ITEM 1. BUSINESS
Forward Looking Statements
This report contains forward-looking statements. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may”, “should”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in the section entitled “Risk Factors”, that may cause our company’s or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.
Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.
Our financial statements are stated in United States dollars (US$) and are prepared in accordance with United States generally accepted accounting principles.
In this report, unless otherwise specified, all references to “common shares” refer to the common shares of our capital stock.
As used in this report, the terms “we”, “us”, “our”, “News of China” means News of China Inc., unless otherwise indicated.
Corporate Overview
We are a development stage company incorporated in Delaware on October 11, 2005. Our principal business until recently has been to provide an online financial media outlet for researching China-related stocks. This media outlet provides financial news and commentary, online video broadcasting, and other information for researching China-related stocks. China-related stocks refer to the stocks issued by companies whose main operations are located in China.
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In our online financial media outlet, we provided financial news and commentary, online video broadcasting, and other information for researching China-related stocks listed on the United States and Canadian stock markets. “China-related stocks” refer to stock issued by companies whose main operations are located in China. Due to the inefficiency of China’s capital markets, more and more China-related companies are seeking avenues to access the public markets in the United States and Canada to raise capital needed to cope with China’s fast growing economy. Stock exchanges in the United States and Canada have also expressed interest in attracting more Chinese companies.
We finished our online financial media outlet software development in August, 2006, and our media outlet became operational online at www.newsofchina.com in August 2006. Since the successful launch of our online financial media outlet, we updated the contents of our online financial media outlet with relevant news updates, editorials and market analyses relating to public companies with business operations in China. In addition to Mr. Chenxi Shi and Mr. Zibing Zhang, we also engaged additional part time staff members to help us gather relevant financial information for the contents of our online financial media outlet.
Furthermore, in December of 2006, Messrs. Zhang and Shi also traveled to China to promote our business with the investment community there. During this trip, Messrs. Zhang and Shi attended meetings with candidates who can assist us to gather and collect relevant financial information in China on Chinese reporting companies. Messrs. Zhang and Shi also met with individuals from Beijing University to discuss the possibility of organizing an investor relations forum at Beijing University. It was hoped that our company would then be able to promote the benefits of its online media outlet to the attendees. Our online financial media outlet has experienced software difficulty and is currently not operational. We are working on fixing the software problem for our online financial media outlet but we are unsure when we can have it operational again.
In August 2007, we started incorporating a wholly owned subsidiary in China called News of China (Beijing) Management Consultants Co., Ltd. and paid the initial capital registration fee of $30,000 as required under Chinese company law. However, the further capital contribution in the amount of $120,000 was too onerous for our company at this early development stage, so subsequent to the advance of $30,000, we decided not to invest the remaining $120,000 in order to complete the incorporation process. As a consequence thereof, our agent in China repaid the $30,000 advance we made in full to our company and the incorporation of our subsidiary was cancelled.
In our management’s opinion, we have not been able to achieve the milestones we set to fully implement our business operations. Because we have not been able to generate revenues from our online financial media outlet and we have little working capital remained, our management has decided to suspend the implementation of our current business plan until such time when we are able to obtain further financing. We anticipate that we will need to raise $2-2.5 million additional financing through sales of our securities in traditional private placement offerings or other types of private placement transactions such as Private Investment in Public Equity (“PIPE”) before we can continue implementing our current business plan. Alternatively, we may decide to pursue a new business in a different direction other than our current business plan.
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ITEM 1A.
ITEM 1A. RISK FACTORS
Our common shares are considered speculative. Prospective investors should consider carefully the risk factors set out below.
Risks Related To Our Company
The global financial crisis has had, and may continue to have, an impact on our business and financial condition.
The ongoing global financial crisis may also limit our ability to access the capital markets at a time when we would like, or need, to raise capital, which could have an impact on our ability to react to changing economic and business conditions. Accordingly, if the global financial crisis and current economic downturn continue or worsen, our business, results of operations and financial condition could be materially and adversely affected.
We have only commenced our business operations in October, 2005 and we have a limited operating history. If we cannot successfully manage the risks normally faced by start-up companies, we may not achieve profitable operations and ultimately our business may fail.
We have a limited operating history. We are currently a development stage company and have developed preliminarily the necessary software for the planned online financial media outlet. Accordingly, we have a very limited operating history and we face all of the risks and uncertainties encountered by early-stage companies.
As at June 30, 2009, we had an accumulated deficit of $155,059. We anticipate continuing to incur significant losses until, at the earliest, we generate sufficient revenues to offset the substantial up-front expenditures and operating costs associated with developing and marketing our services. There can be no assurance that we will ever operate profitably.
Our independent auditors have expressed substantial doubt about our ability to continue as a going concern, which may hinder our ability to obtain future financing.
In their report dated September 17, 2009, our independent auditors stated that our financial statements for the period October 11, 2005 (Date of Inception) to June 30, 2009 were prepared assuming that we would continue as a going concern. Our ability to continue as a going concern is an issue raised as we have never generated any revenue from operations. We anticipate that we will continue to experience net operating losses. Our ability to continue as a going concern is subject to our ability to obtain necessary funding from outside sources, including obtaining additional funding from the sale of our securities. Our lack of revenue and continued net operating losses increase the difficulty in meeting such goals and there can be no assurances that such methods will prove successful.
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We have no customers and generate no revenues and have only limited marketing experience to develop customers.
We have not yet entered into any agreements to sell our online financial medial outlet services to any customers. We do not believe that we will generate significant revenues in the immediate future. We will not generate any meaningful revenues unless we successfully launch our online financial media outlet and we obtain contracts with a significant number of customers. There can be no assurance that we will ever be able to obtain contracts with a significant number of customers to generate meaningful revenues or achieve profitable operations.
We have only limited experience in developing and marketing online financial media services, and there is limited information available concerning the potential performance or market acceptance of our proposed services. There can be no assurance that unanticipated expenses, problems or technical difficulties will not occur which would result in material delays in commercialization of our services or that our efforts will result in successful commercialization.
We need substantial additional financing and a failure to obtain such required financing will inhibit our ability to grow or we may have to curtail or cease operations.
Our capital requirements relating to the developing and marketing of our services have been, and will continue to be, significant. We are dependent on the proceeds of future financing in order to continue in business and to develop and commercialize additional proposed services. We anticipate requiring approximately $2,000,000 to $2,500,000 in additional financing for our longer term growth. Our management has decided to suspend implementation of our current business until such time when additional financing of approximately $2,000,000 to $2,500,000 is achieved. There can be no assurance that we will be able to raise the substantial additional capital resources necessary to permit us to pursue our business plan. We have no current arrangements with respect to, or sources of, additional financing and there can be no assurance that any such financing will be available to us on commercially reasonable terms, or at all. Any inability to obtain additional financing will have a material adverse effect on us, such as requiring us to significantly curtail or cease operations. In that case, you may lose your entire investment.
The continued growth of our business will require additional funding from time to time which would be used for general corporate purposes. General corporate purposes may include acquisitions, investments, repayment of debt, capital expenditures, repurchase of our capital stock and any other purposes that we may specify in any prospectus supplement. Obtaining additional funding would be subject to a number of factors including market conditions, operational performance and investor sentiment. These factors may make the timing, amount, terms and conditions of additional funding unattractive, or unavailable, to us.
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The terms of any future financing may adversely affect your interest as stockholders.
If we require additional financing in the future, we may be required to incur indebtedness or issue equity securities, the terms of which may adversely affect your interests in our company. For example, the issuance of additional indebtedness may be senior in right of payment to your shares upon our liquidation. In addition, indebtedness may be under terms that make the operation of our business more difficult because the lender’s consent will be required before we take certain actions. Similarly the terms of any equity securities we issue may be senior in right of payment of dividends to your common stock and may contain superior rights and other rights as compared to your common stock. Further, any such issuance of equity securities may dilute your interest in our company, which may reduce the value of your investment.
We could lose our competitive advantages if we are not able to continuously develop superior services in our market niche and gain substantial market penetration quickly.
Our success and ability to compete depends, to a significant degree, on our ability to continuously develop superior services in our selected market niche of targeting and providing information on publicly reporting companies with business based in China and obtain substantial market penetration quickly. Our business model is vulnerable to duplication by competitors, especially competitors who are established in providing business and financial information of publicly reporting companies, who have superior financial and technological resources, industry experiences and marketing capacities. It is difficult to take, and we have not taken, any action to protect our business model in our selected market niche. If any of our competitors copies our business model or develops similar services independently, we would not be able to compete as effectively.
We may face regulatory difficulties for our services.
Development of such a media solution might be subject to regulations of various national, state, and provincial authorities in various jurisdictions. To comply with the regulations we may face a variety of bureaucratic difficulties that may likely add extra financial burden to our company.
The online media industry in China is subject to regulations of several Ministries and the State Agencies, including China Internet Network Information Center (CNNIC), The Ministry of Public Security of the People’s Republic of China, the Ministry of Information Industry of the People’s Republic of China, and Internet Society of China (ISC) etc. Although we are not required to obtain authorization from these Ministries and State Agencies, the accessibility of our planned online media might be blocked in China for political or other unpredictable reasons, which might affect our business activities in China substantially.
The uncertain legal environments in the People’s Republic of China and our industry may be vulnerable to local government agencies who have persistent bureaucratic power over customers, reporters and other parties who wish to renegotiate the terms and conditions of, or terminate their agreements or other understandings with us, when we enter substantial agreement of manufacturing and marketing of our proposed services in China.
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Our Certificate of Incorporation and Bylaws contain limitations on the liability of our directors and officers, which may discourage suits against directors and executive officers for breaches of fiduciary duties.
Our Certificate of Incorporation, as amended, and our Bylaws contain provisions limiting the liability of our directors for monetary damages to the fullest extent permissible under Delaware law. This is intended to eliminate the personal liability of a director for monetary damages on an action brought by origin our right for breach of a director’s duties to us or to our stockholders except in certain limited circumstances. In addition, our Certificate of Incorporation, as amended, and our Bylaws contain provisions requiring us to indemnify our directors, officers, employees and agents serving at our request, against expenses, judgments (including derivative actions), fines and amounts paid in settlement. This indemnification is limited to actions taken in good faith in the reasonable belief that the conduct was lawful and in, or not opposed to our best interests. The Certificate of Incorporation and the Bylaws provide for the indemnification of directors and officers in connection with civil, criminal, administrative or investigative proceedings when acting in their capacities as agents for us. These provisions may reduce the likelihood of derivative litigation against directors and executive officers and may discourage or deter stockholders or management from suing directors or executive officers for breaches of their fiduciary duties, even though such an action, if successful, might otherwise benefit our stockholders and directors and officers.
Our success depends on our management team and other key personnel, the loss of any of whom could disrupt our business operations.
Our future success will depend in substantial part on the continual services of our senior management, including our President and Chief Executive Officer, Chenxi Shi, and our Vice President, Zibing Zhang. As a startup company, currently none of the senior management team draws salaries from our company. We do not carry key person life insurance on any of our officers or employees. The loss of the services of one or more of our key personnel could impede implementation of our business plan and result in reduced profitability.
Our future success will also depend on the continued ability to attract, retain and motivate highly qualified technical, sales and marketing, customer support personnel. Competition for qualified personnel is intense in our industry. We cannot assure you that we will be able to retain our key personnel or that we will be able to attract, assimilate or retain qualified personnel in the future. Our inability to hire and retain qualified personnel or the loss of the services of our key personnel could have a material adverse effect upon our business, financial condition and results of operations.
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Because our officers, directors and principal shareholders control a majority of our common stock, investors will have little or no control over our management or other matters requiring shareholder approval.
Our officers and directors and their affiliates in the aggregate, beneficially own approximately 84.16% of issued and outstanding shares of our common stock. As a result, they have the ability to control matters affecting minority shareholders, including the election of our directors, the acquisition or disposition of our assets, and the future issuance of our shares. Because our officers, directors and principal shareholders control the company, investors will not be able to replace our management if they disagree with the way our business is being run. Because control by these insiders could result in management making decisions that are in the best interest of those insiders and not in the best interest of the investors, you may lose some or all of the value of your investment in our common stock.
Because we do not have sufficient insurance to cover our business losses, we might have uninsured losses, increasing the possibility that you would lose your investment.
We may incur uninsured liabilities and losses as a result of the conduct of our business. We do not currently maintain any comprehensive liability or property insurance. Even if we obtain such insurance in the future, we may not carry sufficient insurance coverage to satisfy potential claims. We do not carry any business interruption insurance. Should uninsured losses occur, any purchasers of our common stock could lose their entire investment.
Risks Relating to our Business
Our success depends upon the development of China’s and the world’s capital markets.
China is the one of the fastest growing economies in the world. China is now taking great efforts to develop its current capital market into a more effective one. The growth of China’s capital market might significantly reduce the necessity of Chinese companies to go public in the United States and Canada. Furthermore, Chinese companies also have the options to go public in other global capital markets such as those in Hong Kong and Singapore. The development of other global capital markets can also attract more companies to go public in those alternative stock markets. Moreover, Chinese regulators might limit the number and the ability of Chinese companies to go public in the United States and Canada. Because our online financial media outlet will focus on North American publicly reporting companies with business based in China, all these circumstances can have an adverse effect on our business.
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We face competition from larger and stronger companies that have the resources to provide superior and less costly services.
The markets that we are entering are intensely competitive. We expect additional competition to come from the increasing number of new market entrants who can develop potentially competitive services. We will face competition from numerous sources, including, large established traditional and online media who have superior resources and industry experiences. Our potential competitors may succeed in developing services that are more effective or less costly (or both) than our services. Some of our potential competitors may be large, well-financed and established companies that have greater resources and, therefore, may be better able than us to compete for a share of the market.
Our business is to provide online financial information through our online financial media outlet for researching China-related stocks to North America financial institutions. To our best knowledge, there is no established online media focused on our selected market niche yet. However, we have to compete with a large number of traditional media providing similar or even superior services such as The Wall Street Journal, CNBC, Bloomberg and Financial Times. Competition also comes from various financial online media such as finance.yahoo.com, Reuters.com, wallst.net etc. These traditional and online financial media have superior financial resources, industry experiences, market penetration and marketing capacity. Potential new entrants can copy our business model and compete with us in our selected market niche as well. Our competitive edge relies upon providing a one place financial media solution for researching China-related stocks listed in North American stock exchanges. Our Chinese cultural and language literacy and local connections in China enable us to provide information that is not available to these established traditional and online media. Our media will also cover information about China-related companies, especially small to medium sized ones, which are usually not covered by these established media. However, there is no assurance we can compete with these established or new competitors effectively, and if we fail to provide superior services effectively than these competitors, our business will fail and you will lose your entire investment.
Our operations depend upon the timeliness and quality of the services of web hosting service providers.
Our online financial media outlet is dependent on the quality and the timeliness of web hosting services. We currently use the web hosting services of DailyRazor Hosting (www.dailyrazor.com), a division of Vecordia Corporation. The failure to provide high quality and timely services of the provider will have material adverse effects on our business activities and our profitability.
We may face technological difficulties
Our online media outlet services are dependent upon the smooth operation of the software we develop. Shortcomings and bugs in the software may have material adverse effect on our business. Our online media outlet may also be vulnerable to attacks from hackers and computer viruses, which may cause interruption of our business.
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We may be sued by reporting companies covered by our online financial media outlet, and investors who rely on information disseminated through our online financial media outlet.
We may have dispute with China related reporting companies about the materials and information we cover and disseminate through our online financial media outlet and thus be sued by these companies. Investors who make investment decisions relying upon information disseminated through our financial media outlet may also sue us for their losses. These legal proceedings might have material negative effect on profitability of our business.
Risks Relating to the People’s Republic of China
The economic policies of the People’s Republic of China could affect our business.
Our business is to provide financial information through our online financial media outlet for researching China’s listed companies in the United States and Canada. Accordingly, our results of operations and prospects are subject, to a significant extent, to the economic, political and legal developments in the People’s Republic of China.
While the People’s Republic of China’s economy has experienced significant growth in the past 20 years, such growth has been uneven, both geographically and among various sectors of the economy. The Chinese government has implemented various measures to encourage economic growth and guide the allocation of resources. Some of these measures benefit the overall economy of the People’s Republic of China, but they may also have a negative effect on us.
The economy of the People’s Republic of China has been changing from a planned economy to a more market-oriented economy. In recent years, the Chinese government has implemented measures emphasizing the utilization of market forces for economic reform and the reduction of state ownership of productive assets, and the establishment of corporate governance in business enterprises; however, a substantial portion of productive assets in the People’s Republic of China are still owned by the Chinese government. In addition, the Chinese government continues to play a significant role in regulating industry development by imposing industrial policies. It also exercises significant control over the People’s Republic of China’s economic growth through the allocation of resources, the control of payment of foreign currency-denominated obligations, the setting of monetary policy and the provision of preferential treatment to particular industries or companies.
Capital outflow policies in the People’s Republic of China may hamper our ability to expand our business and/or operations. The People’s Republic of China has adopted currency and capital transfer regulations. These regulations may require us to comply with complex regulations for the movement of capital. Although our management believes that it is currently in compliance with these regulations, should these regulations or the interpretation of them by courts or regulatory agencies change, we may not be able to remit income earned and proceeds received in connection with any off-shore operations or from other financial or strategic transactions we may consummate in the future.
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Fluctuation of the Renminbi could materially affect our financial condition and results of operations.
Fluctuation of the Renminbi, the currency of the People’s Republic of China, could materially affect our financial condition and results of operations. The value of the Renminbi fluctuates and is subject to changes in the People’s Republic of China’s political and economic conditions. Since July 2005, the conversion of Renminbi into foreign currencies, including United States dollars, is pegged against the inter-bank foreign exchange market rates or current exchange rates of a basket of currencies on the world financial markets. As of September 28, 2009, the exchange rate between the Renminbi and the United States dollar was 6.834 Renminbi to every one United States dollar.
We may have difficulty establishing adequate management, legal and financial controls in the People’s Republic of China.
The People’s Republic of China historically has not adopted a Western style of management and financial reporting concepts and practices, as well as in modern banking, computer and other control systems. We may have difficulty in hiring and retaining a sufficient number of qualified employees to work in the People’s Republic of China. As a result of these factors, we may experience difficulty in establishing management, legal and financial controls, collecting financial data and preparing financial statements, books of account and corporate records and instituting business practices that meet Western standards.
It will be extremely difficult to acquire jurisdiction and enforce liability against our officers, directors and assets based in The People’s Republic of China.
Because some of our executive officers and current directors are Chinese citizens, it may be difficult, if not impossible, to acquire jurisdiction over these persons in the event a lawsuit is initiated against us and/or our officers and directors by a stockholder or group of stockholders in the United States.
Our business may face regulatory difficulties in the People’s Republic of China.
The online media industry in China is subject to regulations of several Ministries and the State Agencies, including China Internet Network Information Center (CNNIC), The Ministry of Public Security of the People’s Republic of China, the Ministry of Information Industry of the People’s Republic of China, and Internet Society of China (ISC). Although we are not required to obtain authorization or approval from these Ministries and State Agencies as a foreign online media, the accessibility of our online media might be blocked in China for political or other unpredictable reasons, which might adversely affect our business activities in China substantially. To comply with the regulations the Company may face a variety of bureaucratic difficulties that may likely add extra financial burden to our company. Bureaucracy and corruption that are often seen in China may also have adverse effects on our operation and financial conditions.
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Risks Associated With Our Common Stock
Trading on the OTC Bulletin Board may be volatile and sporadic, which could depress the market price of our common stock and make it difficult for our stockholders to resell their shares.
Our common stock is quoted on the OTC Bulletin Board service of the Financial Industry Regulatory Authority (“FINRA”). Trading in stock quoted on the OTC Bulletin Board is often thin and characterized by wide fluctuations in trading prices due to many factors that may have little to do with our operations or business prospects. This volatility could depress the market price of our common stock for reasons unrelated to operating performance. Moreover, the OTC Bulletin Board is not a stock exchange, and trading of securities on the OTC Bulletin Board is often more sporadic than the trading of securities listed on a quotation system like Nasdaq or a stock exchange like the American Stock Exchange. Accordingly, our shareholders may have difficulty reselling any of their shares.
Our stock is a penny stock. Trading of our stock may be restricted by the SEC’s penny stock regulations and the FINRA’s sales practice requirements, which may limit a stockholder’s ability to buy and sell our stock.
Our stock is a penny stock. 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) less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. Our securities 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 SEC 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 stock.
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In addition to the “penny stock rules” promulgated by the Securities and Exchange Commission, the Financial Industry Regulatory Authority has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, the Financial Industry Regulatory Authority believes that there is a high probability that speculative low-priced securities will not be suitable for at least some customers. The Financial Industry Regulatory Authority requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock.
Other Risks
Trends, Risks and Uncertainties
We have sought to identify what we believe to be the most significant risks to our business, but we cannot predict whether, or to what extent, any such risks may be realized nor can we guarantee that we have identified all possible risks that might arise. Investors should carefully consider all of the risk factors before making an investment decision with respect to our common stock.
ITEM 1B.
ITEM 1B. UNRESOLVED STAFF COMMENTS
Not Applicable
ITEM 2.
ITEM 2. PROPERTIES
Our executive and head offices are located at 1855 Talleyrand, Suite 203A, Brossard, Quebec, Canada. The offices are provided to us at no charge by Mr. Chenxi Shi. We believe our current premises are adequate for our current operations and we do not anticipate that we will require any additional premises in the foreseeable future.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
We know of no material, active or pending legal proceedings against our company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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PART II
ITEM 5.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
Our common stock was originally accepted for quotation on the OTC Bulletin Board under the Symbol “NWCH” on February 22, 2007. Our CUSIP number is 65248X102.
The following table reflects the high and low bid information for our common stock obtained from the OTC Bulletin Board and reflects inter-dealer prices, without retail mark-up, markdown or commission, and may not necessarily represent actual transactions.
Holders of our Common Stock
As of September 28, 2009, there were approximately 56 holders of record of our common stock. As of such date, 25,900,000 shares of common stock were issued and outstanding.
Our shares of common stock are issued in registered form. Intercontinental Registrar and Transfer Agency is the registrar and transfer agent for our shares of common stock.
Dividends
Since our inception, we have not declared nor paid any cash dividends on our capital stock and we do not anticipate paying any cash dividends in the foreseeable future. Our current policy is to retain any earnings in order to finance the expansion of our operations. Our board of directors will determine future declarations and payments of dividends, if any, in light of the then-current conditions they deem relevant and in accordance with applicable corporate law.
There are no restrictions in our articles of incorporation or bylaws that prevent us from declaring dividends. The Nevada Revised Statutes, however, do prohibit us from declaring dividends where, after giving effect to the distribution of the dividend:
1.
We would not be able to pay our debts as they become due in the usual course of business; or
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2.
Our total assets would be less than the sum of our total liabilities plus the amount that would be needed to satisfy the rights of shareholders who have preferential rights superior to those receiving the distribution.
Recent Sales of Unregistered Securities
On June 22, 2009 we sold 10,000,000 shares of our common stock, at a purchase price of $0.005 per share for gross proceeds of $50,000, pursuant to a subscription agreement that we entered into with a non-U.S. person (as that term is defined in Regulation S of the Securities Act of 1933). The offer and sale of these shares occurred outside of the United States.
We issued these shares to a non-U.S. person (as that term is defined in Regulation S of the Securities Act of 1933) in an offshore transaction. In issuing these shares, we relied on Regulation S and/or Section 4(2) of the Securities Act of 1933.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
Not Applicable
ITEM 7.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with our financial statements and the related notes that appear elsewhere in this prospectus. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward looking statements. Factors that could cause or contribute to such differences include those discussed below and elsewhere in this prospectus and registration statement.
Our audited financial statements are stated in United States Dollars and are prepared in accordance with United States Generally Accepted Accounting Principles.
Anticipated Cash Requirements
We estimate our minimum operating expenses and working capital requirements for the next 12 month period to be as follows:
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Results of Operations
The following summary of our results of operations should be read in conjunction with our audited financial statements for the year ended June 30, 2009 which are included herein.
Revenues
We recorded a net operating loss of $32,735 for the 12 months ended June 30, 2009 and have an accumulated deficit of $155,059 since inception. We have had no operating revenues since our inception on February 25, 2005 through to the year ended June 30, 2009. We anticipate that we will not generate any revenues for so long as we are a development stage company.
Expenses
The major components of our expenses for the years ended June 30, 2009 and 2008 are outlined in the table below:
Liquidity and Capital Resources
Our financial condition for the year ended June 30, 2009 and 2008 and the changes between those periods for the respective items are summarized as follows:
Working Capital
The 1,101,92% increase in our working capital was primarily due to the private placement offering we closed on June 22, 2009 to raise $50,000 by issuing 10,000,000 shares of our common stock.
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Cash Flows
Future Financings
We recorded a net operating loss of $32,735 for the year ended June 30, 2009 and have an accumulated deficit of $155,059 since inception. As at June 30, 2009 we had cash totaling $58,037 and for the next 12 months, management anticipates that the minimum cash requirements to fund our continued operations will be $65,000. Accordingly we do not have sufficient funds to meet our planned expenditures over the next 12 months and we will need further financing in order to meet our anticipated expenses.
We currently do not have any arrangements for financing and may not be able to find such financing if required. The most likely sources of future funds that will be available to us are through debt financing and through the issuance of equity capital.
We anticipate continuing to rely on equity sales of our common shares in order to continue to fund our business operations. Issuances of additional shares will result in dilution to our existing shareholders. There is no assurance that we will achieve any additional sales of our equity securities or arrange for debt or other financing to fund our development activities during the next 12 month period.
Going Concern
Because we are in the development stage, have not yet achieved profitable operations and are dependent on our ability to raise capital from stockholders or other sources to meet our obligations and repay our liabilities arising from normal business operations when they become due, in their report on our audited financial statements for the years ended June 30, 2009 and 2008, our independent auditors included an explanatory paragraph regarding substantial doubt about our ability to continue as a going concern. Our financial statements contain additional note disclosure describing the circumstances that lead to this disclosure by our independent auditors.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
- 17 -
ITEM 7A.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not Applicable
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- 18 -
News of China Inc.
(A Company in the Development Stage)
Financial Statements
June 30, 2009
Expressed in U.S. Funds
RSM Richter LLP
Chartered Accountants
Montreal
RSM Richter LLP is an independent member firm of RSM International,
an affiliation of independent accounting and consulting firms.
- 19 -
News of China Inc.
(A Company in the Development Stage)
Financial Statements
June 30, 2009
Expressed in U.S. Funds
Contents
- 20 -
RSM Richter LLP
Comptables agréés
Chartered Accountants
2, Place Alexis Nihon
Montréal, (Québec) H3Z 3C2
Téléphone / Telephone : (514) 934-3400
Télécopieur / Facsimile : (514) 934-3408
www.rsmrichter.com
Report of Independent Registered
Public Accounting Firm
To the Shareholders and Board of Directors of
News of China Inc.
(A Company in the Development Stage)
We have audited the accompanying balance sheets of News of China Inc. (a company in the development stage) as at June 30, 2009 and 2008 and the related statements of operations, shareholders' equity and cash flows for the year ended June 30, 2009 and for the period from inception (October 11, 2005) to June 30, 2009 and June 30, 2008. These financial statements are the responsibility of the Company's 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). These standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An 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, these financial statements present fairly, in all material respects, the financial position of the Company as at June 30, 2009 and June 30, 2008 and the results of its operations and its cash flows for the year ended June 30, 2009 and for the period from inception (October 11, 2005) to June 30, 2009 and June 30, 2008 in accordance with accounting principles generally accepted in the United States.
We were not engaged to examine management's assertion about the effectiveness of the Company's internal control over financial reporting at September 17, 2009 included in the accompanying Item 9A(T) of Form 10-K and, accordingly, we do not express an opinion thereon.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As described in note 2 to the financial statements, the Company has never generated any revenue and this raises substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
[Singed] RSM Richter LLP
Chartered Accountants
Montreal, Quebec
September 17, 2009
- 21 -
News of China Inc.
(A Company in the Development Stage)
Balance Sheets
As At June 30, 2009
Expressed in U.S. Funds
See accompanying notes
- 22 -
News of China Inc.
(A Company in the Development Stage)
Statements of Shareholders' Equity
From Inception (October 11, 2005) to June 30, 2009
Expressed in U.S. Funds
See accompanying notes
- 23 -
News of China Inc.
(A Company in the Development Stage)
Statements of Operations
Expressed in U.S. Funds
See accompanying notes
- 24 -
News of China Inc.
(A Company in the Development Stage)
Statements of Cash Flows
Expressed in U.S. Funds
See accompanying notes
- 25 -
News of China Inc.
(A Company in the Development Stage)
Notes to Financial Statements
From Inception (October 11, 2005) to June 30, 2009
Expressed in U.S. Funds
1.
Organization and Basis of Presentation
The Company was incorporated in the State of Delaware on October 11, 2005 and is based in Montreal, Quebec, Canada. Its principal business is the development of a financial website focused on researching companies whose main operations are in China and are listed on American and Canadian stock exchanges.
The Company is a development stage enterprise as defined by Financial Accounting Standards Board (FASB) Statements of Financial Accounting Standards (SFAS) No.7, "Accounting and Reporting by Development Stage Enterprises". The Company's main activities to date have been developing a market for its services. Because the Company is in the development stage, the accompanying financial statements should not be regarded as typical for normal operating periods.
The Company prepares its financial statements in accordance with accounting principles generally accepted in the United States. This basis of accounting involves the application of accrual accounting and consequently, revenues and gains are recognized when earned, and expenses and losses are recognized when incurred.
The financial statements are expressed in U.S. funds.
Management has performed an evaluation of the Company’s activities through the date and time these financial statements were issued on September 17, 2009 and concluded that there are no additional significant events requiring recognition or disclosure.
2.
Going Concern
The accompanying financial statements have been prepared assuming the Company will continue as a going concern. The Company has not generated any revenue and has never paid any dividends. The Company is unlikely to pay dividends or generate significant earnings in the immediate or foreseeable future. The continuation of the Company as a going concern and the ability of the Company to emerge from the development stage is dependent upon the continued financial support from its shareholders, the ability of the Company to obtain necessary equity financing to continue operations and ability to generate sustainable significant revenue. There is no guarantee that the Company will be able to raise any equity financing or generate profitable operations. As at June 30, 2009, the Company has accumulated losses of $155,059 since inception. These factors raise substantial doubt regarding the Company's ability to continue as a going concern. Should the Company be unable to continue as going concern, it may be unable to realize the carrying value of its assets and to meet its liabilities as they become due.
- 26 -
News of China Inc.
(A Company in the Development Stage)
Notes to Financial Statements
From Inception (October 11, 2005) to June 30, 2009
Expressed in U.S. Funds
3.
Summary of Significant Accounting Policies
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Financial Instruments
The Company estimates the fair value of its financial instruments based on current interest rates, market value and pricing of financial instruments with comparable terms. Cash, sales taxes recoverable, accrued liabilities and loan payable, shareholder are all short-term in nature and as such, their carrying values approximate fair values.
Foreign Currency Translation
The Company's functional currency for its operations is the Canadian dollar. However, the Company's reporting currency is the U.S. dollar. Therefore, the financial statements for all periods presented have been translated into the U.S. dollar using the current rate method. Under this method, the income statement and the cash flows statement items for each period have been translated into U.S. dollar using the rates in effect at the date of the transactions, and assets and liabilities have been translated using the exchange rate at the end of the period. All resulting exchange differences are reported in the cumulative translation adjustment account as a separate component of shareholder's equity.
Income Taxes
The Company accounts for income taxes in accordance with SFAS No. 109, "Accounting for Income Taxes". Deferred taxes are provided on the liability method whereby deferred tax assets are recognized for deductible temporary differences, and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax assets and rates on the date of enactment.
In July 2006, the FASB released FIN 48 "Uncertainty in Income Taxes", which defines accounting for uncertain tax positions and includes amendments to SFAS No. 109. We adopted FIN 48 on June 30, 2007 (our first fiscal year after December 15, 2006). See note 6 for additional information.
- 27 -
News of China Inc.
(A Company in the Development Stage)
Notes to Financial Statements
From Inception (October 11, 2005) to June 30, 2009
Expressed in U.S. Funds
3.
Summary of Significant Accounting Policies (Cont'd)
Loss Per Share
Basic loss per share is calculated based on the weighted average number of shares outstanding during the year.
Newly Issued Accounting Pronouncements
The EITF issued EITF 08-6, “Equity Method Investment Accounting Considerations”. This EITF considers whether all of the provisions of Statement 141(R) and Statement 160 should be applied when accounting for an equity method investment. This EITF is effective on a prospective basis in fiscal years beginning on or after December 15, 2008 and interim periods within those fiscal years. The adoption of EITF 08-6 is not expected to have a material effect on the Company’s financial position or results of operations.
The EITF issued EITF 08-7, “Accounting for Defensive Intangible Assets”. This issue discusses how defensive intangible assets should be accounted for subsequent to their acquisition, including the estimated useful life that should be assigned to such assets. This EITF is effective prospectively for intangible assets acquired on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. The adoption of EITF 08-7 is not expected to have a material effect on the Company’s financial position or results of operations.
The EITF issued EITF 08-8, “Accounting for an Instrument (or an Embedded Feature) with a Settlement Amount That Is Based on the Stock of an Entity's Consolidated Subsidiary”. This Issue addresses the determination of whether a financial instrument for which the payoff to the counterparty is based, in whole or in part, on the stock of an entity's consolidated subsidiary, is indexed to the reporting entity's own stock and therefore should not be precluded from qualifying for the first part of the scope exception in paragraph 11(a) of Statement 133 or being within the scope of Issue 00-19. This EITF is effective for fiscal years beginning on or after December 15, 2008, and interim periods within those fiscal years. The adoption of EITF 08-8 is not expected to have a material effect on the Company’s financial position or results of operations.
In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements” (“SFAS 160”). SFAS 160 establishes new accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a noncontrolling interest in a subsidiary (minority interest) is an ownership interest in the consolidated entity that should be reported as equity in the Consolidated Financial Statements and separate from the parent company’s equity. Among other requirements, this statement requires consolidated net income to be reported at amounts that include the amounts attributable to both the parent and the noncontrolling interest. It also requires disclosure, on the face of the Consolidated Statement of Operations, of the amounts of consolidated net income attributable to the parent and to the noncontrolling interest. The guidance will become effective for the fiscal year beginning after December 15, 2008. The adoption of SFAS 160 is not expected to have a material effect on the Company’s financial position or results of operations.
- 28 -
News of China Inc.
(A Company in the Development Stage)
Notes to Financial Statements
From Inception (October 11, 2005) to June 30, 2009
Expressed in U.S. Funds
3.
Summary of Significant Accounting Policies (Cont'd)
In June 2009, the FASB issued FAS 166, "Accounting for Transfers of Financial Assets an amendment of FASB Statement No. 140", which amends the derecognition guidance in FASB Statement No. 140 and eliminates the exemption from consolidation for qualifying special-purpose entities. This statement is effective for financial asset transfers occurring after the beginning of an entity's first fiscal year that begins after November 15, 2009. The adoption of FAS 166 is not expected to have a material effect on the Company’s financial position or results of operations.
In June 2009, the FASB issued FAS 167, "Amendments to FASB Interpretation No. 46(R)", which amends the consolidation guidance applicable to variable interest entities. The amendments will significantly affect the overall consolidation analysis under FASB Interpretation No. 46(R). This statement is effective as of the beginning of the first fiscal year that begins after November 15, 2009. The adoption of FAS 167 is not expected to have a material effect on the Company’s financial position or results of operations.
On July 1, 2009, the FASB released the final version of its new Accounting Standards Codification (the “Codification”) as the single authoritative source for U.S. generally accepted accounting principle (“GAAP”). The Codification replaces all previous U.S. GAAP accounting standards as described in SFAS 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles FAS 168. While not intended to change U.S. GAAP, the Codification significantly changes the way in which the accounting literature is organized. It is structured by accounting topic to help accountants and auditors more quickly identify the guidance that applies to a specific accounting issue. This statement is effective for financial statements issued for interim and annual periods ending after September 15, 2009. The Company will apply the Codification to the first quarter fiscal 2010 interim financial statements. The adoption of the Codification will not have an effect on the Company’s financial position and results of operations. However, because the Codification completely replaces existing standards, it will affect the way U.S. GAAP is referenced by News of China Inc. in its financial statements and accounting policies.
4.
Loan Payable, Shareholder
The loan payable, shareholder is payable on demand and is non-interest bearing.
5.
Capital Stock
During the year, the Company issued 10,000,000 common shares for cash consideration, in aggregate, of $50,000 of which $49,000 was allocated as additional paid-in capital.
- 29 -
News of China Inc.
(A Company in the Development Stage)
Notes to Financial Statements
From Inception (October 11, 2005) to June 30, 2009
Expressed in U.S. Funds
6.
Income Taxes
As at June 30, 2009, there were Canadian Federal and Provincial income tax losses that may be applied against earnings of future years, not later than as follows:
A valuation allowance has been applied against the entire deferred tax assets balance.
Unrecognized Tax Benefits
On July 1, 2007, the Company adopted the provisions for FIN 48, which is an interpretation of SFAS No. 109. FIN 48 prescribes a recognition threshold that a tax position is required to meet before being recognized in the financial statements and provides guidance on de-recognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition issues. FIN 48 contains a two-step approach to recognizing and measuring uncertain tax positions accounted for in accordance with SFAS No. 109. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained upon ultimate settlement with a taxing authority, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon ultimate settlement. Prior to July 1, 2007 and the implementation of FIN 48, the Company recorded tax contingencies when the exposure item became probable and reasonably estimable, in accordance with SFAS No. 5, Accounting for Contingencies.
The adoption of FIN 48 has not had a material effect on our financial position or results of operations for 2009. We do not expect our unrecognized tax benefits to change significantly over the next twelve months.
Classification of Interest and Penalties
Our policy to include interest and penalties related to unrecognized tax benefits within interest expense did not change as a result of adopting FIN 48.
7.
Related Party Transactions
Included in professional fees are approximately $Nil (2008 - $24,000) paid to a major shareholder for management consulting services rendered to the Company. Included in general and administrative are approximately $Nil (2008 - $700) paid to a shareholder for technical support services rendered for the Company and approximately $500 (2008 - $1,000) paid to a shareholder for accounting services rendered for the Company. The related party transactions have been measured at the exchange amount which is the amount of the consideration established and agreed to by the related parties.
- 30 -
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A(T).
ITEM 9A(T). CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our management has employed a framework consistent with Exchange Act Rule 13a-15(c), to evaluate our internal control over financial reporting described below. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation and fair presentation of financial statements for external purposes in accordance with generally accepted accounting principals.
Based on its evaluation, our management, with the participation of our principal executive and principal financial officer, concluded that as of the end of the period covered by this Annual Report on Form 10-K, our disclosure controls and procedures were effective.
Management's annual report on internal control over financial reporting
Management conducted an evaluation of the design and operation of our internal control over financial reporting as of June 30, 2009 based on the criteria set forth in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. This evaluation included review of the documentation of controls, evaluation of the design effectiveness of controls, testing of the operating effectiveness of controls and a conclusion on this evaluation.
In performing the assessment, our management concluded that as of the end of the period covered by this Annual Report on Form 10-K our internal control over financial reporting was not effective. Our management identified several material weaknesses in our internal control processes. These weaknesses included lack of accounting personnel who has sufficient knowledge in dealing with complex accounting and tax issues, inadequate security, inadequate restricted access to systems and insufficient disaster recovery plans. Management has also identified material weaknesses in our internal control processes over procurement and disbursements, primarily related to lack of segregations of duties.
Our management continues to review processes and will make necessary changes to strengthen our system of internal controls over financial reporting
A material weakness is a deficiency or a combination of control deficiencies in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.
- 31 -
This annual report does not include an attestation report of our company's registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by our company's registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit us to provide only management's report in this annual report.
Changes in internal control over financial reporting
There were no changes in our internal control over financial reporting during the year ended June 30, 2009 that have materially affected, or are reasonably likely to materially affect our internal control over financial reporting.
Certifications
Certifications with respect to disclosure controls and procedures and internal control over financial reporting under Rules 13a-14(a) or 15d-14(a) of the Exchange Act are attached to this annual report on Form 10-K.
ITEM 9B.
ITEM 9B. OTHER INFORMATION
On June 22, 2009, we entered into a subscription agreement with a non-U.S. person (as that term is defined in Regulation S of the Securities Act of 1933) for the sale of 10,000,000 shares of our common stock at a purchase price of $0.005 per share for gross proceeds of $50,000.
PART III
ITEM 10.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Directors and Executive Officers, Promoters and Control Persons
As at June 30, 2009, our directors and executive officers, their age, positions held, and duration of such, are as follows:
- 32 -
Certain Significant Employees
Other than Messrs. Shi, Zhang and Chen, we do not have other significant employees.
Business Experience
The following is a brief account of the education and business experience of directors and executive officers during the past five years, indicating their principal occupation during the period, and the name and principal business of the organization by which they were employed.
Chenxi Shi
Mr. Shi is our founding director and has served as the Chairman of the Board of the Directors since the founding of our company in October 11, 2005 (Date of Inception). He has over 10 years of work experience in computer technology and business management. Mr. Shi has held various technical and managerial positions from entry level to the corporate senior. Mr. Shi has worked in Northern Jiaotong University, Beijing Jiada Technologies Company, Legend Computer Group Co. (Lenovo) and Investors Group of Canada. Mr. Shi received his Bachelor of Science degree in computer sciences from Northern Jiaotong University and his Master of Business Administration degree from Peking University.
Mr. Shi provides his services on a full time basis to our company.
Zibing Zhang
Mr. Zhang is a founder of our company and has served as Vice President since founding our company in October 11, 2005 (Date of Inception). He has over 12 years of work experience in computer technology, financial services and business management. Mr. Zhang has held various technical and managerial positions from entry level to the corporate senior. Mr. Zhang has worked in Liaoning Chengda Group, Holyworks Corp, ZTE Telecom and Investors Group of Canada. Mr. Zhang received a Bachelor of Engineering degree in industrial engineering management from Dalian University of Technology and a Master of Business Administration degree from McGill University. Mr. Zhang provides his services on a full time basis to our company.
- 33 -
Corporate Governance
We currently act with one director. We have determined that Chenxi Shi is not independent as defined by Nasdaq Marketplace Rule 4200(a)(15).
Committees of the Board
Board Meetings and Committees
Our board of directors held no formal meetings during the year ended June 30, 2009. All proceedings of the board of directors were conducted by resolutions consented to in writing by all the directors and filed with the minutes of the proceedings of the directors. Such resolutions consented to in writing by the directors entitled to vote on that resolution at a meeting of the directors are, according to the Delaware Corporation Law and the bylaws of our company, as valid and effective as if they had been passed at a meeting of the directors duly called and held.
We do not have standing audit, nominating or compensation committees, or committees performing similar functions. Our board of directors believe that it is not necessary to have a standing audit or compensation committees at this time because the functions of such committees are adequately performed by our board of directors.
Our board of directors also is of the view that it is appropriate for us not to have a standing nominating committee because the current size of our board of directors does not facilitate the establishment of a separate committee. Our board of directors have performed and will perform adequately the functions of a nominating committee. The directors who perform the functions of a nominating committee are not independent because they are also officers of our company. The determination of independence of directors has been made using the definition of “independent director” contained under Rule 4200(a)(15) of the Rules of the Financial Industry Regulatory Authority. Our board of directors has not adopted a charter for the nomination committee. There has not been any defined policy or procedure requirements for stockholders to submit recommendations or nomination for directors. Our board of directors does not believe that a defined policy with regard to the consideration of candidates recommended by stockholders is necessary at this time because we believe that, given the early stages of our development, a specific nominating policy would be premature and of little assistance until our business operations are at a more advanced level. There are no specific, minimum qualifications that our board of directors believes must be met by a candidate recommended by our board of directors. The process of identifying and evaluating nominees for director typically begins with our board of directors soliciting professional firms with whom we have an existing business relationship, such as law firms, accounting firms or financial advisory firms, for suitable candidates to serve as directors. It is followed by our board of directors’ review of the candidates’ resumes and interview of candidates. Based on the information gathered, our board of directors then makes a decision on whether to recommend the candidates as nominees for director. We do not pay any fee to any third party or parties to identify or evaluate or assist in identifying or evaluating potential nominee.
Our company does not have any defined policy or procedural requirements for shareholders to submit recommendations or nominations for directors. Our directors believe that, given the stage
- 34 -
of our development, a specific nominating policy would be premature and of little assistance until our business operations develop to a more advanced level. Our company does not currently have any specific or minimum criteria for the election of nominees to the Board of Directors and we do not have any specific process or procedure for evaluating such nominees. Our board of directors will assess all candidates, whether submitted by management or shareholders, and make recommendations for election or appointment.
A shareholder who wishes to communicate with our Board of Directors may do so by directing a written request addressed to our President, Chenxi Shi, at the address appearing on the first page of this annual report.
Family Relationships
There are no family relationships between any director or executive officer.
Involvement in Certain Legal Proceedings
Our directors, executive officers, or control persons have not been involved in any of the following events during the past five years:
1.
any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;
2.
any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offences);
3.
being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; or
4.
being found by a court of competent jurisdiction (in a civil action), the Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated.
Code of Ethics
On September 10, 2007, our board of directors confirmed the adoption of our Code of Ethics and Business Conduct that applies to, among other persons, our company's chief executive officer, president and chief financial officer (being our principal executive officer, principal financial officer and principal accounting officer), as well as persons performing similar functions. As adopted, our Code of Ethics and Business Conduct sets forth written standards that are designed to deter wrongdoing and to promote:
- 35 -
1.
honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;
2.
full, fair, accurate, timely, and understandable disclosure in reports and documents that we file with, or submit to, the Securities and Exchange Commission and in other public communications made by us;
3.
compliance with applicable governmental laws, rules and regulations;
4.
the prompt internal reporting of violations of the Code of Ethics and Business Conduct to an appropriate person or persons identified in the Code of Ethics and Business Conduct; and
5.
accountability for adherence to the Code of Ethics and Business Conduct.
Our Code of Ethics and Business Conduct requires, among other things, that all of our company's senior officers commit to timely, accurate and consistent disclosure of information; that they maintain confidential information; and that they act with honesty and integrity.
In addition, our Code of Ethics and Business Conduct emphasizes that all employees have a responsibility for maintaining financial integrity within our company, consistent with generally accepted accounting principles, and federal and state securities laws. Any employee who becomes aware of any incidents involving financial or accounting manipulation or other irregularities, whether by witnessing the incident or being told of it, must report it to our company. Any failure to report such inappropriate or irregular conduct of others is to be treated as a severe disciplinary matter. It is against our company policy to retaliate against any individual who reports in good faith the violation or potential violation of our company's Code of Ethics and Business Conduct by another.
Our Code of Ethics and Business Conduct is being filed with the Securities and Exchange Commission as Exhibit 14.1 to our annual report on Form 10-KSB filed on September 28, 2007. We will provide a copy of the Code of Ethics and Business Conduct to any person without charge, upon request. Requests can be sent to our President at the address appearing on the first page of this annual report.
Section 16(a) Beneficial Ownership Compliance
Section 16(a) of the Securities Exchange Act requires our executive officers and directors, and persons who own more than 10% of our common stock, to file reports regarding ownership of, and transactions in, our securities with the Securities and Exchange Commission and to provide us with copies of those filings. Based solely on our review of the copies of such forms received by us, or written representations from certain reporting persons, we believe that during fiscal year ended June 30, 2009, all filing requirements applicable to its officers, directors and greater than 10% beneficial owners were complied with.
- 36 -
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
Summary Compensation
The particulars of compensation paid to the following persons:
our principal executive officer;
each of our two most highly compensated executive officers who were serving as executive officers at the end of the year ended June 30, 2009; and
up to two additional individuals for whom disclosure would have been provided under (b) but for the fact that the individual was not serving as our executive officer at the end of the most recently completed financial year,
who we will collectively refer to as the named executive officers, for our fiscal years ended June 30, 2009 and 2008, are set out in the following summary compensation table:
Name and
Principal
Position
Year
Salary
($)
Bonus
($)
Stock
Awards
($)
Option
Awards(5)
($)
Non-Equity
Incentive Plan
Compensation
($) Nonqualified
Deferred
Compensation
Earnings
($)
All Other
Compensation
($)
Total
($)
(a)
(b) (c) (d) (e) (f) (g) (h) (i) (j)
Chenxi Shi
President,
Treasurer, CEO,
CFO and Director
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
24,263
Nil
24,263
Zibing Zhang
Vice President
Nil
Nil Nil
Nil Nil
Nil Nil
Nil Nil
Nil Nil
Nil Nil
Nil Nil
Nil
Zhenyu Chen
Vice President
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Employment Agreements
We have not entered into any employment agreement or consulting agreement with our executive officers.
There are no arrangements or plans in which we provide pension, retirement or similar benefits for executive officers. Our executive officers may receive stock options at the discretion of our board of directors in the future. We do not have any material bonus or profit sharing plans pursuant to which cash or non-cash compensation is or may be paid to our directors or executive officers, except that stock options may be granted at the discretion of our board of directors.
We have no plans or arrangements in respect of remuneration received or that may be received by our executive officers to compensate such officers in the event of termination of employment (as a result of resignation, retirement, change of control) or a change of responsibilities following a change of control, where the value of such compensation exceeds $60,000 per executive officer.
- 37 -
Outstanding Equity Awards at Fiscal Year-End
As at June 30, 2009, we had not adopted any equity compensation plan and no stock, options, or other equity securities were awarded to our executive officers.
Option exercises and stock vested table.
None of our directors, officers or employees has exercised their stock options.
Compensation of Directors
The particulars of compensation paid to our director for our year ended June 30, 2009, is set out in the following director compensation table:
Name
Fees Earned
or Paid in
Cash
($)
Stock
Awards
($)
Option
Awards
($)
Non-Equity
Incentive Plan
Compensation
($) Change in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings
All Other
Compensation
($)
Total
($)
(a) (b)
(c)
(d)
(e)
(f)
(g)
(h)
Chenxi Shi Nil
Nil
Nil
Nil
Nil
Nil
Nil
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We reimburse our directors for expenses incurred in connection with attending board meetings. We did not pay director's fees or other cash compensation for services rendered as a director in the year ended June 30, 2009.
We have no formal plan for compensating our directors for their service in their capacity as directors, although such directors are expected in the future to receive stock options to purchase common shares as awarded by our board of directors or (as to future stock options) a compensation committee which may be established. Directors are entitled to reimbursement for reasonable travel and other out-of-pocket expenses incurred in connection with attendance at meetings of our board of directors. Our board of directors may award special remuneration to any director undertaking any special services on our behalf other than services ordinarily required of a director. No director received and/or accrued any compensation for their services as a director, including committee participation and/or special assignments.
Outstanding equity awards at fiscal year-end
The following table sets forth for each director certain information concerning the outstanding equity awards as of June 30, 2009.
Aggregated Options Exercised in the Year Ended June 30, 2009 and Year End Option Values
There were no stock options exercised during the year June 30,
Re-pricing of Options/SARS
We did not re-price any options previously granted during the year ended June 30, 2009
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ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
In the following tables, we have determined the number and percentage of shares beneficially owned in accordance with Rule 13d-3 of the Exchange Act based on information provided to us by our controlling shareholders, executive officers and directors, and this information does not necessarily indicate beneficial ownership for any other purpose. In determining the number of shares of our common stock beneficially owned by a person and the percentage ownership of that person, we include any shares as to which the person has sole or shared voting power or investment power, as well as any shares subject to warrants or options held by that person that are currently exercisable or exercisable within 60 days.
Security ownership of certain beneficial owners
(1) Title of
class (2) Name and address of
beneficial owner (3) Amount and nature of
beneficial ownership
(4) Percent of
class
common stock
Chenling Shi
Room 903, 9/F, Entrance 12, Bldg 4,
Jiaodaokou Dongdajie, Dongcheng District,
Beijing, China 100007. 10,000,000
Direct
38.61%
Security ownership of management
(1) Title of
class (2) Name and address of
beneficial owner (3) Amount and nature of
beneficial ownership
(4) Percent of
class
common stock
Zhenyu Chen
3-5557 Cote Des Neiges
Montreal, QC, Canada 300,000
Direct
1.16%
common stock
Chenxi Shi
Talleyrand, #203A
Brossard, QC J4W 2Y9
10,500,000
1,000,000 direct
and 9,500,000
through
Aventech
Capital Inc. 40.54%
common stock
Zibing Zhang
3-5557 Cote Des Neiges
Montreal, QC, Canada 1,000,000
Direct
3.86%
Directors and Officers as a Group 11,800,000
45.56%
______________________________
1 Percentage of ownership is based on 25,900,000 common shares issued and outstanding as of September 28, 2009. Except as otherwise indicated, we believe that the beneficial owners of the common stock listed above, based on information furnished by such owners, have sole investment and voting power with respect to such shares, subject to community property laws where applicable. Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Shares of common stock subject to options or warrants currently exercisable, or exercisable within 60 days, are deemed outstanding for purposes of computing the percentage ownership of the person holding such option or warrants, but are not deemed outstanding for purposes of computing the percentage ownership of any other person.
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Changes in Control
On June 22, 2009 we issued 10,000,000 shares of our common stock to Chenling Shi in a private placement. The purchase price was $50,000 paid in cash from the personal funds of Mr. Shi.
Mr. Shi now owns 10,000,000 shares of common stock, which is 38.61% of our issued and outstanding common stock as of September 28, 2009.
Prior to the issuance of 10,000,000 shares of common stock to Mr. Chenling Shi, Mr. Chenxi Shi, our director, President, Treasurer, Chief Executive Officer, Chief Financial Officer, previously held 66.04% of our issued and outstanding stock. Mr. Chenxi Shi had been our largest controlling shareholder prior to this issuance.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Transactions with related persons
None of the following parties has, since our date of incorporation, had any material interest, direct or indirect, in any transaction with us or in any presently proposed transaction that has or will materially affect us, other than as noted in this section:
(i)
Any of our directors or officers;
(ii)
Any person proposed as a nominee for election as a director;
(iii)
Any person who beneficially owns, directly or indirectly, shares carrying more than 5% of the voting rights attached to our outstanding shares of common stock;
(iv)
Any of our promoters; and
(v)
Any member of the immediate family (including spouse, parents, children, siblings and in- laws) of any of the foregoing persons.
Employment Contracts
Other than any agreements described above in Item 11. Executive Compensation beginning on page 36, we are not party to any employment contracts with our directors and officers.
Pension, Retirement or Similar Benefit Plans
There are no arrangements or plans in which we provide pension, retirement or similar benefits for directors or executive officers. We have no material bonus or profit sharing plans pursuant to which cash or non-cash compensation is or may be paid to our directors or executive officers, except that stock options may be granted at the discretion of the Board of Directors or a committee thereof.
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We have no plans or arrangements in respect of remuneration received or that may be received by our executive officers to compensate such officers in the event of termination of employment (as a result of resignation, retirement, change of control) or a change of responsibilities following a change of control, where the value of such compensation exceeds $60,000 per executive officer.
ITEM 14.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Audit and Accounting Fees
The following table sets forth the fees billed to the Company for professional services rendered by the Company's principal accountant, for the year ended June 30, 2009 and June 30, 2008:
Audit Fees
Consist of fees billed for professional services rendered for the audits of our financial statements, reviews of our interim financial statements included in quarterly reports, services performed in connection with filings with the Securities and Exchange Commission and related comfort letters and other services that are normally provided by RSM Richter, Chartered Accountants for the fiscal years ended June 2009 and 2008 in connection with statutory and regulatory filings or engagements.
Tax Fees
Consist of fees billed for professional services for tax compliance, tax advice and tax planning. These services include assistance regarding federal, state and local tax compliance and consultation in connection with various transactions and acquisitions.
We do not use RSM Richter for financial information system design and implementation. These services, which include designing or implementing a system that aggregates source data underlying the financial statements or generates information that is significant to our financial statements, are provided internally or by other service providers. We do not engage RSM Richter to provide compliance outsourcing services.
Effective May 6, 2003, the Securities and Exchange Commission adopted rules that require that before RSM Richter is engaged by us to render any auditing or permitted non-audit related service, the engagement be:
approved by our audit committee (the functions of which are performed by our entire board of directors); or
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entered into pursuant to pre-approval policies and procedures established by the board of directors, provided the policies and procedures are detailed as to the particular service, the board of directors is informed of each service, and such policies and procedures do not include delegation of the board of directors' responsibilities to management.
Our board of directors has considered the nature and amount of fees billed by RSM Richter and believe that the provision of services for activities unrelated to the audit is compatible with maintaining RSM Richter’s independence.
However, all of the above services and fees were reviewed and approved by our board of directors either before or after the respective services were rendered.
PART IV
ITEM 15.
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Exhibits required by Regulation S-K
(3) Articles of Incorporation and By-laws
3.1 Articles of Incorporation (attached as an exhibit to our registration statement on Form SB-2 filed September 25, 2006)
3.2 By-Laws (attached as an exhibit to our registration statement on Form SB-2 filed September 25, 2006)
(10) Material Contracts
10.1 Form of Subscription Agreement between News of China Inc. and placees (attached as an exhibit to our registration statement on Form SB-2 filed September 25, 2006)
10.2 Form of Private Placement Subscription Agreement Between Chenling Shi and the Issuer (incorporated by reference to an exhibit to the Issuer’s current report on Form 8- K filed with the Securities and Exchange Commission on June 23, 2009)
(14) Code of Ethics
14.1 Code of Ethics adopted September 10, 2007 (attached as an exhibit to our annual report on Form 10-KSB filed September 28, 2007)
(31) Section 302 Certification
31.1* Certification Statement of the Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
(32) Section 906 Certification
32.1* Certification Statement of the Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
*filed herewith
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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.
NEWS OF CHINA INC.
By:
/s/ Chenxi Shi
Chenxi Shi President, Treasurer and Director
Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer
Date: September 28, 2009
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
/s/ Chenxi Shi
Chenxi Shi President, Treasurer and Director
Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer
Date: September 28, 2009