or investments.

CRITICAL ACCOUNTING POLICIES

The preparation of financial statements in conformity with accounting principles generally accepted in the U.S., or GAAP, requires the Company 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. In recording transactions and balances resulting from business operations, the Company uses estimates based on the best information available for such items as depreciable lives. The Company revises the recorded estimates when better information is available, facts change or actual amounts can be determined. These revisions can affect operating results.

The critical accounting policies and use of estimates are discussed in and should be read in conjunction with the annual consolidated financial statements and notes included in the latest 10-KSB, as filed with the Securities and Exchange Commission, which includes audited consolidated financial statements for the two fiscal years ended December 31, 2007. We believe that the following are some of the more critical judgment areas in the application of our accounting policies that currently affect our financial condition and results of operations.

Revenue recognition and valuation.

The Company generally recognizes asset management and related services income when persuasive evidence of an arrangement exists, services are rendered in accordance with the terms of agreements, the fee is fixed or determinable, and collectability is probable.

We maintain allowances for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required which would result in an additional general and administrative expense in the period such determination was made.

Related party transactions

We do not have any of the following:

•		Trading activities that include non-exchange traded contracts accounted for at fair value.
•		Relationships and transactions with persons or entities that derive benefits from any non-independent relationships other than related party transactions discussed herein.

Vivian Chu, a director and the Company’s Chief Financial Officer, made an unsecured loan to the Company in 2003 in an original principal amount of US$154,000. The loan bore interest at 23% per annum. The loan is now the obligation of Chinawe Asset Management Limited, a wholly-owned subsidiary of the Company. On July 1, 2008, Ms. Chu assigned the amount due to her to Man Keung Alan Wai, the Chief Executive

Officer and President and a director of the Company. Mr. Wai has agreed not to demand repayment of this unsecured loan if such repayment would have a material adverse impact on the Company and no interest will be charged on the advance. Accordingly, the assigned amount is now included under “Advances from Stockholders”. At July 1, 2008, the balance of principal and interest on this loan was $145,443.

From time to time members of management or affiliates thereof have made unsecured, interest-free advances to the Company to provide working capital. As of September 30, 2008, the total outstanding advances, including the reclassified loan, were US$851,234.

Off-Balance Sheet Arrangements

The Company has no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to the Company.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

We are not exposed to a material level of market risk due to changes in interest rates, since we do not have outstanding debt instruments and are under fixed interest rate arrangements.

However, as our asset management business is carried out more and more comprehensively, we may be exposed to a material level of market risk due to undeveloped financial and credit systems in the PRC. Laws, regulations and policies are insufficient to protect asset owners. As an asset management service provider, we can only ensure due professional care.

The Chinese central government imposes control over its foreign currency reserves through control over imports and through direct regulation of the conversion of its national currency into foreign currencies. As a result, the RMB is not freely convertible into foreign currencies.

The PRC subsidiary conducts substantially all of its business in the PRC, and its financial performance and condition is measured in terms of Renminbi (“RMB”). The revenues and profits of the subsidiary are predominantly denominated in RMB, and will have to be converted to pay dividends to the Company in US Dollars or Hong Kong Dollars. Despite the recent appreciation of the RMB, should the RMB devalue against these currencies, such devaluation would have a material adverse effect on the Company’s profits and the foreign currency equivalent of such profits repatriated by the PRC subsidiary to the Company. The Company currently is not able to hedge its exchange rate exposure in the PRC because neither the banks in the PRC nor any other financial institution authorized to engage in foreign exchange transactions offer forward exchange contracts.

Item 4. Controls And Procedures.

The Chief Executive Officer and Chief Financial Officer (the principal executive officer and principal financial officer, respectively) of the Company have concluded, based on their evaluation as of September 30, 2008, that the design and operation of the Company’s “disclosure controls and procedures” (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (“Exchange Act”)) are, to the best of their knowledge, effective to ensure that information required to be disclosed in the reports filed or submitted by the Company under the Exchange Act is accumulated, recorded, processed, summarized and reported to the Company’s management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding whether or not disclosure is required.

During the period ended September 30, 2008, there were no changes in the internal controls of the Company over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that have materially affected, or are reasonably likely to materially affect, the internal controls of the Company over financial reporting.

PART II — OTHER INFORMATION

ITEM 6 — Exhibits

10.4		Amended and Restated Loan Agreement dated as of July 1, 2008 by and between Man Keung Alan Wai and Chinawe Asset Management Limited
31.1		Rule 13a-14(a) / 15d-14(a) Certification of Chief Executive Officer
31.2		Rule 13a-14(a) / 15d-14(a) Certification of Chief Financial Officer
32.1		Section 1350 Certification of Chief Executive Officer
32.2		Section 1350 Certification of Chief Financial Officer

SIGNATURES

     In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Chinawe Com (CE) (USOTC:CHWE)
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