Item 1. Business.
Chinawe.com Inc. (the “Company”, “Chinawe” or “we”), formerly known as Neo Modern Entertainment Corp. (“Neo Modern”), was formed pursuant to the corporation laws of the State of California on March 19, 1997.
Chinawe’s principal business activity was providing professional management services relating to non-performing loans (“NPLs”) in the People’s Republic of China (“PRC”), as well as other consulting services. During the first quarter of 2009, the Company’s 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 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, which was formed for the purpose of acquiring (in March 2000) 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.
Item 1A.
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. The Company’s majority stockholder can cause a dissolution of the Company. The Company’s majority stockholder can cause a dissolution of the Company.
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
BECAUSE OUR COMMON STOCK PRICE IS BELOW $5.00, WE ARE SUBJECT TO ADDITIONAL RULES AND REGULATIONS
The Securities and Exchange Commission (“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. The Company’s common stock, par value $0.001 per share (“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.
POSSIBLE DELISTING OF OUR STOCK FROM TRADING ON THE OTC MARKETS
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 Markets. 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 Markets or any other market or exchange as the approval to re-list the Common Stock is subject to review by applicable regulatory authorities.
POSSIBLE TERMINATION OF REGISTRATION OF OUR STOCK UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
The Company may elect to terminate the registration of the Common Stock under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). In the event the Company so terminates the registration of the Common Stock (i.e., “goes Dark”), the Company’s reporting obligations under the Exchange Act will be suspended and stockholders will no longer have access to current information about the Company.
Item 1B.
Item 1B. Unresolved Staff Comments.
Not applicable.
Item 2.
Item 2. Properties.
The Company’s headquarters are located in Kowloon, Hong Kong.
Item 3.
Item 3. Legal Proceedings.
We are not engaged in any litigation or governmental proceedings.
Item 4.
Item 4. Mine Safety Disclosures.
Not applicable.
PART II
Item 5.
Item 5. Market for Registrant’s 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 OTCQB Market 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:
The foregoing quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions.
On February 6, 2014, the last day the Common Stock traded, the Common Stock was quoted at $.02 per share.
(b) As of March 12, 2014, the Company had 43,800,000 shares of Common Stock outstanding and 23 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.
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 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.
Overview - Results of Operations
The Company’s financial statements for the year ended December 31, 2013 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, 2013, the Company reported a net loss of US$15,669 and as of December 31, 2013 had a negative working capital and stockholders’ deficit of US$388,111 and US$388,111, respectively. Effective March 27, 2009, the Company ceased providing professional management services relating to NPLs in the PRC. The Company has terminated its employees and closed down its offices. The Company has not identified a specific line of business or territory for any new business. There can be no assurance that the Company will be successful in identifying a new line of business that it can enter into or that if such new line of business is identified, 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. The Company is also considering de-registering its Common Stock with the SEC with the result that its shares would be traded on the OTC Pink market of the OTC Markets. See “Item 1A. RISK FACTORS-RISKS RELATING TO OUR STOCK - POSSIBLE TERMINATION OF REGISTRATION OF OUR STOCK UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.”
Year ended December 31, 2013 compared to the year ended December 31, 2012
Revenues. Revenues for the year ended December 31, 2013 were US$0 as compared to US$0 for the year ended December 31, 2012. The Company discontinued its sole business with HOL in March 2009 and has not generated new business in this or any other field.
Expenses. Administrative and general expenses for the year ended December 31, 2013 were US$15,669, a decrease of 20.18% as compared to US$19,632 for the year ended December 31, 2012. The decrease was due to lower professional fees.
Taxation. No income tax expense for the years ended December 31, 2013 and 2012 was incurred because the Company reported a net loss.
Liquidity and Capital Resources
The Company’s financial statements for the year ended December 31, 2013 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, 2013, the Company reported a net loss of US$15,669 and had a negative working capital and stockholders’ deficit of US$388,111 and US$388,111, 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 is the critical judgment area in the application of our accounting policies that currently affects 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 Company’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to the Company.
Future Operations
The Company is seeking investment opportunities that may provide revenue for the Company. However, the Company has not identified a specific line of business or territory for any such new business. There can be no assurance that the Company will be successful in identifying a new line of business that it can enter into or that if such new line of business is identified, that the receipt of revenue is probable. The Company is also considering de-registering its Common Stock with the SEC with the result that its shares would be traded on the OTC Pink market of the OTC Markets. See “Item 1A. RISK FACTORS-RISKS RELATING TO OUR STOCK-POSSIBLE DELISTING OF OUR STOCK FROM TRADING ON THE OTC MARKETS.”
Item 7A.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Not applicable.
Item 8.
Item 8. Financial Statements and Supplementary Data.
The financial statements required by this Item are set forth at the pages indicated in Item 15 in this Report.
Item 9.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
Not applicable
Item 9A.
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 Exchange Act). Based upon this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s 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 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 Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
The Company’s 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 Company’s 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 Company’s 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).
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.
Management’s assessment of the effectiveness of the Company’s internal control over financial reporting is as of the fiscal year ended December 31, 2013. 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 Report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to rules of the SEC that permit the Company to provide only management’s report in this Report.
(b) Changes in Internal Controls.
There were no changes in the Company’s internal control over financial reporting for the year ended December 31, 2013 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
Item 9B.
Item 9B. Other Information.
Not applicable.
PART III
Item 10.
Item 10. Directors, Executive Officers and Corporate Governance.
Management
The following sets forth information regarding our executive officers, directors and other key employees:
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 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 of the Board, 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 became 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 entrepreneurial experience in business development and administration prior to founding Welcon Info-Tech in Hong Kong in 1997.
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 became Secretary on August 26, 2010. He has responsibility for determining and developing the Company’s 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 Company’s directors, its executive officers and any person holding more than 10% of the Company’s Common Stock are required to report their ownership of the Company’s Common Stock and any changes in that ownership to the SEC on the SEC’s Forms 3, 4 and 5. Based on the Company not having received copies of any such forms, the Company believes that no officers, directors or owners of greater than 10% of the Company’s Common Stock engaged in any transactions in the Company’s Common Stock during the fiscal year ended December 31, 2013.
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.
Item 11. Executive Compensation.
No compensation was paid to the Chief Executive Officer during the years ended December 31, 2013 and December 31, 2012. No other executive officer received a total annual salary and bonus exceeding $100,000 during either of such years.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The following table sets forth information as of March 21, 2014, 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.
(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, 2013 with respect to compensation plans (including individual compensation arrangements) under which shares of the Company’s Common Stock are authorized for issuance:
Equity Compensation Plan Information
Item 13.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
The following chart shows advances and repayments made in the year ended December 31, 2013:
(1) Gonet Associates Ltd. is controlled by Man Keung Alan Wai.
The Company’s 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.
Item 14. Principal Accountant Fees and Services.
Audit Fees.
The aggregate fees billed for the fiscal years ended December 31, 2013 and 2012 for professional services rendered by Parker Randall CF (H.K.) CPA Limited (“Parker Randall”) for the audit of the Company’s annual financial statements and the review of the financial statements included in our quarterly reports on Form 10-Q were $5,700 and $5,700, respectively.
Audit-Related Fees.
The Company did not pay any audit-related fees to Parker Randall for the fiscal years ended December 31, 2013 and December 31, 2012.
Tax Fees.
Parker Randall did not provide any tax services to the Company in either of the fiscal years ended December 31, 2013 and December 31, 2012.
All Other Fees.
Parker Randall did not provide any other services to the Company in either of the fiscal years ended December 31, 2013 and December 31, 2012.
PART IV
Item 15.
Item 15. Exhibits and Financial Statement Schedules
(b) EXHIBITS
Filed as an exhibit to our Company’s Form 10-SB, as filed with the SEC on May 19, 2000, and hereby incorporated by reference herein.
Filed as an exhibit to our Company’s Annual Report on Form 10-KSB, as filed with the SEC on April 14, 2005, and hereby incorporated by reference herein.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and the Board of Directors of
CHINAWE.COM INC.
We have audited the accompanying consolidated balance sheets of Chinawe.com Inc. (the “Company”) as of December 31, 2013 and the related consolidated statements of operations, changes in stockholders’ deficit and cash flows for the year ended December 31, 2013. 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). 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.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As of December 31, 2013, the Company had negative working capital and stockholders’ deficit of US$388,111 and US$388,111, respectively, which raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are described in Note 2(b). The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
In our opinion, except for the going concern issue discussed in the preceding paragraph, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2013 and the results of its operations and its cash flows for the year ended December 31, 2013, in conformity with accounting principles generally accepted in the United States of America.
PARKER RANDALL CF (H.K.) CPA LIMITED
Certified Public Accountants
Hong Kong
March 17, 2014
CHINAWE.COM INC. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
See accompanying notes to the financial statements.
CHINAWE.COM INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
See accompanying notes to the financial statements.
CHINAWE.COM INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
See accompanying notes to the financial statements.
CHINAWE.COM INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
See accompanying notes to the financial statements.
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. Chinawe’s principal business activity was providing professional management services relating to non-performing loans (“NPLs”) in the People’s Republic of China (“PRC”), as well as other consulting services. During the first quarter of 2009, the Company’s 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, 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 U.S. dollars (“U.S. $”).
(b) Going concern consideration
The Company’s 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, 2013, the Company had negative working capital and stockholders’ deficit of U.S.$388,111 and U.S.$388,111, respectively, which raise substantial doubt about its ability to continue as a going concern.
The Company has relied on private financing by cash inflows 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.
CHINAWE.COM INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(c) Principles of consolidation
The financial statements include the accounts of Chinawe and its subsidiary. 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:
(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) 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.
CHINAWE.COM INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(h) 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.
(i) 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 2013 or 2012.
(j) Foreign currency translation
The Company’s 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 US$.
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.
(k) 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.
(l) 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 Company’s financial instruments, which include cash, accounts receivable, accounts payable, long-term debt and related party balances, approximate their carrying value in the financial statements.
CHINAWE.COM INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(m) Comprehensive income
Statement of Financial Accounting Standards 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 Company’s components of comprehensive income include net loss for the year and a foreign currency translation adjustment.
(n) 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.
3. RELATED PARTY BALANCES AND TRANSACTIONS
The balances with related parties are as follows:
The amounts due are unsecured, interest free and repayable on demand.
4. 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 also delinquent in filing its U.S. Federal tax returns. The Company has decided not to pursue reinstatement in California or prepare and file past due U.S. Federal tax returns until it has formulated a plan for once again becoming an operating company.
5. SUBSEQUENT EVENT
The Company has evaluated subsequent events through the date the financial statements were issued. The Company has determined that there are no other such events that warrant disclosure or recognition in the consolidated financial statements.
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.
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.
EXHIBIT INDEX