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

 

FORM 20-F

 

CHINESEWORLDNET.COM INC.

 

¨ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

 

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

For the fiscal year ended December 31, 2013

OR

 

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

For the transition period from__________ to _________

OR

 

¨ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report ___________

 

Commission file number 000-33051

 

CHINESEWORLDNET.COM INC.

(Exact name of Registrant as specified in its charter)

 

CAYMAN ISLANDS

(Jurisdiction of incorporation or organization)

 

Appleby, Clifton House 75 Fort Street, PO Box 190, Grand Cayman E9 KY1-1104

(Address of principal executive offices)

 

Mr. Chi Cheong Liu
President, Chief Executive Officer, Chief Financial Officer, Secretary and Treasurer
Tel: +1 (345) 814-2743 Email: info@chineseworldnet.com
Appleby, Clifton House 75 Fort Street, PO Box 190, Grand Cayman E9 KY1-1104

(Name, Telephone, Email and/or Facsimile number and Address of Company Contact Person)

 

Securities registered or to be registered pursuant to Section 12(b) of the Act.

Title of each class Name of each exchange on which registered
Not Applicable Not Applicable

 

Securities registered or to be registered pursuant to Section 12(g) of the Act.

Common Shares, Par Value of US$0.001 Per Share
 
(Title of Class)

 

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.
Not Applicable
(Title of Class)

 

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report: 10,950,000 common shares

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

¨ Yes x No

 

If this report is an annual or transaction report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

¨ Yes x No

 

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.

x Yes ¨ No

 

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).

x Yes ¨ No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.  See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

¨ Large accelerated filer   ¨ Accelerated filer   x Non-accelerated filer

 

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

x  U.S. GAAP   ¨ International Financial Reporting Standards as issued by the
International Accounting Standards Board 		  ¨ Other

 

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.

¨ Item 17 ¨  Item 18

 

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

x Yes ¨ No

 

 
 

 

TABLE OF CONTENTS

 

Part I 4
  Item 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS 4
  Item 2. OFFER STATISTICS AND EXPECTED TIMETABLE 4
  Item 3. KEY INFORMATION 4
    A. Selected Financial Data 4
    B. Capitalization and Indebtedness 4
    C. Reasons for the Offer and Use of Proceeds 5
    D. Risk Factors 5
  Item 4. INFORMATION ON THE COMPANY 6
    A. History and Development of the Company 6
    B. Business Overview 7
    C. Organizational Structure 14
    D. Property, Plants and Equipment 14
  Item 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS 14
    A. Results of Operations 14
    B. Liquidity and Capital Resources 21
    C. Research and Development, Patents and Licenses 21
    D. Trend Information 21
    E. Off-Balance Sheet Arrangements 21
    F. Tabular Disclosure of Contractual Obligations 21
  Item 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES 21
    A. Directors and Senior Management 21
    B. Compensation 22
    C. Board Practices 22
    D. Employees 23
    E. Share Ownership of Directors and Senior Management 23
  Item 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS 24
    A. Major Shareholders 24
    B. Related Party Transactions 24
    C. Interests of Experts and Counsel 25
  Item 8. FINANCIAL INFORMATION 25
    A. Financial Statements 25
    B. Significant Changes 25
  Item 9. THE OFFER AND LISTING 25
    A. Offer and Listing Details 25
    B. Plan of Distribution 26
    C. Markets 26
    D. Selling Shareholders 26
    E. Dilution 26
    F. Expenses of the Issue 26
  Item 10. ADDITIONAL INFORMATION 26
    A. Share Capital 26
    B. Memorandum and Articles of Association 26
    C. Material Contracts 27
    D. Exchange Controls 27
    E. Taxation 27
    F. Dividends and Paying Agents 27
    G. Statement by Experts 27
    H. Documents on Display 28
    I. Subsidiary Information 28
  Item 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 28
  Item 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES 28

 

 
 

 

Part II 28
  Item 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES 28
  ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS 28
  ITEM 15. CONTROLS AND PROCEDURES 28
  ITEM 16. [RESERVED] 29
  ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT 29
  ITEM 16b. CODE OF ETHICS 29
  ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES 30
  ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES 30
  ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILAITED PURCHASERS 30
  ITEM 16f. changes in registrant's certifying accountant 30
  ITEM 16G. CORPORATE GOVERNANCE 30
  ITEM 16H. MINE SAFETY DISCLOSURE 30
       
Part III 30
  Item 17. FINANCIAL STATEMENTS 30
  ITEM 18. FINANCIAL STATEMENTS 31
  ITEM 19. EXHIBITS 31

 

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INTRODUCTION AND USE OF CERTAIN TERMS

 

ChineseWorldNet.Com Inc. is a corporation incorporated under the Company Law (1998 revision) of the Cayman Islands on January 12, 2000.  Except as the context otherwise requires, all references in this annual report (the “ Report ”) on Form 20-F to “we,” “us,” “our,” “CWN,” and the “Company” are to ChineseWorldNet.Com Inc. and, where applicable, our former subsidiaries, including NAI Interactive Ltd. ( “NAI” ), a company incorporated under the laws of British Columbia, ChineseWorldNet.com (Hong Kong) Ltd. ( “CWN HK” ), a company incorporated under the laws of Hong Kong, 85% owned interest in ChineseWorldNet.com (Shanghai) Ltd. ( “CWN China” ), a company incorporated under the laws of People’s Republic of China, and 85% owned interest in Weihai Consulting Investment Ltd. (“ Weihai ”), a company incorporated under the laws of People’s Republic of China.

 

Our consolidated financial statements are prepared in accordance with the United States generally accepted accounting principles ( “US GAAP” ) and are presented in United States dollars ( “US dollars” ).  All monetary amounts contained in this Report are in US dollars unless otherwise indicated.  References to “Fiscal 2013” are to our fiscal year ended December 31, 2013, and other fiscal years of the Company are referred to in a corresponding manner.  References to “Common Shares” are to our Common Shares, par value of US$0.001 per share.

 

Our registered office and principal executive office is located at Appleby, Clifton House, 75 Fort Street, P.O. Box 190, Grand Cayman, Cayman Islands KY1-1104. 

 

CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS

 

This Report contains forward-looking statements that reflect the management’s current expectations and assumptions with respect to the general economic and business conditions, our operation and business strategies, products, services and competition, future financial position and results, and various other factors, both referenced and not referenced in this Report.  All statements made in this Report other than statements of historical fact, including, among others, statements that address operating performance, events, circumstances, or developments that the management expects or anticipates will or may occur in the future, statements related to revenue and volume growth, profitability, new sales and marketing channels, adequacy of and ability to raise additional funding for operations, and statements expressing general optimism about future operating results and non-historical information, are forward-looking statements.  In particular, the words “believe,” “expect,” “intend,” “anticipate,” “estimate,” “plan,” “target,” “may,” variations of such words, and similar expressions identify forward-looking statements, but are not the exclusive means of identifying such statements and their absence does not mean that statements are not forward-looking.

 

These forward-looking statements are subject to risks and uncertainties that could cause our actual financial position and results to differ materially from those expressed in, anticipated or implied by these forward-looking statements for many reasons, including the risks and statements described in more detail under “ Item 3. Key Information – D. Risk Factors” and “Item 5. Operating and Financial Review and Prospects” included elsewhere in this Report.  We do not undertake any obligation to revise or update these forward-looking statements to reflect new information, future events or circumstances unless required by applicable legislation or regulation.  These forward-looking statements contained in this Report are expressly qualified by this cautionary statement.

 

 
 

 

Part I

 

Item 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS

 

This Report on Form 20-F is being filed as an annual report under the Securities Exchange Act of 1934 (the “ Exchange Act ”) and, as such, there is no requirement to provide any information under this item.

 

Item 2. OFFER STATISTICS AND EXPECTED TIMETABLE

 

This Report on Form 20-F is being filed as an annual report under the Exchange Act and, as such, there is no requirement to provide any information under this item.

 

Item 3. KEY INFORMATION

 

A. Selected Financial Data

 

The following table sets forth selected consolidated financial information from our consolidated financial statements prepared in accordance with US GAAP for our five most recently completed fiscal periods consisting of the years ended December 31, 2013, 2012, 2011, 2010 and 2009.  The information for the last three fiscal years ended December 31, 2013, 2012 and 2011, have been extracted from our audited consolidated financial statements and the related notes included herein and should be read in conjunction with such in “ Item 5 – Operating and Financial Review and Prospects” .  Information for the year ended December 31, 2010 has been extracted from audited consolidated financial statements not disclosed elsewhere and presented below.

 

    Year ended December 31,  
    2013     2012     2011     2010     2009  
Consolidated Statements of Operations:                                        
Revenue   $ 937,781       1,243,638       1,675,875       1,733,329       906,455  
Net income (loss) for the year     (521,394 )     (128,931 )     138,040       296,604       (402,209 )
Net income (loss) attributable to non-controlling interest     (31,156 )     (43,843 )     (60,926 )     107,858       (72,977 )
Net income (loss) attributable to common stockholders     (490,238 )     (85,088 )     198,966       188,746       (329,232 )
Earning (loss) per share – basic     (0.05 )     (0.01 )     0.01       0.02       (0.03 )
Earning (loss) per share – diluted     (0.05 )     (0.01 )     0.01       0.02       (0.03 )
Weighted average common shares outstanding – basic     10,950,000       10,950,000       10,950,000       10,873,288       10,700,000  
Weighted average common shares outstanding – diluted     10,950,000       10,950,000       11,404,862       10,873,288       10,700,000  
                                         
Consolidated Balance Sheets:                                        
Total assets   $ 3,164,476       2,571,264       3,182,417       2,171,219       1,933,021  
Equipment     14,853       23,515       36,519       50,521       73,012  
Total current liabilities     1,679,145       546,060       1,123,354       384,673       583,959  
Total stockholders’ equity (deficiency)     1,485,331       2,025,204       2,059,063       1,786,546       1,349,062  

 

No dividends have been declared or paid in Fiscal 2013 and Fiscal 2012.

 

B. Capitalization and Indebtedness

 

This Report on Form 20-F is being filed as an annual report under the Exchange Act and, as such, there is no requirement to provide any information under this item.

 

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C. Reasons for the Offer and Use of Proceeds

 

This Report on Form 20-F is being filed as an annual report under the Exchange Act and, as such, there is no requirement to provide any information under this item.

 

D. Risk Factors

 

The following discussion in this Report on Form 20-F contains forward-looking statements regarding our business, prospects and results of operations that involve risks and uncertainties.  Our actual results may differ materially from the results that may be anticipated by such forward-looking statements and discussed elsewhere in this Report. Factors that could cause or contribute to such differences include, but are not limited to, those discussed below, as well as those discussed under the heading “Item 4 – Information on the Company” and “Item 5 – Operating and Financial Review and Prospects” and those discussed elsewhere in this Report.  In evaluating our business, prospects and results of operations, readers should carefully consider the following factors in addition to other information presented in this Report and in our other reports filed with the Securities and Exchange Commission that attempt to advise interested parties of the risks and factors that may affect our business, prospects and results of operations.  See “Cautionary Notice Regarding Forward Looking Statements” above.

 

Trading of our common shares may be restricted by the Securities and Exchange Commission’s penny stock regulations which may limit a shareholder’s ability to buy and sell our common shares

 

The Securities and Exchange Commission has adopted Rule 15g-9 which generally defines “penny stock” to be any equity security that has a market price (as defined) of less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. Our common shares are covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and “accredited investors”. The term “accredited investor” refers generally to institutions with assets in excess of $5,000,000 or individuals with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouse. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the Securities and Exchange Commission which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny stock held in the customer’s account. The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer’s confirmation. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the stock that is subject to these penny stock rules. Consequently, these penny stock rules may affect the ability of broker-dealers to trade our securities. We believe that the penny stock rules discourage investor interest in and limit the marketability of our common shares.

 

Our shareholders may face difficulties in protecting their interests because we are incorporated under Cayman Islands law.

 

Our corporate affairs are governed by our memorandum and articles of association, by the Company Law (1998 Revision) and the common law of the Cayman Islands.  The rights of shareholders to take action against our directors, actions by minority shareholders and the fiduciary responsibilities of our directors under Cayman Islands law are to a large extent governed by the common law of the Cayman Islands.

 

Under the common law of the Cayman Islands, the fiduciary relationship of a director is to the Company and a director, therefore, does not usually owe a fiduciary duty to individual shareholders.  As a result, it may be difficult for a shareholder to take action against the directors for breach of fiduciary duty.

 

The common law in the Cayman Islands is derived in part from comparatively limited judicial precedent in the Cayman Islands and from English common law, the decisions of whose courts are of persuasive authority but are not binding on a court in the Cayman Islands.  Cayman Islands law in this area may conflict with jurisdictions in the United States and/or other jurisdictions.  As a result, our public shareholders may face more difficulties in protecting their interests in the face of actions against the management, directors or our controlling shareholders than would shareholders of a corporation incorporated in a jurisdiction in the United States.

 

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There is uncertainty as to our shareholders’ ability to enforce civil liabilities in the Cayman Islands.

 

We are a Cayman Islands company and have no assets located in the United States.  All of our directors and officers are nationals and/or residents of countries other than the United States.  All or a substantial portion of the assets of these persons are located outside the United States.  As a result, it may be difficult to effect service of process within the United States upon these persons.  In addition, there is uncertainty as to whether the courts of the Cayman Islands and other jurisdictions would recognize or enforce judgments of United States courts obtained against us or such persons predicated upon the civil liability provisions of the securities laws of the United States or any state thereof, or be competent to hear original actions brought in the Cayman Islands or other jurisdictions against us or such persons predicated upon the securities laws of the United States or any of our state.

 

Item 4. INFORMATION ON THE COMPANY

 

A. History and Development of the Company

 

ChineseWorldNet.Com Inc. was incorporated on January 12, 2000 under the Company Law (1998 revision) of the Cayman Islands.   The address of our registered and principle executive office is that of our agent, Appleby, being: Clifton House, 75 Fort Street, P.O. Box 190, Grand Cayman, Cayman Islands KY1-1104, telephone number is (345) 949-4900. 

 

In August 2009, we incorporated CWN Capital Inc. (“ CWN Capital ”) under the BVI Business Companies Act, with a registered address at Morgan & Morgan Building, Pasea Estate, Road Town, Tortola, British Virgin Islands, focusing on capital markets businesses.  CWN Capital provided a vehicle for expanding the scope of our businesses into the capital markets.  On October 1, 2010, CWN Capital completed a non-brokered private placement and issued 25,000 of its common shares at a subscription price of $0.01 per share to Silver Lake Investment Partners, Ltd., resulted in CWN diluted down to a 50% ownership in CWN Capital.  On December 18, 2010, CWN Capital completed another non-brokered private placement and issued 55,000 of its common shares at a subscription price of $1.00 per share to Goldpac Investments Partners Ltd., resulted in CWN a diluted down to 23.8% ownership in CWN Capital. As a result we deconsolidated CWN Capital on December 18, 2010 and recorded our interest in CWN Capital as an equity interest. Silver Lake Investment Partners, Ltd. and Goldpac Investments Partners Ltd. were companies controlled by two directors of our company.

 

On September 8, 2009, CWN China funded and incorporated Weihai as a local entity for the purpose of carrying out certain business operations in the Greater China.  Weihai has the same address as CWN China.  Through CWN China, we had a 85% controlling interest in Weihai.

 

On February 1, 2008, CWN HK and Shanghai Compass Venture Capital Investment Company Limited (“ Shanghai Compass ”) signed an Agreement to Establish CWN China Co., Ltd., a Chinese-Foreign Joint Venture Limited Liability Company.  In April 2008, the two parties incorporated CWN China with CWN HK having a 70% controlling interest in CWN China. In March 2011, we completed substantially all of the regulatory procedures and processes with Shanghai Compass, the other shareholder of CWN China and invested further 5,000,000 Renminbi to CWN China. CWN HK is required to contribute the additional registered capital of 5,000,000 Renminbi by paying cash within two years from August 19, 2011. During the year ended December 31, 2011, CWN HK paid cash of $400,000 which result of our financial interest increased from 70% to 80%. During the year ended December 31, 2012, CWN HK further paid cash of $200,000 which resulted in our financial interest increasing from 80% to 83.67%. During the fiscal year 2013, CWN HK further invested an amount of $187,200 to CWN China and the Company‘s effective ownership of equity interest increased from 83.67% to 85% in CWN China. CWN China has an office located at #1003, Eton Place Tower B, 555 Pudong Ave., Shanghai, PRC 200120.  CWN China provided us with the capabilities and resources to penetrate and expand particularly in the Greater China markets.  As of December 31, 2013, there were approximately eleven employees in Shanghai, China, with duties ranging from translations, web design and technical support, to sales, business development and marketing.  CWN China also headed our efforts in hosting various events in the Greater China.

 

During Fiscal 2012 and Fiscal 2013, we made no purchases of property and equipment. There are currently no major capital projects or divestitures in progress.

 

Sale of Subsidiaries

 

On April 28, 2014, the Company completed the sale of all shares that the Company owned in the capital of its subsidiaries to Ningbo International Limited (the “Purchaser” ) in exchange for a cash payment of CDN$263,968.90 and a non-interest bearing promissory note in the principal amount of CDN$831,031.10 with a maturity date of one year with the option to extend upon mutual agreement (the “Transaction” ), pursuant to a share purchase agreement dated March 19, 2014 (the “Share Purchase Agreement” ). The Transaction amounted to the sale of substantially all of the assets of the Company.

 

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Pursuant to the Share Purchase Agreement, the Company sold its right, title and interest in and to all shares that the Company owned in the capital of its subsidiaries as follows:

 

1. 100 shares in the capital of NAI Interactive Ltd. ( “NAI” ), which shares represent all of the issued and outstanding shares in the capital of NAI;

 

2. 990 shares in the capital of ChineseWorldNet.com (Hong Kong) Ltd. ( “CWN HK” ) and 10 shares in the capital of CWN HK owned by Chi Cheong Liu, a director and major shareholder of the Company, on the Company’s behalf, which shares, together, represent all of the issued and outstanding shares in the capital of CWN HK; and

 

3. 25,000 shares in the capital of CWN Capital Inc. ( “CWN Capital” ), which shares represent 23.8% of the issued and outstanding shares in the capital of CWN Capital.

 

The shareholders of the Company approved the Share Purchase Agreement at the extraordinary general meeting of the shareholders of the Company held on April 18, 2014.

 

CHANGE OF DIRECTORS AND OFFICERS

 

In connection with the closing of the Share Purchase Agreement, on April 28, 2014, Joe K.F. Tai resigned as President, Chief Executive Officer and a director of the Company, Andy S.W. Lam resigned as a director of the Company, Kelvin Szeto resigned as Chief Financial Officer and Chief Operating Officer of the Company, Gilbert Chan resigned as Senior Vice President, Marketing and Investor Relations of the Company and Terry Wong resigned as Financial Expert of the Company. In addition, on April 28, 2014, Chi Cheong Liu was appointed as President, Chief Executive Officer, Chief Financial Officer and Secretary of the Company.

 

B. Business Overview

 

As of Fiscal 2013, we had four principal businesses operated by NAI, CWN HK and CWN China: (1) the financial web portal (“ Portal ”) business, conducted under the ChineseWorldNet.com brand via the “www.chineseworldnet.com” website; (2) the investor relations and public relations (“ IR/PR ”) business, conducted under the NAI500 brand via a number of media channels including the “www.nai500.com” and “en.nai500.com” websites, as well as certain other promotional services; (3) the North America and Greater China cross-border business partnering conferences (“ Conference ”) business, conducted via the brand of Global Chinese Financial Forum and its ”www.gcff.ca” website; and (4) the financial content and information distribution business.

 

Financial Web Portal (“Portal”) Business

 

Overview

 

NAI’s www.chineseworldnet.com website is a web-based portal that provides up-to-date financial content and information and financial management tools in the Chinese language targeting the Chinese investor community in North America.  The Portal business provides financial news and covers corporate information of more than 98% of the listed stocks on major North American exchange markets, including New York Stock Exchange (“ NYSE ”), American Stock Exchange (“ AMEX ”), NASDAQ Stock Market (“ NASDAQ ”), OTC Bulletin Board (“ OTCBB ”), Toronto Stock Exchange (“ TSX”) , and Toronto Venture Exchange (“ TSX-V ”).  The Portal business also provides certain coverage of the financial markets in China, Hong Kong and Taiwan.  All information and services that are provided through the www.chineseworldnet.com website are free of charge, except certain premium and personalized information and services such as premium articles and market commentary accessible only by “ Premium Subscribers ” who are required to register as a subscriber and pay a subscription fee.

 

Current Product / Service Offering

 

The Portal business provides an abundant of resources and investor’s tools on a variety of items including: Stocks, Forex, Options, Futures, ETF (exchange-traded funds), Financial Services and Financial Products.  The following contents and features are provided free of charge on the www.chineseworldnet.com website to all readers, other than the Premium Services described below for which a subscription fee is charged.

 

Company Profile

 

This section features a variety of interactive investment tools that enable users to conduct their own financial research of companies, including delayed stock quotes, summary company profiles, analysts’ buy/sell ratings, company news, insider trading information, intraday and historical stock charts, and financial statements summary.

 

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Headlines and Market News

 

Throughout the day, the Portal provides headlines and news stories in brief covering various corporate announcements.  The Portal also provides continuous update of market news from 5 a.m. to 5 p.m. Pacific Time on each business day covering the latest movements of the major indices, the most active stocks, news from foreign markets, earnings news, mergers and acquisitions news, and other major market events.

 

Commentary

 

This section features commentary prepared by in-house editorial team and external contributors who comment on topics such as money management, technical analysis, currency issues, industry analysis, macroeconomics, fundamental analysis, financial planning, mutual funds, initial public offerings, technology, and international investing.

 

Premium Services

 

In addition to the provision of financial news and corporate information of public companies in North America and the Greater China region, our www.chineseworldnet.com website also offers to Premium Subscribers, through partnerships and affiliations, personalized services such as online investment tools and applications such as portfolio tracking.  The following “ Premium Services ” are provided to Premium Subscribers, who currently pay a monthly subscription fee of $9.95 or an annual subscription fee of $59.95.

 

a. Personalized Financial Services “MyCWN”:

 

“MyCWN” is a platform on the www.chineseworldnet.com website that allows Premium Subscribers to create a personalized portal to customize and manage their own personal stock portfolios. They can also easily access and view news and information of companies in their particular portfolios.

 

b. CWN Research Reports

 

Premium Subscribers get access to weekly in-depth research reports prepared by the in-house editorial team on individual stocks, overall market trends, industry, and other topics of interest.

 

Future Product / Service Offering

 

Readers are not required to register as subscribers at this time.

 

During fiscal 2011, www.chineseworldnet.com website was upgraded to provide a new layout that focuses on user friendliness. 

 

Revenue Model of the Portal Business

 

Premium Subscription Fees

 

All information and services provided through the www.chineseworldnet.com website are free of charge, except certain premium and personalized information and services such as premium articles and market commentary accessible only by Premium Subscribers who are required to register as a subscriber and pay a subscription fee.  Currently, Premium Subscribers pay a monthly subscription fee of $9.95 or an annual subscription fee of $59.95.

 

Banner Advertising

 

NAI derived revenue from selling banner advertising space on the   www.chineseworldnet.com website.  The fee for a six-month banner ad ranges from $750 to $1,980 per month.  The amount of fees charged depends on the size and the location of the banner ad on the website.  There is no price adjustment to the monthly fees if the actual clicks differ from the estimated clicks.

 

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Online Marketing and Intermediary Service

 

It was our intention that its subscribers be able to access information on various financial products and service providers such as online brokerage, mutual funds, insurance and bonds by logging onto its partnering companies’ independent Internet-based trading platforms through its web portal.  However, the Company was not involved in executing any types of transactions for the account of others.  All trading transactions are performed directly between the subscribers and partnering companies.  In order to do so, the subscribers have to independently register with partnering companies.

 

The Portal business derives no revenue from ubscribers through this service offering.

 

Investor Relations and Public Relations (“IR/PR”) Business

 

Overview

 

The IR/PR business was the result of the acquisition of NAI.  NAI operates the IR/PR business focusing on providing IR/PR services for fast growing public companies trading on the North American exchange markets to reach the Chinese investor community in North America through various media such as its www.nai500.com website, publications, and various web and online marketing services.  In May 2009, NAI rebranded its business model and launched “NAI 500” which provides the 500 fastest growing companies from 10 different sectors generated from NAI’s market intelligence and street-smart expertise accumulated through its 10 plus years of operations and experience.  NAI also added a road show business component in 2009, providing face-to-face meeting opportunities for public companies and institutional and retail investors.

 

Current Product / Service Offering

 

www.nai500.com and NAI 500

 

NAI operates the www.nai500.com website (formerly www.na-investor.com) which provides IR/PR services to fee-paying North American public company clients who are listed or quoted on the small or micro public markets in North America, such as the TSX, TSX-V, NASDAQ and OTCBB.  The website offers stock quotes, company reviews, newsletters and guide to investing of these client companies in the Chinese language to readers in the Chinese investor community in North America.  Currently, there are over 64,000 registered members on the www.nai500.com website which attracts over 1,800,000 viewers each month.

 

In May 2009, NAI launched an English version of the www.nai500.com website, the en.nai500.com website, in order to meet the needs of a broader reader base including those who prefer the English language.

 

Also in May 2009, NAI rebranded its business model and launched “ NAI 500 ” which provides the 500 fastest growing companies from 10 different sectors including: Mining and Resources; Oil and Gas; Clean Tech; Life Science; Industrial Products; Software and IT Services; Technology; Consumer Products and Services; China-theme Stocks; and Special Industries.  This is generated from NAI’s market intelligence and street-smart expertise accumulated through its 10 plus years of operations and experience, and is being updated monthly.

 

In October 2010, NAI launched the “ NAI 500 iPhone App ”, which is a mobile phone application designed for iPhone users to access NAI 500 content and information from their iPhone including delayed stock quotes and updates, daily top stories, press releases etc., available in both Chinese and English, downloadable from the Internet for free.

 

Unlike www.chineseworldnet.com, www.nai500.com is not a financial portal for registered members or readers but an Internet-based medium for the dissemination of information from fee-paying client companies to increase exposure in the Chinese investor community.  NAI charges its client companies an annual fee of $4,500 to $6,800 for these services.  There is no fee being charged to individual registered members or readers of the www.nai500.com website. The company is launching the new upgraded version of NAI500.com by middle of the year 2013 to accommodate the growing needs of investors in Asia to look for online investment info in North America. New version will add more functionality and interactive capability to enhance the user experience at the platform of both the client companies and individual members. This new version will be marketed to attract US listed client companies where such market is currently untapped for the company.

 

Road Show Business

 

During fiscal 2010, NAI started the Road Show Business where it creates and provides face-to-face meeting opportunities for its North American public company clients and their representatives to meet with potential institutional and high net worth individual investors in Greater China.  NAI operates its Road Show Business in two separate models: firstly, multi-client road shows and secondly, tailor made road shows for individual clients. NAI arranges everything from top to bottom and brings its client companies together in Greater China and provides an environment (e.g. private meetings, presentations, luncheons, dinners etc.) for them to meet with potential investors, and charged the participating companies for fees and expenses accordingly, ranges from $20,000 to $25,000.  NAI operates this through collaboration with various investment groups in China in addition to partnership with a top local brokerage firm that has a client base and network of over 3 million potential investors.  NAI focused on working with Mining companies listed on TSX or TSX Venture in the past 3 years but has expanded more to the oil & as sector beginning in 2013. NAI expects to continue to expand its Road Show Business in 2014 by continuing the same format.

 

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Design, Printing and Translation Services

 

NAI provides various IR/PR services to its client companies such as the design and printing of promotional materials and financial reports.  NAI also provides translation service to its client companies translating promotional materials and financial reports from English into Chinese.  NAI charges $100 to $150 per page for its translation service.

 

Chinese Webpage Design, Hosting and Maintenance

 

NAI offers assistance to client companies to translate their English websites into Chinese.  These Chinese web pages are linked to the featured company section on the www.nai500.com website.  NAI charges a one-time set-up fee plus a 12-month maintenance fee for our services ranging from $2,000 to $5,000 based on the scope of services as agreed with each client.

 

Online Marketing Service

 

This service aims to increase the publicity and website traffic of client companies’ websites.  Our range of online marketing service includes the creation of search criteria for Internet-based search engines to enable quick access to client companies’ websites, e-mail blasts to NAI members and other services such as online promotional events to help increasing Internet traffic to client companies’ websites.  In particular, our “Mining Search Engine” was launched in November 2006 focusing on the promotion of client companies from the mining sector. This service aims to provide and promote the mining companies’ information and news to potential investors and at the same time increasing such companies’ publicity in the community.  NAI currently charges its e-mail blast service at $600 to $1,200 per blast which reaches over 64,000 of our registered members.

 

Publication Service

 

NAI began publishing specialty investment publications in 2002. The first investment handbook was focused on the mining sector, selling for CDN$13.80 Canadian dollars each.  In 2005, NAI published the Mining Investment Guide, Vol. 3 and the Chinese Theme Stocks Investment Guide, Vol. 1, both selling for CDN$13.80 Canadian dollars each.  In 2006, NAI published the Mining Investment Guide, Vol. 4, selling at an increased price of CDN$29.50 Canadian dollars each due to content increase.  In 2007, NAI published the Mining Investment Guide, Vol. 5 and the Chinese Theme Stocks Investment Guide, Vol. 2 – A New Chapter of Success, both selling for $29.95 each.  In 2008, NAI published the Resource Investment Guide, Vol. 6, a renamed iteration of the Mining Investment Guide, selling for $29.95 each.  In 2009, NAI published the Resource Investment Guide, Vol. 7 and the China Theme Stocks Investment Guide 2009/2010, both selling for $29.95 each.  In 2010, NAI published the Resource Investment Guide 2010/2011, Vol. 8, selling for $29.95 each.  In 2011, NAI published the Resource Investment Guide Vol 9 - 2011/2012 selling for the same price again. For 2012, NAI distributed the Resource Investment Guide through paid distribution channels, such as book stores, in both North America and China, and NAI also intend to increase the price of the Resource Investment Guide to $39.95. In 2013, NAI published the Gold Book, which was sold for USD$49.99. NAI charge client companies ranged at $500 to $2,000 each to be profiled in the publications.  The publications are sold through NAI’s and CWN HK’s offices, online and in selected bookstores. In 2013, the company launched various investment guides with more sector focus: gold, uranium, specialty metals and energy.

 

NAI Membership

 

NAI Membership program is a new feature started in late 2012 as a result of growing interests from individual investors to gain more knowledge and attend more our private investor meetings and luncheons. Each membership is sold at CDN$50 yearly to earn priority seating at our investor events, a copy of our Resource investment Guide, and subscribe to our weekly newsletter “Resource Weekly”. This newsletter is a 6-8 page weekly summary of the market news and activities in the global resource market. It is written in English and translated then into Chinese. Both versions were being distributed at the beginning of each week.

 

Future Product / Service Offering

 

With the sale of NAI in April 2014, the Company will have no further involvement with future products and service offerings of the IR/PR business.

 

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Revenue Model of the IR/PR Business

 

The IR/PR business is marketed via the brand name of NAI 500.  Sources of revenue for the IR/PR business are from each of the current product / service offering mentioned above.

 

Conference (“Conference”) Business

 

Overview

 

NAI’s conference business was originally an integrated aspect of products and services provided by NAI under our IR/PR business model.  Because of the success of our conference series in 2006, the conference business has grown to become an individual component of our business model.

 

NAI organizes and markets its conferences in the name of Global Chinese Financial Forum (“ GCFF ”) in the North America and China and operates the investment seminar and conference website www.gcff.ca. GCFF provides a networking environment for local private and public companies and services providers in China.  Since 2008, GCFF has increased its focus and efforts on providing cross-border partnership opportunities in the capital markets in North America and Greater China.  The GCFF aims to be the largest series of bilingual (Chinese/English) financial and business related functions connecting participants and client companies including individual potential investors, public and private companies, service providers, and various industry associations.  Revenue generated through GCFF is recorded under the revenue model of NAI 500. In 2013, NAI successfully held two Global Resource Investment Conferences in China in the cities of Shanghai and Shenzhen. The strategy is to build GCFF series in different cities of Canada, US or Greater China to serve the local market. As of 2013, NAI has successfully hosted GCFF events in Vancouver, Toronto, Shenzhen, Shanghai, and Hong Kong and intends to expand its presence into more other cities in the future and increase the scale of its events.

 

Current Product / Service Offering

 

The format of GCFF is conducted through exhibition booths and presentation sessions, held in various cities in North America and China. While client companies can pay a fee to rent an exhibition booth area to showcase and promote their companies, they can also conduct corporate presentations in the industry related topics determined beforehand.  Since 2008, GCFF has established itself to serve for two distinctive purposes: (1) the retail investment services to bring together the Chinese-speaking retail investors and the players in the financial markets at its Retail Events, and (2) the cross-border (North America and Greater China) capital market and strategic investment services at its Institutional Events.  With respect to its Institutional Events, GCFF offers its client companies the Privately Arranged Meetings service, which provides them and the participants the opportunities to meet together through the arrangement of GCFF based on criteria set upon by all parties prior to the events.  The Privately Arranged Meetings service has become a major pillar of the GCFF business, which took major spotlights in our previous conferences.

 

General sponsorship opportunities are available for all conferences for a fee. There are several categories of sponsorship for interested parties to participate and sponsor our conferences. These categories include Platinum, Gold, Silver, Corporate and Media, in addition to the Global Corporate Sponsorship program.  Conference specific sponsorship opportunities are also available for a fee with a focus on specific functions and themes of the events.

 

Future Product / Service Offering

 

With the sale of NAI in April 2014, the Company will have no further involvement with future products and service offerings of the GCFF conferences.

 

Revenue Model of the Conference Business

 

NAI charges $3,000 for a standard exhibition booth at GCFF retail level events.  With respect to the GCFF industrial, cross-border related events, individual delegate passes were charged between $980 and $1680.  NAI also earned revenue from sponsorships. Conference specific sponsorship fees ranged from $5,000 to $30,000.   As of Fiscal 2013, complimentary admission is offered for individual investors pre-registering for the conferences.  Drop-in attendees were required to pay an admission fee ranging from $15 to 25 depending on the conferences. 

 

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FINANCIAL CONTENT AND INFORMATION DISTRIBUTION BUSINESS

 

Overview

 

During fiscal 2010, we had restructured our business model and focused our resources on the development as a financial content and information provider targeting potential investors in the Greater China; in addition to building our network with various content and information distribution channels in the region. Through the various products and services offered, we have accumulated substantial and valuable corporate information and financial data in our database, including companies publicly listed in North America, market news, investors’ tools and commentaries etc. We translate such information and data into Chinese and collaborate with local Greater China distribution channels to distribute and disseminate the contents and information. In March 2010, we have signed a Distributorship Agreement with MegaHub Limited, a fast growing player in financial data distribution in the Greater China providing us with exposure to various financial institutions and over 100 million active investors in the region. We are also actively engaging other joint venture opportunities as part of our efforts in this new endeavor.

 

Current Product / Service Offering

 

We provided and licensed proprietary financial content and data to clients electronically for publishing, distribution, and broadcasting. Our financial content includes North American public company fundamental information, financial information, sector and industry analysis, stock information, and various tools for assisting investors, all of which is produced in Chinese.

 

Future Product / Service Offering

 

With the sale of NAI, CWN HK and CWN China in April 2014, the Company will have no further involvement with future products and service offerings of the financial content and information distribution business.

 

Revenue Model of the Financial Content and Information Distribution Business

 

NAI charged $2,000 to $4,000 per month for clients of our financial content and information distribution business.

 

Revenue Breakdown

 

The breakdown of the revenue sources for the years ended December 31, 2013, 2012 and 2011 is as follows.

 

    Year ended December 31,  
Revenue Breakdown   2013     2012     2011  
GCFF Conference Business   $ 430,377     $ 513,715     $ 683,378  
Road Show Business     87,396       153,461       151,699  
Various IR/PR Service     61,177       97,706       323,716  
Chinese Webpage Design, Hosting and Maintenance     115,373       137,911       156,709  
Online Marketing Service     28,683       73,135       118,950  
Banner Advertising     3,122       1,740       30,552  
Publication Service     16,825       11,478       31,054  
CWN Membership and Online Service     2,643       2,844       3,287  
Translation Service (Company Review, Company Newsletter)     4,500       9,464       11,721  
Other Revenues     187,685       242,184       164,789  
Total   $ 937,781     $ 1,243,638     $ 1,675,875  

 

The breakdown of the revenue sources by geographic market for the years ended December 31, 2013, 2012,and 2011 is as follows. A majority of our revenues was generated from our wholly-owned subsidiary NAI based in Vancouver in Canada, and partly is generated from CWN China based in Shanghai in China.

 

    Year ended December 31,  
Revenue Breakdown   2013     2012     2011  
Canada     923,350       1,227,285       1,661,061  
China     14,431       16,353       14,814  

 

Corporate Strategy and Strategic Business Plan

 

Over the past years, global investment interest, particularly from the Greater China region, has been focused on the natural resources sectors, including mining and oil and gas, and our business model has reacted accordingly to capture the opportunities this global trend has brought to our Conferencing and IR/PR business.  With regards to our Financial Content and Information business, our business model had been focused on our development as a financial content and information provider targeting potential investors in the Greater China region.  Through the various products and services we offered, we had accumulated substantial and valuable corporate information and financial data in our database, including companies publicly listed in North America, market news, investors’ tools and commentaries etc.  We translated such information and data into Chinese and collaborate with local Greater China distribution channels to distribute and disseminate the contents and information.  In March 2010, we signed a Distributorship Agreement with MegaHub Limited, a fast growing player in financial data distribution in the Greater China providing us with exposure to various financial institutions and over 100 million active investors in the region.  We had also actively engaged other joint venture opportunities as part of our efforts in this new endeavor.

 

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In addition, our goal was to become a global leader in communication and information gateways between investors and products and services providers worldwide.  We offered an Internet-based financial community by providing a diverse range of financial news and corporate information on public companies targeting the Chinese investors in North America and Asia.  Through our infrastructure and client and user base, we formed partnerships and collaborations with various providers of financial products and services and market them to Chinese investors in North America and Asia. We believe we have already built a strong foundation of our Portal and IR/PR businesses in North America.  Since fiscal 2010, with the growing interest in Asia and the Greater China region as a source of capital for North American companies, our IR/PR business has seen growing potential in the Hong Kong and the Greater China markets, particularly with investors in the natural resources industries.  Our Conference business, named the Global Chinese Financial Forum or GCFF, evolved into a stand-alone business since 2006 and conferences are being hosted in major cities in North America and Greater China. Since fiscal 2011, our Conference business has also evolved to include a new brand within the GCFF, the Global Resource Investment Conference, held specifically in China, in cities such as Shenzhen, for the purpose of capturing the increasing opportunities in the mining and energy markets. We provided a networking environment to companies and products and services providers and we connect them together by the various services we offer.  As we had already established our presence in the North American market, our next milestone was to penetrate deeper into the Greater China market, beyond our existing presence in major cities such as Shanghai, Shenzhen, and Hong Kong, and then gradually expand into other cities in Asia, particularly Seoul and Taipei.  Together, our four principal businesses enabled us to further expand our businesses and services to reach the users in Asia with a focus on the Greater China region. 

 

As part of our expansion into Asia, CWN China was spearheading our efforts in establishing partnerships with local Chinese organizations and companies. One of which is our exclusive partnership agreement with Shanghai International Mining Exchange, which has mandated CWN to become the exclusive representative of the Shanghai International Mining Exchange in North America. The partnership with the Shanghai International Mining Exchange is to assist that group to find potential clients with North American based mining and energy companies and will allow CWN to access a new layer of investors from China.  CWN China currently has three main purposes: (1) It helps building the necessary channels to capture the financial information, conference and IR/PR businesses locally.  (2) It offers assistance in the organization and coordination of regional marketing activities.  For instance, the Shenzhen Conference 2012 in December 2012 relied on the networks we gained through CWN China in order to bring in local Chinese governmental agencies, public and private companies, industrial associations and other business professionals and experts in order to provide the attendees, speakers and partners for this industrial level event. In addition, NAI’s events and roadshows in Shanghai, Shenzhen, Toronto and Hong Kong have greatly benefitted from the coordination, marketing and business development work done by CWN China.  (3) It seeks other business opportunities including the development of investor relations/public relations business, the creation of a basis for potential acquisition opportunities, and for further the digital financial media business in the Greater China region.

 

Internet Content Partners

 

Through NAI, the Company had agreements in place with the following Internet content partners:

 

Company Name   Services Provided
     
InterFax   InterFax is a news agency in China that provides business news and stories to various different publications and media worldwide. We publish its contents to a section of our www.chineseworldnet.com website in return for RMB$8,000 per year.
IRAsia   IRAsia provides financial news and articles of the stock market in Hong Kong.
PR Newswire   PR Newswire provides news releases of companies in North America, China, Hong Kong, and Taiwan which we disseminate on our www.chineseworldnet.com website.
Quote123.com   Quote123.com provides news and market commentaries in North America on our website.
Tanrich Financial Group   Tanrich Financial Group provides us information on the future market and stock market in Hong Kong in exchange for our news and market commentaries on the North American stock markets.

 

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Our agreements with PR Newswire, Tanrich Financial Group and FMFOREX were all service-to-service connections which did not incur any direct fees on us.  We provide a channel to PR Newswire for dissemination of press releases in return for PR Newswire’s content and trademark to be provided on our website.  Tanrich Financial Group provides us with the Hong Kong market sector news for our marketing purposes and in return we provide a link to access the Tanrich Financial Group website on our website.  FMFOREX provides foreign exchange data and news in exchange for complimentary ad space on our website.

 

With the sale of NAI, the Company is no longer involved in the agreements.

 

C. Organizational Structure

 

ChineseWorldNet.Com Inc. (“ CWN ”) was incorporated under the Company Law (1998 revision) of the Cayman Islands on January 12, 2000.  Our registered and principal executive office is located at Appleby, Clifton House, 75 Fort Street, P.O. Box 190, Grand Cayman, Cayman Islands KY1-1104. 

 

As a result of the sale of its subsidiaries to Ningbo International Limited on April 28, 2014, CWN has no subsidiaries.

 

D. Property, Plants and Equipment

 

We do not own any real property. 

 

ITEM 4A. UNRESOLVED STAFF COMMENTS

 

Not applicable.

 

Item 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

 

This discussion and analysis is of our operating results and our financial position for the fiscal years ended December 31, 2013, 2012, and 2011 should be read in conjunction with the consolidated financial statements and the related notes thereto provided at “ Item 18 – Financial Statements” .

 

A. Results of Operations

 

Prior to the sale of our subsidiaries on April 28, 2014, we generated revenue from our Portal, IR/PR and Conference businesses.  Our annual and quarterly operating results were primarily affected by the level of our sales and costs of operations over these three businesses. 

 

YEARS ENDED DECEMBER 31, 2013, 2012, and 2011

 

For the year ended December 31, 2013 (“ Fiscal 2013 ”), we recorded a net loss of $521,394 with a net loss of $490,238 attributable to common stockholders (($0.05) per Common Share), compared to a net income of $128,931 of which $85,088 was attributable to common stockholders ($0.01 per Common Share) for the year ended December 31, 2012 (“ Fiscal 2012 ”).  The decrease of net income of $392,463 was primarily due to the decrease revenue, the increase loss from foreign exchange and the consolidation of the operation loss from CWN Capital despite the fact that the company reduced expenses on salary, costs of conferencing events and travelling & entertainment expenditures. In Fiscal 2013, we recorded revenue of $937,781 compared to $1,243,638 in Fiscal 2012.  The decrease of revenue of $305,857 was primarily the large drop of core business in North American because adverse global economic conditions persisted in 2013.

 

For the year ended December 31, 2012 (“ Fiscal 2012 ”), we recorded a net loss of $128,931 with a net loss of $85,088 attributable to common stockholders (($0.01) per Common Share), compared to a net income of $138,040 of which $198,966 was attributable to common stockholders ($0.01 per Common Share) for the year ended December 31, 2011 (“ Fiscal 2011 ”).  The decrease of net income of $266,971 was primarily due to the decrease revenue and the increase of salary, office expenses and travelling & entertainment expenditures. In Fiscal 2012, we recorded revenue of $1,243,638 compared to $1,675,875 in Fiscal 2011.  The decrease of revenue of $432,237 was primarily the large drop of core business in North American because of bad global economic conditions in 2012.

 

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Year Ended December 31, 2013 Compared to Year Ended December 31, 2012

 

In Fiscal 2013, the Company saw continued uncertainty in the western economy and capital markets, reflected in the volatility seen in the mining exploration industry. In light of the continued uncertainty in the markets, the Company has taken measures to reduce operating costs.   We generated revenue from our Portal, and NAI’s IR/PR and Conference businesses.  Our revenue sources came from these products and services that NAI offered – GCFF Conference Business, Road Show Business, Various IR/PR Service, Chinese Webpage Design, Hosting and Maintenance, and Online Marketing Service.  Other revenue sources included Banner Advertising, Publication Service, CWN Membership and Online Service, Translation Service, and others.

 

Revenue Growth Trend

 

The weakened western capital markets and the lack of capitalization of Canadian junior mining exploration companies, which is the main clientele of the NAI’s products, have had a negative impact on our businesses in Fiscal 2013 as shown in our decreased revenues, client base and conference attendance and sales.  Sales of conference exhibition spaces have been notably impacted as potential clients faced tighter budgets.  Our business development strategies in the Greater China region, while showing success in terms of the attraction of varied and sizable investors to our events, have not significantly impacted our revenues as these investors are not a major client base for our products. 

 

Revenues

 

GCFF Conference Business

 

Revenue generated from GCFF Conference Business was $430,377 in Fiscal 2013, compared to $513,715 in Fiscal 2012.  The decrease of revenue by $83,338 was due to the decrease of presenting companies and exhibitors’ sponsorship in our conferences in North American and China during Fiscal 2013 as compared to Fiscal 2012. 

 

Road Show Business

 

Revenue generated from Road Show Business was $87,396 in Fiscal 2013, compared to $153,461 in Fiscal 2012.  The substantial decrease of revenue by $66,065 in Fiscal 2013 as compared with Fiscal 2012 was due to the reduction of the number of companies that participated for the events in 2013 . 

 

Various IR/PR Service

 

Revenue from Various IR/PR Service was $61,177 in Fiscal 2013, compared to $97,706 in Fiscal 2012.  The decrease of revenue by $36,529 was mainly due to drop on client companies participated our IR/PR services as compared to Fiscal 2012.

 

Chinese Webpage Design, Hosting and Maintenance

 

Revenue from Chinese Webpage Design, Hosting and Maintenance was $115,373 in Fiscal 2013, compared to $137,911 in Fiscal 2012.  The decrease of $22,538 was primarily due to less client companies interested in our Chinese micro-site development and hosting services as compared to Fiscal 2012.

 

Online Marketing Service

 

Revenue from Online Marketing Service was $28,683 in Fiscal 2013, compared to $73,135 in Fiscal 2012.  The significant decrease of $44,452 was primarily due to large decrease of client companies subscribed our online data providing services and E-mail blast services in Fiscal 2013 as compared to Fiscal 2012.

 

Banner Advertising

 

Revenue we generated from Banner Advertising increased to $3,122 in Fiscal 2013 from $1,740 in Fiscal 2012.  No significant difference in Fiscal 2013 as compared with Fiscal 2012 on client companies’ frequency of placing advertisements on our websites.

 

Publication Service

 

Revenue we generated from Publication Service slightly increased by $5,347 from $11,478 in Fiscal 2012 to $16,825 in Fiscal 2013.  This was primarily due to the increase in number of sponsorship of our client companies in Fiscal 2013.

 

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CWN Membership and Online Service

 

Revenue we generated from CWN Membership and Online Service decreased $201 from $2,844 in Fiscal 2012 to $2,643 in Fiscal 2013.  This was primarily due to slightly decrease in the number of Premium Subscribers of our websites as compared to a year ago.

 

Translation Service

 

Translation Service was $4,500 in fiscal 2013, compared to $9,464 in fiscal 2012. The decrease of $4,964 was due to less translation projects as compared to a year ago.

 

Other Revenues

 

Other Revenues was $187,685 in fiscal 2013, compared to $242,184 in fiscal 2012.  The large decrease of $54,499 was mainly due to the substantial reduction of consulting fee revenue as compared to a year ago.

 

Expenses

 

For fiscal 2013, we recorded operating expenses of $1,195,775 compared to operating expenses of $1,613,282 for fiscal 2012.  The large decrease of operating expenses of $417,507 was primarily due to decrease of expenditures on salary, seminar and conference related expenses, travel and entertainment and stock based compensation in Fiscal 2013 as compared to fiscal 2012.

 

Advertising and Promotion

 

Advertising and promotion expenses were $82,907 in fiscal 2013, compared to $212,930 in Fiscal 2012. Substantial decrease on expenses of $130,023 was primarily due to the resources that were allocated in operating our conferencing events were further reduced in Fiscal 2013 as compared with Fiscal 2012. The size of events greatly contracted and the expenses, such as hotel rentals and advertisements, were diminished accordingly in Fiscal 2013 in light of adverse market conditions.

 

Audit and Legal

 

Audit and legal expenses were $82,014 in fiscal 2013, compared to $84,354 in Fiscal 2012.  The slightly decrease of $2,340 was primarily due to the decrease of legal fees in Fiscal 2013 as compared to Fiscal 2012.

 

Consulting Fees

 

Consulting fees expenses were $90,000 in Fiscal 2012 and 2013. No new contracts were signed in Fiscal 2013 and fee of $90,000 was remained unchanged.

 

Depreciation

 

Depreciation expenses were $7,776 in Fiscal 2013 compared to $15,216 in Fiscal 2012. The difference was mainly due to the adjustment done for depreciation method on fixed assets in CWN Shanghai in Fiscal 2013.

 

Directors’ Remuneration

 

Directors’ remuneration expenses were $12,000 in Fiscal 2013, which is the same as that in Fiscal 2012.  There were no changes on the directors’ fees paid to each director during Fiscal 2013 and 2012.

 

Office and Miscellaneous

 

Office and miscellaneous expenses were $72,142 in Fiscal 2013, compared to $82,316 in Fiscal 2012.  The decrease of $10,174 was primarily due to decreases on expenditures of web site and server maintenance and other sundry expenses in Fiscal 2013.

 

Printing

 

Printing expenses were $8,068 in Fiscal 2013, compared to $17,579 in Fiscal 2012. The decrease of $9,511 was primarily due to less promotional material being printed for advertising and conferences in Fiscal 2013 as compared to Fiscal 2012. The number of mining investment guides printed in Fiscal 2013 was further reduced as compared to Fiscal 2012.

 

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Provision for bad and doubtful debts

 

Provision for bad and doubtful debts was $51,112 in Fiscal 2013 as compared to a credit of $30,472 in Fiscal 2012. The increase was mainly due to provision for bad doubtful debts for one customer which was uncollectible in Fiscal 2013.

 

Rent and Operating

 

Rent and operating expenses were $145,356 in Fiscal 2013, compared to $139,509 in Fiscal 2012. There was no change on the rent in Fiscal 2013, as compared to Fiscal 2012. The increase of $5,847 was mainly due to extra strata fees paid by NAI in Fiscal 2013.

 

Salaries and Benefits

 

Salaries and benefits expenses were $491,519 in Fiscal 2013, compared to $695,639 in Fiscal 2012.  The large decrease of $204,120 was primarily due to a reduction on numbers of employee in NAI during Fiscal 2013.

 

Stock-based Compensation

 

Stock-based compensation expenses decreased $33,563 from $59,404 in Fiscal 2012 to $25,841 in Fiscal 2013. There was no new stock incentive options granted during Fiscal 2013.

 

Telephone

 

Telephone expenses were $13,747 in Fiscal 2013, compared to $18,808 in Fiscal 2012.  The substantial decrease of $5,061 was primarily due to lesser expenditure on telephone charges by signing a cheaper contract with service provider in Fiscal 2013.

 

Travel and Entertainment

 

Travel and entertainment expenses were $113,293 in Fiscal 2013, compared to $215,379 in Fiscal 2012.  The substantial decrease of $102,086 was primarily due to lesser travelling allowances spent on keynote speakers for our conferences in Fiscal 2013 as compared with Fiscal 2012. Also, management and business development teams travelled to Asia and met a greater number of potential clients were lesser in Fiscal 2013 as compared with Fiscal 2012.

 

Other Income (Loss)

 

We recorded other loss of $259,543 in Fiscal 2013, compared to other income of $289,997 in Fiscal 2012.  The substantial increase of other loss of $549,540 was primarily due to loss of $89,108 on foreign exchange in Fiscal 2013, as compared with gain of $35,294 in Fiscal 2012. The company recorded an equity loss of $197,276 in Fiscal 2013, as compared with an equity income of $166,735 in Fiscal 2012. In Fiscal 2013, we recorded a profit on short-term investment of $6,451, as compared gain of $50,193 in Fiscal 2012. 

 

Year Ended December 31, 2012 Compared to Year Ended December 31, 2011

 

The continued weakened western economy in 2012 has impacted the western capital markets as well as the mining exploration industry, which has caused weakened market demand for the Company’s conference business and NAI’s various products.  We generated revenue from our Portal, IR/PR and Conference businesses.  Our revenue sources came from these products and services we offered – GCFF Conference Business, Road Show Business, Various IR/PR Service, Chinese Webpage Design, Hosting and Maintenance, and Online Marketing Service.  Other revenue sources included Banner Advertising, Publication Service, CWN Membership and Online Service, Translation Service, and others.

 

- 17 -
 

 

Revenue Growth Trend

 

The weakened western capital markets and the lack of capitalization of Canadian junior mining exploration companies, which is the main clientele of the Company’s products, have had a negative impact on our businesses in Fiscal 2012 as shown in our decreased revenues, client base and conference attendance and sales.  Sales of conference exhibition spaces have been notably impacted as potential clients faced tighter budgets.  Our business development strategies in the Greater China region, while showing success in terms of the attraction of varied and sizable investors to our events, have not significantly impacted our revenues as these investors are not a major client base for our products.  Going forward, given China’s growing role in funding international mining projects and our networks with Asian investors, we expect increasing interest for our products and services.  We expect our revenues to recover in 2013 as our client base continues to recognize China as a major source for financing.

 

Revenues

 

GCFF Conference Business

 

Revenue generated from GCFF Conference Business was $513,715 in Fiscal 2012, compared to $683,378 in Fiscal 2011.  The decrease of revenue by $169,663 was due to the decrease of presenting companies and exhibitors’ sponsorship in our conferences in North American and China during Fiscal 2012 as compared to Fiscal 2011.  We anticipate revenue from GCFF Conference Business will be greatly affected by the market condition.

 

Road Show Business

 

Revenue generated from Road Show Business was $153,461 in Fiscal 2012, compared to $151,699 in Fiscal 2011.  No significant difference in Fiscal 2012 as compared with Fiscal 2011 as the number of companies that participated for the events were same. We anticipate revenue will increase in 2013 as the companies were willing to invest more for meeting more potential investors.

 

Various IR/PR Service

 

Revenue from Various IR/PR Service was $97,706 in Fiscal 2012, compared to $323,736 in Fiscal 2011.  The substantial decrease of $226,030 was mainly due to great drop on client companies participated our IR/PR services as compared to Fiscal 2011.

 

Chinese Webpage Design, Hosting and Maintenance

 

Revenue from Chinese Webpage Design, Hosting and Maintenance was $137,911 in Fiscal 2012, compared to $156,709 in Fiscal 2011.  The decrease of $18,798 was primarily due to less client companies interested in our Chinese micro-site development and hosting services as compared to Fiscal 2011.

 

Online Marketing Service

 

Revenue from Online Marketing Service was $73,135 in Fiscal 2012, compared to $118,950 in Fiscal 2011.  The significant decrease of $45,815 was primarily due to decrease of client companies subscribed our online data providing services and E-mail blast services in Fiscal 2011 as compared to Fiscal 2011.

 

Banner Advertising

 

Revenue we generated from Banner Advertising greatly reduced to $1,740 in Fiscal 2012 from $30,552 in Fiscal 2011.  This was primarily due to the significant decrease in client companies’ frequency of placing advertisements on our websites.

 

Publication Service

 

Revenue we generated from Publication Service decreased by $19,576 from $31,054 in Fiscal 2011 to $11,478 in Fiscal 2012.  This was primarily due to the decrease in number of sponsorship of our client companies in Fiscal 2012 because of the weakened financial market situation as compared to a year ago.

 

CWN Membership and Online Service

 

Revenue we generated from CWN Membership and Online Service decreased $443 from $3,287 in Fiscal 2011 to $2,844 in Fiscal 2012.  This was primarily due to further decrease in the number of Premium Subscribers of our websites as compared to a year ago.

 

Translation Service

 

Translation Service was $9,464 in fiscal 2012, compared to $11,721 in fiscal 2011. The decrease of $2,257 was due to less translation projects as compared to a year ago.

 

- 18 -
 

 

Other Revenues

 

Other Revenues was $242,184 in fiscal 2012, compared to $164,789 in fiscal 2011.  The large increase of $77,395 was mainly due to the increase of consulting fee revenue and corporate office & secretarial service fee revenue as compared to a year ago.

 

Expenses

 

For fiscal 2012, we recorded operating expenses of $1,613,282 compared to operating expenses of $1,678,976 for fiscal 2011.  The decrease of operating expenses of $65,694 was primarily due to decrease of expenditures on consulting fee, stock based compensation, and seminar and conference related expenses in Fiscal 2012 as compared to fiscal 2011. As we focus on expanding and diversifying our core revenue generating products and services in 2013, we expect our operating expenditures, particularly in relation to salaries and benefits and travel and entertainment and other related expenses, will increase accordingly to accommodate our growth strategies.

 

Advertising and Promotion

 

Advertising and promotion expenses were $212,930 in fiscal 2012, compared to $271,164 in Fiscal 2011.  The substantial decrease of $58,234 was primarily due to the resources that were allocated in operating our conferencing events were relatively reduced in Fiscal 2012 as compared with Fiscal 2011. The size of events greatly contracted and the expenses, such as hotel rentals and advertisements, were diminished accordingly in Fiscal 2012.

 

Audit and Legal

 

Audit and legal expenses were $84,354 in fiscal 2012, compared to $63,962 in fiscal 2011.  The increase of $20,392 was primarily due to the increase in legal fees to review our filing documents in Fiscal 2012 as compared to fiscal 2011. The audit fee also increased in Fiscal 2012. The Company also incurred expenses on filing of the XBRL required by the SEC starting from 2012.

 

Consulting Fees

 

Consulting fees expenses were $90,000 in Fiscal 2012, compared to $104,000 in fiscal 2011.  The decrease of $14,000 was primarily due to consultants’ service provided was terminated in fiscal 2012.

 

Depreciation

 

Depreciation expenses were $15,216 in Fiscal 2012, compared to $15,918 in fiscal 2011.  No significant difference in Fiscal 2012 as compared with Fiscal 2011.

 

Directors’ Remuneration

 

Directors’ remuneration expenses were $12,000 in Fiscal 2012, which is the same as that in 2011.  There is no change on the directors’ fees paid to each director during Fiscal 2012 and 2011.

 

Office and Miscellaneous

 

Office and miscellaneous expenses were $82,316 in Fiscal 2012, compared to $74,077 in Fiscal 2011.  The increase of $8,239 was primarily due to increases on expenditures of web site and server maintenance in Fiscal 2012.

 

Printing

 

Printing expenses were $17,579 in Fiscal 2012, compared to $26,245 in Fiscal 2011.  The decrease of $8,666 was primarily due to less promotional material being printed for advertising and conferences in Fiscal 2012 as compared to Fiscal 2011. The number of mining investment guides printed in Fiscal 2012 was also reduced by 30% as compared to Fiscal 2011.

 

Provision for bad and doubtful debts

 

Provision for bad and doubtful debts was a credit of $30,472 in Fiscal 2012 as compared to expenses of $55,917 in Fiscal 2011. The decrease of $86,389 was mainly due to the unexpected collection from a customer that provision for bad doubtful debts was partially set up in Fiscal 2011. Also, there was no additional provision for bad and doubtful debts in Fiscal 2012.

 

- 19 -
 

 

Rent and Operating

 

Rent and operating expenses were $139,509 in Fiscal 2012, compared to $135,049 in Fiscal 2011. There is no significant change on the rent in Fiscal 2012, as compared to Fiscal 2011.

 

Salaries and Benefits

 

Salaries and benefits expenses were $695,639 in Fiscal 2012, compared to $635,260 in Fiscal 2011.  The increase of $60,379 was primarily due to the salary increment of employees during Fiscal 2012.

 

Seminar Operating Expense

 

Seminar operating expenses were $620 in Fiscal 2012, compared to $763 in Fiscal 2011.  There is no significant change on the rent in Fiscal 2012, as compared to Fiscal 2011.

 

Stock-based Compensation

 

Stock-based compensation expenses decreased $80,638 from $140,042 in Fiscal 2011 to $59,404 in Fiscal 2012. There is no new stock incentive options granted during Fiscal 2012.

 

Telephone

 

Telephone expenses were $18,807 in Fiscal 2012, compared to $27,339 in Fiscal 2011.  The substantial decrease of $8,532 was primarily due to migration of internet provider that charged at a cheaper rate in Fiscal 2012.

 

Travel and Entertainment

 

Travel and entertainment expenses were $215,379 in Fiscal 2012, compared to $117,240 in Fiscal 2011.  The substantial increase of $98,139 was primarily due to more travelling allowances spent on keynote speakers for our conferences in 2012 for the purpose of attracting more attendees and investors. Also, management and business development teams travelled more often to Asia and met a greater number of potential clients in Fiscal 2012 as compared to Fiscal 2011.

 

Other Income (Loss)

 

We recorded other income of $289,997 in Fiscal 2012 and $195,727 in Fiscal 2011.  The substantial increase of other income of $94,270 was primarily due to gain of $35,294 on foreign exchange in Fiscal 2012, as compared with loss of $28,348 in Fiscal 2011. In Fiscal 2012, we recorded a profit on short-term investment of $50,193, as compared loss of $5,995 in Fiscal 2011. 

 

Currency

 

We maintain our accounting records in US dollars.  The functional currency of NAI is Canadian dollar, of CWN HK and CWN Capital is Hong Kong dollar, and of CWN China and Weihai is Chinese Renminbi, and the current rate method of translation was used.  We translate our assets and liabilities at the exchange rate prevailing as of the balance sheet date.  Revenues and expenses are translated at the average exchange rate for the year.  Foreign exchange gains and losses are deferred and shown separately in the shareholders’ equity (deficiency).

 

Foreign currency fluctuations may have an impact on our financial condition.  However, we do not engage in any foreign currency hedge transactions.

 

Inflation

 

We do not believe that inflation will have a material adverse effect on our financial condition.  Traditionally, Canada has not been a country that experienced a substantial increase in inflation.  As of December 31, 2013, the annual average rate of inflation in Canada was 1.14 %.

 

- 20 -
 

 

B. Liquidity and Capital Resources

 

As of December 31, 2013, we had cash and cash equivalents of $1,715,300 (December 31, 2012 – $805,874). We had a working capital of $1,322,672 at December 31, 2013, compared to $1,628,829 at December 31, 2012.  

 

C. Research and Development, Patents and Licenses

 

We have not engaged in research and development activities for the last three fiscal years, and have no patents and licenses.

 

D. Trend Information

 

As a result of the sale of our subsidiaries on April 28, 2014, we do not currently know of any trends that would be material to our operations.

 

E. Off-Balance Sheet Arrangements

 

We do not have any off-balance sheet arrangements.

 

F. Tabular Disclosure of Contractual Obligations

 

    Payments due by period ($)  
Contractual Obligations
as of December 31, 2013 		  Total     Less than
1 year 		    1-3 years     3-5 years     More than
5 years 		 
Long-Term Debt Obligations     —       —       —       —       —  
Capital (Finance) Lease Obligations     —       —       —       —       —  
Operating Lease Obligations     253,208       98,747       154,461       —       —  
Purchase Obligations     —       —       —       —       —  
Other Long-Term Liabilities     —       —       —       —       —  
Total     253,208       98,747       154,461       —       —  

 

Item 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES 

 

A. Directors and Senior Management

 

The following table sets forth all directors and executive officers of CWN.  Each director’s term of office expires at the next annual general meeting of shareholders.

 

Name   Age   Office Held Since   Offices and Positions Held in CWN
Chi Cheong Liu(1)   54   January 12, 2000   Director, President, Chief Executive Officer, Chief Financial Officer, Secretary and Treasurer
Chi Kong Liu(1)   53   January 12, 2000   Director

 

(1) Chi Cheong Liu and Chi Kong Liu are related parties.

 

The business background and principal occupations of each of CWNs director and executive officer for the preceding five years are as follows:

 

Chi Cheong Liu 

 

Mr. Liu has been a director and treasurer of CWN since January 2000.  Mr. Liu has been President of Chigo Engineering Company, a security engineering firm, for the last 18 years.  Mr. Liu is a venture capitalist specializing in biotechnology and technology investments.

 

- 21 -
 

 

Chi Kong Liu 

 

Mr. Liu has been a director of CWN since January 2000.  Mr. Liu is President and owner of S & B Trading Company Limited, a diamond and jewelry wholesaler.  Mr. Liu is a venture capitalist specializing in biotechnology and technology investments.

 

B. Compensation

 

The following table provides information regarding direct and indirect remuneration paid to the directors and executive officers of CWN and its subsidiaries during Fiscal 2013.

 

    Annual Compensation in Fiscal 2013  
Name and Respective Office and Position Held   Salary
($) 		    Bonus
($) 		    Other Annual
Compensation
($) 		 
Joe K.F. Tai(1)(5)
Director, President and Chief Executive Officer 		    Nil       Nil       93,000  
Chi Cheong Liu(2)(5)
Director and Treasurer 		    Nil       Nil       3,000  
Chi Kong Liu(3)(5)
Director 		    Nil       Nil       3,000  
Andy S.W. Lam(4)(5)
Director 		    Nil       Nil       3,000  
Kelvin Szeto(5)
Chief Operating Officer and Chief Financial Officer 		    51,075       Nil       Nil  
Gilbert Chan(5)
Senior Vice President, Sales and Marketing 		    47,279       Nil       Nil  

 

(1) Mr. Tai is a shareholder and does not receive salary.  We paid Mr. Tai director fee of $3,000 per year in 2013, $3,000 per year in 2012, and $3,000 per year in 2011.  We had consulting agreements with Goldpac Investments Ltd. and paid consulting fees of $90,000 per year in 2013 and $90,000 per year in 2012 and $80,000 in 2011.  Mr. Tai is Managing Director of Goldpac Investments Ltd. 

 

(2) Mr. Liu is a shareholder and does not receive salary.  We paid Mr. Liu director fee of $3,000 per year in 2013, 2012 and 2011.

 

(3) Mr. Liu is a shareholder and does not receive salary.  We paid Mr. Liu director fee of $3,000 per year in 2013, $3,000 per year in 2012, and $3,000 per year in 2011.  

 

(4) Mr. Lam is a director and does not receive salary. We paid Mr. Lam director fee of $3,000 per year in 2013 and $3,000 per year in 2012, and $3,000 per year in 2011.

 

(5) In connection with the closing of the Share Purchase Agreement, on April 28, 2014, Joe K.F. Tai resigned as President, Chief Executive Officer and a director of the Company, Andy S.W. Lam resigned as a director of the Company, Kelvin Szeto resigned as Chief Financial Officer and Chief Operating Officer of the Company, Gilbert Chan resigned as Senior Vice President, Marketing and Investor Relations of the Company and Terry Wong resigned as Financial Expert of the Company. In addition, on April 28, 2014, Chi Cheong Liu was appointed as President, Chief Executive Officer, Chief Financial Officer and Secretary of the Company.

 

Pension Plans

 

We do not provide pension, retirement or similar benefits for directors, senior management or employees.

 

C. Board Practices

 

Directors hold office for a term of one year or until the next annual general meeting of shareholders at which directors are elected.  All of the current directors have served our company since January 12, 2000.  Our officers are appointed by the board and serve at the board’s discretion.

 

We have not entered into service contracts with any of our directors.  

 

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We do not have an audit committee or remuneration committee, but our entire board of directors acts in such capacities.

 

D. Employees

 

As of December 31, 2013, there were seven employees in NAI and twelve employees in CWN China.

 

Employee Breakdown   NAI (Vancouver)     CWN China (Shanghai)  
Management     1       0  
Business Development     3       3  
Editorial     0       5  
Finance and Accounting     1       1  
IT     0       1  
Sales/Marketing     2       1  
Total     7       11  

 

E. Share Ownership of Directors and Senior Management

 

The following table sets forth certain information regarding the ownership of our Common Shares by each of the persons who were directors and members of senior management during Fiscal 2013.  The percentage owned is based on 10,950,000 shares outstanding as at April 29, 2014.

 

Name and Respective Office and Position Held   Share Ownership     % Share Ownership  
Joe K.F. Tai(1)(2)(9)     250,000       2.28 %
Chi Cheong Liu(3)(4)(9)     1,730,000       15.80 %
Chi Kong Liu(5)(9)     580,000       5.30 %
Andy S.W. Lam(6)(9)     —       —  
Kelvin Szeto(7)(9)     150,000       1.37 %
Gilbert Chan(8)(9)     50,000       0.46 %
Total     2,760,000       25.21 %

 

(1) Ms. Tim Yee Lau, a related party to Mr. Tai, owned 112,500 Common Shares of our company. Goldpac Investments Ltd., for which Mr. Tai is Managing Director, owned 200,000 Common Shares of our company.  Total direct and indirect share ownership was 562,500 Common Shares or 5.14% of the total Common Shares of our company.

 

(2) Mr. Tai owns 300,000 stock options exercisable at an exercise price of $0.60 per share until June 10, 2015.

 

(3) Goldpac Investment Partners Ltd., for which Mr. Liu is principal, owned 1,166,667 Common Shares of our company.  Total direct and indirect share ownership was 2,896,667 Common Shares or 26.45% of the total Common Shares of our company.

 

(4) Mr. Liu owns 100,000 stock options exercisable at an exercise price of $0.60 per share until June 10, 2015.

 

(5) Mr. Liu owns 100,000 stock options exercisable at an exercise price of $0.60 per share until June 10, 2015.

 

(6) Mr. Lam owns 100,000 stock options exercisable at an exercise price of $0.60 per share until June 10, 2015.

 

(7) Mr. Szeto owns 180,000 stock options exercisable at an exercise price of $0.60 per share until June 10, 2015.

 

(8) Mr. Chan owns 140,000 stock options exercisable at an exercise price of $0.60 per share until June 10, 2015.

 

(9) In connection with the closing of the Share Purchase Agreement, on April 28, 2014, Joe K.F. Tai resigned as President, Chief Executive Officer and a director of the Company, Andy S.W. Lam resigned as a director of the Company, Kelvin Szeto resigned as Chief Financial Officer and Chief Operating Officer of the Company, Gilbert Chan resigned as Senior Vice President, Marketing and Investor Relations of the Company and Terry Wong resigned as Financial Expert of the Company. In addition, on April 28, 2014, Chi Cheong Liu was appointed as President, Chief Executive Officer, Chief Financial Officer and Secretary of the Company.

 

Stock Options

 

Our board of directors (the “ Board ”) adopted the 2007 Stock Option Plan (the “ 2007 Plan ”) on October 11, 2007, under which we issued incentive stocks options with the right to purchase up to 550,000 Common Shares to our directors, officers, and employees.  All of these options granted on October 11, 2007 have an exercise price of $1.08 per share and a vesting period of 1 to 5 years, and a term of 5 years expiring on October 11, 2012.  We had not grant options to individual consultants or advisors.

 

- 23 -
 

 

The Board further adopted the 2010 Stock Option Plan (the “ 2010 Plan ”) on June 10, 2010, under which we issued incentive stocks options with the right to purchase up to 1,090,000 Common Shares to our directors, officers, and employees.  All of these options granted on June 10, 2010 have an exercise price of $0.60 per share and a vesting period of 1 to 5 years, and a term of 5 years expiring on June 10, 2015.  We had not grant options to individual consultants or advisors.

 

As at December 31, 2013, we had 1,020,000 options issued and outstanding, of which 612,000 options   were fully vested.

 

Item 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS 

 

A. Major Shareholders

 

To the knowledge of our directors and senior officers, the following table sets forth the persons or companies who beneficially own, directly or indirectly, or exercise control or direction over shares carrying 5% or more of the voting rights attached to the total outstanding Common Shares as at April 29, 2014.  The percentage owned is based on 10,950,000 shares outstanding as at April 29, 2014.

 

Name of Shareholder   Number of
Common Shares 		    Percentage of Shares
Beneficially Owned 		 
Chi Cheong Liu(1)     2,896,667       26.45 %
Vcanland China Holdings Ltd.     1,500,000       13.70 %
Datacom Venture Limited     600,000       5.48 %
Chi Kong Liu     580,000       5.30 %
Monica Law     570,000       5.21 %
Joe K.F. Tai (2)     562,500       5.14 %
Total     6,709,167       61.28 %

 

(1) Mr. Liu owns 1,730,000 Common Shares.  Goldpac Investment Partners Ltd., for which Mr. Liu is principal, owned 1,166,667 Common Shares.

 

(2) Mr. Tai owns 250,000 Common Shares.  Ms. Tim Yee Lau, a related party to Mr. Tai, owns 112,500 Common Shares.  Goldpac Investments Ltd., for which Mr. Tai is Managing Director, owns 200,000 Common Shares.

 

As at April 29, 2014, there were five registered shareholders in the U.S. with holdings of 2,170,833 Common Shares representing 19.82% of the total issued and outstanding Common Shares.

 

Unless otherwise indicated by footnote, we believe that the beneficial owners of the Common Shares listed above, based on information furnished by such owners, have sole investment and voting power with respect to such Common Shares, subject to community property laws where applicable.  Beneficial ownership is determined in accordance with the rules of the United States Securities and Exchange Commission and generally includes voting or investment power with respect to securities.  As far as it is known to us, except as disclosed herein, we are not directly or indirectly owned or controlled by another corporation, by any foreign government or any other person or entity.  The shareholders, who own five percent or more of our Common Shares, do not have voting rights which are different than our other shareholders who own our Common Shares.

 

B. Related Party Transactions

 

In 2013, the Company incurred $90,000 [2012 - $90,000 and 2011 - $104,000] in consulting fees to a company related to a director of the Company, of which $22,500 [2012 - $22,500 ]was outstanding balance as at December 31, 2013.

 

In 2013, the Company paid $98,102 [2012 - $110,723 and 2011 - $103,651] salary to the senior officers of the Company.

 

As at December 31, 2013, the Company has non-interest bearing loan from stockholders of $12,444 [2012 - $24,150].

 

Included in accounts payable, $84,947 [2012 - $74,836] was payable to directors and senior officers of the Company.

 

During Fiscal 2013, the Company incurred $12,000 [2012 - $12,000 and 2011 - $12,000] in director fees, of which $12,000 [2012 - $12,000 and 2011 - $12,000] was outstanding and included in accounts payable and accrued liabilities as at December 31, 2013.

 

- 24 -
 

 

During Fiscal 2013, the Company provided service for a total of $115,093 [2012 - $270,810 and 2011 - $202,280] to CWN Capital, of which $115,093 [2012 - $270,810] was outstanding and included in receivable from a related party as at December 31, 2013. The balance of receivable from a related party in the amount of $57,147 [2012 - $215,644] represents costs incurred on behalf of CWN Capital by the Company.

 

In 2013, the Company provided service for a total of $11,653 [2012- $14,043 and 2011 - $Nil] to CWN Mining Acquisition, a company has significantly influenced by CEO of the Company.

 

C. Interests of Experts and Counsel

 

This Report on Form 20-F is being filed as an annual report under the Exchange Act and, as such, there is no requirement to provide any information under this item.

 

Item 8. FINANCIAL INFORMATION 

 

A. Financial Statements

 

This Report on Form 20-F includes our audited consolidated financial statements for the years ended December 31, 2013, 2012, and 2011, including our consolidated balance sheets as of December 31, 2013, and 2012, and the consolidated statements of shareholders’ equity, operations and cash flows for the years ended December 31, 2013, 2012, and 2011, and the related notes to those statements and the auditors’ reports thereon.  Reference is made to these documents commencing at Page 60 of this Report.

 

B. Significant Changes

 

There have been no significant changes in our businesses in the period from December 31, 2013 until the date of this document.

 

Item 9. THE OFFER AND LISTING 

 

A. Offer and Listing Details

 

Our common shares are currently quoted on the OTC Bulletin Board under the symbol “ CWNOF.OB ” .  For the periods indicated, the following table sets forth the high and low market prices of our common shares, as reported by the OTC Bulletin Board.  These prices represent inter-dealer quotations without retail markup, markdown, or commission and may not necessarily represent actual transactions. 

 

Periods   High     Low  
Fiscal 2013   $ 0.55     $ 0.05  
Fiscal 2012   $ 1.34     $ 0.12  
Fiscal 2011   $ 1.40     $ 0.12  
Fiscal 2010   $ 0.75     $ 0.25  
Fiscal 2009   $ 0.25     $ 0.13  
Fiscal 2008   $ 1.30     $ 0.20  
Fiscal 2007   $ 1.50     $ 1.00  
                 
Fiscal 2014                
1Q-2014 (1)   $ 0.05     $ 0.05  
                 
Fiscal 2013                
4Q-2013 (1)   $ 0.25     $ 0.05  
3Q-2013 (1)   $ 0.25     $ 0.25  
2Q 2013   $ 0.25     $ 0.25  
1Q 2013   $ 0.55     $ 0.12  
                 
Fiscal 2012                
4Q-2012   $ 1.16     $ 0.12  
3Q-2012   $ 1.34     $ 0.12  
2Q-2012 (1)   $ N/A     $ N/A  
1Q-2012 (1)   $ N/A     $ N/A  

 

- 25 -
 

 

Periods   High     Low  
Fiscal 2011                
4Q-2011   $ N/A     $ N/A  
3Q-2011   $ 1.34     $ 1.34  
2Q-2011   $ 1.40     $ 0.12  
1Q-2011   $ 0.55     $ 0.55  
                 
Most Recent 6 months from October 2013 through March 2014                
March 2014 (1)   $ 0.05     $ 0.05  
February 2014 (1)   $ 0.05     $ 0.05  
January 2014 (1)   $ 0.05     $ 0.05  
December 2013 (1)   $ 0.25     $ 0.05  
November 2013 (1)   $ 0.25     $ 0.25  
October 2013 (1)   $ 0.25     $ 0.25  

 

(1) There were no trades of our common shares during the period from January to June 2012, August to November 2012 and July 2013 to March 2014.

 

B. Plan of Distribution

 

This Report on Form 20-F is being filed as an annual report under the Exchange Act and, as such, there is no requirement to provide any information under this item.

 

C. Markets

 

Our common shares are quoted on the OTC Bulletin Board operated by the Financial Industry Regulatory Authority under the symbol “ CWNOF.OB ” .

 

D. Selling Shareholders

 

This Report on Form 20-F is being filed as an annual report under the Exchange Act and, as such, there is no requirement to provide any information under this item.

 

E. Dilution

 

This Report on Form 20-F is being filed as an annual report under the Exchange Act and, as such, there is no requirement to provide any information under this item.

 

F. Expenses of the Issue

 

This Report on Form 20-F is being filed as an annual report under the Exchange Act and, as such, there is no requirement to provide any information under this item.

 

Item 10. ADDITIONAL INFORMATION

 

A. Share Capital

 

This Report on Form 20-F is being filed as an annual report under the Exchange Act and, as such, there is no requirement to provide any information under this item.

 

B. Memorandum and Articles of Association

 

There have been no changes to the Memorandum, Articles of Association, or Cayman Islands Law with respect to rights and powers of directors and shareholders since our 20-F Registration Statement (SEC file no. 000-33051) filed on July 3, 2002.  Such discussion is hereby incorporated by reference into this Report.

 

- 26 -
 

 

C. Material Contracts

 

The material contracts entered into by us during the last two years, other than those contracts entered into in the ordinary course of business, are as follows:

 

· On April 18, 2014, the company received shareholder approval for a share purchase agreement for the sale of all issued and outstanding shares in NAI, all issued and outstanding shares of CWN HK and 23.8% of issued and outstanding shares of CWN Capital. As part of the contract, we will receive an aggregate of $263,968.90 in funds and one or more non-interest bearing promissory notes in the aggregate principal amount of $831,031.10 with a maturity date of one year with the option to extend upon mutual agreement.

 

· On April 20, 2010, we renewed an office lease agreement for our current premises located at #1003, Eton Place Tower B, 555 Pudong Ave., Shanghai, PRC 200120.  The term of the lease is for 1 year expiring on June 8, 2013.  The monthly lease payment is RMB$22,467.88 plus applicable taxes and maintenance fees.

 

· Consulting agreements dated January 1, 2011 and January 1, 2012 with Goldpac Investments Ltd. See Item 6.B. Compensation , Item 6.C. Board Practices and Item 7.B. Related Party Transactions .

 

· Consulting agreements dated January 1, 2011 with Silver Lake Investment Partners, Ltd. See Item 6.B. Compensation , Item 6.C. Board Practices and Item 7.B. Related Party Transactions .

 

· Share purchase agreement dated March 19, 2014 with Ningbo International Limited. See Item 4.A. History and Development of the Company .

 

D. Exchange Controls

 

Cayman Islands

 

We are organized under the laws of the Cayman Islands. We do not believe there are any decrees or regulations under the laws of the Cayman Islands applicable to us restricting the import or export of capital or affecting the remittance of dividends or other payments to non-resident holders of our common stock.  There are no restrictions under CWN’s Articles of Association or Memorandum of Association or under Cayman Islands law as dividends thereon.  There is uncertainty as to whether the Courts of Cayman Island would (i) enforce judgments of United States Courts obtained against us or our directors and officers predicated upon the civil liability provisions of the federal securities laws of the United States or (ii) entertain original actions brought in Cayman Island Courts against us or such persons predicated upon the federal securities laws of the United States.  There is no treaty in effect between the United States and Cayman Island providing for such enforcement.

 

E. Taxation

 

Cayman Island Income Tax Consequences

 

CWN is organized under the laws of Cayman Islands.  At present, there is no Cayman Islands profit tax, withholding tax, capital gains tax, capital transfer tax, estate duty or inheritance tax payable by our United States shareholders, except shareholders ordinarily resident in the Cayman Islands.  There is currently no reciprocal tax treaty between Cayman Islands and the United States regarding withholding taxes.

 

F. Dividends and Paying Agents

 

This Report on Form 20-F is being filed as an annual report under the Exchange Act and, as such, there is no requirement to provide any information under this item.

 

G. Statement by Experts

 

This Report on Form 20-F is being filed as an annual report under the Exchange Act and, as such, there is no requirement to provide any information under this item.

 

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H. Documents on Display

 

Any documents referred to in this Report on Form 20-F may be inspected at our principal office located at Appleby, Clifton House, 75 Fort Street, P.O. Box 190, Grand Cayman, Cayman Islands KY1-1104 during normal business hours.

 

Our filings with the Securities and Exchange Commission, and the exhibits thereto, are available for inspection and copying at the public reference facilities maintained by the Securities and Exchange Commission in 100 F. St., NE, Washington, D.C., 20549.  Copies of these filings may be obtained from these offices after the payment of prescribed fees.  Please call the Securities and Exchange Commission at 1-800-SEC-0330 for further information on the public reference rooms. These filings are also available on the Securities and Exchange Commission's website at www.sec.gov .

 

I. Subsidiary Information

 

Prior to their sale on April 28, 2014, we had 4 subsidiaries, including NAI Interactive Ltd., a company incorporated under the laws of British Columbia “NAI” ), ChineseWorldNet.com (Hong Kong) Ltd., a company incorporated under the laws of Hong Kong ( “CWN HK” ), 85% owned interest in ChineseWorldNet.com (Shanghai) Ltd., a company incorporated under the laws of PRC ( “CWN China” ), and 85% owned interest in Weihai Consulting Investment Ltd., a company incorporated under of PRC (“ Weihai ”). As a result of their sale on April 28, 2014, we do not have any subsidiaries.

 

Item 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 

 

We are a small business issuer as defined in Section 230.405 of the Securities Act of 1933 and Section 240.12b-2 of the Exchange Act and, as such, there is no requirement to provide any information under this item.

 

Item 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

 

This Report on Form 20-F is being filed as an annual report under the Exchange Act and, as such, there is no requirement to provide any information under this item.

 

Part II

 

Item 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

 

There has not been a material default in the payment of principal, interest, a sinking or purchase fund installment, or any other material default not cured within 30 days, relating to any indebtedness of us or any of our significant subsidiaries.  No payment of dividends is in arrears.

 

Item 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

 

There has been no modification of the instruments defining the rights of holders of any class of our registered securities.  There has been no modification or qualification of the rights evidenced by any class of our registered securities by issuing or modifying any other class of securities.  There are no assets securing any class of our registered securities.  There has been no change in the last financial year to the trustee of our registered securities.

 

Item 15. CONTROLS AND PROCEDURES

 

Disclosure Controls and Procedures

 

As required by Rule 13a-15 under the Securities Exchange Act of 1934, our management, with the participation of our principal executive officer and principal financial officer, evaluated our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934) as of the end of the period covered by this annual report.

 

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934 is accumulated and communicated to our principal executive officer and principal financial officer to allow timely decisions regarding required disclosure.

 

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Based on its evaluation, our management, with the participation of our principal executive officer and principal financial officer concluded that as of December 31, 2013, our disclosure controls and procedures were not effective. The ineffectiveness of our disclosure controls and procedures was due to a material weakness described below.

 

MANAGEMENT’S REPORT ON INTERNAL CONTROLS OVER FINANCIAL REPORTING

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) under the Exchange Act.  Our management evaluated the effectiveness of our internal control over financial reporting as of December 31, 2013 based on criteria for effective internal control over financial reporting described in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission .  Based on its evaluation, our management concluded that our internal control over financial reporting was not effective as of December 31, 2013, as per the five components of the Framework: Control Environment, Risk Assessment, Control Activities, Information and Communication and Monitoring.

 

During its assessment of internal control over financial reporting, management identified the following deficiencies.  Based on the context in which the deficiencies occur, management believes that these deficiencies individually represent significant deficiencies:

 

1. Inadequate segregation of duties over certain information system access controls.  Although there were no major error or incident noted during the evaluation, the control deficiency carries significant risk of management overrides and unauthorized and approved transactions.

 

2. There was no human resources department in our company; the monthly salary calculations were conducted by the accounting department instead of human resources.  The lack of segregation of duties would not ensure the calculation of salary’s accuracy, and possibilities for staff receiving payment for work not attended.  There was also the potential risk of management override.

 

3. Purchase requisitions and purchase orders were not prepared, only oral indication was given by management.  Purchases could be initiated and executed for other uses or purchased goods or services could be misappropriated for other uses.  There was also the potential risk of fraud for these purchases.

 

Based only on these facts, management has determined that the combination of these significant deficiencies represents a material weakness.  Individually, these deficiencies were evaluated as representing a more than remote likelihood that a misstatement that was more than inconsequential, but less than material, could occur. However, each of these significant deficiencies affects the same set of accounts. Taken together, these significant deficiencies represent a more than remote likelihood that a material misstatement could occur and not be prevented or detected.  Therefore, in combination, these significant deficiencies represent a material weakness. 

 

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

 

There were no changes to our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended) during the year ended December 31, 2013 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

Item 16. [RESERVED]

 

ITEM 16A AUDIT COMMITTEE FINANCIAL EXPERT

 

Our board of directors serves as our audit committee.  The board has determined that it does not have an audit committee financial expert.  We believe that retaining an independent director who would qualify as an “audit committee financial expert” would be overly costly and burdensome and is not warranted given that we sold all of our subsidiaries.

 

ITEM 16B. CODE OF ETHICS

 

On October 29, 2004, we adopted a Code of Ethics (the “Code of Ethics” ).  A copy of our Code of Ethics was filed as an exhibit to the Report on Form 20-F filed with the Securities Exchange Commission on December 3, 2004.  Our Code of Ethics will be made available in print, free of charge, to any person requesting a copy in writing from our secretary at Appleby, Clifton House 75 Fort Street, PO Box 190, Grand Cayman E9 KY1-1104.

 

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ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES

 

The following table sets forth the aggregate fees billed by our auditors, MNP LLP, in 2013 and 2012.  Our board of directors has considered these fees and professional services rendered compatible with maintaining the independence of that firm.

 

    For year ending December 31,  
    2013     2012  
Audit Fees(1)   $ 55,000     $ 54,000  
Audit-Related Fees(2)     —       —  
Tax Fees(3)     1,500       1,500  
All Other Fees     —       —  
Total   $ 56,500     $ 55,500  

 

(1) Audit Fees consist of fees for the audit of our annual financial statements and review in connection with our statutory and regulatory filings.

 

(2) Audit-Related Fees consist of fees related to assurance and related services that are reasonably related to the performance of the audit or review of our financial statements and are not reported under “Audit Fees”.

 

(3) Tax Fees consist of fees related to tax compliance, tax advice and tax planning.

 

ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES

 

There are no applicable disclosures required by Exchange Act Rule 10a-3(d) regarding an exemption from the listings standards for audit committees.

 

ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS

 

Neither our company, nor any affiliated purchaser of our company, has purchased any of our securities during Fiscal 2013.

 

ITEM 16F. CHANGES IN REGISTRANT’S CERTIFYING ACCOUNTANT

 

None.

 

ITEM 16G. CORPORATE GOVERNANCE

 

We are not listed on a national securities exchange and, as such, there is no requirement to provide any information under this item.

 

ITEM 16H. MINE SAFETY DISCLOSURE

 

Not applicable.

 

Part III

 

Item 17. FINANCIAL STATEMENTS

 

Not applicable.

 

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Item 18. FINANCIAL STATEMENTS

 

The following Consolidated Financial Statements and the related Notes thereto are filed as part of this Report, commencing at Page 34 to 50 of this Report:

 

Report of Independent Registered Public Accounting Firm 34
Consolidated Balance Sheets as at December 31, 2013 and 2012 35
Consolidated Statements of Stockholders’ Equity (Deficiency) for the years ended December 31, 2013, 2012 and 2011 36
Consolidated Statements of Operations for the years ended December 31, 2013, 2012 and 2011 37
Consolidated Statements of Cash Flows for the years ended December 31, 2013, 2012 and 2011 38
Notes to Consolidated Financial Statements 39 to 50

 

Item 19. EXHIBITS

 

Exhibit

No.

    Document Description
       
1 (1)   Articles of Association, Memorandum of Association and Certificate of Incorporation of CWN
       
2.1 (2)   Form of Convertible Debenture dated May 31, 2004
       
4.1 (4)   Stock Option Plan Agreement dated October 1, 2007
       
4.2 (6)   Stock Option Plan Agreement dated June 10, 2010
       
4.3 (5)   Agreement to Establish [CWN China Co., Ltd.], a Chinese – Foreign Joint Venture Ltd. Liability Company
       
4.4 (6)   Consulting Agreement between Chineseworldnet.Com Inc. and Goldpac Investments Ltd. dated January 1, 2010
       
4.5 (6)   Consulting Agreement between Chineseworldnet.Com Inc. and Silver Lake Investment Partners, Ltd. dated January 1, 2010
       
4.6 (7)   Consulting Agreement between Chineseworldnet.Com Inc. and Goldpac Investments Ltd. dated January 1, 2011
       
4.7 (7)   Consulting Agreement between Chineseworldnet.Com Inc. and Silver Lake Investment Partners, Ltd. dated January 1, 2011
       
4.8 (8)   Consulting Agreement between Chineseworldnet.Com Inc. and Goldpac Investments Ltd. dated January 1, 2012
       
4.9 (9)   Share purchase agreement dated March 19, 2014 with Ningbo International Limited
       
11 (3)   Code of Ethics
       
12.1 *   Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
       
13.1 *   Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
       
101.INS *   XBRL Instance Document

 

- 31 -
 

 

101.SCH *   XBRL Taxonomy Extension Schema Document
       
101.CAL *   XBRL Taxonomy Extension Calculation Linkbase Document
       
101.DEF *   XBRL Taxonomy Extension Definition Linkbase Document
       
101.LAB *   XBRL Taxonomy Extension Label Linkbase Document
       
101.PRE *   XBRL Taxonomy Extension Presentation Linkbase Document

 

* Filed herewith
   
(1) Incorporated by reference to Exhibits of Registrant’s Registration Statement on Form 20-F (file no. 000-33051) filed on July 3, 2002.
   
(2) Incorporated by reference to Exhibits of Registrant’s Annual Report on Form 20-F (file no. 000-33051) filed on December 3, 2004.
   
(3) Incorporated by reference to Exhibits of Registrant’s Annual Report on Form 20-F (file no. 000-33051) filed on June 30, 2005.
   
(4) Incorporated by reference to Exhibits of Registrant’s Annual Report on Form 20-F (file no. 000-33051) filed on June 30, 2008.
   
(5) Incorporated by reference to Exhibits of Registrant’s Annual Report on Form 20-F (file no. 000-33051) filed on June 30, 2009.
   
(6) Incorporated by reference to Exhibits of Registrant’s Annual Report on Form 20-F (file no. 000-33051) filed on May 13, 2011.
   
(7) Incorporated by reference to Exhibits of Registrant’s Annual Report on Form 20-F (file no. 000-33051) filed on April 30, 2012.
   
(8) Incorporated by reference to Exhibits of Registrant’s Annual Report on Form 20-F (file no. 000-33051) filed on April 30, 2013.
   
(9) Incorporated by reference to Schedule “A” to Exhibit 99.4 of Registrant’s Form 6-K (file no. 000-33051) filed on March 24, 2014.

 

- 32 -
 

 

SIGNATURES

 

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F, and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.

 

Dated: April 30, 2014

 

ChineseWorldNet.com Inc. ,

a Cayman Islands Corporation

 

/s/ CHI CHEONG LIU

CHI CHEONG LIU

Director, President, Chief Executive Officer,

Chief Financial Officer, Secretary and Treasurer

 

- 33 -
 

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Directors and Stockholders of

 

Chineseworldnet.Com Inc.

 

We have audited the accompanying consolidated balance sheets of Chineseworldnet.Com Inc. and subsidiaries (the “Company”) as of December 31, 2013 and 2012, and the related consolidated statements of operations and comprehensive income (loss), stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2013. The Company’s management is responsible for these consolidated financial statements. Our responsibility is to express an opinion on these financial statements based on our audits. The cumulative data from January 12, 2000 (date of inception) to December 31, 2010 in the consolidated statements of stockholders’ equity, operations and cash flows, were audited by other auditors. Our opinion, insofar as it relates to the amounts included for cumulative data from January 1, 2010 to December 31, 2010, is based solely on the report of the other auditors.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2013 and 2012, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2013 in conformity with accounting principles generally accepted in the United States of America.

 

Vancouver, Canada
April 29, 2014
Chartered Accountants

 

 

- 34 -
 

 

Chineseworldnet.Com Inc.

 

CONSOLIDATED BALANCE SHEETS

 

As at December 31

(Expressed in U.S. Dollars)

 

    2013     2012  
    $     $  
             
ASSETS                
Current assets                
Cash and cash equivalents [note 2]     1,715,300       805,874  
Available-for-sale securities [note 3]     974,639       761,888  
Accounts receivable [note 4]     73,489       66,219  
Receivable from a related party [note 9f]     172,240       486,454  
Prepaid expenses and deposits     66,149       50,597  
Deferred tax assets [note 10]     -       3,857  
Total current assets     3,001,817       2,174,889  
                 
Equipment [note 5]     14,853       23,515  
Long term investments [note 6]     147,806       372,860  
Total assets     3,164,476       2,571,264  
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY                
Current liabilities                
Accounts payable and accrued liabilities     300,022       324,414  
Due to related parties, non-interest bearing [note 9c]     24,444       24,150  
Deferred revenue     75,677       97,240  
Bank loans [note 7]     1,279,002       100,256  
Total current liabilities     1,679,145       546,060  
                 
Stockholders’ equity [note 8]                
Common stock                
Authorized                
100,000,000,000 common shares with a par value of $0.001 per share                
Issued and outstanding 10,950,000 common shares     10,950       10,950  
Additional paid-in capital     4,257,028       4,255,550  
Accumulated other comprehensive income     (19,521 )     26,015  
Deficit     (2,801,484 )     (2,311,246 )
Equity attributable to shareholders of the Company     1,446,973       1,981,269  
Non-controlling interests     38,358       43,935  
Total stockholders’ equity     1,485,331       2,025,204  
Total liabilities and stockholders’ equity     3,164,476       2,571,264  
Nature of operation [note 1]                
Commitments [note 12]                
Subsequent events [note 13]                

 

See accompanying notes

 

- 35 -
 

 

Chineseworldnet.Com Inc.

 

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

 

Years ended December 31

(Expressed in U.S. Dollars)

 

    Common stock     Additional
paid-in 		          Accumulated
other
comprehensive 		    Total equity
(deficiency)
attributable 
to common 		    Non
controlling 		       
    Shares     Amount     capital     (Deficit)     Income     stockholders     interest     Total  
    #     $     $     $     $     $     $     $  
Balance, December 31, 2011     10,950,000       10,950       4,226,339       (2,226,158 )     (9,351 )     2,001,780       57,283       2,059,063  
                                                                 
Stock based compensation     —       —       59,404       —       —       59,404       —       59,404  
Change of ownership in CWN china                     (30,193 )                     (30,193 )     30,193       -  
Components of comprehensive income (loss):                                                                
Unrealized gain or loss on Available-for-sale securities                                     22,309       22,309               22,309  
Foreign currency translation adjustment     —       —       —       —       13,057       13,057       302       13,359  
Net income (loss) for the year     —       —       —       (85,088 )     —       (85,088 )     (43,843 )     (128,931 )
                                                                 
Balance, December 31, 2012     10,950,000       10,950       4,255,550       (2,311,246 )     26,015       1,981,269       43,935       2,025,204  
                                                                 
Stock based compensation     —       —       25,841       —       —       25,841       —       25,841  
Change of ownership in CWN china                     (24,363 )                     (24,363 )     24,363       -  
Components of comprehensive income (loss):                                                                
Unrealized gain or loss on Available-for-sale securities     -—-       —       —       —       (16,284 )     (16,284 )     —       (16,284 )
Foreign currency translation adjustment     —       —       —       —       (29,252 )     (29,252 )     1,216       (28,036 )
Net income (loss) for the year     —       —       —       (490,238 )     —       (490,238 )     (31,156 )     (521,394 )
Balance, December 31, 2013     10,950,000       10,950       4,257,028       (2,801,484 )     (19,521 )     1,446,973       38,358       1,485,331  

 

See accompanying notes

 

- 36 -
 

 

Chineseworldnet.Com Inc.

 

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

 

Year ended December 31

(Expressed in U.S. Dollars)

 

    2013     2012     2011  
    $     $     $  
                   
Revenue     937,781       1,243,638       1,675,875  
                         
Expenses                        
Advertising and promotion     82,907       212,930       271,164  
Audit and legal     82,014       84,354       63,962  
Consulting fees     90,000       90,000       104,000  
Depreciation     7,776       15,216       15,918  
Directors’ remuneration     12,000       12,000       12,000  
Office and miscellaneous     72,142       82,316       74,077  
Printing     8,068       17,579       26,245  
Provision  for bad and doubtful debts     51,112       (30,472 )     55,917  
Rent and operating     145,356       139,509       135,049  
Salaries and benefits     491,519       695,639       635,260  
Seminar operating expense     —       620       763  
Stock based compensation     25,841       59,404       140,042  
Telephone     13,747       18,808       27,339  
Travel and entertainment     113,293       215,379       117,240  
      (1,195,775 )     (1,613,282 )     (1,678,976 )
Other income (loss)                        
Interest and sundry income     20,390       37,775       37,671  
Gain (loss) on available-for-sale securities     6,451       50,193       (5,995 )
Foreign exchange gain (loss) and other losses     (89,108 )     35,294       (28,348 )
Equity pick up     (197,276 )     166,735       192,399  
Other income (loss), net     (259,543 )     289,997       195,727  
Income (loss) before income taxes     (517,537 )     (79,647 )     192,626  
                         
Deferred tax recovery (expense)     (3,857 )     (49,284 )     (54,586 )
Net income (loss) for the year     (521,394 )     (128,931 )     138,040  
Other comprehensive income                        
Unrealized gain or loss on available –for-sale securities     (45,536 )     22,309       (3,015 )
Currency translation adjustments     1,216       13,359       (2,550 )
Comprehensive income (loss)     (44,320 )     35,668       (5,565 )
                         
Net income (loss) attributable to:                        
Common stockholders     (490,238 )     (85,088 )     198,966  
Non-controlling interests     (31,156 )     (43,843 )     (60,926 )
      (521,394 )     (128,931 )     138,040  
Net comprehensive income (loss) attributable to:                        
Common stockholders     (535,774 )     (49,722 )     173,194  
Non-controlling interests     (29,940 )     (43,541 )     (40,719 )
      (565,714 )     (93,263 )     132,475  
                         
Earning (loss) per share – basic     (0.05 )     (0.01 )     0.01  
Earning (loss) per share – diluted     (0.05 )     (0.01 )     0.01  
Weighted average number of common shares outstanding                        
- basic     10,950,000       10,950,000       10,950,000  
- diluted     10,950,000       10,950,000       11,404,862  

 

See accompanying notes

 

- 37 -
 

 

Chineseworldnet.Com Inc.

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

Year ended December 31

(Expressed in U.S. Dollars)

 

    2013     2012     2011  
    $     $     $  
                   
OPERATING ACTIVITIES                        
Net income (loss) for the year     (521,394 )     (128,931 )     138,040  
Adjustment to reconcile net loss to net cash used in operating activities:                        
Depreciation     7,776       15,216       15,918  
Deferred tax recovery     3,857       49,284       54,586  
Stock based compensation     25,841       59,404       140,042  
Equity interest pick up     197,276       (166,735 )     (144,257 )
Gain on short term investment     —       (50,193 )     —  
Write-down equipments     506       —       —  
Changes in non-cash working capital items:                        
Accounts receivable     (12,230 )     46,825       (91,634 )
Prepaid expenses and deposits     (18,481 )     (3,767 )     (18,166 )
Accounts payable and accrued liabilities     (6,747 )     69,656       33,270  
Deferred revenue     (15,520 )     (42,449 )     34,213  
Net cash provided by (used in) operating activities     (339,116 )     (151,690 )     162,012  
                         
FINANCING ACTIVITIES                        
Short term loan     1,178,746       (602,610 )     702,866  
Due to related parties     331,125       (190,448 )     130,417  
Net cash provided by financing activities     1,509,871       (793,058 )     833,283  
                         
INVESTING ACTIVITIES                        
Purchase of equipment     —       (1,726 )     (1,084 )
Short term investments     (274,778 )     (19,944 )     (172,886 )
Net cash provided by (used in) investing activities     (274,778 )     (21,670 )     (173,970 )
                         
Effect of exchange rate changes on cash and cash equivalents     13,449       631       12,326  
                         
Increase (decrease) in cash and cash equivalents     909,426       (965,787 )     833,651  
Cash and cash equivalents, beginning of year     805,874       1,771,661       938,010  
Cash and cash equivalents, end of year     1,715,300       805,874       1,771,661  
                         
Supplemental disclosure of cash flow information                        
Cash paid for interest, net of interest capitalized     —       —       —  
Cash paid for income taxes     —       —       —  

 

See accompanying notes

 

- 38 -
 

 

1. NATURE OF OPERATIONS

 

The Company was incorporated under the laws of Cayman Islands on January 12, 2000. On January 15, 2000 the Company acquired 100% of the issued and outstanding shares of NAI Interactive Ltd. (“NAI”), a company incorporated under the laws of British Columbia, Canada. The Company also has a dormant wholly-owned subsidiary ChineseWorldNet.com HK Limited (“CWN HK”) incorporated under the laws of Hong Kong.  ChineseWorldNet.com (Shanghai) Ltd. (“CWN China”) was incorporated under the laws of People’s Republic of China in April 2008. In fiscal year 2012, the Company’s ownership interests in CWN China increased from 80% to 83% after CWN HK invested an amount of $200,000 to CWN China’s registered capital. During the fiscal year 2013, the Company’s ownership interests in CWN China further increased from 83% to 85% after CWN HK invested an amount of $187,200 to CWN China’s registered capital. CWN China has a wholly-owned subsidiary, Weihai Consulting Investment Ltd (“Weihai”), a company incorporated under the laws of People’s Republic of China in September 2009.  

 

The Company’s business is to provide online internet services through its Chinese world-wide website. The online internet services comprise banner advertisements, web page hosting and maintenance, online promotion for customers, translation services, investment seminars, investment handbooks, website contest events, and subscription fees. The Company, through its subsidiary, NAI, is also in the business of providing investor relations and public relations (IR/PR) services to public companies.  The IR/PR services are comprised of investment conferences in North America and China, company road shows, investor outreach events, publication of industry related handbooks, online marketing through its proprietary website, and e-mail marketing. These services are considered as one segment based upon the Company’s organizational structure, the way in which these operations are managed and evaluated by management, the availability of separate financial results and materiality considerations.

 

These consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. The Company has accumulated losses since its inception and requires additional funds to maintain and expand its intended business operations.  Management’s plans in this regard are to raise debt or equity financing as required which the Company has been able to finance the operations through a series of equity and debt financings and additional funds is still required to fund the Company’s anticipated business expansion.

 

These conditions raise substantial doubt about the Company’s ability to continue as a going concern.  These consolidated financial statements do not include any adjustments that might result from this uncertainty.

 

2. SIGNIFICANT ACCOUNTING POLICIES

 

Basis of consolidation

 

These consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and include the accounts of the Company and its wholly owned subsidiaries and subsidiaries which the Company owns 85% interests and its investment in CWN Capital Inc. All material inter-company accounts and transactions have been eliminated upon consolidation.

 

During the fiscal year 2011, CWN HK invested an amount of $400,000 to CWN China. As a result, through CWN HK, the Company had an effective ownership of 80% equity interests in CWN China. In fiscal year 2012, CWN HK further invested an amount of $200,000 to CWN China and the Company‘s effective ownership of equity interest increased from 80% to 83% in CWN China. During the fiscal year 2013, CWN HK further invested an amount of $187,200 to CWN China and the Company‘s effective ownership of equity interest increased from 83% to 85% in CWN China. The transaction was accounted for as an equity transaction and the non-controlling interest was adjusted to reflect the changes in the interest in CWN China.

 

- 39 -
 

 

2. SIGNIFICANT ACCOUNTING POLICIES (cont’d.)

 

Use of estimates

 

The preparation of consolidated financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates and would impact the results of operations and cash flows.

Estimates and underlying assumptions are reviewed at each period end. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected. Significant areas requiring the use of management estimates relate to the determination of the net recoverable value of assets, fair value of financial instruments, allowance for doubtful accounts, asset impairment, deferred income tax assets and liabilities and stock based compensation.

 

Equipment

 

Equipment is recorded at cost, net of accumulated amortization.

 

Depreciation on equipment is provided on a declining-balance basis over its expected useful lives at the following annual rates:

 

Furniture and fixtures     20 %
Computer equipment     30 %
Vehicle     25 %

 

Equipments are written down to net realizable value when management determines there has been a change in circumstances which indicates its carrying amount may not be recoverable. No write-downs have been necessary to date.

 

Cash equivalents

 

Cash equivalents usually consist of highly liquid investments which are readily convertible into cash with maturity of three months or less when purchased. As at December 31, 2013, the Company held a $Nil [2012 - $504,107] term deposit.

 

Accounts receivable

 

Accounts receivable are recorded at face value, less an allowance for doubtful accounts. The allowance for doubtful accounts is an estimate calculated based on an analysis of current business and economic risks, customer credit-worthiness, specific identifiable risks such as bankruptcies, terminations or discontinued customers, or other factors that may indicate a potential loss. The allowance is reviewed on a regular basis, at least annually, to ensure that it adequately provides for all reasonably expected losses in the receivable balances. An account may be determined to be uncollectible if all collection efforts have been exhausted, the customer has filed for bankruptcy and all recourse against the account is exhausted, or disputes are unresolved and negotiations to settle are exhausted. This uncollectible amount is written off against the allowance. For the fiscal year of 2013, the company incurred an expense for bad debt and provision for allowance for doubtful accounts receivable in the amount of $51,112. The Company recorded bad debt recovery of $30,472 from allowance for doubtful accounts in 2012. In 2011, the company incurred an expense for bad debt and provision for allowance for doubtful accounts receivable in the amount of $55,917.

 

Foreign currency translations

 

The Company, NAI, CWN HK, CWN China and Weihai maintain their accounting records in their functional currencies of U.S. dollars, Canadian dollars, HK dollars, Chinese Renminbi and Chinese Renminbi, respectively. However, the Company reports in U.S. dollars. Foreign currency transactions in the foreign subsidiaries are translated into their functional currency using the exchange rate in effect at that date for assets, liabilities, revenues and expenses. At the period end, monetary assets and liabilities denominated in the foreign currency are re-evaluated into the functional currency by using the exchange rate in effect for the period end. The resulting foreign exchange gains and losses are included in operations.

 

Assets and liabilities of the foreign subsidiaries are translated into the reporting U.S. dollars at exchange rates in effect at the balance sheet date. Revenues and expenses are translated at the average exchange rates. Gain and losses from such translations are included in stockholders’ equity, as a component of other comprehensive income.

 

- 40 -
 

 

2. SIGNIFICANT ACCOUNTING POLICIES (cont’d.)

 

Allowance for Doubtful Accounts

 

The Company provides an allowance for doubtful accounts when management estimates collectibility to be uncertain. Accounts receivable are continually reviewed to determine which, if any, accounts are doubtful of collection. In making the determination of the appropriate allowance amount, the Company considers current economic and industry conditions, relationships with each significant customer, overall customer credit-worthiness and historical experience.

 

Income taxes

 

The Company accounts for income taxes under the provisions of Accounting Standards Codification (“ASC”) 740 (formerly Statement of Financial Accounting Standards (“SFAS”) No. 109), Accounting for Income Taxes , which requires the Company to recognize deferred tax liabilities and assets for the expected future tax consequences of events that have been recognized in the Company’s financial statements or tax returns using the liability method. Under this method, deferred tax liabilities and assets are determined based on the temporary differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse. The effect on deferred income tax assets and liabilities of a change in income tax rates is included in the period that includes the enactment date. Valuation allowances are established when necessary to reduce deferred income tax assets to the amount expected to be realized.

 

On January 1, 2007 the Company adopted FAS Interpretation No. 48, “Accounting for Uncertainty in Income Taxes— an interpretation of FASB Statement No. 109 ("FIN 48")”, codified into ASC 740. FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise's financial statements in accordance with SFAS No. 109, Accounting for Income Taxes. FIN 48 describes a recognition threshold and measurement attribute for the recognition and measurement of tax positions taken or expected to be taken in a tax return and also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.

 

Comprehensive income

 

The Company accounts for comprehensive income under the provisions of ASC 220 (formerly SFAS 130), Reporting Comprehensive Income , which establishes standards for reporting and display of comprehensive income, its components and accumulated balances. The Company is disclosing this information on its Statement of Stockholders’ Equity. The Company’s comprehensive income (loss) consists of net earnings (loss) for the year, foreign currency translation adjustments and unrealized gain (loss) on available-for-sale securities.

 

Financial instruments and concentration of risks

 

Fair value of financial instruments is made at a specific point in time, based on relevant information about financial markets and specific financial instruments. As these estimates are subjective in nature, involving uncertainties and matters of significant judgment, they cannot be determined with precision. Changes in assumptions can significantly affect estimated fair values.

 

The carrying value of cash and cash equivalents, available for sale securities, accounts receivable, receivable from related parties, accounts payable and accrued liabilities, due to related parties and bank loans approximates their fair value because of the short-term nature of these instruments. The Company is exposed to interest rates risk on its cash and cash equivalents, marketable funds and bank loans. Management does not believe that the impact of interest rate fluctuate will be significant.

 

The Company has cash and cash equivalents with various financial institutions, which may exceed insured limits throughout the year. The Company is exposed to credit loss for amounts in excess of insured limits in the event of non-performance by the institution. However, the Company does not anticipate non-performance.  

 

Concentration of credit risk with respect to trade receivables is limited due to the Company’s large number of diverse customers. The Company does not require collateral or other security to support financial instruments subject to credit risk.

 

The Company operates and incurs significant expenditures outside of the United States of America and is exposed to foreign currency risks due to the currency exchange fluctuation between the subsidiaries’ functional currency and the Company’s reporting currency.

 

- 41 -
 

 

2. SIGNIFICANT ACCOUNTING POLICIES (cont’d.)

 

Fair value of financial instruments

 

The Company has adopted the provisions of ASC Topic 820, Fair Value Measurements , which defines fair value, establishes a framework for measuring fair value in GAAP, and expands disclosures about fair value measurements. ASC 820 does not require any new fair value measurements, but provides guidance on how to measure fair value by providing a fair value hierarchy used to classify the source of the information. The fair value hierarchy distinguishes between assumptions based on market data (observable inputs) and an entity’s own assumptions (unobservable inputs). The hierarchy consists of three levels:

 

· Level one – Quoted market prices in active markets for identical assets or liabilities;

 

· Level two – Inputs other than level one inputs that are either directly or indirectly observable; and

 

· Level three – Unobservable inputs developed using estimates and assumptions, which are developed by the reporting entity and reflect those assumptions that a market participant would use.

 

For the period ended December 31, 2013 and 2012, the fair value of cash and cash equivalents and public traded securities, marketable funds and bank loans are recognized on the balance sheets as level one per the fair value hierarchy; and the fair value of share options are recognized in the balance sheets as level three per the fair value hierarchy.

 

Available-for-sale securities

 

Available-for-sale securities represent securities and other financial instruments that are non- strategic and neither held for trading, nor held to maturity. Available-for-sale securities are recorded at market value. Unrealized holding gains and losses on available-for-sale securities are excluded from income and charged to Accumulated other comprehensive income as a separate component of stockholders’ equity until realized.

 

Investments in Companies Accounted for Using the Equity Method

 

Investments in equity method investees are accounted for using the equity method based upon the level of ownership and/or the Company’s ability to exercise significant influence over the operating and financial policies of the investee. Investments of this nature are recorded at original cost and adjusted periodically to recognize the Company’s proportionate share of the investees’ net income or losses after the date of investment. When net losses from and investment accounted for under the equity method exceed its carrying amount, the investment balance is reduced to zero. The Company resumes accounting for the investment under the equity method if the entity subsequently reports net income and the Company’s share of that net income exceeds the share of the net losses not recognized during the period the equity method was suspended. Investments are written down only when there is clear evidence that a decline in value that is other than temporary has occurred. When an investment accounted for using the equity method issues its own shares, the subsequent reduction in the Company’s proportionate interest in the investee is reflected in income as a deemed dilution gain or loss on disposition. The Company evaluates its investments in companies accounted for the equity or cost method for impairment when there is evidence or indicators that a decrease in value may be other than temporary.

 

Non-monetary transactions

 

The Company entered into agreements for the supply of content for the Company’s websites in exchange for advertising, consisting primarily of links to the supplier’s websites.  The Company accounted for these transactions in accordance with ASC 845 (formerly Accounting Principles Board No. 29) Nonmonetary Transactions and with ASC 605-20 (formerly Emerging Issues Task Force No. 99-17)  Revenue Recognition .  No cash was exchanged between the parties in any of these transactions.  These transactions have been recorded at a zero value, being the carrying amount of the content supplied.

 

- 42 -
 

 

2. SIGNIFICANT ACCOUNTING POLICIES (cont’d.)

 

Revenue recognition

 

Revenue consists of two main sources:

 

1. Fees from banner advertisement, webpage hosting and maintenance, on-line promotion and translation services, advertising and promotion fees for customers in the Company’s Chinese Investment Guides, sponsorship fees from investment seminars, road show and forums, all of which sales prices are fixed and determinable at the time the contracts are signed and there are no provisions for refunds contained in the contracts. These revenues are recognized when all significant contractual obligations have been satisfied and collection of the resulting receivable is reasonably assured.

 

2. Fees from membership subscriptions. These revenues are recognized over the term of the subscription.

 

Fees received in advance and require continuing performance obligation are deferred and recognized as revenue systematically over the period of services provided to customers.

 

Long-lived assets impairment

 

Long-term assets of the Company are reviewed for impairment whenever events or changes in circumstances indicate that their carrying value has become impaired, in accordance with the guidance established in ASC 360 (formerly SFAS144), Property, Plant and Equipment . An impairment loss would be recognized when the carrying amount of an asset exceeds the estimated undiscounted future cash flows expected to result from the use of the asset and its eventual disposition. The amount of the impairment loss to be recorded is calculated by the excess of the asset’s carrying value over its fair value. Fair value is generally determined using a discounted cash flow analysis. There were no impairment charges during the periods presented.

 

Stock-based compensation

 

The Company has adopted the fair value method of accounting for stock-based compensation as recommended by ASC 718 (formerly SFAS 123R) Compensation –Stock Compensation . The Company has granted stock options to directors and certain employees for services provided to the Company under this method. The Company recognizes compensation expense for stock options awarded based on the fair value of the options at the grant date using the Black-Scholes option pricing model. The fair value of the options is amortized over the vesting period.

 

Commitment and Contingencies

 

The Company follows subtopic 450-20 of the FASB Accounting Standards Codification to report accounting for contingencies. Certain conditions may exist as of the date the consolidated financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur.   The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment.   In assessing loss contingencies related to legal proceedings that are pending against the Company or un-asserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or un-asserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.

 

If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s consolidated financial statements.   If the assessment indicates that a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed.

 

Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed.   Management does not believe, based upon information available at this time, that these matters will have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows. However, there is no assurance that such matters will not materially and adversely affect the Company’s business, financial position, and results of operations or cash flows.

 

- 43 -
 

 

2. SIGNIFICANT ACCOUNTING POLICIES (cont’d.)

 

Earning (Loss) per share

 

Earning (loss) per share is computed using the weighted average number of common shares outstanding during the period. The Company has adopted ASC 260 (formerly SFAS128), Earnings Per Share . Diluted earning (loss) per share is equal to basic loss per share because there is no potential dilutive security.

  

Recent Accounting Pronouncements

 

 In January 2013, the FASB issued ASU 2013-01, Balance Sheet (Topic 210) - Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities. This amendment requires companies to disclose information about financial instruments that have been offset and related arrangements to enable users of the company's financial statements to understand the effect of those arrangements on the company's financial position. Companies will be required to provide both net (offset amounts) and gross information in the notes to the financial statements for relevant assets and liabilities that are offset. The guidance is effective prospectively for the Company's interim and annual periods beginning after January 1, 2013. Adoption of this amendment had no impact on the on the Company’s balance sheet or results of operations.

 

- 44 -
 

 

3. AVAILABLE-FOR-SALE SECURITIES

 

Available –for –sale securities consist of marketable funds, marketable securities and stock options and are summarized as follows:

 

    2013     2012  
          Fair           Fair  
          Market           Market  
    Cost
$ 		    value
$ 		    Cost
$ 		    value
$ 		 
                         
Public traded securities     1,177       -       1,177       -  
Marketable funds     966,673       974,639       735,215       761,888  
Stock options     -       -       -       -  
Total     967,850       974,639       736,392       761,888  

 

The fair market value of public traded securities and marketable funds are measured using quoted prices in active market for the identical assets, the total fair market value is the published market price per share/unit multiplied by the number of shares/units held without consideration of transaction costs.

 

On January 26, 2011, the Company received 300,000 stock options from Argex Mining Inc.(the “Argex”), which expire on July 26, 2012 with each stock option entitling to its holder to purchase one common share at C$0.495 which are vested 25% immediately and remaining 75% shall become vested on every 6 month from the grant date.

 

During the fiscal year 2011, the Company exercised 75,000 stock options. As at December 31, 2011, Argex cancelled 75,000 stock options and the Company has 150,000 stock options outstanding. During the fiscal year 2012, the Company exercised all remaining 150,000 stock options, sold all Argex’s shares for net proceeds of $156,267, and recognized the gain in the amount of $43,409.

 

4. ACCOUNTS RECEIVABLE

 

    December 31, 
2013 		    December 31, 
2012 		 
Accounts receivable     214,661       153,970  
Allowance for doubtful accounts     (141,172 )     (87,751 )
Total     73,489       66,219  

 

5. EQUIPMENT

 

          Accumulated     Net book  
      Cost     amortization     value  
    $     $     $  
2013                        
Furniture and fixtures     35,221       30,946       4,275  
Computer equipment     92,016       87,653       4,363  
Leasehold improvement     27,689       27,689       -  
Vehicle     37,817       31,602       6,215  
      192,743       177,890       14,853  
2012                        
Furniture and fixtures     37,137       30,942       6,195  
Computer equipment     100,132       92,632       7,500  
Leasehold improvement     25,674       25,674       -  
Vehicle     36,683       26,863       9,820  
      199,626       176,111       23,515  

 

A reduction in the value of Computer equipment is due to the Company wrote-off outdated computer equipment.

 

- 45 -
 

 

6. LONG TERM INVESTMENTS

 

The Company previously had a wholly-owned subsidiary CWN Capital Inc. (“CWN Capital”), a company incorporated under the laws of British Virgin Islands in August 2009.  On December 18, 2010, the Company’s ownership interests were diluted to 23.8% upon CWN Capital Inc. issued 80,000 common shares to two companies controlled by two directors of the Company.  As the dilution has resulted in the Company losing a controlling interest, the Company deconsolidated CWN Capital on December 18, 2010 and recorded its interest in CWN Capital as an equity investment.

 

The dilution occurred on October 1, 2010 and December 18, 2010 when CWN Capital issued 25,000 and 55,000 common stocks at a price of $0.01 and $1.00 per share of its common stock to a company controlled by a director of the Company and another company controlled by another director of the Company, respectively.  The above issuance of CWN Capital common stocks diluted the Company’s ownership interest in CWN Capital down to 50% and 23.8%, respectively. Upon the issuance of 55,000 common stocks of CWN Capital on December 18, 2010, the Company has become a non-controlling shareholder, which the Company (the former parent) deconsolidated CWN Capital from its consolidated financial statements in accordance with ASC 810-10-65 (formerly SFAS 160 Non-controlling Interests in Consolidated Financial Statements – an amendment of ARB No. 51), and subsequently the Company accounts for its investment in the CWN Capital under the equity method.

 

Pursuant to ASC 810-10-65 (formerly SFAS 160 Non-controlling Interests in Consolidated Financial Statements – an amendment of ARB No. 51), upon the deconsolidation of CWN Capital, the Company’s retained non-controlling equity investment in the CWN Capital (former subsidiary) was initially measured at the estimated fair value of $112,218 as of December 18, 2010. As a result, the Company recognized a dilution loss of $128,356.

 

For the fiscal year 2010 consolidated financial statements, the Company included the operations of CWN Capital for the period from January 1, 2010 to December 17, 2010 and recorded an equity income of $13,897 for the period from December 18, 2010 to December 31, 2010, which resulted in a net investment of $126,115.

 

For the fiscal year 2011 consolidated financial statements, the Company recorded an equity income of $192,399 for the period from January 1, 2011 to December 31, 2011, which resulted in a net investment of $270,371 as of December 31, 2011.

 

For the fiscal year 2012 consolidated financial statements, the Company recorded an equity income of $166,735 for the year from January 1, 2012 to December 31, 2012, which resulted in a net investment of $372,860 as of December 31, 2012.

 

For the fiscal year 2013 consolidated financial statements, the Company recorded an equity loss of $197,276 for the year from January 1, 2013 to December 31, 2013, which resulted in a net investment of $147,806 as of December 31, 2013.

 

7. BANK LOANS

 

In July 27, 2012, the Company entered into a $1 million Revolving Credit Facility. The amount is subject to availability of Collateral Lending Value as assessed by the bank from time to time. The Revolving Credit Facility includes both term loan and overdraft for up to 12 months maximum tenor each subject to availability and bank’s discretion. The interest for current account overdraft will be charged monthly in arrears at the bank’s appropriate funding rate plus 2% p.a. or advised by the bank from time to time. The interest for term loans will be charged at 1% p.a. over bank’s cost of funds or as advised by the bank from time to time and payable upon end of the corresponding interest periods and quarterly if the loan tenor exceeds three months. The Revolving Credit Facility will be subject to review at any time at the bank’s discretion without prior notice to the Company. The Revolving Credit Facility is secured by the Company’s total assets. As at December 31, 2013, the Company had $1,279,002 of term loan outstanding under the Revolving Credit Facility.

 

Bank loans consisted of the following:

 

    December 31, 2013     December 31, 2012  
From Financial institutions     Rate       Balance       Rate       Balance  
EFG Bank of Hong Kong     1.17 %   $ 1,279,002       1.5 %   $ 100,256  
Total           $ 1,279,002             $ 100,256  

 

The bank loan has been renewed subsequent to year end and the interest rate decreased to 1.16%.

 

- 46 -
 

 

8. STOCKHOLDERS’ EQUITY

 

Stock Options

 

On October 11, 2007, the Company granted key officers and directors 550,000 stock options, which expire on October 11, 2012 with each stock option entitling its holder to purchase one common share at $1.08, which are vested 20% on the first anniversary of the grant date and remaining 80% shall become vested in four equal yearly installments on each of the four anniversary dates of the grant date subsequent to the first anniversary of the grant date.

 

On June 10, 2010, the Company granted key officers and directors 1,090,000 stock options, which expire on June 10, 2015 with each stock option entitling its holder to purchase one common share at $0.60, which are vested 20% on the first anniversary of the grant date and remaining 80% shall become vested in four equal yearly installments on each of the four anniversary dates of the grant date subsequent to the first anniversary of the grant date.

 

    Number of Options     Weighted Average
 Exercise Price 		 
Balance, December 31, 2011     1,510,000     $ 0.74  
Forfeited     (20,000 )     0.60  
Expired     (450,000 )     1.08  
Balance, December 31, 2012     1,040,000       0.60  
Forfeited     (20,000 )     0.60  
Balance, December 31, 2013     1,020,000     $ 0.60  

 

As at December 31, 2013, the Company has 1,020,000 stock options outstanding:

 

Exercise price     Outstanding as at December 31, 2013     Exercisable as at December 31, 2013  
      Number of
Options 		    Weighted
Average
Exercise
Price 		    Weighted
Average
Remaining
Contractual
Life (years) 		    Number of
Options 		    Weighted
Average
Exercise
Price 		    Weighted
Average
Remaining
Contractual
Life (years) 		 
                                       
$ 0.60       1,020,000     $ 0.60       1.44       612,000     $ 0.60       1.44  
          1,020,000     $ 0.60       1.44       612,000     $ 0.60       1.44  

 

Exercise price     Outstanding as at December 31, 2012     Exercisable as at December 31, 2012        
      Number of
Options 		    Weighted
Average
Exercise
Price 		    Weighted
Average
Remaining
Contractual
Life (years) 		    Number of
Options 		    Weighted
Average
Exercise
Price 		    Weighted
Average
Remaining
Contractual
Life (years) 		 
                                       
$ 0.60       1,040,000     $ 0.60       2.44       419,000     $ 0.60       2.44  
          1,040,000     $ 0.60       2.44       419,000     $ 0.60       2.44  

 

The fair value of each stock option granted in the fiscal year 2010 was calculated as $0.30. The Company recorded stock based compensation expense of $25,841 in fiscal year 2013 (2012- $59,404 and 2011-$140,042) for options granted in the previous years. The fair value of each option granted is estimated on the date of the grant using the Black-Scholes option pricing model with weighted average assumptions for grants as follows:

 

    2010  
Risk-free interest rate     2.65 %
Expected life of options     5 years  
Annualized volatility     76.71 %
Dividend rate     0 %

 

There was no stock option granted in fiscal year 2013 and 2012.

 

- 47 -
 

 

9. RELATED PARTY TRANSACTIONS

 

[a] In 2013, the Company incurred $90,000 [2012 - $90,000 and 2011 - $104,000] in consulting fees to a company related to a director of the Company, of which $22,500 [2012 - $22,500] was outstanding included in accounts payable and accrued liabilities as at December 31, 2013.

 

[b]  In 2013, the Company paid $98,102 [2012 - $110,723 and 2011 - $103,651] salary to the senior officers of the Company.

 

[c] As at December 31, 2013, the Company has non-interest bearing loan from the stockholders in the amount of $12,444 [2012 - $24,150].

 

[d] Included in accounts payable and accrued liabilities, $84,947 [2012 - $74,836] was payable to directors and senior officers of the Company.

 

[e] In 2013, the Company incurred $12,000 [2012 - $12,000 and 2011 - $12,000] in director fees, of which $12,000 [2012 - $12,000] was outstanding and included in accounts payable and accrued liabilities as at December 31, 2013.

 

[f] In 2013, the Company provided service for a total of $115,093 [2012 - $270,810 and 2011 - $202,280] to CWN Capital, of which $115,093 [2012 - $270,810] was outstanding and included in receivable from a related party as at December 31, 2013. The balance of receivable from a related party in the amount of $57,147 [2012 - $215,644] represents costs incurred on behalf of CWN Capital by the Company.

 

[g] In 2013, the Company provided service for a total of $11,653 [2012 - $14,043 and 2011 - $Nil] to CWN Mining Acquisition, a company in which CEO of the Company has significant influence.

 

Also see note 6.

 

All related party transactions were entered into in the normal course of business and are recorded at the exchange amount established and agreed to between the related parties.

 

10. INCOME TAXES

 

The parent company is subject to the tax laws of Cayman Islands and the tax rate is 0%. NAI is a Canadian company and its income tax expense varies from the amount that would be computed from applying the combined Canadian federal and provincial income tax rate at 25.75%. CWN HK and CWN China are taxed at 16.5% and 25% based on the Hong Kong and Chinese tax laws. The reconciliation of the income tax expense is as follows:

 

    2013
$ 		    2012
$ 		    2011
$ 		 
                   
Net Income (loss) for the year     (517,537 )     (79,646 )     192,626  
Statutory Cayman Islands corporate tax rate     0 %     0 %     0 %
Anticipated tax recovery     —       —       —  
                         
Change in tax rates resulting from:                        
Non-deductible items     8,962       15,250       —  
Change in estimates     (2,268 )     (7,259 )     -  
Change enacted of tax rate     (2,702 )     -       6,818  
Functional currency adjustments     (10,985 )     (2,022 )     -  
Foreign tax rate differential     (53,640 )     (84,074 )     8,477  
Others     -       -       (11,461 )
Change in valuation allowance     64,490       127,389       50,752  
Income tax expense (recovery)     3,857       (49,284 )     54,586  

 

- 48 -
 

 

10. INCOME TAXES (cont’d.)

 

Deferred taxes reflect the tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and their tax values. Deferred tax assets (liabilities) at December 31, 2013 and 2012 are comprised of the following:

 

    2013
$ 		    2012
$ 		 
             
Non-capital loss carryforwards     413,959       357,624  
Capital losses     -       744  
Equipment and furniture     2,008       1,219  
Others     (1,286 )     (5,539 )
      414,681       354,048  
Valuation allowance     (414,681 )     (350,191 )
Net deferred tax assets     -       3,857  

 

The Company has non capital loss carryforwards of approximately $243,434 (2011: $288,000) which may be carried forward to apply against future year income tax for Canadian income tax purposes, subject to the final determination by taxation authorities, expiring in the following years:

 

    $  
2028     121,699  
2029     62,653  
2032     59,082  
      243,434  

 

The Company has net operating loss carryforwards of approximately $48,116 (2012: $45,473) which may be carried forward indefinitely to apply against future year income tax for Hong Kong income tax purposes, subject to the final determination by taxation authorities.

 

The Company has net operating loss carryforwards of approximately $1,353,337 (2012: $1,109,400) which may be carried forward to apply against future year income tax for Chinese income tax purposes, subject to the final determination by taxation authorities, expiring in the following years:

 

    $  
2016     924,258  
2017     221,591  
2018     207,488  
      1,353,337  

 

The parent company is subject to the tax laws of Cayman Islands and the tax rate is 0%. Often, differing opinions regarding legal interpretation exist both among and within government ministries and organizations; thus, creating uncertainties and areas of conflict. Tax declarations are subject to review and investigation by the authority, which are enabled by law to impose extremely severe fines, penalties and interest charges. The risk remains that the relevant authorities could take differing positions with regard to interpretive issues and the effect could be significant. The fact that a year has been reviewed does not close that year, or any tax declaration applicable to that year, from further review.

 

- 49 -
 

 

11.    GEOGRAPHIC INFORMATION

 

The Company’s head office is located in Vancouver, British Columbia, Canada. The operations of the Company are primarily in two geographic areas: Canada and China. A summary of geographical information for the Company’s assets and net loss for the years is as follows:

 

Year ended December 31, 2013   Canada     China     Total  
                   
Revenue from external customers   $ 923,350     $ 14,431     $ 937,781  
Net income (loss)     (313,717 )     (207,677 )     (521,394 )
Total assets   $ 3,128,054     $ 48,422     $ 3,176,476  

 

Year ended December 31, 2012   Canada     China     Total  
                   
Revenue from external customers   $ 1,227,285     $ 16,353     $ 1,243,638  
Net income (loss)     90,283       (219,214 )     (128,931 )
Total assets   $ 2,439,206     $ 132,058     $ 2,571,264  

 

12. COMMITMENTS

 

Operating leases

 

The Company has entered into operating leases for automobile and office space. Minimum future rental payments under these leases are as follows:

 

    $  
2014     98,747  
2015     97,033  
2016     55,612  
2017     1,816  
Total     253,208  

 

13.  SUBSEQUENT EVENTS

 

[a] Subsequent to the year end, the Company and NAI entered into a new consulting agreement with Goldpac Investments Ltd, a company controlled by a director of the Company respectively.  The Company and NAI will pay $12,000 per quarter to Goldpac Investments Ltd respectively for the consulting services from January 1 to December 31, 2013

 

[b] On April 18, 2014, the company received shareholder approval for a share purchase agreement for the sale of all issued and outstanding shares in NAI, all issued and outstanding shares of CWN HK and 23.8% of issued and outstanding shares of CWN Capital. As part of the contract, we will receive an aggregate of $263,968 in funds and one or more non-interest bearing promissory notes in the aggregate principal amount of $831,031with a maturity date of one year with the option to extend upon mutual agreement.

 

Also see note 7.

 

14.  COMPARATIVE FIGURES

 

Certain of comparative figures have been reclassified to conform with the presentation adopted in the current period.

 

- 50 -

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