FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
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þ
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
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For
the quarterly period ended March 31, 2009
OR
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Commission File Number: 000-29169
Chinawe.com Inc.
(Exact name of registrant as specified in its charter)
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California
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95-462728
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer Identification No.)
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Room 1307,
Block A
Fuk Keung Industrial Building
66-68 Tong Mei Road
Kowloon, Hong Kong
(Address of principal executive offices) (Zip Code)
(852) 23810818
(Registrants 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 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 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
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):
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Large accelerated filer
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Accelerated filer
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Non-accelerated filer
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(Do not check if a smaller reporting company)
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Smaller reporting company
þ
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Indicate by check whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act).
Yes
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No
o
Indicate the number of shares outstanding of each of the issuers classes of common stock, as of
the latest practical date:
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Class of Common Stock
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Outstanding at May 14, 2009
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Common Stock, $.001 par value
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43,800,000
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PART I FINANCIAL INFORMATION
Item 1. Financial Statements.
CHINAWE.COM INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
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Three months ended March 31,
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Note
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2009
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2008
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US$
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US$
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REVENUES FROM DISCOUNTINUED OPERATIONS
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Asset management and related services
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131,558
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188,429
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131,558
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188,429
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Depreciation
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(2,383
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(15,235
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Administrative and general expenses
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(216,496
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(231,480
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LOSS FROM DISCONTINUED OPERATIONS
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(87,321
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(58,286
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NON-OPERATING INCOME (EXPENSE)
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Interest
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(981
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(8,783
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Surcharge on taxes
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8
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(25,700
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(23,608
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Provision for contract termination costs
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10
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(68,267
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Other income
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229
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589
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LOSS BEFORE INCOME TAXES
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(182,040
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(90,088
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Income tax expense
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7
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NET LOSS
FROM DISCONTINUED OPERATIONS
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(182,040
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(90,088
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OTHER COMPREHENSIVE INCOME (LOSS)
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Foreign currency translation
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100
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(11,106
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COMPREHENSIVE LOSS
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(181,940
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(101,194
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Basic and diluted net loss per share of common stock
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(0.0042
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(0.0021
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Weighted average number of shares of common stock
outstanding
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43,800,000
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43,800,000
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The financial statements should be read in conjunction with the accompanying notes.
3
CHINAWE.COM INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
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As of
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As of
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Note
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March 31, 2009
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December 31, 2008
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(Unaudited)
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US$
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US$
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ASSETS
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Current assets:
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Cash and cash equivalents
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242,793
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339,538
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Accounts receivable
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38,867
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Prepayments, deposits and other debtors
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28,796
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30,419
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Total current assets of discontinued operations
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310,456
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369,957
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Property, plant and equipment, net
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4
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10,358
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12,741
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TOTAL ASSETS OF DISCONTINUED OPERATIONS
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320,814
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382,698
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LIABILITIES AND STOCKHOLDERS DEFICIT
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Current liabilities:
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Accrued expenses and other current liabilities
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354,847
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294,208
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Customer deposits received
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118,381
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134,952
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Current portion of long-term debt
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5
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19,070
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20,100
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Due to related parties
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6
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979,342
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920,193
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Income tax payable
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7
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453,832
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457,618
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Surcharge on taxes
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8
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278,986
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253,335
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Total current liabilities of discontinued operations
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2,204,458
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2,080,406
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Long term liabilities:
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Non-current portion of long-term debt
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5
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3,226
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7,222
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Contingencies and commitments
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8
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Stockholders deficit:
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Preferred stock, par value US$0.001 per share; authorized
20,000,000 shares; none issued
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Common stock, par value US$0.001 per share;
authorized 100,000,000 shares;
issued and outstanding 43,800,000 shares
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43,800
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43,800
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Capital in excess of par
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85,948
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85,948
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Accumulated losses
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(2,010,498
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(1,828,458
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Accumulated other comprehensive loss
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(6,120
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(6,220
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Total stockholders deficit
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(1,886,870
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(1,704,930
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TOTAL LIABILITIES AND STOCKHOLDERS DEFICIT OF
DISCONTINUED OPERATIONS
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320,814
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382,698
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The financial statements should be read in conjunction with the accompanying notes.
4
CHINAWE.COM INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
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Three months ended March 31,
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2009
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2008
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(US$)
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(US$)
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CASH FLOWS FROM OPERATING ACTIVITIES OF DISCONTINUED OPERATIONS
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Net loss from discontinued operations
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(182,040
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(90,088
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Adjustments to reconcile net loss to net cash used in operating activities:
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Depreciation
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2,383
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15,235
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Changes in operating assets and liabilities:
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Accounts receivable
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(38,867
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(66,253
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Prepayments, deposits and other debtors
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1,619
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4,121
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Customer deposits received
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(16,545
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(66,573
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Accrued expenses and other current liabilities
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60,673
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(44,488
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Surcharge on taxes
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25,700
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23,608
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Income tax payable
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(3,709
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(1,055
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NET CASH USED IN OPERATING ACTIVITIES OF DISCONTINUED OPERATIONS
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(150,786
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(225,493
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CASH FLOWS FROM FINANCING ACTIVITIES OF DISCONTINUED OPERATIONS
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Repayment of long-term debt
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(5,026
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(5,025
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Advance from related parties
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64,805
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81,290
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Repayment to related parties
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(5,676
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(743
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Increase in loan from a director
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1,221
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NET CASH PROVIDED BY FINANCING ACTIVITIES OF DISCONTINUED OPERATIONS
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54,103
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76,743
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NET DECREASE IN CASH AND CASH EQUIVALENTS
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(96,683
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(148,750
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Cash and cash equivalents, beginning of period
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339,538
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301,695
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Effect of exchange rate changes
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(62
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11,000
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CASH AND CASH EQUIVALENTS, END OF PERIOD
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242,793
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163,945
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SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
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Cash paid for interest
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981
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8,783
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The financial statements should be read in conjunction with the accompanying notes.
5
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 March 31,
2009 and December 31, 2008, and its results of operations for the three months ended March 31, 2009
and 2008. 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
recurring accruals) considered necessary for a fair presentation have been included. Operating
results for the three months ended March 31, 2009 are not necessarily indicative of the results
that may be expected for the year ending December 31, 2009.
The balance sheet at December 31, 2008 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 Companys Annual Report
on Form 10-K for the year ended December 31, 2008.
Adoption
of recently issued accounting pronouncements
In December 2007, the Financial Accounting Standards Board (FASB) issued Statement of Financial
Accounting Standards (SFAS) No. 141(R), Business Combinations (SFAS 141(R)), which replaces
SFAS No. 141. The statement retains the fundamental requirements in SFAS No. 141 that the
acquisition method of accounting (previously referred to as the purchase method of accounting) be
used for all business combinations, but requires a number of changes, including changes in the way
assets and liabilities are recognized as a result of business combinations. It also requires the
capitalization of in-process research and development at fair value and requires the expensing of
acquisition-related costs as incurred. In April 2009, the FASB issued Staff Position No. FAS
141(R)-1 which amends SFAS 141(R) by establishing a model to account for certain pre-acquisition
contingencies. Under the FSP, an acquirer is required to recognize at fair value an asset acquired
or a liability assumed in a business combination that arises from a contingency if the
acquisition-date fair value of that asset or liability can be determined during the measurement
period. If the acquisition-date fair value cannot be determined, then the acquirer should follow
the recognition criteria in SFAS No. 5, Accounting for Contingencies, and FASB Interpretation
No. 14, Reasonable Estimation of the Amount of a Loss an interpretation of FASB Statement
No. 5. SFAS 141(R) and FAS 141(R)-1 are effective beginning July 1, 2009, and will apply
prospectively to business combinations completed on or after that date. The impact of the adoption
of SFAS 141(R) and FAS 141(R)-1 will depend on the nature of acquisitions completed after the date
of adoption.
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
Security and Exchange Commissions 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 Companys financial statements.
6
In February 2008, the FASB issued FSP FAS 157-2, Effective Date of FASB Statement No. 157, which
delays the effective date of SFAS No. 157 to July 1, 2009, for all nonfinancial assets and
nonfinancial liabilities, except for items that are recognized or disclosed at fair value in the
financial statements on a recurring basis (at least annually). We believe the adoption of the
delayed items of SFAS No. 157 will not have a material impact on our financial statements.
In April 2009, the FASB issued three Staff Positions (FSPs) that are intended to provide
additional application guidance and enhance disclosures about fair value measurements and
impairments of securities. FSP FAS 157-4 clarifies the objective and method of fair value
measurement even when there has been a significant decrease in market activity for the asset being
measured. FSP FAS 115-2 and FAS 124-2 establish a new model for measuring other-than-temporary
impairments for debt securities, including establishing criteria for when to recognize a write-down
through earnings versus other comprehensive income. FSP FAS 107-1 and APB 28-1 expands the fair
value disclosures required for all financial instruments within the scope of SFAS
No. 107, Disclosures about Fair Value of Financial Instruments, to interim periods. All of these
FSPs are effective beginning April 1, 2009. The adoption of FSP FAS 157-4, FSP FAS 115-2,
FAS 124-2, FSP FAS 107-1 and APB 28-1 will not have a material impact on the Companys financial
statements.
2. Organization
Chinawe.com Inc. (Chinawe) was incorporated under the laws of the State of California. Chinawes
principal business activity was providing professional management services relating to
non-performing loans (NPLs) in the Peoples Republic of China (PRC), as well as other
consulting services. During the first quarter of 2009, the
Companys sole customer, Huizhou One
Limited (HOL) issued a notice of termination to terminate the services contracts with effect from
March 26 and March 27, 2009. Effective from March 27, 2009, the Company has become a non-operating
company.
The consolidated financial statements include the accounts of Chinawe and the following
subsidiaries (collectively referred to as the Company):
Officeway Technology Limited; a company incorporated in the British Virgin Islands in December
1999, which was 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 (CAM (PRC)) was established in the PRC in April 2005 to
service the NPLs under services agreements with HOL, which accounted for 100% of the revenue from
assets management and related services for the three months ended March 31, 2009 and 2008.
3. Going concern consideration
The Companys financial statements 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 March 31, 2009, the Company had negative working capital and stockholders deficit
of US$1,894,002 and US$1,886,870, respectively, which raise substantial doubt about its ability to
continue as a going concern. The Company has relied on private financing by cash inflow from the
principal stockholders of the Company, who have agreed not to demand repayment of amounts due to
them as long as the Company has negative working capital. These stockholders have indicated their
intention to finance the Company for a reasonable period of time to enable the Company to
continue as a going concern, assuming that in such a period of time the Company would not be able
to raise additional capital to support its continuation. However, it is uncertain for how long or
to what extent such a period of time would be reasonable and there can be no assurance that the
financing from these stockholders will be continued. The accompanying financial statements do not
include or reflect any adjustments that might result from the outcome of these uncertainties.
7
4. Property, plant and equipment, net
Property, plant and equipment are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
As of
|
|
|
|
March 31, 2009
|
|
|
December 31, 2008
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
US$
|
|
|
US$
|
|
Office equipment
|
|
|
10,337
|
|
|
|
10,741
|
|
Computer equipment
|
|
|
11,362
|
|
|
|
11,646
|
|
Leasehold improvement
|
|
|
46,830
|
|
|
|
62,921
|
|
Motor vehicles
|
|
|
96,174
|
|
|
|
96,174
|
|
|
|
|
|
|
|
|
Total cost
|
|
|
164,703
|
|
|
|
181,482
|
|
Accumulated depreciation
|
|
|
(139,752
|
)
|
|
|
(153,202
|
)
|
Accumulated impairment loss
|
|
|
(14,593
|
)
|
|
|
(17,882
|
)
|
Currency translation adjustment
|
|
|
|
|
|
|
2,343
|
|
|
|
|
|
|
|
|
Net
|
|
|
10,358
|
|
|
|
12,741
|
|
|
|
|
|
|
|
|
5. Long term debt
Long term debt consists of obligations under capital leases for purchases of vehicles with
US$22,296 and US$27,322 outstanding as of March 31, 2009 and December 31, 2008, respectively. The
debt is collateralized by two motor vehicles with an aggregate net book value of US$10,064 and
US$12,387 as of March 31, 2009 and December 31, 2008, respectively, bearing interest at 3-5% per
annum and is repayable by monthly installments of US$2,002 with the final installments due in
February 2010 and January 2011. Maturity of the debt is as follows:
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
As of
|
|
|
|
March 31, 2009
|
|
|
December 31, 2008
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
US$
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
Within 1 year
|
|
|
22,788
|
|
|
|
24,023
|
|
Over 1 year but not exceeding 2 years
|
|
|
3,839
|
|
|
|
8,610
|
|
|
|
|
|
|
|
|
|
|
|
26,627
|
|
|
|
32,633
|
|
Less: Amount representing interest
|
|
|
(4,331
|
)
|
|
|
(5,311
|
)
|
|
|
|
|
|
|
|
Present value of net minimum lease payments
|
|
|
22,296
|
|
|
|
27,322
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current portion
|
|
|
19,070
|
|
|
|
20,100
|
|
Non-current portion
|
|
|
3,226
|
|
|
|
7,222
|
|
|
|
|
|
|
|
|
|
|
|
22,296
|
|
|
|
27,322
|
|
|
|
|
|
|
|
|
8
6. Related party transactions
The balances with related parties are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
As of
|
|
|
|
Note
|
|
|
March 31, 2009
|
|
|
December 31, 2008
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
US$
|
|
|
US$
|
|
At cost:
|
|
|
|
|
|
|
|
|
|
|
|
|
Advances from stockholders
|
|
|
(a
|
)
|
|
|
979,342
|
|
|
|
920,193
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
The amounts due are unsecured, non-interest bearing and repayable on demand. During the three
months ended March 31, 2009 and 2008, the Company received advances from related parties of
US$64,805 and US$81,290, respectively. In addition, during the three months ended March 31,
2009 and 2008, the Company repaid advances of US$5,676 and US$743 to related parties,
respectively.
|
In addition, during the three months ended March 31, 2009 and 2008, the Company paid US$3,871 and
US$3,871, respectively, to a director in respect of operating lease
charges for premises.
7. Income taxes
It is managements 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 Companys 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 month periods ended March 31, 2009 and 2008, respectively.
Companies that carry on business and derive income in the PRC are subject to income tax at 25% for
the three months ended March 31, 2009 and 2008.
No income taxes have been provided for the subsidiary in Hong Kong as it has incurred losses for
taxation purposes during the three months ended March 31, 2009 and 2008, respectively.
9
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 for 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 is currently suspended in the State of California due to failure to file reports with
the Franchise Tax Board. The Company is in the process of preparing the relevant reports and
expects to be back in good standing in the coming future. The Company believes that the amount of taxes and
penalties owed will not be material to the financial statements. 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 Companys 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 March 31, 2009 and December 31, 2008, no awards have been made
under the Plan.
10. Discontinued Operations
The Companys principal business was the provision of professional management services relating to
NPLs in the PRC. Effective from March 27, 2009, the
Company ceased providing professional management services relating to NPLs in the PRC. All business
activities of the Company ceased on March 27, 2009. As a result, for the periods presented, the
results of operations, total assets, total liabilities, and cash flows of the Company are reported
as discontinued operations.
Following the discontinuance of the Companys sole business, management has arranged to close down
all offices and lay off all employees in the PRC. Certain unavoidable costs in respect of severance
payments for the lay-off of employees and a non-cancellable operating lease in connection with the
discontinuance have been provided which has been included in other current liabilities. A summary
of the provision for contract termination costs is summarized below:
|
|
|
|
|
|
|
As of
|
|
|
|
March 31, 2009
|
|
|
|
(Unaudited)
|
|
|
|
US$
|
|
|
|
|
|
|
Severance payments
|
|
|
15,767
|
|
Operating lease
|
|
|
52,500
|
|
|
|
|
|
|
|
|
68,267
|
|
|
|
|
|
10
Item 2. Managements 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
Effective March 27, 2009, the Company ceased providing professional management services relating to
non-performing loans (NPLs) in the Peoples Republic of China (PRC). The Company has
terminated its employees and closed down its offices. The Company has not identified a specific
line of business or territory for any new business. There can be no assurance that the Company
will be successful in identifying a new line of business that it can enter into or that if such new
line of business is identified, that the Company will have adequate funding to commence operations
of a new line of business. The principal stockholders of the Company currently intends to continue
to fund the expenses of the Company until a new line of business has been identified.
The following table sets forth selected income data as a percentage of total operating revenue for
the periods indicated.
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
Operating revenues
|
|
|
100
|
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
(167
|
)
|
|
|
(131
|
)%
|
|
|
|
|
|
|
|
|
|
Operating loss from discontinued operations
|
|
|
(66
|
)
|
|
|
(31
|
)%
|
|
|
|
|
|
|
|
|
|
Loss before income taxes
|
|
|
(138
|
)
|
|
|
(48
|
)%
|
|
|
|
|
|
|
|
|
|
Provision for income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss from discontinued operations
|
|
|
(138
|
)
|
|
|
(48
|
)%
|
|
|
|
|
|
|
|
THREE MONTHS ENDED MARCH 31, 2009 (UNAUDITED) COMPARED TO THREE MONTHS ENDED MARCH 31, 2008
(UNAUDITED)
OPERATING REVENUES. Operating revenues for the first quarter of 2009 totaled US$131,558 compared to
US$188,429 for the comparable period last year. This represented a decrease of 29% 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 Companys portfolios in Huizhou and Shanwei in the PRC, revenue from
the recovery of NPLs has started to diminish.
11
OPERATING EXPENSES. The Companys operating expenses totaled US$218,879, or 167% of operating
revenues, for the first quarter of 2009, compared to US$246,715, or 131% of operating revenues, for
the first quarter of 2008. This represented a decrease of US$27,836 or 11% mainly due to the
decrease in rental expenses and salary paid to employees.
NET NON-OPERATING EXPENSES. Net non-operating expenses for the first quarter of 2009 totaled
US$94,719 compared to US$31,802 in the first quarter of 2008. This represented an increase of 198%
due to the provision for surcharge and contract of termination cost resulting from the
discontinuance of the Companys business.
PROVISION FOR INCOME TAXES. No income tax expense for the three months ended March 31, 2009 and
2008 was incurred because the Company and its subsidiaries incurred losses for taxation purposes.
NET LOSS FROM DISCONTINUED OPERATIONS. The Company has recorded a net loss from discontinued
operations of US$182,040 for the first quarter of 2009, compared to a net loss from discontinued
operations of US$90,088 for the first quarter of 2008. Resulting from the decrease in revenue
accompanied by the expenses provided for the discontinuance of the Companys business, the Company
suffered a net loss in the first quarter of 2009 larger than the loss for the same period in 2008.
LIQUIDITY AND CAPITAL RESOURCES
The Company is currently financing its operations primarily through cash generated from financing
activities.
Cash and cash equivalent balances as of March 31, 2009 and March 31, 2008 were US$242,793 and
US$163,945, respectively. The increase in cash and cash equivalent balance was a net result from
the decrease in cash used in operations and decrease in cash provided by financing activities.
Net cash used in operating activities of discontinued operations was US$ 150,786 and US$225,493 for
the three months ended March 31, 2009 and 2008, respectively. The cash outflow from operations
mainly resulted from the late settlement of trade receivables for the first quarter of 2009 as well
as the net loss for the period which included a non-cash provision for expenses in connection with
the discontinuance of the Companys business.
Net cash provided by financing activities of discontinued operations was US$54,103 and US$76,743 in
the three months ended March 31, 2009 and 2008, respectively. The decrease in net cash provided by
financing activities of discontinued operations mainly resulted from the decrease in net advances
from related parties.
During the three months ended March 31, 2009, 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 three months ended March 31, 2009 and 2008, the Company had no material purchases or
investments.
CRITICAL ACCOUNTING POLICIES
Our financial statements reflect the selection and application of accounting policies which require management to make
significant estimates and assumptions. 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.
|
12
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 Companys financial condition, changes in financial condition,
revenues or expenses, results of operations, liquidity, capital expenditures or capital resources
that are material to the Company.
Future Operations
The Company is seeking investment opportunities that may provide revenues for the Company. However,
the Company has not identified a specific line of business or territory for any such new business.
There can be no assurance that the Company will be successful in identifying a new line of business
that it can enter into or that if such new line of business is identified, that the receipt of
revenues is probable.
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
have never registered or issued debt instruments. Our outstanding long term liabilities are mostly
loans from a director or other related parties, which are unsecured and interest rate fixed or
interest-free. Currently we do not maintain a portfolio of interest-sensitive debt instruments or
any fixed-income derivatives. Management has continuously paid great attention to the financial
leverage in business development and interest expenses in operations.
ITEM 4 CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this report, the Company conducted an evaluation, under the
supervision and with the participation of its Chief Executive Officer and Chief Financial Officer,
of its disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the
Securities Exchange Act of 1934, as amended (Exchange Act)). Based upon this evaluation, the
Chief Executive Officer and Chief Financial Officer concluded that the Companys disclosure
controls and procedures are effective to ensure that information required to be disclosed by the
Company in the reports that the Company files or submits under the Exchange Act is recorded,
processed, summarized and reported within the time periods specified
in the Securities and Exchange Commissions rules and forms
and which also are effective in ensuring that information required to be disclosed by the Company
in the reports that it files or submits under the Exchange Act is accumulated and communicated to
the Companys management, including the Companys Chief Executive Officer and Chief Financial
Officer, to allow timely decisions regarding required disclosure.
Managements assessment of the effectiveness of the Companys internal control over financial
reporting is as of the three months ended March 31, 2009. We believe that our internal control over
financial reporting is effective. We have not identified any current material weaknesses
considering the nature and extent of our current operations and any risks or errors in financial
reporting under current operations.
(b) Changes in Internal Controls
There were no changes in the Companys internal control over financial reporting for the three
months ended March 31, 2009 that have materially affected, or are reasonably likely to materially
affect, the Companys internal control over financial reporting.
13
PART II OTHER INFORMATION
Item 6. Exhibits.
|
|
|
|
|
|
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
|
14
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.
|
|
|
|
|
|
|
|
|
Date: May 15, 2009
|
|
|
|
CHINAWE.COM INC.
|
|
|
|
|
|
|
(Registrant)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
By:
|
|
/s/ Man Keung Wai
Man Keung Wai
|
|
|
|
|
|
|
|
|
Chief Executive Officer
|
|
|
|
|
|
|
|
|
(Principal Executive Officer)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
By:
|
|
/s/ Vivian Chu
Vivian Chu
|
|
|
|
|
|
|
|
|
Chief Financial Officer
|
|
|
|
|
|
|
|
|
(Principal Financial Officer)
|
|
|
15
EXHIBIT INDEX
|
|
|
|
|
Exhibit No.
|
|
Description
|
|
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
|
16
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