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 September 30, 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
(State or other jurisdiction of
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95-462728
(I.R.S. Employer Identification No.)
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incorporation or organization)
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Room 1208, 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):
Large accelerated filer
o
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Accelerated filer
o
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Non-accelerated filer
o
(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
þ
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 November 13, 2009
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Common Stock, $.001 par value
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43,800,000
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PART I FINANCIAL INFORMATION
Item 1. Financial Statements.
CHINAWE.COM INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
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Three months ended September 30,
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Nine months ended September 30,
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Note
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2009
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2008
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2009
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2008
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US$
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US$
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US$
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US$
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REVENUES FROM DISCONTINUED OPERATIONS
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Asset management and related services
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185,075
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131,558
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592,807
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185,075
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131,558
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592,807
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Depreciation
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(2,383
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(7,743
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)
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(7,148
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(33,398
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Administrative and general expenses
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(44,454
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)
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(227,745
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(303,194
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(719,577
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)
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LOSS FROM DISCONTINUED OPERATIONS
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(46,837
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)
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(50,413
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(178,784
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(160,168
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NON-OPERATING (EXPENSE) INCOME
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Interest
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(981
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(887
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(2,942
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(18,451
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Surcharge on taxes
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8
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(25,849
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(24,593
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(77,373
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(72,910
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Other income
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178
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628
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575
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10,256
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Provision for contract termination cost
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(68,267
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LOSS BEFORE INCOME TAXES
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(73,489
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(75,265
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(326,791
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(241,273
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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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(73,489
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(75,265
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(326,791
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(241,273
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OTHER COMPREHENSIVE INCOME (LOSS)
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Foreign currency translation
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(260
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1,047
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(348
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(16,679
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COMPREHENSIVE LOSS
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(73,749
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(74,218
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(327,139
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(257,952
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Basic and diluted net income
per share of common stock
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(0.002
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(0.002
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(0.007
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(0.006
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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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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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September 30, 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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253,911
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339,538
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Prepayments, deposits and other debtors
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18,603
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30,419
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Total current assets of discontinued operations
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272,514
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369,957
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Property, plant and equipment, net
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4
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5,592
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12,741
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TOTAL ASSETS OF DISCONTINUED OPERATIONS
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278,106
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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 creditors
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220,401
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294,208
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Customer deposits received
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78,963
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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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10,955
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20,100
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Due to related parties
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6
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1,184,586
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920,193
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Income tax payable
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7
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454,151
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457,618
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Surcharge on taxes
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8
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330,911
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253,335
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Provision
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10
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28,918
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Total current liabilities of discontinued operations
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2,308,885
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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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1,290
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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$0.001 per share;
authorized 100,000,000 shares;
issued and outstanding 43,800,000 shares
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43,800
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43,800
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Capital in excess of par
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85,948
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85,948
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Accumulated losses
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(2,155,249
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(1,828,458
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Accumulated other comprehensive loss
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(6,568
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(6,220
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Total stockholders deficit
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(2,032,069
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(1,704,930
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TOTAL LIABILITIES AND STOCKHOLDERS DEFICIT
OF DISCONTINUED OPERATIONS
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278,106
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382,698
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The financial statements should be read in conjunction with the accompanying notes.
4
CHINAWE.COM INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
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Nine months ended September 30,
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2009
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2008
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US$
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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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(326,791
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)
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(241,273
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)
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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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7,148
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33,398
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Gain on disposal on property, plant and equipment
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(9,016
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Changes in assets and liabilities:
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Accounts receivable, net
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2,365
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Prepayments, deposits and other debtors
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11,816
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2,093
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Accrued expenses and other creditors
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(73,912
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(69,077
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Customer deposits received
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(56,054
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37,439
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Surcharge on taxes
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77,305
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72,910
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Income tax payable
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(3,794
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(1,333
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Provision
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28,918
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NET CASH USED IN OPERATING ACTIVITIES OF DISCONTINUED
OPERATIONS
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(335,364
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(172,494
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CASH FLOWS FROM INVESTING ACTIVITIES OF DISCONTINUED OPERATIONS
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Proceeds from disposal of property, plant and equipment
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9,141
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Purchase of property, plant and equipment
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(6,462
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)
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NET CASH PROVIDED BY INVESTING ACTIVITIES OF
DISCONTINUED OPERATIONS
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2,679
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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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(15,077
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(15,136
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Advance from stockholders
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264,955
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391,181
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Repayment to stockholders
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(311
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)
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(1,908
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Repayment to a director
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(142,272
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)
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NET CASH PROVIDED BY FINANCING ACTIVITIES OF
DISCONTINUED OPERATIONS
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249,567
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231,865
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NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
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(85,797
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)
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62,050
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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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170
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19,123
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CASH AND CASH EQUIVALENTS, END OF PERIOD
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253,911
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382,868
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SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
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Cash paid for interest
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2,942
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18,451
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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 and its
subsidiaries (collectively referred to as the Company) as of September 30, 2009 and December 31,
2008, and its results of operations for the three months and nine months ended
September 30, 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
and recurring accruals) considered necessary for a fair presentation have been included. Operating
results for the three-month and nine-month periods ended September 30, 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.
The Company has evaluated subsequent events after the balance sheet date of September 30, 2009
through the date this quarterly report is filed on November 16, 2009.
Recently issued accounting pronouncements
During the third quarter of 2009, the Company adopted the new Accounting Standards Codification
(ASC) as issued by the Financial Accounting Standards Board (FASB). The ASC has become the
source of authoritative U.S. generally accepted accounting principles (GAAP) recognized by the
FASB to be applied by nongovernmental entities. The ASC is not intended to change or alter existing
GAAP. The adoption of the ASC did not have a material impact on the Companys financial statements.
In June 2009, the FASB issued Statement of Financial Accounting Standards (SFAS) No. 166,
Accounting for Transfers of Financial Assets an amendment of FASB Statement No. 140 (SFAS
166). SFAS 166 requires entities to provide more information about sales of securitized financial
assets and similar transactions, particularly if the seller retains some risk to the assets. The
statement eliminates the concept of a qualifying special-purpose entity, changes the requirements
for the de-recognition of financial assets, and calls upon sellers of the assets to make additional
disclosures about them. SFAS 166 is effective on or after November 15, 2009 and will not have a
material impact on the Companys financial statements.
In June 2009, the FASB issued SFAS No. 167, Amendments to FASB Interpretation No. 46(R) (SFAS
167). SFAS 167 amends Interpretation No. 46(R) to require enhanced disclosures that will provide
users of financial statements with more transparent information about an enterprises involvement
in a variable interest entity. SFAS 167 is effective for an entitys first fiscal period that
begins after November 15, 2009 and will not have a material impact on the Companys financial
statements.
6
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 its service contracts with the Company
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:
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 the service agreements with HOL, which accounted for 100% of the revenue
from asset management and related services for the nine months ended September 30, 2009 and 2008
and has become non-operating since the termination of the aforesaid service contracts with HOL in
March 2009.
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 September 30, 2009, the Company had negative working capital and stockholders
deficit of US$2,036,371 and US$2,032,069, respectively, which raise substantial doubt about its
ability to continue as a going concern. The Company has relied on private financing by cash inflow
from the principal stockholders of the Company, who have agreed not to demand repayment of amounts
due to them as long as the Company has negative working capital. These stockholders have indicated
their intention to finance the Company for a reasonable period of time to enable the Company to
continue as a going concern, assuming that in such a period of time the Company would not be able
to raise additional capital to support its continuation. However, it is uncertain for how long or
to what extent such a period of time would be reasonable and there can be no assurance that the
financing from these stockholders will be continued. The accompanying financial statements do not
include or reflect any adjustments that might result from the outcome of these uncertainties.
4. Property, plant and equipment, net
Property, plant and equipment are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
As of
|
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
US$
|
|
|
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
|
|
|
(159,110
|
)
|
|
|
(153,202
|
)
|
Accumulated impairment loss
|
|
|
|
|
|
|
(17,882
|
)
|
Currency translation adjustment
|
|
|
(1
|
)
|
|
|
2,343
|
|
|
|
|
|
|
|
|
Net
|
|
|
5,592
|
|
|
|
12,741
|
|
|
|
|
|
|
|
|
7
5. Long term debt
Long term debt consists of obligations under capital leases for purchases of vehicles with
US$12,245 and US$27,322 outstanding as of September 30, 2009 and December 31, 2008, respectively.
The debt is collateralized by two motor vehicles with an aggregate net book value of US$5,419 and
US$12,387 as of September 30, 2009 and December 31, 2008, respectively, bearing interest at 3-5%
per annum and is repayable by monthly installments of US$2,002 with the final installments due in
February 2010 and January 2011. Maturity of the debt is as follows:
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
As of
|
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
US$
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
Within 1 year
|
|
|
12,116
|
|
|
|
24,023
|
|
Over 1 year but not exceeding 2 years
|
|
|
3,071
|
|
|
|
8,610
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,187
|
|
|
|
32,633
|
|
Less: Amount representing interest
|
|
|
(2,942
|
)
|
|
|
(5,311
|
)
|
|
|
|
|
|
|
|
Present value of net minimum lease payments
|
|
|
12,245
|
|
|
|
27,322
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current portion
|
|
|
10,955
|
|
|
|
20,100
|
|
Non-current portion
|
|
|
1,290
|
|
|
|
7,222
|
|
|
|
|
|
|
|
|
|
|
|
12,245
|
|
|
|
27,322
|
|
|
|
|
|
|
|
|
6. Related party transactions
The balances with related parties are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
As of
|
|
|
|
Note
|
|
|
September 30, 2009
|
|
|
December 31, 2008
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
US$
|
|
|
US$
|
|
At cost:
|
|
|
|
|
|
|
|
|
|
|
|
|
Advances from stockholders
|
|
|
(a
|
)
|
|
|
1,184,586
|
|
|
|
920,193
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
The amounts due are unsecured, non-interest bearing and repayment will not be requested
by the stockholders as long as the Company has negative working capital. During the nine
months ended September 30, 2009 and 2008, the Company received advances from related parties
of US$264,955 and US$391,181, respectively. In addition, during the nine months ended
September 30, 2009 and 2008, the Company repaid advances of US$311 and US$1,908 to related
parties, respectively.
|
In addition, during the nine months ended September 30, 2009 and 2008, the Company paid
US$11,613 and US$11,613, respectively, to a director in respect of operating lease charges for
premises.
8
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% for the three months and nine months ended September 30, 2009 and 2008. Companies that
carry on business and derive income in the PRC are subject to income tax at 25% for the three
months and nine months ended September 30, 2009 and 2008.
No income taxes have been provided for the subsidiaries in Hong Kong and PRC as they have incurred
losses for taxation purposes during the three months and nine months period ended September 30,
2009 and 2008, respectively.
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.
There was no litigation brought against the Company as of September 30, 2009 and December 31,
2008.
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 September 30, 2009 and December 31, 2008, no awards have been
made under the Plan.
9
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 closed down all
offices and terminated all employees in the PRC. Certain unavoidable costs in respect of severance
payments for the terminated employees and a non-cancellable operating lease have been provided
for, which costs have been included in other current liabilities. A summary of the provision for contract
termination costs is set forth below:
|
|
|
|
|
|
|
As of
|
|
|
|
September 30, 2009
|
|
|
|
(Unaudited)
|
|
|
|
US$
|
|
Severance payments
|
|
|
15,775
|
|
Operating lease
|
|
|
13,143
|
|
|
|
|
|
|
|
|
28,918
|
|
|
|
|
|
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 such new line of
business. The principal stockholders of the Company have agreed not to demand repayment of amounts
due to them as long as the Company has negative working capital and have indicated their intention
to finance the Company to enable the Company to continue as a going concern. See Note 3 to the
financial statements included in Part I of this report.
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,
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenues
|
|
|
|
|
|
|
100
|
|
|
|
100
|
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
|
|
|
|
(127
|
)
|
|
|
(236
|
)
|
|
|
(127
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
|
|
|
|
|
(27
|
)
|
|
|
(136
|
)
|
|
|
(27
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income taxes
|
|
|
|
|
|
|
(41
|
)
|
|
|
(248
|
)
|
|
|
(41
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
|
(41
|
)
|
|
|
(248
|
)
|
|
|
(41
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
THREE MONTHS ENDED SEPTEMBER 30, 2009 (UNAUDITED) COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 2008 (UNAUDITED)
OPERATING REVENUES.
Operating revenues for the third quarter of 2009 were $0 compared to US$185,075
of last year. As the Company discontinued its sole business with Huizhou One
Limited in March 2009, no revenues were generated during the third quarter of 2009.
OPERATING EXPENSES. The Companys operating expenses totaled US$46,837 for the third quarter of
2009, compared to US$235,488 for the third quarter of 2008. This represented a decrease of
US$188,651 mainly due to the decrease in professional fees, rental expenses, motor vehicles
expenses and salary paid to employees following the discontinuation of the Companys business.
NET NON-OPERATING EXPENSES. Total non-operating expenses for the third quarter of 2009 totaled
US$26,652 compared to US$24,852 for the comparable period of 2008. This represented an increase of
7% mainly due to the accumulation of a provision for surcharge relating to PRC business tax for the
three months ended September 30, 2009.
PROVISION FOR INCOME TAXES. No income tax expense for the three months ended September 30, 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 of US$73,489 for the
third quarter of 2009, compared to a net loss of US$75,265 for the third quarter of 2008. This
represented a decreased loss of US$1,776 following the discontinuance of the Companys business.
NINE MONTHS ENDED SEPTEMBER 30, 2009 (UNAUDITED) COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
2008 (UNAUDITED)
OPERATING REVENUES. Operating revenues for the nine months of 2009 totaled US$131,558 compared to
US$592,807 for the comparable period last year. This represented a decrease of 78% mainly due to
the decrease in the scale of business. Operating revenues ceased to be generated since the
termination of all service contracts in March 2009.
OPERATING EXPENSES. The Companys operating expenses totaled US$310,342, or 236% of operating
revenues, for the first three quarters of 2009, compared to US$752,975, or 127% of operating
revenues, for the first three quarters of 2008. This represented a decrease of US$442,633 or 59%
mainly due to the decrease in professional fees, rental expenses and salary paid to employees
following the termination of contracts in March 2009.
NET NON-OPERATING EXPENSES. Total non-operating expenses for the first three quarters of 2009
totaled US$148,007 compared to US$81,105 for the first three quarters of 2008. The increase was
mainly due to the provision for termination costs for the nine months ended September 30, 2009.
PROVISION FOR INCOME TAXES. No income tax expense for the nine months ended September 30, 2009 and
2008 was incurred because the Company and its subsidiaries incurred losses for taxation purposes.
11
NET LOSS FROM DISCONTINUED OPERATIONS. The Company has recorded a net loss of US$326,791 for the
first three quarters of 2009, compared to a net loss of US$241,273 for the first three quarters of
2008. As a result of the decrease in revenue accompanied by the expenses provided for the
discontinuance of the Companys business, the Company suffered a net loss in the
three first three quarters of 2009 larger than the loss for the same period in 2008.
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, 2009 and December 31, 2008 were US$253,911
and US$339,538, respectively.
Net cash used in operating
activities was US$335,364 and US$172,494 for the nine month periods
ended September 30, 2009 and 2008, respectively.
Net cash provided by
investing activities was $0 and US$2,679 for the nine month periods ended
September 30, 2009 and 2008, respectively, which is a result of proceeds from the disposal of
property, plant and equipment.
Net cash provided by
financing activities was US$249,567 and US$231,865 for the nine month periods
ended September 30, 2009 and 2008, respectively. The positive cash flow is a result of advances
from stockholders. See Note 6 to the financial statements included in Part I of this report.
During the nine month
periods ended September 30, 2009 and 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 month
periods ended September 30, 2009 and 2008, the Company made 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.
12
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.
|
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 expense 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.
Based
on managements assessment of the effectiveness of the
Companys internal controls over
financial reporting as of the nine months ended September 30, 2009, we believe that our internal
controls 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 over Financial Reporting
There were no changes in the Companys internal controls over financial reporting during the nine
months ended September 30, 2009 that have materially affected, or are reasonably likely to
materially affect, the Companys internal controls 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) 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: November 16, 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
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