Attached files
file | filename |
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EX-21 - EX-21 - CHINAWE COM INC | c14706exv21.htm |
EX-31.2 - EXHIBIT 31.2 - CHINAWE COM INC | c14706exv31w2.htm |
EX-23.1 - EX-23.1 - CHINAWE COM INC | c14706exv23w1.htm |
EX-32.2 - EXHIBIT 32.2 - CHINAWE COM INC | c14706exv32w2.htm |
EX-31.1 - EXHIBIT 31.1 - CHINAWE COM INC | c14706exv31w1.htm |
EX-32.1 - EXHIBIT 32.1 - CHINAWE COM INC | c14706exv32w1.htm |
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2010
OR
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number: 000-29169
Chinawe.com Inc.
(Exact name of registrant as specified in its charter)
California (State or other jurisdiction of incorporation or organization) |
95-462728 (I.R.S. Employer Identification No.) |
Room 1208, Block A
Fuk Keung Industrial Building
66-68 Tong Mei Road
Kowloon, Hong Kong
Fuk Keung Industrial Building
66-68 Tong Mei Road
Kowloon, Hong Kong
(Address of principal executive offices) (Zip Code)
Registrants telephone number, including area code: (852) 23810818
Registrants telephone number, including area code: (852) 23810818
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock, par value $0.001 per share
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule
405 of the Securities Act.
Yes o No þ
Yes o No þ
Indicate by check mark if the registrant is not required to file reports pursuant to Section
13 or Section 15(d) of the Act. Yes o No þ
Indicate by check mark whether the registrant (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post such files). Yes o No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation
S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of
registrants knowledge, in definitive proxy or information statements incorporated by reference in
Part III of this Form 10-K or any amendment to Form 10-K.
þ
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large
accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the
Exchange Act. (Check one):
Large accelerated filer o | Accelerated filer o | Non-accelerated filer o | Smaller reporting company þ | |||
(Do not check if a smaller reporting company) |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Exchange Act). Yes þ No o
The aggregate market value of Common Stock held by non-affiliates of the registrant (based
upon the closing sale price) on June 30, 2010 was $0.00. Shares held by each executive officer,
director and by each person who owns 10% or more of the outstanding Common Stock have been excluded
in that such persons may be deemed to be affiliates. This determination of affiliate status is not
necessarily a conclusive determination for other purposes.
As of March 28, 2011, there were 43,800,000 shares of Common Stock, $0.001 per share par
value, outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
None.
TABLE OF CONTENTS
Table of Contents
PART I
Item 1. | Business. |
Chinawe.com Inc. (the Company, Chinawe or we), formerly known as Neo Modern
Entertainment Corp., was formed pursuant to the corporation laws of the State of California on
March 19, 1997.
Chinawes principal business activity was providing professional management services relating to
non-performing loans (NPLs) in the Peoples Republic of China (PRC), as well as other
consulting services. During the first quarter of 2009, the Companys sole customer, Huizhou One
Limited (HOL), issued a notice of termination to terminate its service contracts with the Company
with effect from March 26 and March 27, 2009. Effective from March 27, 2009, the Company has become
a non-operating company.
The consolidated financial statements include the accounts of Chinawe and Officeway Technology
Limited; a company incorporated in the British Virgin Islands in December 1999, which was formed
for the purpose of acquiring (in March 2000) its wholly-owned subsidiary, Chinawe Asset Management
Limited (CAM (HK)).
CAM (HK), a company incorporated in Hong Kong in June 1997, which was an investment holding
company, ceased to be an indirect subsidiary of Chinawe when CAM (HK) was sold to an independent
third party, on July 26, 2010 (the CAM (HK) Sale). Chinawe Asset Management (PRC) Limited (CAM
(PRC)), established in the PRC in April 2005 to service the NPLs under the service agreements with
HOL, accounted for 100% of the revenue from assets management and related services for the nine
months ended September 30, 2009 and 2008 and became non-operating since the termination of the
aforesaid service contracts with HOL in March 2009. As a result of the CAM (HK) Sale, CAM(PRC), a
subsidiary of CAM (HK) also ceased to be an indirect subsidiary of Chinawe.
The Company is currently suspended in the State of California due to failure to file reports with
the Franchise Tax Board. The Company is in the process of preparing the relevant reports and
expects to be back in good standing shortly. The Company believes that the amount of taxes and
penalties owed will not be material to the financial statements.
Item 1A. | Risk Factors. |
Set forth below are certain risks and uncertainties relating to our business. These are not
the only risks and uncertainties we face. Additional risks and uncertainties not presently known to
us or that we currently deem immaterial may also impair our business. If any of the following risks
actually occur, our business, operating results or financial condition could be materially
adversely affected.
RISK RELATED TO OUR BUSINESS
THE COMPANY CURRENTLY HAS NO OPERATING BUSINESS
The Company is currently seeking one or more lines of business that it can enter into. The Company,
however, has not identified a specific line of business or territory for any such new business.
There can be no assurance that the Company will be successful in identifying a new line of business
that it can enter into or that it will be successful in operating any such new business. If we do
not successfully address these risks and uncertainties, our financial condition will be materially
adversely affected and the Company may have to dissolve.
Table of Contents
WE WILL REQUIRE FUNDS TO FINANCE ENTRY INTO A NEW LINE OF BUSINESS
We will need financing to enter into a new line of business. We may seek to obtain such funds
through sales of equity and/or debt, or other external financing in order to fund any new
operations. We cannot assure that any capital resources will be available to us, or, if available,
will be on terms that will be acceptable to us. Any equity financing will dilute the equity
interests of existing security holders. If adequate funds are not available or are not available on
acceptable terms, our ability to execute any new business plan and our business will be materially
and adversely affected. Management has in the past advanced funds to the Company to continue its
operations. Although Management has indicated that it will continue to fund the Company while the
Company searches for a new line of business, there can be no assurance that Management will
continue to so fund the Company until a new line of business is located.
RISKS RELATING TO OUR STOCK
POSSIBLE DELISTING OF OUR STOCK FROM TRADING ON THE ELECTRONIC BULLETIN BOARD
Absent NASDAQ Capital Market or other NASDAQ or stock exchange listing, trading, if any, in our
common stock will, as it presently is, continue on the OTC Bulletin Board administered by the
Financial Industry Regulatory Authority, Inc., or FINRA. As a result, you may find it difficult
to dispose of or to obtain accurate quotations as to the market value of the common stock. Once
delisted, we cannot predict when, if ever, our class of common stock would be re-listed for trading
on the OTC Bulletin Board or any other market or exchange as the approval to re-list the common
stock is subject to review by applicable regulatory authorities.
BECAUSE OUR COMMON STOCK PRICE IS BELOW $5.00, WE ARE SUBJECT TO ADDITIONAL RULES AND REGULATIONS.
The SEC has adopted regulations which generally define a penny stock to be any equity security
that has a market price (as defined) of less than $5.00 per share, subject to certain exceptions.
Our common stock presently is a penny stock. Because our stock is a penny stock, it is subject
to rules that impose additional sales practice requirements on broker/dealers who sell our
securities to persons other than established customers and accredited investors. There can be no
assurance that the Common Stock will trade for $5.00 or more per share, or if so, when.
Item 1B. | Unresolved Staff Comments. |
Not applicable.
Item 2. | Properties. |
The Companys headquarters are located in Kowloon, Hong Kong.
Item 3. | Legal Proceedings. |
We are not engaged in any litigation or governmental proceedings.
Item 4. | [Removed and Reserved]. |
2
Table of Contents
PART II
Item 5. | Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities. |
(a) Our shares of common stock, par value $0.001 per share (Common Stock), presently are traded on
the OTC Bulletin Board under the symbol CHWE.
The following table sets forth the range of high and low bids for our Common Stock for our two most
recent fiscal years:
High | Low | |||||||
2010 |
||||||||
January 1, 2010 March 31, 2010 |
.01 | .00 | ||||||
April 1, 2010 June 30, 2010 |
.01 | .00 | ||||||
July 1, 2010 September 30, 2010 |
.00 | .00 | ||||||
October 1, 2010 December 31, 2010 |
.02 | .01 | ||||||
2009 |
||||||||
January 1, 2009 March 31, 2009 |
.01 | .00 | ||||||
April 1, 2009 June 30, 2009 |
.01 | .00 | ||||||
July 1, 2009 September 30, 2009 |
.00 | .00 | ||||||
October 1, 2009 December 31, 2009 |
.02 | .01 |
The foregoing quotations reflect inter-dealer prices, without retail mark-up, mark-down or
commission and may not represent actual transactions.
On March 10, 2011, the last day the Common Stock traded, the Common Stock was quoted at $0.01 per share.
(b) As of March 21, 2011, the Company had 43,800,000 shares of Common Stock outstanding and 44
stockholders computed by the number of record holders, not including holders for whom shares are
being held in the name of brokerage houses and clearing agencies.
(c) We have not paid any cash dividends with respect to our Common Stock, nor does our Board of
Directors intend to declare cash dividends on our Common Stock in the foreseeable future, in order
to conserve cash for working capital purposes.
Item 6. | Selected Financial Data. |
Not applicable.
Item 7. | Managements Discussion and Analysis of Financial Condition and Results of
Operations. |
The following discussion should be read in conjunction with the Consolidated Financial
Statements and Notes thereto appearing elsewhere in this Form 10-K. The following discussion
contains forward-looking statements. Our actual results may differ significantly from those
projected in the forward-looking statements. Factors that might cause future results to differ
materially from those projected in the forward-looking statements include, but are not limited to,
those discussed in Risk Factors and elsewhere in this Report.
3
Table of Contents
Overview Results of Operations
The Companys financial statements for the year ended December 31, 2010 have been prepared on
a going concern basis, which contemplates the realization of assets and the settlement of
liabilities and commitments in the normal course of business. For the year ended December 31, 2010,
the Company reported a net income of US$1,832,713 and as of December 31, 2010 had a negative
working capital and stockholders deficit of US$334,457 and US$334,457, respectively. Effective
March 27, 2009, the Company ceased providing professional management services relating to
non-performing loans in the Peoples Republic of China. The Company has terminated its employees
and closed down its offices. The Company has not identified a specific line of business or
territory for any new business. There can be no assurance that the Company will be successful in
identifying a new line of business that it can enter into or that if such new line of business is
identified, that the Company will have adequate funding to commence operations of a new line of
business. The principal stockholders of the Company have indicated their intention to finance the
Company for a reasonable period of time to enable the Company to continue as a going concern,
assuming that in such a period of time the Company would not be able to raise additional capital to
support its continuation. However, it is uncertain for how long or to what extent such a period of
time would be reasonable and there can be no assurance that the financing from these stockholders
will be continued. Management of the Company currently intends to continue to fund the expenses of
the Company until a new line of business has been identified. See Risk Factors.
Year ended December 31, | ||||||||
2010 | 2009 | |||||||
US$ | US$ | |||||||
Turnover |
| 131,462 | ||||||
Operating costs |
(94,837 | ) | (359,639 | ) | ||||
Finance costs |
(1,143 | ) | (3,923 | ) | ||||
Gain on disposal |
1,827,289 | | ||||||
Other income |
138,319 | 3,918 | ||||||
Non-operating expenses |
(41,711 | ) | | |||||
Surcharge on tax |
138,319 | (102,632 | ) | |||||
Gain (loss) before taxation |
1,827,917 | (462,276 | ) | |||||
Taxation |
| | ||||||
Gain (loss) before minority interest |
1,827,917 | (462,276 | ) | |||||
Minority interest |
| | ||||||
Net gain (loss) attributable to discontinued operation |
1,827,917 | (462,276 | ) | |||||
Year ended December 31, 2010 compared to the year ended December 31, 2009
Revenues. Revenues for the year ended December 31, 2010 were US$0 as compared to US$131,462
for the year ended December 31, 2009, a decrease of 100%. The Company discontinued its sole
business with HOL in March 2009 and has not generated new business in this field.
4
Table of Contents
Expenses. Administrative and general expenses for the year ended December 31, 2010 were US$91,687,
a decrease of 80.96% as compared to US$481,573 for the year ended December 31, 2009.
The decrease in salary paid to employees, reduction in rental fees to branch offices and decrease
in motor vehicle expenses were the main reasons for the decrease.
Gain on Disposal. Gain on disposal for the year ended December 31, 2010 was US$1,827,917, an
increase of 100% as compared to US$0 for the year ended December 31, 2009. The increase was due to
the CAM(HK) sale on July 26, 2010.
Taxation. No income tax expense for the year ended December 31, 2010 and 2009 was incurred mainly
because the PRC enterprise incurred a loss from asset management and related services earned in the
PRC.
Liquidity and Capital Resources
The Companys financial statements for the year ended December 31, 2010 have been prepared on a
going concern basis, which contemplates the realization of assets and the settlement of liabilities
and commitments in the normal course of business. For the year ended December 31, 2010, the Company
reported a net income of US$1,832,713 and as of December 31, 2010 had a negative working capital
and stockholders deficit of US$334,457 and US$334,457, respectively. The Company has relied on
private financing by advances from the principal stockholders of the Company, who have agreed not
to demand repayment of amounts due to them as long as the Company has negative working capital.
These stockholders have indicated their intention to finance the Company for a reasonable period
of time to enable the Company to continue as a going concern, assuming that in such a period of
time the Company would not be able to raise additional capital to support its continuation.
However, it is uncertain for how long or to what extent such a period of time would be reasonable
and there can be no assurance that the financing from these stockholders will be continued. The
accompanying financial statements do not include or reflect any adjustments that might result from
the outcome of these uncertainties.
Critical Accounting Policies and Estimates
Our financial statements reflect the selection and application of accounting policies which
require management to make significant estimates and assumptions. We believe that the following are
some of the more critical judgment areas in the application of our accounting policies that
currently affect our financial condition and results of operations.
Revenue Recognition. The Company has no business.
Off-Balance Sheet Arrangements
The Company has no off-balance sheet arrangements that have or are reasonably likely to have a
current or future effect on the Companys financial condition, changes in financial condition,
revenues or expenses, results of operations, liquidity, capital expenditures or capital resources
that are material to the Company.
Item 7A. | Quantitative and Qualitative Disclosures About Market Risk. |
Not applicable.
5
Table of Contents
Item 8. | Financial Statements and Supplementary Data. |
The financial statements required by this Item are set forth at pages indicated in Item 15 in this
Report.
Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. |
The Board of Directors (the Board) of the Company, effective March 9, 2010, dismissed Mazars CPA
Limited (Mazars), as the Companys independent auditors. Mazars had been the Companys auditors
since June 29, 2007. The Board dismissed Mazars in order to engage less costly independent
auditors. Mazars audit report on the Companys consolidated financial statements for each of the
past two fiscal years did not contain an adverse opinion or disclaimer of opinion and was not
qualified or modified as to uncertainty, audit scope or accounting principles, except that Mazars
reports on the Companys consolidated financial statements for the fiscal year ended December 31,
2008 included an explanatory paragraph describing the uncertainty as to the Companys ability to
continue as a going concern. During the Companys fiscal years ending December 31, 2007 and 2008
and through the subsequent interim period on or prior to March 9, 2010, (a) there were no
disagreements between the Company and Mazars on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure, which disagreements, if not
resolved to the satisfaction of Mazars, would have caused Mazars to make reference to the subject
matter of the disagreement in connection with its report; and (b) no reportable events as set forth
in Item 304(a)(1)(v)(A) through (D) of Regulation S-K have occurred.
Item 9A. | Controls and Procedures. |
(a) Evaluation of Disclosure Controls and Procedures.
As of the end of the period covered by this Report, the Company conducted an evaluation, under the
supervision and with the participation of its Chief Executive Officer and Chief Financial Officer,
of its disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the
Securities Exchange Act of 1934, as amended (the Exchange Act)). Based upon this evaluation, the
Chief Executive Officer and Chief Financial Officer concluded that the Companys disclosure
controls and procedures are effective to ensure that information required to be disclosed by the
Company in the reports that the Company files or submits under the Exchange Act is recorded,
processed, summarized and reported within the time periods specified in the rules and forms of the
Securities and Exchange Commission (SEC) and which also are effective in ensuring that
information required to be disclosed by the Company in the reports that it files or submits under
the Exchange Act is accumulated and communicated to the Companys management, including the
Companys Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding
required disclosure.
The Companys management is responsible for establishing and maintaining adequate internal control
over financial reporting for the Company as defined in Rules 13a-15(f) and 15d-15(f) under the
Exchange Act. The Companys internal control over financial reporting is designed to provide
reasonable assurance regarding the (i) effectiveness and efficiency of operations, (ii) reliability
of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles, and (iii) compliance with applicable laws
and regulations. The Companys internal controls framework is based on the criteria set forth in
the Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of
the Treadway Commission (COSO).
6
Table of Contents
Because of its inherent limitations, internal control over financial reporting may not prevent or
detect misstatements. Also, projections of any evaluation of effectiveness to future periods are
subject to the risk that controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate.
Managements assessment of the effectiveness of the Companys internal control over financial
reporting is as of the fiscal year ended December 31, 2010. We believe that our internal control
over financial reporting is effective. We have not identified any current material weaknesses
considering the nature and extent of our current operations and any risks or errors in financial
reporting under current operations.
This annual report does not include an attestation report of the Companys registered public
accounting firm regarding internal control over financial reporting. Managements report was not
subject to attestation by the Companys registered public accounting firm pursuant to rules of the
SEC that permit the Company to provide only managements report in this annual report.
(b) Changes in Internal Controls.
There were no changes in the Companys internal control over financial reporting for the year ended
December 31, 2010 that have materially affected, or are reasonably likely to materially affect, the
Companys internal control over financial reporting.
Item 9B. | Other Information. |
Not applicable.
PART III
Item 10. | Directors, Executive Officers and Corporate Governance. |
Management
The following sets forth information regarding our executive officers, directors and other key
employees:
Name | Age | Title | ||||
Man Keung Alan Wai
|
49 | Chairman of the Board, Chief Executive Officer, Chief Financial Officer and President | ||||
Man Ying Ken Wai
|
44 | Vice President and Secretary, Director | ||||
Barry Yiu
|
49 | Vice President, Director |
The following is a brief account of the business experience of the above mentioned
individuals. References to our Company and since its incorporation in the following description
refer to Gonet Associates Limited and affiliates and not Neo Modern Entertainment Corp. as it
existed prior to the merger of Chinawe.com Inc., a Delaware corporation, with and into Neo Modern
on March 15, 2001.
Mr. Wai, Man Keung Alan Chairman, Chief Executive Officer, Chief Financial Officer and President
Mr. Wai, Man Keung Alan is the founder of the Company, and the Chairman and Chief Executive Officer
since its incorporation. He becaome Chief Financial Officer on August 26, 2010. He is responsible
for identifying business opportunities, overall strategic planning and development of the Company.
Mr. Wai has over 15 years of entrepreneur experience in business development and administration
prior to founding Welcon Info-Tech in Hong Kong in 1997.
7
Table of Contents
Mr. Wai, Man Ying Ken Director, Vice President and Secretary
Mr. Wai, Man Ying Ken is the co-founder, Director, Vice President and Secretary of our Company
since its incorporation. He becaome Secretary on August 26, 2010. He has responsibility for
determining and developing the Companys direction, establishing operation strategies, considering
economic benefits, assets valuation and financial decision making. Prior to his current position,
Mr. Wai was a director in a Hong Kong -based company specializing in property development and
construction. Having co-founded Chinawe with his elder brother Mr. Wai Man Keung Alan, he has
dedicated himself to the development and management of our Company ever since. He studied General
Science at the University of Waterloo, Canada.
Mr. Barry Yiu Director
Mr. Barry Yiu is responsible for fund raising. He has over 15 years of experience in business
development, strategy planning and financing management. Prior to his current position, Mr. Yiu has
been engaged in several companies in Hong Kong and China involving sizable developments and
investments. Mr. Yiu obtained his Bachelor degree from the University of Toronto, Canada in 1983
and his MBA in Finance from McMaster University in Hamilton, Canada in 1985.
Section 16(a) Beneficial Ownership Reporting Compliance
Under Federal securities laws, the Companys directors, its executive officers and any person
holding more than 10% of the Companys Common Stock are required to report their ownership of the
Companys Common Stock and any changes in that ownership to the SEC on the SECs Forms 3, 4 and 5.
Based on the Company not having received copies of any such forms, the Company believes that no
officers, directors and owners of greater than 10% of the Companys Common Stock engaged in any
transactions in the Companys Common Stock during the fiscal year ended December 31, 2010.
Code of Ethics
The Company has adopted a Code of Ethics that applies to all of its directors, officers (including
its Chief Executive Officer, Chief Financial Officer, Controller and any person performing similar
functions) and employees. The Company has filed a copy of this Code of Ethics as Exhibit 14 to its
Annual Report on Form 10-KSB for the year ended December 31, 2003.
Audit Committee Financial Expert.
The Company does not have a standing Audit Committee and, accordingly, does not have an Audit
Committee Financial Expert within the meaning of the rules and regulations of the SEC.
Item 11. | Executive Compensation. |
No compensation was paid to the Chief Executive Officer during the years ended December 31, 2010
and December 31, 2009. No other executive officer received a total annual salary and bonus
exceeding $100,000 during either of such years.
8
Table of Contents
Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters. |
The following table sets forth information as of March 28, 2011, regarding the beneficial
ownership of Common Stock of (1) each person or group known by us to beneficially own 5% or more of
the outstanding shares of Common Stock, (2) each director and named executive officer and (3) all
directors and executive officers as a group. Unless otherwise noted, the persons named below have
sole voting and investment power with respect to the shares shown as beneficially owned by them.
Percent of Outstanding | ||||||||
Name of Beneficial Owner(1) | Amount of Beneficial Ownership | Shares of Class Owned | ||||||
Gonet Associates Ltd |
22,054,090 | 50.4 | ||||||
Man Keung Alan Wai(2) |
22,054,090 | 50.4 | ||||||
Man Ying Ken Wai |
0 | 0 | ||||||
Barry Yiu |
3,800,000 | (3) | 8.7 | |||||
Charter One Investments Limited(4) |
3,800,000 | 8.7 | ||||||
All officers and directors as a group (3 persons) |
25,854,090 | (2)(3) | 59.1 |
(1) | The address for each of the officers and directors of the Company is c/o our corporate
headquarters in Kowloon, Hong Kong. |
|
(2) | Man Keung Wai, through his control of Gonet Associates Ltd., beneficially owns the shares of
Common Stock held by Gonet. |
|
(3) | By virtue of his ownership interest in Charter One Investments Limited, Mr. Yiu may be deemed
to beneficially own the shares of Common Stock owned by Charter One Investments Limited. |
|
(4) | The address for Charter One Investments Limited is P.O. Box 957, Offshore Incorporations
Centre, Road Town, Tortola, British Virgin Islands. Barry Yiu is a director of Charter One
Investments Limited. |
* * *
The following table sets forth information as of December 31, 2010 with respect to compensation
plans (including individual compensation arrangements) under which shares of the Companys Common
Stock are authorized for issuance:
Equity Compensation Plan Information
Number of securities | ||||||||||||
remaining available for | ||||||||||||
Number of securities to | Weighted-average | future issuance under | ||||||||||
be issued upon exercise | exercise price of | equity compensation plans | ||||||||||
of outstanding options, | outstanding options, | (excluding securities | ||||||||||
warrants and rights | warrants and rights | reflected in column (a)) | ||||||||||
Plan category | (a) | (b) | (c) | |||||||||
Equity compensation
plans approved by
security holders |
0 | N/A | 0 | |||||||||
Equity compensation
plans not approved
by security holders |
0 | N/A | 5,000,000 | |||||||||
Total |
0 | N/A | 5,000,000 |
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On July 25, 2001, the Board adopted the 2001 Restricted Stock Plan (the Plan).
The purpose of the Plan is to promote the long-term growth of the Company by making awards of
Common Stock to key employees and directors of the Company or its subsidiaries.
The Plan is administered by the Board. The Board is authorized, subject
to the provisions of the Plan, to (i) select the participants; (ii) determine the number of shares
of Common Stock to be awarded to each of the participants and the terms and conditions on which
such awards will be made; (iii) establish from time to time regulations for the administration of
the Plan; (iv) interpret the Plan; and (v) make all determinations deemed necessary or advisable
for the administration of the Plan.
5,000,000 shares of Common Stock are reserved for award under the Plan. At the time of an award of
restricted stock, the Board will establish for each participant one or more restricted periods
during which shares of Common Stock awarded under the Plan may not be sold, assigned, transferred,
pledged or otherwise disposed of or encumbered, except as described below; provided, however, that
the Board may, in its discretion, accelerate such restricted periods with respect to outstanding
awards of restricted stock. Except for such restrictions, the participant as owner of restricted
stock shall have all the rights of a stockholder including but not limited to the right to receive
all dividends paid on such shares and the right to vote such shares.
Upon the death, retirement or permanent disability of a participant, upon the involuntary
termination by the Company or any subsidiary for reasons other than cause, or upon the sale of
assets of the Company or the merger or consolidation of the Company with another corporation and
the terms of such sale, merger or consolidation do not entitle the participant to shares of the
purchasing, surviving or resulting corporation, all of such shares shall be free of such
restrictions. If the participant ceases to be an employee of the Company or its subsidiaries for
any other reason, then all unvested shares of restricted stock therefore awarded to him, will upon
such termination of employment be forfeited and returned to the Company and available for award to
another participant.
An award of restricted stock shall not be effective unless the participant enters into an agreement
with the Company in a form specified by the Board agreeing to the terms, conditions and
restrictions of the award and such other matters as the Board shall in its sole discretion
determine.
At the expiration of a restricted period, the Company will deliver to the participant (or his legal
representatives, beneficiaries or heirs) the certificates of Common Stock held by the Company for
which such restricted period has terminated.
The aggregate number of shares of Common Stock which may be awarded under the Plan will be
appropriately adjusted for any increase or decrease in the total number of shares of the Companys
Common Stock resulting from a division or combination of shares or other capital adjustment; or
resulting from the payment of a stock dividend, or other increase or decrease in such shares by the
Company.
The Board of Directors may amend the Plan from time to time in such respects as the Board of
Directors may deem advisable, provided that no change may be made in any award theretofore granted
which would impair the rights of a participant, without consent of the participant. The Board may
amend agreements between participants and the Company from time to time as the
Board may deem advisable, provided that no change may be made in any award theretofore granted
which would impair the rights of a participant without the written consent of the participant.
10
Table of Contents
The Board may at any time terminate the Plan. Any such termination will not affect
awards already in effect and such awards shall remain in full force and effect as if the Plan had
not been terminated.
No awards may be made under the Plan subsequent to December 31, 2011. No awards have been made
under the Plan as of the date of this Annual Report.
Item 13. | Certain Relationships and Related Transactions, and Director Independence. |
The following chart shows advances and repayments made in the year ended December 31, 2010:
Name | Advances made | Repayment made | Disposal of CAM(HK) | Balance | ||||||||||||
US$ | US$ | US$ | US$ | |||||||||||||
Gonet Associates Ltd. (1) |
| | 89,953 | | ||||||||||||
Man Keung Alan Wai |
20,012 | | 1,053,006 | 329,322 | ||||||||||||
Man Ying Ken Wai |
| | 14,559 | | ||||||||||||
Vivian Wai Wa Chu |
| | 1,829 | |
(1) | Gonet Associates Ltd. is controlled by Man Keung Alan Wai. |
The Companys Board of Directors consists of Man Keung Alan Wei, Man Ying Ken Wai and Barry
Yiu. None of such directors are independent as such term is defined in the Corporate Governance
Rules of the Nasdaq Stock Market.
Item 14. | Principal Accountant Fees and Services. |
Audit Fees.
The aggregate fees billed for the fiscal years ended December 31, 2010 and 2009 for professional
services rendered by Parker Randall for the audit of the annual financial statements and the review
of the financial statements included in our quarterly reports on Form 10-Q were $3,000 and $15,000,
respectively.
Audit-Related
Fees.
The Company did not pay any audit-related fees to Parker Randall for the fiscal years ended
December 31, 2010 and December 31, 2009.
Tax
Fees.
Parker Randall did not provide any tax services to the Company in either of the fiscal years ended
December 31, 2010 and December 31, 2009.
All Other
Fees.
Parker Randall did not provide any other services to the Company in either of the fiscal years
ended December 31, 2010 and December 31, 2009.
11
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PART IV
Item 15. | Exhibits and Financial Statement Schedules |
PAGE | ||||
1. Financial Statements of Chinawe.com Inc.: |
||||
F-1 | ||||
F-2 | ||||
F-3 | ||||
F-4 | ||||
F-5 | ||||
F-6 |
(b) EXHIBITS
Exhibit No. | Description | |||
3. | (i) | Articles of Incorporation (1) |
||
3. | (ii) | By-Laws (1) |
||
10.1 | Chinawe.com Inc. 2001 Restricted Stock Plan (2) |
|||
14 | Code of Ethics (3) |
|||
21 | Subsidiaries |
|||
23.1 | Consent of Parker Randall CF (H.K.) CPA Limited |
|||
31.1 | Rule 13a-14(a)/15d-14(a) Certification |
|||
31.2 | Rule 13a-14(a)/15d-14(a) Certification |
|||
32.1 | Section 1350 Certification of Chief Executive Officer |
|||
32.2 | Section 1350 Certification of Chief Financial Officer |
1 | Filed as an exhibit to our Companys Form 10-SB, as filed with the SEC on May
19, 2000, and hereby incorporated by reference herein. |
|
2 | Filed as an exhibit to our Companys Form S-8, as filed with the SEC on October
17, 2001, and hereby incorporated by reference herein. |
|
3 | Filed as an exhibit to our Companys Annual Report on Form 10-KSB, as filed with
the SEC on April 14, 2005, and hereby incorporated by reference herein. |
12
Table of Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and the Board of Directors of
CHINAWE.COM INC.
CHINAWE.COM INC.
We have audited the accompanying consolidated balance sheets of Chinawe.com Inc. (the Company) as
of December 31, 2010 and the related consolidated statements of operations, changes in
stockholders deficit and cash flows for the year ended December 31, 2010. These financial
statements are the responsibility of the Companys management. Our responsibility is to express an
opinion on these financial statements based on our audits.
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 financial statements are free of material misstatement. Our
audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. Our audit also includes 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 financial statements referred to above present fairly, in all material
respects, the financial position of the Company as of December 31, 2010 and the results of its
operations and its cash flows for the year ended December 31, 2010, in conformity with accounting
principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the Company will continue as
a going concern. As discussed in Note 4 to the financial statements, the Company had negative
working capital and stockholders deficit as of December 31, 2010 of US$334,457 and US$334,457,
respectively, which raise substantial doubt about its ability to continue as a going concern.
Managements plans in regard to these matters are described in Note 4. The financial statements do
not include any adjustments that might result from the outcome of this uncertainty.
PARKER RANDALL CF (H.K.) CPA LIMITED
Certified Public Accountants
Hong Kong
March 12, 2011
Certified Public Accountants
Hong Kong
March 12, 2011
F-1
Table of Contents
CHINAWE.COM INC. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
Year ended December 31, | ||||||||||||
NOTE | 2010 | 2009 | ||||||||||
US$ | US$ | |||||||||||
OPERATING REVENUES |
||||||||||||
Asset management and related services |
| 131,462 | ||||||||||
| 131,462 | |||||||||||
Depreciation of property, plant and equipment |
(3,150 | ) | (9,528 | ) | ||||||||
Administrative and general expenses |
(91,687 | ) | (481,573 | ) | ||||||||
LOSS FROM OPERATIONS |
(94,837 | ) | (359,639 | ) | ||||||||
NON-OPERATING INCOME (EXPENSE) |
||||||||||||
Interest |
(1,143 | ) | (3,923 | ) | ||||||||
Surcharge on taxes |
| (102,632 | ) | |||||||||
Other income |
138,319 | 3,918 | ||||||||||
Non operating expense |
(41,711 | ) | | |||||||||
Investment income |
9 | 1,827,289 | | |||||||||
INCOME/(LOSS) BEFORE INCOME TAXES |
1,827,917 | (462,276 | ) | |||||||||
Income tax expense |
5 | | | |||||||||
NET INCOME/(LOSS) |
1,827,917 | (462,276 | ) | |||||||||
OTHER COMPREHENSIVE INCOME |
||||||||||||
Foreign currency translation |
4,796 | 1,424 | ||||||||||
COMPREHENSIVE INCOME/(LOSS) |
1,832,713 | (460,852 | ) | |||||||||
Basic and diluted net income/(loss) per share of common stock |
0.042 | (0.0105 | ) | |||||||||
Weighted average number of shares of common stock outstanding |
43,800,000 | 43,800,000 | ||||||||||
See accompanying notes to the financial statements.
F-2
Table of Contents
CHINAWE.COM INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
As of | As of | |||||||||||
December 31, | December 31, | |||||||||||
Note | 2010 | 2009 | ||||||||||
US$ | US$ | |||||||||||
ASSETS |
||||||||||||
Current assets: |
||||||||||||
Cash and cash equivalents |
| 33,427 | ||||||||||
Prepayments, deposits and other debtors |
| 18,121 | ||||||||||
Amount due from a director Wai Man Keung |
| 254,918 | ||||||||||
Amount due from the related parties |
| 5,523 | ||||||||||
Total current assets |
| 311,989 | ||||||||||
Property, plant and equipment, net |
3 | | 3,208 | |||||||||
TOTAL ASSETS |
| 315,197 | ||||||||||
LIABILITIES AND STOCKHOLDERS DEFICIT |
||||||||||||
Current liabilities: |
||||||||||||
Accrued expenses and other current liabilities |
5,135 | 272,477 | ||||||||||
Current portion of long-term debt |
4 | | 7,216 | |||||||||
Due to related parties |
6 | 329,322 | 1,392,093 | |||||||||
Income tax payables |
5 | | 453,673 | |||||||||
Surcharge on taxes |
| 355,520 | ||||||||||
Total current liabilities |
334,457 | 2,480,979 | ||||||||||
Stockholders deficit: |
||||||||||||
Preferred stock, par value US$0.001 per
share; authorized 20,000,000 shares; none
issued |
||||||||||||
Common stock, par value US$0.001 per share;
authorized 100,000,000 shares; issued and
outstanding 43,800,000 shares |
43,800 | 43,800 | ||||||||||
Capital in excess of par |
84,560 | 85,948 | ||||||||||
Accumulated losses |
(462,817 | ) | (2,290,734 | ) | ||||||||
Accumulated other comprehensive loss |
| (4,796 | ) | |||||||||
Total stockholders deficit |
(334,457 | ) | (2,165,782 | ) | ||||||||
TOTAL LIABILITIES AND STOCKHOLDERS DEFICIT |
| 315,197 | ||||||||||
See accompanying notes to the financial statements.
F-3
Table of Contents
CHINAWE.COM INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
Capital | Accumulated | Total | ||||||||||||||||||||||
Number | in excess | Accumulated | other comprehensive | Stockholders | ||||||||||||||||||||
of shares | Amount | of par | losses | (loss) income | deficit | |||||||||||||||||||
US$ | US$ | US$ | US$ | US$ | ||||||||||||||||||||
Balance as of
January 1, 2009 |
43,800,000 | 43,800 | 85,948 | (1,828,458 | ) | (6,220 | ) | (1,704,930 | ) | |||||||||||||||
Comprehensive loss: |
||||||||||||||||||||||||
Net loss for the year |
| | | (462,276 | ) | | (462,276 | ) | ||||||||||||||||
Currency translation adjustment |
| | | | 1,424 | 1,424 | ||||||||||||||||||
Total comprehensive loss |
| | | (462,276 | ) | 1,424 | (460,852 | ) | ||||||||||||||||
Balance as of
December 31, 2009 |
43,800,000 | 43,800 | 85,948 | (2,290,734 | ) | (4,796 | ) | (2,165,782 | ) | |||||||||||||||
Comprehensive income: |
||||||||||||||||||||||||
Net income for the year |
| | | 1,827,917 | | 1,827,917 | ||||||||||||||||||
Currency translation adjustment |
| | | | 4,796 | 4,796 | ||||||||||||||||||
Total comprehensive income |
| | | 1,827,917 | 4,796 | 1,832,713 | ||||||||||||||||||
Disposal on CAM(HK) |
| | (1,388 | ) | | | (1,388 | ) | ||||||||||||||||
Balance as of December 31, 2010 |
43,800,000 | 43,800 | 84,560 | (462,817 | ) | | (334,457 | ) | ||||||||||||||||
See accompanying notes to the financial statements.
F-4
Table of Contents
CHINAWE.COM INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended December 31, | ||||||||
2010 | 2009 | |||||||
US$ | US$ | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES |
||||||||
Net income/(loss) |
1,827,917 | (462,276 | ) | |||||
Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
Depreciation |
3,150 | 9,533 | ||||||
Gain on disposal |
(1,827,289 | ) | | |||||
Changes in operating assets and liabilities: |
||||||||
Prepayments, deposits and other receivables |
| (260,441 | ) | |||||
Customer deposits received |
| 12,297 | ||||||
Accrued expenses and other current liabilities |
(102,053 | ) | 1,090,063 | |||||
Surcharge on taxes |
| 102,185 | ||||||
Income tax payable |
| (3,945 | ) | |||||
NET CASH USED IN OPERATING ACTIVITIES |
(98,275 | ) | 487,416 | |||||
CASH FLOWS FROM INVESTING ACTIVITIES |
||||||||
Net cash outflow from disposal of subsidiary |
(16,362 | ) | | |||||
NET CASH USED IN INVESTING ACTIVITIES |
(16,362 | ) | | |||||
CASH FLOWS FROM FINANCING ACTIVITIES |
||||||||
New loan raised |
34,147 | | ||||||
Repayment of long-term debt |
| (20,106 | ) | |||||
Advance from related parties |
88,441 | 145,347 | ||||||
Repayment to related parties |
(41,361 | ) | (920,193 | ) | ||||
NET CASH USED IN FINANCING ACTIVITIES |
81,227 | (794,952 | ) | |||||
NET DECREASE IN CASH AND CASH EQUIVALENTS |
(33,410 | ) | (307,536 | ) | ||||
Cash and cash equivalents, beginning of period |
33,427 | 339,538 | ||||||
Effect of exchange rate changes |
(17 | ) | 1,425 | |||||
CASH AND CASH EQUIVALENTS, END OF PERIOD |
| 33,427 | ||||||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION |
||||||||
Cash paid for interest |
1,143 | 3,923 |
See accompanying notes to the financial statements.
F-5
Table of Contents
CHINAWE.COM INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS AND ORGANIZATION STRUCTURE
Chinawe.com Inc. (Chinawe) was incorporated under the laws of the State of California. Chinawes
principal business activity was providing professional management services relating to
non-performing loans (NPLs) in the Peoples Republic of China (PRC), as well as other
consulting services. During the first quarter of 2009, the Companys sole customer, Huizhou One
Limited, issued a notice of termination to terminate the services contracts with effect from March
26 and March 27, 2009. Effective from March 27, 2009, the Company became a non-operating company.
The consolidated financial statements include the accounts of Chinawe and Officeway Technology
Limited, a company incorporated in the British Virgin Islands in December 1999 (hereinafter
collectively referred to as the Company).
Chinawe Asset Management Limited, a company incorporated in Hong Kong (CAM (HK)), ceased to be an
indirect subsidiary of Chinawe when CAM (HK) was sold on July 26, 2010 (the CAM (HK) Sale). As a
result of the CAM (HK) Sale, Chinawe Asset Management (PRC) Limited (CAM (PRC)), a subsidiary of
CAM (HK) also ceased to be an indirect subsidiary of Chinawe.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of accounting
The financial statements have been prepared in accordance with generally accepted accounting
principles (GAAP) in the United States of America (U.S.). The functional currency of its major
subsidiary is Renminbi (RMB). The financial statements are presented in US dollars (U.S. $).
(b) Going concern consideration
The Companys financial statements have been prepared on a going concern basis, which contemplates
the realization of assets and the settlement of liabilities and commitments in the normal course of
business. As of December 31, 2010, the Company had negative working capital and stockholders
deficit of U.S. $334,457 and U.S. $334,457, respectively, which raise substantial doubt about its
ability to continue as a going concern.
The Company has relied on private financing by cash inflow from the principal stockholders of the
Company, who have agreed not to demand repayment of amounts due to them as long as the Company has
negative working capital. These stockholders have indicated their intention to finance the Company
for a reasonable period of time to enable the Company to continue as a going concern, assuming
that in such a period of time the Company would not be able to raise additional capital to support
its continuation. However, it is uncertain for how long or to what extent such a period of time
would be reasonable and there can be no assurance that the financing from these stockholders will
be continued. The accompanying financial statements do not include or reflect any adjustments that
might result from the outcome of these uncertainties.
F-6
Table of Contents
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(c) Principles of consolidation
The financial statements include the accounts of Chinawe and its subsidiaries. All material
inter-company balances and transactions have been eliminated in consolidation.
(d) Cash and cash equivalents
The Company considers all highly liquid investments purchased with an original maturity of three
months or less that are readily convertible into a known amount of cash to be cash equivalents.
(e) Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and accumulated
impairment losses.
Depreciation is calculated on a straight-line basis to write off the cost of each asset using
annual percentage rates as follows:
Office equipment |
30 | % | ||
Computer equipment |
30 | % | ||
Leasehold improvements |
20 | % | ||
Motor vehicles |
30 | % |
(f) Accounting for the impairment of long-lived assets
The long-lived assets held and used by the Company are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of assets may not be recoverable. It is
reasonably possible that these assets could become impaired as a result of technology or other
industry changes. Recoverability of assets to be held and used is determined by comparing the
carrying amount of an asset to future net undiscounted cash flows to be generated by the assets. If
such assets are considered to be impaired, the impairment to be recognized is measured by the
amount by which the carrying amount of the assets exceeds the recoverable amount of the assets.
Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs
to sell.
(g) Revenue recognition
The Company has no business currently.
(h) Operating leases
Leases where substantially all the rewards and risks of ownership of assets remain with the leasing
company are accounted for as operating leases. Rentals payable under operating leases are recorded
in the statement of operations on a straight-line basis over the lease term.
(i) Income taxes
Provision for income and other taxes has been made in accordance with the tax rates and laws of the
countries in which the Company operates.
F-7
Table of Contents
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(i) Income taxes (Continued)
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to
differences between the financial statements carrying amounts of existing assets and liabilities
and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which those temporary differences are
expected to be recovered or settled.
(j) Earnings (loss) per common share
Basic earnings (loss) per share amounts are based on the weighted average shares of common stock
outstanding. Diluted earnings (loss) per share assume the conversion, exercise or issuance of all
potential common stock instruments such as options, warrants and convertible securities, unless the
effect is to reduce a loss or increase earnings per share. The Company had no potential common
stock instruments which would result in diluted earnings (loss) per share in 2010 or 2009.
(k) Foreign currency translation
The Companys functional currency is RMB, which is the currency of the primary economic environment
in which the Company operates. For group reporting purposes, the amounts shown in the financial
statements are presented in U.S. dollars (reporting currency).
For translation of financial statements into the reporting currency, assets and liabilities for
each balance sheet presented are translated at the rates of exchange existing at the year end.
Income and expenses for each income statement presented are translated at the average rates during
the year. Resulting exchange differences are recognized in accumulated other comprehensive income
within stockholders equity.
(l) Use of estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make
estimates and assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period. Such estimates includes
provisions for doubtful accounts, sales returns and allowances, impairment of long-lived assets and
incomes taxes. Actual results could differ from those estimates.
(m) Fair value of financial instruments
The estimated fair values for financial instruments are determined at discrete points in time based
on relevant market information. These estimates involve uncertainties and cannot be determined with
precision. The estimated fair values of the Companys financial instruments, which include cash,
accounts receivable, accounts payable, long-term debt and related party balances, approximate their
carrying value in the financial statements.
F-8
Table of Contents
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(n) Comprehensive income
Statement of Financial Accounting Standards (SFAS) No. 130, Reporting Comprehensive Income,
establishes requirements for disclosure of comprehensive income which includes certain items
previously not included in the statements of operations, including minimum pension liability
adjustments and foreign currency translation adjustments, among others. The Companys components of
comprehensive income include net loss for the year and a foreign currency translation adjustment.
(o) Related parties
Parties are considered to be related if one party has the ability, directly or indirectly, to
control the other party or exercise significant influence over the other party in making financial
and operating decisions. Parties are also considered to be related if they are subject to common
control or common significant influence.
(p) New accounting pronouncements
In January 2010, the Financial Accounting Standards Board (the FASB) issued ASU No. 2010-02
Accounting and Reporting for Decrease in Ownership of a subsidiary a Scope Clarification. The
update provides amendments to subtopic 810-10 and related guidance within US GAAP to clarify that
the scope of the decrease in ownership provisions of the Subtopic and related guidance applies to
three cases. The amendments in this Update also clarify that the decrease in ownership guidance in
Subtopic 810-10 does not apply to the sales of in substance real estate and conveyances of oil and
gas mineral rights transactions even if they involve businesses. If a decrease in ownership occurs
in a subsidiary that is not a business or nonprofit activity, and entity first needs to consider
whether the substance of the transaction causing the decrease in ownership in addressed in other
U.S. GAAP, such as transfers of financial assets, revenue recognition, exchanges of nonmonetary
assets, sales of in substance real estate, or conveyances of oil and gas mineral rights, and apply
that guidance as applicable. If no other guidance exists, an entity should apply the guidance in
Subtopic 810-10. The amendments in this Update also expand the disclosure about the deconsolidation
of a subsidiary or derecognition of a group of assets within the scope of Subtopic 810-10. The
Company adopted this Update on January 1, 2010 and the disclosure is shown in note 10.
In January 2010, the FASB issued ASU No. 2010-06 Fair Value Measurements and Disclosures (Topic
820): Improving Disclosures about Fair Value Measurements. This update provides amendments to
Subtopic 820-10 that required new disclosures for two situations. First, a reporting entity should
disclose separately the amount of significant transfers in and out of Level 1 and 2 fair value
measurements and describe the reasons for the transfers. Second, in the reconciliation for fair
value measurements using significant unobservable inputs (Level 3), a reporting entity should
present separate information about purchases, sales, issuance and settlements. This pronouncement
has no current application to the Company.
F-9
Table of Contents
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(p) New accounting pronouncements (Continued)
In February 2010, the FASB issued ASU No. 2010-09 Subsequent Events (Topic 855): Amendments to
Certain Recognition and Disclosure Requirements. This Update provides the following amendments to
(i) an entity that either (a) is a company that files periodic reports with the Securities and
Exchange Commission (SEC filer) or (b) is a conduit bond obligor for conduit debt securities that
are traded in a public market (a domestic or foreign stock exchange or an over-the-counter market,
including local or regional markets) is required to evaluate subsequent events through the date
that the financial statements are issued. If an entity meets neither of those criteria, it should
evaluate subsequent events through the date the financial statements are available to be issued,
(ii) the glossary of Topic 855 is amended to include the definition of SEC filer, (iii) an entity
that is an SEC filer is not required to disclose the date through which subsequent events have been
evaluated, (iv) the glossary of Topic 855 is amended to remove the definition of public entity, and
(v) the scope of the reissuance disclosure requirements is refined to include revised financial
statements only. No aspect of this new pronouncement has current application to the Company.
In May 2010, the FASB issued ASU No. 2010-19 Foreign Currency (Topic 830): Foreign Currency
Issues: Multiple Foreign Currency Exchange Rates (SEC Update). The purpose of the SEC
Update is to codify the SEC Staff Announcement made at the March 18, 2010 meeting of the FASB
Emerging Issues Task Force (EITF) by the SEC observer to the EITF. The Staff Announcement
provides the SEC staffs view on certain foreign currency issues related to investments in
Venezuela. This new pronouncement has no current application to the Company.
In December 2010, the FASB issued ASU No. 2010-29 Business Combinations (Topic 805): Disclosure
of Supplementary Pro Forma Information for Business Combinations (a consensus of the FASB Emerging
Issues Task Force). The amendments in this update specify that if a public entity
presents comparative financial statements, the entity should disclose revenue and earnings of the
combined entity as though the business combination(s) that occurred during the current year had
occurred as of the beginning of the comparable prior annual reporting period only. The
amendments in this update also expand the supplemental pro forma disclosures under Topic 805 to
include a description of the nature and amount of material, nonrecurring pro forma adjustments
directly attributable to the business combination included in the reported pro forma revenue and
earnings. This new pronouncement has no current application to the Company.
F-10
Table of Contents
3. PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment are summarized as follows:
As of | As of | |||||||
December 31, 2010 | December 31, 2009 | |||||||
U.S $ | U.S. $ | |||||||
Office equipment |
| 11,869 | ||||||
Computer equipment |
| 50,760 | ||||||
Leasehold improvement |
| 57,005 | ||||||
Motor vehicles |
| 103,065 | ||||||
Total cost |
| 222,699 | ||||||
Accumulated depreciation |
| (219,487 | ) | |||||
Currency translation adjustment |
| (4 | ) | |||||
Net |
| 3,208 | ||||||
4. LONG-TERM DEBT
Long term debt consists of obligations under capital leases for purchases of vehicles with U.S. $0 and
U.S. $7,216 outstanding as of December 31, 2010 and December 31, 2009, respectively. The debt is
collateralized by two motor vehicles with an aggregate net book value of U.S. $0 and U.S. $12,387
as of December 31, 2010 and December 31, 2009, respectively. The long term debt was fully settled
in June, 2010.
As of | As of | |||||||
December 31, 2010 | December 31, 2009 | |||||||
U.S. $ | U.S. $ | |||||||
Within 1 year |
| 8,605 | ||||||
Less: Amount representing interest |
| (1,389 | ) | |||||
Present value of net minimum lease payments |
| 7,216 | ||||||
Current portion |
| 7,216 | ||||||
Total |
| 7,216 | ||||||
F-11
Table of Contents
5. INCOME TAXES
It is managements intention to reinvest all the income attributable to the Company earned by its
operations outside the U.S. Accordingly, no U.S. corporate income taxes are provided for in these
financial statements.
The Company is subject to income taxes on an entity basis on income arising in or derived from the
tax jurisdiction in which each entity is domiciled.
Under the current laws of the British Virgin Islands (the BVI), dividends and capital gains
arising from the Companys investments in the BVI are not subject to income taxes and no
withholding tax is imposed on payments of dividends to the Company.
Companies that carry on business and derive income in Hong Kong (HK) are subject to Hong Kong
Profits Tax at 16.5% for the year ended December 31, 2010 and 2009, respectively. Companies that
carry on business and derive income in the PRC are subject to income tax at 25% for the year ended
December 31, 2010 and 2009. No income taxes have been provided for the subsidiary in Hong Kong as
it has incurred losses for taxation purposes during the year ended December 31, 2010 and 2009,
respectively. A 100% valuation allowance has been established against the deferred tax asset, as
the utilization of the loss carry-forwards cannot reasonably be assured
The reconciliation between the effective tax rate and the statutory U.S. federal, HK and PRC income
tax rate is as follows:
Year ended | ||||||||
December 31, | ||||||||
2010 | 2009 | |||||||
% of Pre- Tax Income | % of Pre- Tax Income | |||||||
U.S. federal income tax rate |
34 | 34 | ||||||
Valuation allowance U.S. federal income tax |
(34 | ) | (34 | ) | ||||
| | |||||||
Year ended | ||||||||
December 31, | ||||||||
2010 | 2009 | |||||||
% of Pre- Tax Income | % of Pre- Tax Income | |||||||
HK income tax rate |
16.5 | 16.5 | ||||||
Valuation allowance HK income tax |
(16.5 | ) | (16.5 | ) | ||||
| | |||||||
Year ended | ||||||||
December 31, | ||||||||
2010 | 2009 | |||||||
% of Pre- Tax Income | % of Pre- Tax Income | |||||||
PRC income tax rate |
25 | 25 | ||||||
Valuation allowance PRC income tax |
(25 | ) | (25 | ) | ||||
| | |||||||
F-12
Table of Contents
6. RELATED PARTY BALANCES AND TRANSACTIONS
The balances with related parties are as follows:
As of | As of | |||||||
December 31, 2010 | December 31, 2009 | |||||||
U.S. $ | U.S. $ | |||||||
Advances from stockholders |
329,322 | 1,392,093 | ||||||
The amounts due are unsecured, interest free and repayable on
demand. As of December 31, 2010 and 2009, the Company had advances
from related parties of U.S. $329,322 and U.S. $1,392,093,
respectively. The decrease in advances from stockholders reflects
the application of proceeds from the sale of CAM (HK) to the
outstanding balance.
7. OPERATING LEASE COMMITMENTS
The Company had total future minimum lease payments under non-cancelable operating leases payable
as follows:
As of December 31, | ||||||||
2010 | 2009 | |||||||
U.S. $ | U.S. $ | |||||||
Within one year |
| 3,868 | ||||||
In the second to fifth years inclusive |
| | ||||||
| 3,868 | |||||||
Operating lease payments of U.S. $0 and U.S. $102,041 for the years ended December 31, 2010 and
2009, respectively, represent rental paid by the Company for its office premises and staff quarters
of which leases are negotiated for a term of one year.
8. STOCK PLAN
As of July 25, 2001 the Board of Directors approved the Chinawe.com Inc. 2001 Restricted Stock Plan
(the Plan), under which 5,000,000 shares of the Companys common stock have been reserved for
award under the Plan.
Pursuant to the Plan, stock awards may be granted to eligible officers, directors, employees and
consultants of the Company. As of December 31, 2010 and December 31, 2009, no awards have been made
under the Plan.
F-13
Table of Contents
9. INVESTMENT INCOME
As of July 26, 2010, the Company announced the decision of its board of directors to dispose of its
entire interests in CAM (HK). As a result of the CAM (HK) Sale, CAM (PRC), a subsidiary of CAM
(HK), also ceased to be an indirect subsidiary of Chinawe.
As of | As of | |||||||
December 31, 2010 | December 31, 2009 | |||||||
U.S. $ | U.S. $ | |||||||
Net assets disposed of: |
||||||||
Cash and cash equivalents |
16,362 | | ||||||
Prepayments, deposits and other receivables |
272,885 | | ||||||
Property, plant and equipment, net |
56 | | ||||||
Accrued expenses and other current liabilities |
(172,470 | ) | | |||||
Income tax payable |
(402,083 | ) | | |||||
Surcharge on taxes |
(358,953 | ) | | |||||
Due to directors |
(1,150,215 | ) | | |||||
Exchange fluctuation reserve realized |
(32,871 | ) | | |||||
Subtotal |
(1,827,289 | ) | | |||||
Gain on disposal of CAM (HK) |
1,827,289 | | ||||||
| | |||||||
As of July 26, 2010, the cost and impairment of investment in CAM (HK) was U.S. $264,635 and
U.S. $264,634, leaving the net book value of U.S. $1. The cash consideration was U.S. $1, mainly
due to the negative balance of the net asset of CAM (HK) by U.S. $1,794,418.
An analysis of the net inflow of cash and cash equivalents in respect of the disposal of CAM (HK)
is as follows:
As of | As of | |||||||
December 31, 2010 | December 31, 2009 | |||||||
U.S. $ | U.S. $ | |||||||
Cash consideration |
1 | | ||||||
Due from a director-Wai Man Keung |
(1 | ) | | |||||
Cash and bank balance disposed of |
(16,362 | ) | | |||||
Net inflow of cash and cash
equivalents in respect of the
disposal of CAM (HK) |
(16,362 | ) | | |||||
10. CONTINGENCIES
The Company is currently suspended in the State of California due to failure to file reports with
the Franchise Tax Board. The Company is in the process of preparing the relevant reports and
expects to be back in good standing shortly. The Company believes that the amount of taxes and
penalties owed will not be material to the financial statements. The Company is also delinquent in
filing its U.S. Federal tax returns. The Company is in the process of preparing the relevant
returns and does not believe that the amount of taxes owed will be material.
11. SUBSEQUENT EVENT
The Company has evaluated subsequent events through the date the financial statements were issued
and filed with the Securities and Exchange Commission on December 31, 2010. The Company has
determined that there are no other such events that warrant disclosure or recognition in the
consolidated financial statements.
F-14
Table of Contents
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
Date: March 30, 2011 |
CHINAWE.COM INC. (Registrant) |
|||
By: | /s/ Man Keung Wai | |||
Man Keung Wai | ||||
Chief Executive Officer |
In accordance with the Exchange Act, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on the dates indicated.
SIGNATURES | TITLE | DATE | ||
/s/ Man Keung Wai
|
Chairman of the Board, Chief Executive Officer, Chief Financial Officer and Director (Principal Executive Officer and Principal Financial Officer) |
March 30, 2011 | ||
/s/ Man Ying Ken Wai
|
Vice President of Marketing, Secretary and Director | March 30, 2011 | ||
/s/ Barry Yiu
|
Vice President and Director | March 30, 2011 |
Table of Contents
EXHIBIT INDEX
Exhibit No. | Description | |||
21 | Subsidiaries |
|||
23.1 | Consent of Parker Randall CF (H.K.) CPA Limited |
|||
31.1 | Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer |
|||
31.2 | Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer |
|||
32.1 | Section 1350 Certification of Chief Executive Officer |
|||
32.2 | Section 1350 Certification of Chief Financial Officer |