UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 20-F
CHINESEWORLDNET.COM INC.
¨ | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934 |
OR
x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2015
OR
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
OR
¨ | SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Date of event requiring this shell company report
Commission file number000-33051
CHINESEWORLDNET.COM INC.
(Exact name of Registrant as specified in its charter)
CAYMAN ISLANDS
(Jurisdiction of incorporation or organization)
Appleby, Clifton House 75 Fort Street, PO Box 190, Grand Cayman E9 KY1-1104
(Address of principal executive offices)
Mr. Chi Cheong Liu
President, Chief Executive Officer, Chief Financial Officer, Secretary and Treasurer
Tel: +1 (345) 814-2743 Email: info@chineseworldnet.com
Appleby, Clifton House 75 Fort Street, PO Box 190, Grand Cayman E9 KY1-1104
(Name, Telephone, Email and/or Facsimile number and Address of Company Contact Person)
Securities registered or to be registered pursuant to Section 12(b) of the Act. | |
Title of each class | Name of each exchange on which registered |
Not Applicable | Not Applicable |
Securities registered or to be registered pursuant to Section 12(g) of the Act. | |
Common Shares, Par Value of US$0.001 Per Share | |
(Title of Class) | |
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act. | |
Not Applicable | |
(Title of Class) |
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report: 10,950,000 common shares
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
¨ Yes | x No |
If this report is an annual or transaction report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
¨ Yes | x No |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
x Yes | ¨ No |
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
x Yes | ¨ No |
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.
¨ Large accelerated filer | ¨ Accelerated filer | x Non-accelerated filer |
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
x U.S. GAAP | ¨ International Financial Reporting Standards as issued by the International Accounting Standards Board | ¨ Other |
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.
¨ Item 17 | ¨ Item 18 |
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
x Yes | ¨ No |
TABLE OF CONTENTS
Part II | 20 | ||
Item 13. | DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES | 20 | |
Item 14. | MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS | 20 | |
Item 15. | CONTROLS AND PROCEDURES | 20 | |
Item 16. | [RESERVED] | 21 | |
ITEM 16A. | AUDIT COMMITTEE FINANCIAL EXPERT | 21 | |
ITEM 16b. | CODE OF ETHICS | 21 | |
ITEM 16C. | PRINCIPAL ACCOUNTANT FEES AND SERVICES | 21 | |
ITEM 16D. | EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES | 22 | |
ITEM 16E. | PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILAITED PURCHASERS | 22 | |
ITEM 16f. | changes in registrant's certifying accountant | 22 | |
ITEM 16G. | CORPORATE GOVERNANCE | 22 | |
ITEM 16H. | MINE SAFETY DISCLOSURE | 22 | |
Part III | 22 | ||
Item 17. | FINANCIAL STATEMENTS | 22 | |
Item 18. | FINANCIAL STATEMENTS | 22 | |
Item 19. | EXHIBITS | 23 |
ii |
INTRODUCTION AND USE OF CERTAIN TERMS
ChineseWorldNet.Com Inc. is a corporation incorporated under the Company Law (1998 revision) of the Cayman Islands on January 12, 2000. Except as the context otherwise requires, all references in this annual report (the “Report”) on Form 20-F to “we,” “us,” “our,” “CWN,” and the “Company” are to ChineseWorldNet.Com Inc. and, where applicable, our former subsidiaries, including NAI Interactive Ltd. (“NAI”), a company incorporated under the laws of British Columbia, ChineseWorldNet.com (Hong Kong) Ltd. (“CWN HK”), a company incorporated under the laws of Hong Kong, 85% owned interest in ChineseWorldNet.com (Shanghai) Ltd. (“CWN China”), a company incorporated under the laws of People’s Republic of China, and 85% owned interest in Weihai Consulting Investment Ltd. (“Weihai”), a company incorporated under the laws of People’s Republic of China.
Our financial statements are prepared in accordance with the United States generally accepted accounting principles (“US GAAP”) and are presented in United States dollars (“US dollars”). All monetary amounts contained in this Report are in US dollars unless otherwise indicated. References to “Fiscal 2015” are to our fiscal year ended December 31, 2015, and other fiscal years of the Company are referred to in a corresponding manner. References to “Common Shares” are to our Common Shares, par value of US$0.001 per share.
Our registered office and principal executive office is located at Appleby, Clifton House, 75 Fort Street, P.O. Box 190, Grand Cayman, Cayman Islands KY1-1104.
CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS
This Report contains forward-looking statements that reflect the management’s current expectations and assumptions with respect to the general economic and business conditions, our operation and business strategies, products, services and competition, future financial position and results, and various other factors, both referenced and not referenced in this Report. All statements made in this Report other than statements of historical fact, including, among others, statements that address operating performance, events, circumstances, or developments that the management expects or anticipates will or may occur in the future, statements related to revenue and volume growth, profitability, new sales and marketing channels, adequacy of and ability to raise additional funding for operations, and statements expressing general optimism about future operating results and non-historical information, are forward-looking statements. In particular, the words “believe,” “expect,” “intend,” “anticipate,” “estimate,” “plan,” “target,” “may,” variations of such words, and similar expressions identify forward-looking statements, but are not the exclusive means of identifying such statements and their absence does not mean that statements are not forward-looking.
These forward-looking statements are subject to risks and uncertainties that could cause our actual financial position and results to differ materially from those expressed in, anticipated or implied by these forward-looking statements for many reasons, including the risks and statements described in more detail under “Item 3. Key Information – D. Risk Factors”and “Item 5. Operating and Financial Review and Prospects” included elsewhere in this Report. We do not undertake any obligation to revise or update these forward-looking statements to reflect new information, future events or circumstances unless required by applicable legislation or regulation. These forward-looking statements contained in this Report are expressly qualified by this cautionary statement.
Item 1. | IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS |
This Report on Form 20-F is being filed as an annual report under the Securities Exchange Act of 1934 (the “Exchange Act”) and, as such, there is no requirement to provide any information under this item.
Item 2. | OFFER STATISTICS AND EXPECTED TIMETABLE |
This Report on Form 20-F is being filed as an annual report under the Exchange Act and, as such, there is no requirement to provide any information under this item.
Item 3. | KEY INFORMATION |
A. | Selected Financial Data |
The following table sets forth selected consolidated financial information from our consolidated financial statements prepared in accordance with US GAAP for our five most recently completed fiscal periods consisting of the years ended December 31, 2015, 2014, 2013, 2012 and 2011. The information for the last three fiscal years ended December 31,2014, 2013 and 2012, have been extracted from our audited consolidated financial statements and the related notes included herein and should be read in conjunction with such in “Item 5 – Operating and Financial Review and Prospects”. Information for the year ended December 31, 2011 has been extracted from audited consolidated financial statements not disclosed elsewhere and presented below.
Year ended December 31, | ||||||||||||||||||||
2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||
Consolidated Statements of Operations: | ||||||||||||||||||||
Revenue | $ | - | 158,752 | 937,781 | 1,243,638 | 1,675,875 | ||||||||||||||
Net income (loss) for the year | (167,809 | ) | (606,346 | ) | (521,394 | ) | (128,931 | ) | 138,040 | |||||||||||
Net income (loss) attributable to non-controlling interest | - | (10,352 | ) | (31,156 | ) | (43,843 | ) | (60,926 | ) | |||||||||||
Net income (loss) attributable to common stockholders | (167,809 | ) | (595,994 | ) | (490,238 | ) | (85,088 | ) | 198,966 | |||||||||||
Earning (loss) per share – basic | (0.02 | ) | (0.05 | ) | (0.05 | ) | (0.01 | ) | 0.01 | |||||||||||
Earning (loss) per share – diluted | (0.02 | ) | (0.05 | ) | (0.05 | ) | (0.01 | ) | 0.01 | |||||||||||
Weighted average common shares outstanding – basic | 10,950,000 | 10,950,000 | 10,950,000 | 10,950,000 | 10,950,000 | |||||||||||||||
Weighted average common shares outstanding – diluted | 10,950,000 | 10,950,000 | 10,950,000 | 10,950,000 | 11,404,862 | |||||||||||||||
Consolidated Balance Sheets: | ||||||||||||||||||||
Total assets | $ | 673,204 | 884,935 | 3,164,476 | 2,571,264 | 3,182,417 | ||||||||||||||
Equipment | - | - | 14,853 | 23,515 | 36,519 | |||||||||||||||
Total current liabilities | 44,412 | 89,390 | 1,679,145 | 546,060 | 1,123,354 | |||||||||||||||
Total stockholders’ equity (deficiency) | 628,792 | 795,545 | 1,485,331 | 2,025,204 | 2,059,063 |
No dividends have been declared or paid in Fiscal 2015, Fiscal 2014 and Fiscal 2013.
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B. | Capitalization and Indebtedness |
This Report on Form 20-F is being filed as an annual report under the Exchange Act and, as such, there is no requirement to provide any information under this item.
C. | Reasons for the Offer and Use of Proceeds |
This Report on Form 20-F is being filed as an annual report under the Exchange Act and, as such, there is no requirement to provide any information under this item.
D. | Risk Factors |
The following discussion in this Report on Form 20-F contains forward-looking statements regarding our business, prospects and results of operations that involve risks and uncertainties. Our actual results may differ materially from the results that may be anticipated by such forward-looking statements and discussed elsewhere in this Report. Factors that could cause or contribute to such differences include, but are not limited to, those discussed below, as well as those discussed under the heading “Item 4 – Information on the Company” and “Item 5 – Operating and Financial Review and Prospects” and those discussed elsewhere in this Report. In evaluating our business, prospects and results of operations, readers should carefully consider the following factors in addition to other information presented in this Report and in our other reports filed with the Securities and Exchange Commission that attempt to advise interested parties of the risks and factors that may affect our business, prospects and results of operations. See “Cautionary Notice Regarding Forward Looking Statements” above.
Trading of our common shares may be restricted by the Securities and Exchange Commission’s penny stock regulations which may limit a shareholder’s ability to buy and sell our common shares
The Securities and Exchange Commission has adopted Rule 15g-9 which generally defines “penny stock” to be any equity security that has a market price (as defined) of less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. Our common shares are covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and “accredited investors”. The term “accredited investor” refers generally to institutions with assets in excess of $5,000,000 or individuals with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouse. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the Securities and Exchange Commission which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny stock held in the customer’s account. The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer’s confirmation. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the stock that is subject to these penny stock rules. Consequently, these penny stock rules may affect the ability of broker-dealers to trade our securities. We believe that the penny stock rules discourage investor interest in and limit the marketability of our common shares.
Our shareholders may face difficulties in protecting their interests because we are incorporated under Cayman Islands law.
Our corporate affairs are governed by our memorandum and articles of association, by the Company Law (1998 Revision) and the common law of the Cayman Islands. The rights of shareholders to take action against our directors, actions by minority shareholders and the fiduciary responsibilities of our directors under Cayman Islands law are to a large extent governed by the common law of the Cayman Islands.
Under the common law of the Cayman Islands, the fiduciary relationship of a director is to the Company and a director, therefore, does not usually owe a fiduciary duty to individual shareholders. As a result, it may be difficult for a shareholder to take action against the directors for breach of fiduciary duty.
- 5 - |
The common law in the Cayman Islands is derived in part from comparatively limited judicial precedent in the Cayman Islands and from English common law, the decisions of whose courts are of persuasive authority but are not binding on a court in the Cayman Islands. Cayman Islands law in this area may conflict with jurisdictions in the United States and/or other jurisdictions. As a result, our public shareholders may face more difficulties in protecting their interests in the face of actions against the management, directors or our controlling shareholders than would shareholders of a corporation incorporated in a jurisdiction in the United States.
There is uncertainty as to our shareholders’ ability to enforce civil liabilities in the Cayman Islands.
We are a Cayman Islands company and have no assets located in the United States. All of our directors and officers are nationals and/or residents of countries other than the United States. All or a substantial portion of the assets of these persons are located outside the United States. As a result, it may be difficult to effect service of process within the United States upon these persons. In addition, there is uncertainty as to whether the courts of the Cayman Islands and other jurisdictions would recognize or enforce judgments of United States courts obtained against us or such persons predicated upon the civil liability provisions of the securities laws of the United States or any state thereof, or be competent to hear original actions brought in the Cayman Islands or other jurisdictions against us or such persons predicated upon the securities laws of the United States or any of our state.
Item 4. | INFORMATION ON THE COMPANY |
A. | History and Development of the Company |
ChineseWorldNet.Com Inc. was incorporated on January 12, 2000 under the Company Law (1998 revision) of the Cayman Islands. The address of our registered and principle executive office is that of our agent, Appleby, being: Clifton House, 75 Fort Street, P.O. Box 190, Grand Cayman, Cayman Islands KY1-1104, telephone number is (345) 949-4900.
In August 2009, we incorporated CWN Capital Inc. (“CWN Capital”) under the BVI Business Companies Act, with a registered address at Morgan & Morgan Building, Pasea Estate, Road Town, Tortola, British Virgin Islands, focusing on capital markets businesses. CWN Capital provided a vehicle for expanding the scope of our businesses into the capital markets. On October 1, 2010, CWN Capital completed a non-brokered private placement and issued 25,000 of its common shares at a subscription price of $0.01 per share to Silver Lake Investment Partners, Ltd., resulted in CWN diluted down to a 50% ownership in CWN Capital. On December 18, 2010, CWN Capital completed another non-brokered private placement and issued 55,000 of its common shares at a subscription price of $1.00 per share to Goldpac Investments Partners Ltd., resulted in CWN a diluted down to 23.8% ownership in CWN Capital. As a result we deconsolidated CWN Capital on December 18, 2010 and recorded our interest in CWN Capital as an equity interest. Silver Lake Investment Partners, Ltd. and Goldpac Investments Partners Ltd. were companies controlled by two directors of our company.
On September 8, 2009, CWN China funded and incorporated Weihai as a local entity for the purpose of carrying out certain business operations in the Greater China. Weihai has the same address as CWN China. Through CWN China, we had a 85% controlling interest in Weihai.
On February 1, 2008, CWN HK and Shanghai Compass Venture Capital Investment Company Limited (“Shanghai Compass”) signed an Agreement to Establish CWN China Co., Ltd., a Chinese-Foreign Joint Venture Limited Liability Company. In April 2008, the two parties incorporated CWN China with CWN HK having a 70% controlling interest in CWN China. In March 2011, we completed substantially all of the regulatory procedures and processes with Shanghai Compass, the other shareholder of CWN China and invested further 5,000,000 Renminbi to CWN China. CWN HK is required to contribute the additional registered capital of 5,000,000 Renminbi by paying cash within two years from August 19, 2011. During the year ended December 31, 2011, CWN HK paid cash of $400,000 which result of our financial interest increased from 70% to 80%. During the year ended December 31, 2012, CWN HK further paid cash of $200,000 which resulted in our financial interest increasing from 80% to 83.67%. During the fiscal year 2013, CWN HK further invested an amount of $187,200 to CWN China and the Company‘s effective ownership of equity interest increased from 83.67% to 85% in CWN China. During Fiscal 2013, Fiscal 2014 and Fiscal 2015, we made no purchases of property and equipment. There are currently no major capital projects or divestitures in progress.
Sale of Subsidiaries
On April 28, 2014, the Company completed the sale of all shares that the Company owned in the capital of its subsidiaries to Ningbo International Limited(the“Purchaser”) in exchange for a cash payment of CDN$263,968.90 and a non-interest bearing promissory note in the principal amount of CDN$831,031.10 with a maturity date of one year with the option to extend upon mutual agreement (the“Transaction”), pursuant to a share purchase agreement dated March 19, 2014 (the“Share Purchase Agreement”). The Transaction amounted to the sale of substantially all of the assets of the Company.
- 6 - |
Pursuant to the Share Purchase Agreement, the Company sold its right, title and interest in and to all shares that the Company owned in the capital of its subsidiaries as follows:
1. | 100 shares in the capital of NAI Interactive Ltd. (“NAI”), which shares represent all of the issued and outstanding shares in the capital of NAI; |
2. | 990 shares in the capital of ChineseWorldNet.com (Hong Kong) Ltd. (“CWN HK”) and 10 shares in the capital of CWN HK owned by Chi Cheong Liu, a director and major shareholder of the Company, on the Company’s behalf, which shares, together, represent all of the issued and outstanding shares in the capital of CWN HK; and |
3. | 25,000 shares in the capital of CWN Capital Inc. (“CWN Capital”), which shares represent 23.8% of the issued and outstanding shares in the capital of CWN Capital. |
The shareholders of the Company approved the Share Purchase Agreement at the extraordinary general meeting of the shareholders of the Company held on April 18, 2014.
CHANGE OF DIRECTORS AND OFFICERS
In connection with the closing of the Share Purchase Agreement, on April 28, 2014, Joe K.F. Tai resigned as President, Chief Executive Officer and a director of the Company, Andy S.W. Lam resigned as a director of the Company, Kelvin Szeto resigned as Chief Financial Officer and Chief Operating Officer of the Company, Gilbert Chan resigned as Senior Vice President, Marketing and Investor Relations of the Company and Terry Wong resigned as Financial Expert of the Company. In addition, on April 28, 2014, Chi Cheong Liu was appointed as President, Chief Executive Officer, Chief Financial Officer and Secretary of the Company and Fong Szeto was appointed as a director.
B. | Business Overview |
Prior to April 28, 2014, we had four principal businesses operated by NAI, CWN HK and CWN China: (1) the financial web portal (“Portal”) business, conducted under the ChineseWorldNet.com brand via the “www.chineseworldnet.com” website; (2) the investor relations and public relations (“IR/PR”) business, conducted under the NAI500 brand via a number of media channels including the “www.nai500.com” and “en.nai500.com” websites, as well as certain other promotional services; (3) the North America and Greater China cross-border business partnering conferences (“Conference”) business, conducted via the brand of Global Chinese Financial Forum and its ”www.gcff.ca” website; and (4) the financial content and information distribution business.
As of April 28, 2014, we had no principal businesses. The company is currently seeking opportunities to acquire or invest in other business opportunities.
Revenue Breakdown
The breakdown of the revenue sources for the years ended December 31, 2015, 2014, and 2013 is as follows:
Year ended December 31, | ||||||||||||
Revenue Breakdown | 2015 | 2014 | 2013 | |||||||||
GCFF Conference Business | $ | - | $ | 31,205 | $ | 430,377 | ||||||
Road Show Business | - | - | 87,396 | |||||||||
Various IR/PR Service | - | 12,708 | 61,177 | |||||||||
Chinese Webpage Design, Hosting and Maintenance | - | 21,937 | 115,373 | |||||||||
Online Marketing Service | - | - | 28,683 | |||||||||
Banner Advertising | - | - | 3,122 | |||||||||
Publication Service | - | - | 16,825 | |||||||||
CWN Membership and Online Service | - | 631 | 2,643 | |||||||||
Translation Service (Company Review, Company Newsletter) | - | 3,867 | 4500 | |||||||||
Other Revenues | - | 88,404 | 187,685 | |||||||||
Total | $ | - | $ | 158,752 | $ | 937,781 |
The breakdown of the revenue sources by geographic market for the years ended December 31, 2015, 2014,and 2013 is as follows. A majority of our revenues were generated from our wholly-owned subsidiary NAI based in Vancouver in Canada, and partly is generated from CWN China based in Shanghai in China.
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Year ended December 31, | ||||||||||||
Revenue Breakdown | 2015 | 2014 | 2013 | |||||||||
Canada | - | 158,333 | 923,350 | |||||||||
China | - | 419 | 14,431 |
Corporate Strategy and Strategic Business Plan
As at December 31, 2015, ChineseWorldNet.com Inc. does not have any operating businesses. The Company is now looking for opportunities to acquire or invest in other business opportunities.
C. | Organizational Structure |
ChineseWorldNet.Com Inc. (“CWN”) was incorporated under the Company Law (1998 revision) of the Cayman Islands on January 12, 2000. Our registered and principal executive office is located at Appleby, Clifton House, 75 Fort Street, P.O. Box 190, Grand Cayman, Cayman Islands KY1-1104.
As a result of the sale of its subsidiaries to Ningbo International Limited on April 28, 2014, CWN has no subsidiaries.
D. | Property, Plants and Equipment |
We do not own any real property.
ITEM 4A. | UNRESOLVED STAFF COMMENTS |
Not applicable.
Item 5. | OPERATING AND FINANCIAL REVIEW AND PROSPECTS |
This discussion and analysis is of our operating results and our financial position for the fiscal years ended December 31, 2015, 2014, and 2013 should be read in conjunction with the consolidated financial statements and the related notes thereto provided at “Item 18 – Financial Statements”.
A. | Results of Operations |
The company is inactive since April 28, 2014. Prior to the sale of our subsidiaries on April 28, 2014, we generated revenue from our Portal, IR/PR and Conference businesses. Our annual and quarterly operating results were primarily affected by the level of our sales and costs of operations over these three businesses.
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YEARS ENDED DECEMBER 31, 2015, 2014, and 2013
For the year ended December 31, 2015 (“fiscal 2015”), we recorded a net loss of $167,809 attributable to common stockholders (($0.02) per common share), compared to a net loss of $606,346 of which $595,994 was attributable to common stockholders ($0.05 loss per common share) for the year ended December 31, 2014 (“fiscal 2014”). The decrease of net loss of $438,537 was primarily due to the loss of $422,565 from disposal of subsidiaries in fiscal 2014. In fiscal 2015, we recorded revenue of $Nil compared to $158,752 in fiscal 2014. No revenue recorded in fiscal 2015 was primarily due to the sale of all business operations after April 28, 2014.
For the year ended December 31, 2014 (“fiscal 2014”), we recorded a net loss of $606,346 with a net loss of $595,994 attributable to common stockholders (($0.05) per common share), compared to a net loss of $521,394 of which $490,238 was attributable to common stockholders (($0.05) per common share) for the year ended December 31, 2013 (“fiscal 2013”). The increase of net loss of $84,952 was primarily due to the loss of $422,565 from disposal of subsidiaries and the foreign exchange loss of $85,799. In fiscal 2014, we recorded revenue of $158,752 compared to $937,781 in fiscal 2013. The decrease of revenue of $779,029 was primarily due to the sale of all business operations on April 28, 2014. The revenue of subsidiaries in fiscal 2014 was included and recorded in loss from discontinuing operations.
For the year ended December 31, 2013 (“Fiscal 2013”), we recorded a net loss of $521,394 with a net loss of $490,238 attributable to common stockholders (($0.05) per Common Share), compared to a net income of $128,931 of which $85,088 was attributable to common stockholders ($0.01 per Common Share) for the year ended December 31, 2012 (“Fiscal 2012”). The decrease of net income of $392,463 was primarily due to the decrease revenue, the increase loss from foreign exchange and the consolidation of the operation loss from CWN Capital despite the fact that the company reduced expenses on salary, costs of conferencing events and travelling & entertainment expenditures. In Fiscal 2013, we recorded revenue of $937,781 compared to $1,243,638 in Fiscal 2012. The decrease of revenue of $305,857 was primarily the large drop of core business in North American because adverse global economic conditions persisted in 2013.
Year Ended December 31, 2015 Compared to Year Ended December 31, 2014
In Fiscal 2015, the Company no longer had any revenue sources after disposal of all subsidiaries.
Revenues
GCFF Conference Business
Revenue generated from GCFF Conference Business was $Nil in Fiscal 2015, compared to $31,205 in Fiscal 2014. The decrease of revenue by $31,205 was due to discontinuing operations of core businesses after sale of subsidiaries on April 28, 2014.
Various IR/PR Service
Revenue from Various IR/PR Service was $Nil in Fiscal 2015, compared to $12,708 in Fiscal 2014. The decrease of revenue by $12,708 was due to the sale of the Company’s businesses on April 28, 2014
Chinese Webpage Design, Hosting and Maintenance
Revenue from Chinese Webpage Design was $Nil in Fiscal 2015, Hosting and Maintenance was, compared $21,937 in Fiscal 2014. The decrease of revenue by $21,937 was due to the sale of the Company’s businesses in April 28, 2014.
CWN Membership and Online Service
Revenue we generated from CWN Membership and Online Service decreased $631 from $631 in Fiscal 2014 to $Nil in Fiscal 2015. The decrease of revenue was due to the sale of the Company’s businesses after April 28, 2014.
Translation Service
Translation Service was $Nil in Fiscal 2015, compared to $3,867 in Fiscal 2014. The decrease of revenue by $3,867 was due to the sale of the Company’s businesses after April 28, 2014.
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Other Revenues
Other Revenues was $Nilin Fiscal 2015, compared to $88,404 in Fiscal 2014. The decrease of revenue by $88,404 was due to the sale of the Company’s businesses after April 28, 2014.
Expenses
For fiscal 2015, we recorded operating expenses of $39,214 compared to operating expenses of $301,050 for Fiscal 2014. The decrease of expenses by $261,836 was due to the sale of subsidiaries on April 28, 2014. Most of the expenses had been greatly reduced in Fiscal 2015 as compared with Fiscal 2014.
Advertising and Promotion
Advertising and promotion expenses were $Nil in fiscal 2015, compared to $14,647 in fiscal 2014. The decrease of expenses by $14,647 was due to the sale of subsidiaries on April 28, 2014.
Audit and Legal
Audit and legal expenses were $37,865 in fiscal 2015, compared to $60,973 in fiscal 2014. The decrease of $23,108 was primarily due to the decrease of audit and legal fees in Fiscal 2015 as compared to Fiscal 2014.
Consulting Fees
Consulting fees expenses were $Nil in Fiscal 2015, compared to $30,062 in Fiscal 2014. The decrease was primarily due to termination of consulting contracts on April 30, 2014.
Directors’ Remuneration
No directors’ remuneration expenses were paid in Fiscal 2014 & Fiscal 2015.
Office and Miscellaneous
Office and miscellaneous expenses were $293 in Fiscal 2015, compared to $50,551 in Fiscal 2014. The significant decrease of $50,258 was primarily due to the sale of the Company’s businesses after April 28, 2014.
Printing
Printing expenses were $Nil in Fiscal 2015, compared to $1,408 in Fiscal 2014. The decrease of $1,408 was primarily due to the sale of the Company’s businesses after April 28, 2014.
Rent and Operating
Rent and operating expenses were $Nil in Fiscal 2015, compared to $44,692 in Fiscal 2014. The significant decrease of $44,692 was primarily due to the sale of the Company’s businesses after April 28, 2014. No office spaces were rented in Fiscal 2015
Salaries and Benefits
Salaries and benefits expenses were $Nil in Fiscal 2015, compared to $150,922 in Fiscal 2014 The significant decrease of $150,922 was primarily due to the sale of the Company’s businesses after April 28, 2014. There were no employees hired in the Company.
Stock-based Compensation
Stock-based compensation expenses recorded a credit of $74,955 in Fiscal 2014 compared to $25,841 in Fiscal 2013. The decrease was due to the 820,000 stock options granted Jun 10, 2010 was cancelled after sale of subsidiaries on April 28, 2014.
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Telephone
Telephone expenses were $Nil in Fiscal 2015, compared to $3,795 in Fiscal 2014. The decrease of $3,795 was primarily due to the sale of the Company’s businesses after April 28, 2014.
Travel and Entertainment
Travel and entertainment expenses were $Nil in Fiscal 2015, compared to $23,809 in Fiscal 2014. The decrease of $23,809 was primarily due to the sale of the Company’s businesses after April 28, 2014.
Other Income (Loss)
We recorded other loss of $128,595 in Fiscal 2015, compared to other loss of $464,048 in Fiscal 2014. The substantial decrease of other loss of $335,453 was primarily due to the sale of the Company’s businesses after April 28, 2014 and recorded a loss of $422,565 on disposal in Fiscal 2014.
Year Ended December 31, 2014 Compared to Year Ended December 31, 2013
In Fiscal 2014, the Company divested its various subsidiaries and business units. From April 2014 onward, the Company had no longer had any revenue sources, including the GCFF Conference Business, Road Show Business, various IR/PR services, Chinese Webpage Design, Hosting and Maintenance, and Online Marketing Service.
Revenues
GCFF Conference Business
Revenue generated from GCFF Conference Business was $31,205 in Fiscal 2014, compared to $430,377 in Fiscal 2013. The decrease of revenue by $399,172 was due to discontinuing operations of core businesses after sale of subsidiaries on April 28, 2014.
Road Show Business
Revenue generated from Road Show Business was $Nil in Fiscal 2014, compared to $87,396 in Fiscal 2013. No revenue was generated before discontinuing operations of core businesses after sale of subsidiaries on April 28, 2014.
Various IR/PR Service
Revenue from Various IR/PR Service was $12,708 in Fiscal 2014, compared to $61,177 in Fiscal 2013. The decrease of revenue by $48,469 was due to the sale of the Company’s businesses on April 28, 2014
Chinese Webpage Design, Hosting and Maintenance
Revenue from Chinese Webpage Design was $21,937 in Fiscal 2014, Hosting and Maintenance was, compared $115,373 in Fiscal 2013. The decrease of revenue by $93,436 was due to the sale of the Company’s businesses in April 28, 2014.
Online Marketing Service
Revenue from Online Marketing Service was $Nil in Fiscal 2014, compared was $28,683 in Fiscal 2013 No revenue was generated before discontinuing operations of core businesses after sale of subsidiaries on April 28, 2014.
Banner Advertising
Revenue from Banner Advertising was $Nil in Fiscal 2014, compared was $3,122 in Fiscal 2013 No revenue was generated before discontinuing operations of core businesses after sale of subsidiaries on April 28, 2014.
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Publication Service
Revenue from Publication Service was $Nil in Fiscal 2014, compared was $16,825 in Fiscal 2013 No revenue was generated before discontinuing operations of core businesses after sale of subsidiaries on April 28, 2014.
CWN Membership and Online Service
Revenue we generated from CWN Membership and Online Service decreased $2,012 from $2,643 in Fiscal 2013 to $631 in Fiscal 2014. The decrease of revenue was due to the sale of the Company’s businesses after April 28, 2014.
Translation Service
Translation Service was $3,867 in Fiscal 2014, compared to $4,500 in Fiscal 2013. The decrease of revenue by $633 was due to the sale of the Company’s businesses after April 28, 2014.
Other Revenues
Other Revenues was $88,404in Fiscal 2014, compared to $187,685 in Fiscal 2013. The decrease of revenue by $99,281 was due to the sale of the Company’s businesses after April 28, 2014.
Expenses
For fiscal 2014, we recorded operating expenses of $301,050 compared to operating expenses of $1,195,775 for Fiscal 2013. The decrease of expenses by $894,725 was due to the sale of subsidiaries on April 28, 2014.
Advertising and Promotion
Advertising and promotion expenses were $14,647 in fiscal 2014, compared to $82,907 in fiscal 2013. The decrease of expenses by $68,260 was due to the sale of subsidiaries on April 28, 2014.
Audit and Legal
Audit and legal expenses were $60,973 in fiscal 2014, compared to $82,014 in fiscal 2013. The decrease of $21,041 was primarily due to the decrease of legal fees in Fiscal 2014 as compared to Fiscal 2013.
Consulting Fees
Consulting fees expenses were $30,062 in Fiscal 2014, compared to $90,000 in Fiscal 2013. The decrease was primarily due to termination of consulting contract on April 30, 2014 and no new contract was signed from May 2014.
Directors’ Remuneration
Directors’ remuneration expenses were $Nil in Fiscal 2014 compared to $12,000 in Fiscal 2013. There was no fee paid to directors in Fiscal 2014.
Office and Miscellaneous
Office and miscellaneous expenses were $50,551 in Fiscal 2014, compared to $72,142 in Fiscal 2013. The significant decrease of $21,591 was primarily due to the sale of the Company’s businesses after April 28, 2014.
Printing
Printing expenses were $1,408 in Fiscal 2014, compared to $8,068 in Fiscal 2013. The significant decrease of $6,660 was primarily due to the sale of the Company’s businesses after April 28, 2014.
Provision for bad and doubtful debts
Provision for bad and doubtful debts was $Nil in Fiscal 2014 as compared to $51,112 in Fiscal 2013. No expenses had been incurred by CWN itself in Fiscal 2014.
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Rent and Operating
Rent and operating expenses were $44,692 in Fiscal 2014, compared to $145,356 in Fiscal 2013. The significant decrease of $100,664 was primarily due to the sale of the Company’s businesses after April 28, 2014.
Salaries and Benefits
Salaries and benefits expenses were $150,922 in Fiscal 2014, compared to $491,519 in Fiscal 2013 The significant decrease of $340,597 was primarily due to the sale of the Company’s businesses after April 28, 2014.
Stock-based Compensation
Stock-based compensation expenses recorded a credit of $74,955 in Fiscal 2014 compared to $25,841 in Fiscal 2013. The decrease was due to the 820,000 stock options granted Jun 10, 2010 was cancelled after sale of subsidiaries on April 28, 2014.
Telephone
Telephone expenses were $3,795 in Fiscal 2014, compared to $13,747 in Fiscal 2013. The significant decrease of $9,952 was primarily due to the sale of the Company’s businesses after April 28, 2014.
Travel and Entertainment
Travel and entertainment expenses were $23,809 in Fiscal 2014, compared to $113,293 in Fiscal 2013. The significant decrease of $89,484 was primarily due to the sale of the Company’s businesses after April 28, 2014.
Other Income (Loss)
We recorded other loss of $464,048 in Fiscal 2014, compared to other loss of $259,543 in Fiscal 2013. The substantial increase of other loss of $204,505 was primarily due to the sale of the Company’s businesses after April 28, 2014 and recorded a loss of $422,565 on disposal.
Currency
We maintain our accounting records in US dollars.
Foreign currency fluctuations may have an impact on our financial condition. However, we do not engage in any foreign currency hedge transactions.
Inflation
We do not believe that inflation will have a material adverse effect on our financial condition. Traditionally, Canada has not been a country that experienced a substantial increase in inflation. As of December 31, 2015, the annual average rate of inflation in Canada was 1.20 %.
B. | Liquidity and Capital Resources |
As of December 31, 2015, we had cash and cash equivalents of $85,906. We had a working capital of $628,792 at December 31, 2015, compared to $795,545 at December 31, 2014.
C. | Research and Development, Patents and Licenses |
We have not engaged in research and development activities for the last three fiscal years, and have no patents and licenses.
D. | Trend Information |
As a result of the sale of our subsidiaries on April 28, 2014, we do not currently know of any trends that would be material to our operations.
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E. | Off-Balance Sheet Arrangements |
We do not have any off-balance sheet arrangements.
Item 6. | DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES |
A. | Directors and Senior Management |
The following table sets forth all directors and executive officers of CWN. Each director’s term of office expires at the next annual general meeting of shareholders.
Name | Age | Office Held Since | Offices and Positions Held in CWN | |||
Chi Cheong Liu(1) | 56 | January 12, 2000 | Director, President, Chief Executive Officer, Chief Financial Officer, Secretary and Treasurer | |||
Chi Kong Liu(1) | 55 | January 12, 2000 | Director | |||
Fong Szeto | 68 | April 28, 2014 | Director |
(1) | Chi Cheong Liu and Chi Kong Liu are related parties. |
The business background and principal occupations of each of CWNs director and executive officer for the preceding five years are as follows:
Chi Cheong Liu
Mr. Liu has been a director and treasurer of CWN since January 2000. Mr. Liu has been President of Chigo Engineering Company, a security engineering firm, for the last 18 years. Mr. Liu is a venture capitalist specializing in biotechnology and technology investments.
Chi Kong Liu
Mr. Liu has been a director of CWN since January 2000. Mr. Liu is President and owner of S & B Trading Company Limited, a diamond and jewelry wholesaler. Mr. Liu is a venture capitalist specializing in biotechnology and technology investments.
Fong Szeto
Mr. Szeto has been a director of CWN since April 28, 2014. Mr. Szeto is an experienced international businessman with expertise in the People’s Republic of China and Hong Kong SAR.
B. | Compensation |
The following table provides information regarding direct and indirect remuneration paid to the directors and executive officers of CWN and its subsidiaries during Fiscal 2015.
Annual Compensation in Fiscal 2015 | ||||||
Name and Respective Office and Position Held | Salary ($) | Bonus ($) | Other Annual Compensation ($) | |||
Chi Cheong Liu(1) Director, President and Chief Executive Officer, Chief Financial Officer, Secretary and Treasurer | Nil | Nil | ________ | |||
Chi Kong Liu(2) Director | Nil | Nil | ________ | |||
Fong Szeto(3) Director | Nil | Nil | ________ |
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(1) | Mr. Liu is a shareholder and does not receive salary. The company paid Mr. Liu director fee of $Nil in 2015, $Nil in 2014, and $3,000 per year in 2013. |
(2) | Mr. Liu is a shareholder and does not receive salary. The company paid Mr. Liu director fee of $Nil in 2015, $Nil in 2014, and $3,000 per year in 2013. |
(3) | Mr. Szeto is a shareholder and does not receive salary. The company paid Mr. Szeto director fee of $Nil in 2015 and 2014. |
Pension Plans
We do not provide pension, retirement or similar benefits for directors, senior management or employees.
C. | Board Practices |
Directors hold office for a term of one year or until the next annual general meeting of shareholders at which directors are elected. Two of the current directors have served our company since January 12, 2000 and a third was appointed on April 28, 2014. Our officers are appointed by the board and serve at the board’s discretion.
We have not entered into service contracts with any of our directors.
We do not have an audit committee or remuneration committee, but our entire board of directors acts in such capacities.
D. | Employees |
As of December 31, 2015, there were no employees of the Company.
E. | Share Ownership of Directors and Senior Management |
The following table sets forth certain information regarding the ownership of our Common Shares by each of the persons who were directors and members of senior management during Fiscal 2015. The percentage owned is based on 10,950,000 shares outstanding as at April 29, 2016.
Name and Respective Office and Position Held | Share Ownership | % Share Ownership | ||||||
Chi Cheong Liu (1) | 1,730,000 | 15.80 | % | |||||
Chi Kong Liu | 580,000 | 5.30 | % | |||||
Fong Szeto | 30,000 | 0.27 | % | |||||
Total | 2,340,000 | 21.37 | % |
(1) | Goldpac Investment Partners Ltd., for which Mr. Liu is principal, owned 1,166,667 Common Shares of our company. Goldpac Investments Ltd., for which Mr. Liu is principal, owned 200,000 Common Shares of our company. Total direct and indirect share ownership was 3,096,667 Common Shares or 28.28% of the total Common Shares of our company. |
Stock Options
Our board of directors (the “Board”) adopted the 2007 Stock Option Plan (the “2007 Plan”) on October 11, 2007, under which we issued incentive stocks options with the right to purchase up to 550,000 Common Shares to our directors, officers, and employees. All of these options granted on October 11, 2007 have an exercise price of $1.08 per share and a vesting period of 1 to 5 years, and a term of 5 years expiring on October 11, 2012. We had not grant options to individual consultants or advisors.
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The Board further adopted the 2010 Stock Option Plan (the “2010 Plan”) on June 10, 2010, under which we issued incentive stocks options with the right to purchase up to 1,090,000 Common Shares to our directors, officers, and employees. All of these options granted on June 10, 2010 have an exercise price of $0.60 per share and a vesting period of 1 to 5 years, and a term of 5 years expiring on June 10, 2015. We had not grant options to individual consultants or advisors.
As at December 31, 2015, we had no options issued and outstanding, of which 200,000 options were fully vested and expired.
Item 7. | MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS |
A. | Major Shareholders |
To the knowledge of our directors and senior officers, the following table sets forth the persons or companies who beneficially own, directly or indirectly, or exercise control or direction over shares carrying 5% or more of the voting rights attached to the total outstanding Common Shares as at April 29, 2016. The percentage owned is based on 10,950,000 shares outstanding as at April 29, 2016.
Name of Shareholder | Number of Common Shares | Percentage of Shares Beneficially Owned | ||||||
Chi Cheong Liu(1) | 3,096,667 | 28.28 | % | |||||
Vcanland China Holdings Ltd. | 1,500,000 | 13.70 | % | |||||
Datacom Venture Limited | 600,000 | 5.48 | % | |||||
Chi Kong Liu | 580,000 | 5.30 | % | |||||
Monica Law | 570,000 | 5.21 | % | |||||
Total | 6,709,167 | 61.28 | % |
(1) | Mr. Liu owns 1,730,000 Common Shares. Goldpac Investment Partners Ltd., for which Mr. Liu is principal, owns 1,166,667 Common Shares. Goldpac Investments Ltd., for which Mr. Liu is a principal, owns 200,000 Common Shares. |
Unless otherwise indicated by footnote, we believe that the beneficial owners of the Common Shares listed above, based on information furnished by such owners, have sole investment and voting power with respect to such Common Shares, subject to community property laws where applicable. Beneficial ownership is determined in accordance with the rules of the United States Securities and Exchange Commission and generally includes voting or investment power with respect to securities. As far as it is known to us, except as disclosed herein, we are not directly or indirectly owned or controlled by another corporation, by any foreign government or any other person or entity. The shareholders, who own five percent or more of our Common Shares, do not have voting rights which are different than our other shareholders who own our Common Shares.
B. | Related Party Transactions |
As at December 31, 2015, the Company has non-interest bearing loan from the stockholders in the amount of $2,628 [2014 - $2,628].
All related party transactions were entered into in the normal course of business and are recorded at the exchange amount established and agreed to between the related parties.
C. | Interests of Experts and Counsel |
This Report on Form 20-F is being filed as an annual report under the Exchange Act and, as such, there is no requirement to provide any information under this item.
Item 8. | FINANCIAL INFORMATION |
A. | Financial Statements |
This Report on Form 20-F includes our audited consolidated financial statements for the years ended December 31, 2014, 2013, and 2012, including our consolidated balance sheets as of December 31, 2014, and 2013, and the consolidated statements of shareholders’ equity, operations and cash flows for the years ended December 31, 2014, 2013, and 2012, and the related notes to those statements and the auditors’ reports thereon. Reference is made to these documents commencing at Page 27 of this Report.
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B. | Significant Changes |
As of April 28, 2014, we have sold all subsidiaries and business units. The core business activities and operations have been discontinued as at year ended 2015.
Item 9. | THE OFFER AND LISTING |
A. | Offer and Listing Details |
Our common shares are currently quoted on the OTC Bulletin Board under the symbol “CWNOF.OB”. For the periods indicated, the following table sets forth the high and low market prices of our common shares, as reported by the OTC Bulletin Board. These prices represent inter-dealer quotations without retail markup, markdown, or commission and may not necessarily represent actual transactions.
Periods | High | Low | ||||||
Fiscal 2015 | $ | 0.08 | $ | 0.02 | ||||
Fiscal 2014 | $ | 0.07 | $ | 0.05 | ||||
Fiscal 2013 | $ | 0.55 | $ | 0.05 | ||||
Fiscal 2012 | $ | 1.34 | $ | 0.12 | ||||
Fiscal 2011 | $ | 1.40 | $ | 0.12 | ||||
Fiscal 2010 | $ | 0.75 | $ | 0.25 | ||||
Fiscal 2009 | $ | 0.25 | $ | 0.13 | ||||
Fiscal 2008 | $ | 1.30 | $ | 0.20 | ||||
Fiscal 2016 | ||||||||
1Q-2016(1) | $ | 0.02 | $ | 0.02 | ||||
Fiscal 2015 | ||||||||
4Q-2015(1) | $ | 0.02 | $ | 0.02 | ||||
3Q-2015(1) | $ | 0.02 | $ | 0.02 | ||||
2Q-2015 | $ | 0.02 | $ | 0.02 | ||||
1Q-2015 | $ | 0.08 | $ | 0.02 | ||||
Fiscal 2014 | ||||||||
4Q-2014(1) | $ | 0.07 | $ | 0.07 | ||||
3Q-2014 | $ | 0.07 | $ | 0.06 | ||||
2Q-2014 | $ | 0.06 | $ | 0.05 | ||||
1Q-2014(1) | $ | 0.05 | $ | 0.05 | ||||
Fiscal 2013 | ||||||||
4Q-2013(1) | $ 0. 25 | $ | 0.05 | |||||
3Q-2013(1) | $ | 0.25 | $ | 0.25 | ||||
2Q-2013 | $ | 0.25 | $ | 0.25 | ||||
1Q-2013 | $ | 0.55 | $ | 0.12 | ||||
Most Recent 6 months from November 2015 through April 2016 | ||||||||
April 2016(1) | $ | 0.02 | $ | 0.02 | ||||
March 2016(1) | $ | 0.02 | $ | 0.02 | ||||
February 2016(1) | $ | 0.02 | $ | 0.02 | ||||
January 2016(1) | $ | 0.02 | $ | 0.02 | ||||
December 2015(1) | $ | 0.02 | $ | 0.02 | ||||
November 2015(1) | $ | 0.02 | $ | 0.02 |
(1) | There were no trades of our common shares during this period. |
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B. | Plan of Distribution |
This Report on Form 20-F is being filed as an annual report under the Exchange Act and, as such, there is no requirement to provide any information under this item.
C. | Markets |
Our common shares are quoted on the OTC Bulletin Board operated by the Financial Industry Regulatory Authority under the symbol “CWNOF.OB”.
D. | Selling Shareholders |
This Report on Form 20-F is being filed as an annual report under the Exchange Act and, as such, there is no requirement to provide any information under this item.
E. | Dilution |
This Report on Form 20-F is being filed as an annual report under the Exchange Act and, as such, there is no requirement to provide any information under this item.
F. | Expenses of the Issue |
This Report on Form 20-F is being filed as an annual report under the Exchange Act and, as such, there is no requirement to provide any information under this item.
Item 10. | ADDITIONAL INFORMATION |
A. | Share Capital |
This Report on Form 20-F is being filed as an annual report under the Exchange Act and, as such, there is no requirement to provide any information under this item.
B. | Memorandum and Articles of Association |
There have been no changes to the Memorandum, Articles of Association, or Cayman Islands Law with respect to rights and powers of directors and shareholders since our 20-F Registration Statement (SEC file no. 000-33051) filed on July 3, 2002. Such discussion is hereby incorporated by reference into this Report.
C. | Material Contracts |
The material contracts entered into by us during the last two years, other than those contracts entered into in the ordinary course of business, are as follows:
· | On April 28, 2016, the company entered into an agreement with Ningbo extending the promissory loan by 2 years. The loan bears an 8% per annum interest rate and is payable at any time within the 2 years. |
· | On April 18, 2014, the company received shareholder approval for a share purchase agreement for the sale of all issued and outstanding shares in NAI, all issued and outstanding shares of CWN HK and 23.8% of issued and outstanding shares of CWN Capital. As part of the contract, we will receive an aggregate of $263,968.90 in funds and one or more non-interest bearing promissory notes in the aggregate principal amount of $831,031.10 with a maturity date of one year with the option to extend upon mutual agreement. |
· | Share purchase agreement dated March 19, 2014 with Ningbo International Limited. See Item 4.A.History and Development of the Company. |
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D. | Exchange Controls |
Cayman Islands
We are organized under the laws of the Cayman Islands. We do not believe there are any decrees or regulations under the laws of the Cayman Islands applicable to us restricting the import or export of capital or affecting the remittance of dividends or other payments to non-resident holders of our common stock. There are no restrictions under CWN’s Articles of Association or Memorandum of Association or under Cayman Islands law as dividends thereon. There is uncertainty as to whether the Courts of Cayman Island would (i) enforce judgments of United States Courts obtained against us or our directors and officers predicated upon the civil liability provisions of the federal securities laws of the United States or (ii) entertain original actions brought in Cayman Island Courts against us or such persons predicated upon the federal securities laws of the United States. There is no treaty in effect between the United States and Cayman Island providing for such enforcement.
E. | Taxation |
Cayman Island Income Tax Consequences
CWN is organized under the laws of Cayman Islands. At present, there is no Cayman Islands profit tax, withholding tax, capital gains tax, capital transfer tax, estate duty or inheritance tax payable by our United States shareholders, except shareholders ordinarily resident in the Cayman Islands. There is currently no reciprocal tax treaty between Cayman Islands and the United States regarding withholding taxes.
F. | Dividends and Paying Agents |
This Report on Form 20-F is being filed as an annual report under the Exchange Act and, as such, there is no requirement to provide any information under this item.
G. | Statement by Experts |
This Report on Form 20-F is being filed as an annual report under the Exchange Act and, as such, there is no requirement to provide any information under this item.
H. | Documents on Display |
Any documents referred to in this Report on Form 20-F may be inspected at our principal office located at Appleby, Clifton House, 75 Fort Street, P.O. Box 190, Grand Cayman, Cayman Islands KY1-1104 during normal business hours.
Our filings with the Securities and Exchange Commission, and the exhibits thereto, are available for inspection and copying at the public reference facilities maintained by the Securities and Exchange Commission in 100 F. St., NE, Washington, D.C., 20549. Copies of these filings may be obtained from these offices after the payment of prescribed fees. Please call the Securities and Exchange Commission at 1-800-SEC-0330 for further information on the public reference rooms. These filings are also available on the Securities and Exchange Commission's website at www.sec.gov .
I. | Subsidiary Information |
Prior to their sale on April 28, 2014, we had 4 subsidiaries, including NAI Interactive Ltd., a company incorporated under the laws of British Columbia“NAI”), ChineseWorldNet.com (Hong Kong) Ltd., a company incorporated under the laws of Hong Kong (“CWN HK”), 85% owned interest in ChineseWorldNet.com (Shanghai) Ltd., a company incorporated under the laws of PRC (“CWN China”), and 85% owned interest in Weihai Consulting Investment Ltd., a company incorporated under of PRC (“Weihai”). As a result of their sale on April 28, 2014, we do not have any subsidiaries.
Item 11. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
We are a small business issuer as defined in Section 230.405 of the Securities Act of 1933 and Section 240.12b-2 of the Exchange Act and, as such, there is no requirement to provide any information under this item.
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Item 12. | DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES |
This Report on Form 20-F is being filed as an annual report under the Exchange Act and, as such, there is no requirement to provide any information under this item.
Item 13. | DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES |
There has not been a material default in the payment of principal, interest, a sinking or purchase fund installment, or any other material default not cured within 30 days, relating to any indebtedness of us or any of our significant subsidiaries. No payment of dividends is in arrears.
Item 14. | MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS |
There has been no modification of the instruments defining the rights of holders of any class of our registered securities. There has been no modification or qualification of the rights evidenced by any class of our registered securities by issuing or modifying any other class of securities. There are no assets securing any class of our registered securities. There has been no change in the last financial year to the trustee of our registered securities.
Item 15. | CONTROLS AND PROCEDURES |
Disclosure Controls and Procedures
As required by Rule 13a-15 under the Securities Exchange Act of 1934, our management, with the participation of our principal executive officer and principal financial officer, evaluated our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934) as of the end of the period covered by this annual report.
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934 is accumulated and communicated to our principal executive officer and principal financial officer to allow timely decisions regarding required disclosure.
Based on its evaluation, our management, with the participation of our principal executive officer and principal financial officer concluded that as of December 31, 2015, our disclosure controls and procedures were not effective. The ineffectiveness of our disclosure controls and procedures was due to a material weakness described below.
MANAGEMENT’S REPORT ON INTERNAL CONTROLS OVER FINANCIAL REPORTING
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) under the Exchange Act. Our management evaluated the effectiveness of our internal control over financial reporting as of December 31, 2013 based on criteria for effective internal control over financial reporting described in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission . Based on its evaluation, our management concluded that our internal control over financial reporting was not effective as of December 31, 2015, as per the five components of the Framework: Control Environment, Risk Assessment, Control Activities, Information and Communication and Monitoring.
During its assessment of internal control over financial reporting, management identified the following deficiencies. Based on the context in which the deficiencies occur, management believes that these deficiencies individually represent significant deficiencies:
1. | Inadequate segregation of duties over certain information system access controls. Although there were no major error or incident noted during the evaluation, the control deficiency carries significant risk of management overrides and unauthorized and approved transactions. |
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2. | There was no human resources department in our company; the monthly salary calculations were conducted by the accounting department instead of human resources. The lack of segregation of duties would not ensure the calculation of salary’s accuracy, and possibilities for staff receiving payment for work not attended. There was also the potential risk of management override. |
3. | Purchase requisitions and purchase orders were not prepared, only oral indication was given by management. Purchases could be initiated and executed for other uses or purchased goods or services could be misappropriated for other uses. There was also the potential risk of fraud for these purchases. |
Based only on these facts, management has determined that the combination of these significant deficiencies represents a material weakness. Individually, these deficiencies were evaluated as representing a more than remote likelihood that a misstatement that was more than inconsequential, but less than material, could occur. However, each of these significant deficiencies affects the same set of accounts. Taken together, these significant deficiencies represent a more than remote likelihood that a material misstatement could occur and not be prevented or detected. Therefore, in combination, these significant deficiencies represent a material weakness.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
There were no changes to our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended) during the year ended December 31, 2015 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Item 16. | [RESERVED] |
ITEM 16A | AUDIT COMMITTEE FINANCIAL EXPERT |
Our board of directors serves as our audit committee. The board has determined that it does not have an audit committee financial expert. We believe that retaining an independent director who would qualify as an “audit committee financial expert” would be overly costly and burdensome and is not warranted given that we sold all of our subsidiaries.
ITEM 16B. | CODE OF ETHICS |
On October 29, 2004, we adopted a Code of Ethics (the “Code of Ethics”). A copy of our Code of Ethics was filed as an exhibit to the Report on Form 20-F filed with the Securities Exchange Commission on December 3, 2004. Our Code of Ethics will be made available in print, free of charge, to any person requesting a copy in writing from our secretary at Appleby, Clifton House 75 Fort Street, PO Box 190, Grand Cayman E9 KY1-1104.
ITEM 16C. | PRINCIPAL ACCOUNTANT FEES AND SERVICES |
The following table sets forth the aggregate fees billed by our auditors, MNP LLP, in 2015 and 2014. Our board of directors has considered these fees and professional services rendered compatible with maintaining the independence of that firm.
For year ending December 31, | ||||||||
2015 | 2014 | |||||||
Audit Fees(1) | $ | 8,000 | $ | 40,000 | ||||
Audit-Related Fees(2) | — | — | ||||||
Tax Fees(3) | — | |||||||
All Other Fees | — | — | ||||||
Total | $ | 8,000 | $ | 40,000 |
(1) | Audit Fees consist of fees for the audit of our annual financial statements and review in connection with our statutory and regulatory filings. |
(2) | Audit-Related Fees consist of fees related to assurance and related services that are reasonably related to the performance of the audit or review of our financial statements and are not reported under “Audit Fees”. |
(3) | Tax Fees consist of fees related to tax compliance, tax advice and tax planning. |
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ITEM 16D. | EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES |
There are no applicable disclosures required by Exchange Act Rule 10a-3(d) regarding an exemption from the listings standards for audit committees.
ITEM 16E. | PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS |
Neither our company, nor any affiliated purchaser of our company, has purchased any of our securities during Fiscal 2015.
ITEM 16F. | CHANGES IN REGISTRANT’S CERTIFYING ACCOUNTANT |
None.
ITEM 16G. | CORPORATE GOVERNANCE |
We are not listed on a national securities exchange and, as such, there is no requirement to provide any information under this item.
ITEM 16H. | MINE SAFETY DISCLOSURE |
Not applicable.
Item 17. | FINANCIAL STATEMENTS |
Not applicable.
Item 18. | FINANCIAL STATEMENTS |
The following Consolidated Financial Statements and the related Notes thereto are filed as part of this Report, commencing at Page 34 to 51 of this Report:
- 22 - |
Item 19. | EXHIBITS |
Exhibit No. | Document Description | |
1 | (1) | Articles of Association, Memorandum of Association and Certificate of Incorporation of CWN |
2.1 | (2) | Form of Convertible Debenture dated May 31, 2004 |
4.1 | (4) | Stock Option Plan Agreement dated October 1, 2007 |
4.2 | (6) | Stock Option Plan Agreement dated June 10, 2010 |
4.3 | (5) | Agreement to Establish [CWN China Co., Ltd.], a Chinese – Foreign Joint Venture Ltd. Liability Company |
4.4 | (6) | Consulting Agreement between Chineseworldnet.Com Inc. and Goldpac Investments Ltd. dated January 1, 2010 |
4.5 | (6) | Consulting Agreement between Chineseworldnet.Com Inc. and Silver Lake Investment Partners, Ltd. dated January 1, 2010 |
4.6 | (7) | Consulting Agreement between Chineseworldnet.Com Inc. and Goldpac Investments Ltd. dated January 1, 2011 |
4.7 | (7) | Consulting Agreement between Chineseworldnet.Com Inc. and Silver Lake Investment Partners, Ltd. dated January 1, 2011 |
4.8 | (8) | Consulting Agreement between Chineseworldnet.Com Inc. and Goldpac Investments Ltd. dated January 1, 2012 |
4.9 | (9) | Share purchase agreement dated March 19, 2014 with Ningbo International Limited |
11 | (3) | Code of Ethics |
12.1 | * | Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
13.1 | * | Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
101.INS | * | XBRL Instance Document |
101.SCH | * | XBRL Taxonomy Extension Schema Document |
101.CAL | * | XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF | * | XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB | * | XBRL Taxonomy Extension Label Linkbase Document |
101.PRE | * | XBRL Taxonomy Extension Presentation Linkbase Document |
* | Filed herewith |
- 23 - |
(1) | Incorporated by reference to Exhibits of Registrant’s Registration Statement on Form 20-F (file no. 000-33051) filed on July 3, 2002. |
(2) | Incorporated by reference to Exhibits of Registrant’s Annual Report on Form 20-F (file no. 000-33051) filed on December 3, 2004. |
(3) | Incorporated by reference to Exhibits of Registrant’s Annual Report on Form 20-F (file no. 000-33051) filed on June 30, 2005. |
(4) | Incorporated by reference to Exhibits of Registrant’s Annual Report on Form 20-F (file no. 000-33051) filed on June 30, 2008. |
(5) | Incorporated by reference to Exhibits of Registrant’s Annual Report on Form 20-F (file no. 000-33051) filed on June 30, 2009. |
(6) | Incorporated by reference to Exhibits of Registrant’s Annual Report on Form 20-F (file no. 000-33051) filed on May 13, 2011. |
(7) | Incorporated by reference to Exhibits of Registrant’s Annual Report on Form 20-F (file no. 000-33051) filed on April 30, 2012. |
(8) | Incorporated by reference to Exhibits of Registrant’s Annual Report on Form 20-F (file no. 000-33051) filed on April 30, 2013. |
(9) | Incorporated by reference to Schedule “A” to Exhibit 99.4 of Registrant’s Form 6-K (file no. 000-33051) filed on March 24, 2014. |
- 24 - |
SIGNATURES
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F, and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.
Dated: April 29, 2016
ChineseWorldNet.com Inc., |
a Cayman Islands Corporation |
/s/ CHI CHEONG LIU |
CHI CHEONG LIU |
Director, President, Chief Executive Officer, Chief Financial Officer, Secretary and Treasurer |
- 25 - |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders ofChineseworldnet.Com Inc.:
We have audited the accompanying balance sheets of Chineseworldnet.Com Inc. (the “Company”) as of December 31, 2015 and 2014, and the related statements of operations and comprehensive income (loss), stockholders’ equity and cash flows for the year ended December 31, 2015, 2014 and 2013. The Company’s management is responsible for these financial statements. 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. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2015 and 2014, and the results of its operations and its cash flows for the year ended December 31, 2015, 2014 and 2013 in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements referred to above have been prepared assuming the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company incurred losses from operations since inception, has not attained profitable operations and is dependent upon obtaining adequate financing to fulfill its operating activities. These factors raise substantial doubt about the Company's ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Vancouver, Canada | MNP LLP, Chartered Professional Accountants |
April 29, 2016
- 26 - |
BALANCE SHEETS
As at December 31
(Expressed in U.S. Dollars)
2015 | 2014 | |||||||
$ | $ | |||||||
ASSETS | ||||||||
Current assets | ||||||||
Cash and cash equivalents[note 2] | 85,906 | 186,757 | ||||||
Note receivable[note 6] | 582,384 | 693,296 | ||||||
Prepaid expenses and deposits | 4,914 | 4,882 | ||||||
Total current assets | 673,204 | 884,935 | ||||||
Total assets | 673,204 | 884,935 | ||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities | ||||||||
Accounts payable and accrued liabilities | 41,784 | 86,762 | ||||||
Due to related parties, non-interest bearing [note 11] | 2,628 | 2,628 | ||||||
Total current liabilities | 44,412 | 89,390 | ||||||
Stockholders’ equity [note 10] | ||||||||
Common stock | ||||||||
Authorized | ||||||||
100,000,000,000 common shares with a par value of $0.001 per share | ||||||||
Issued and outstanding 10,950,000 common shares | 10,950 | 10,950 | ||||||
Additional paid-in capital | 4,183,129 | 4,182,073 | ||||||
Deficit | (3,565,287 | ) | (3,397,478 | ) | ||||
Total stockholders’ equity | 628,792 | 795,545 | ||||||
Total liabilities and stockholders’ equity | 673,204 | 884,935 | ||||||
Nature of operation[note 1] | ||||||||
Subsequent events [note 14] |
See accompanying notes
- 27 - |
STATEMENTS OF STOCKHOLDERS’ EQUITY
Years ended December 31
(Expressed in U.S. Dollars)
Common stock | Additional paid-in | Accumulated other comprehensive | Total equity (deficiency) attributable to common | Non controlling | ||||||||||||||||||||||||||||
Shares | Amount | capital | (Deficit) | Income | stockholders | interest | Total | |||||||||||||||||||||||||
# | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||
Balance, December 31, 2013 | 10,950,000 | 10,950 | 4,257,028 | (2,801,484 | ) | (19,521 | ) | 1,446,973 | 38,358 | 1,485,331 | ||||||||||||||||||||||
Stock based compensation | — | — | (74,955 | ) | — | — | (74,955 | ) | — | (74,955 | ) | |||||||||||||||||||||
Foreign currency translation adjustment on deconsolidation of subsidiary | — | — | — | — | 19,521 | 19,521 | — | 19,521 | ||||||||||||||||||||||||
Deconsolidation of non-controlling interest | — | — | — | — | — | — | (38,358 | ) | (38,358 | ) | ||||||||||||||||||||||
Net income (loss) for the year | — | — | — | (595,994 | ) | — | (595,994 | ) | — | (595,994 | ) | |||||||||||||||||||||
Balance, December 31, 2014 | 10,950,000 | 10,950 | 4,182,073 | (3,397,478 | ) | — | 795,545 | — | 795,545 | |||||||||||||||||||||||
Stock-based compensation | — | — | 1,056 | — | — | 1,056 | — | 1,056 | ||||||||||||||||||||||||
Net income (loss) for the year | — | — | — | (167,809 | ) | — | (167,809 | ) | — | (167,809 | ) | |||||||||||||||||||||
Balance, December 31, 2015 | 10,950,000 | 10,950 | 4,183,129 | (3,565,287 | ) | — | 628,792 | — | 628,792 |
See accompanying notes
- 28 - |
STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
Year ended December 31
(Expressed in U.S. Dollars)
2015 | 2014 | 2013 | ||||||||||
$ | $ | $ | ||||||||||
Revenue | - | 158,752 | 937,781 | |||||||||
Expenses | ||||||||||||
Advertising and promotion | - | 14,647 | 82,907 | |||||||||
Audit and legal | 30,817 | 60,973 | 82,014 | |||||||||
Consulting fees | - | 30,062 | 90,000 | |||||||||
Depreciation | - | (4,854 | ) | 7,776 | ||||||||
Directors’ remuneration | - | - | 12,000 | |||||||||
Office and miscellaneous | 7,341 | 50,551 | 72,142 | |||||||||
Printing | - | 1,408 | 8,068 | |||||||||
Provision for bad and doubtful debts | - | - | 51,112 | |||||||||
Rent and operating | - | 44,692 | 145,356 | |||||||||
Salaries and benefits | - | 150,922 | 491,519 | |||||||||
Stock based compensation | 1,056 | (74,955 | ) | 25,841 | ||||||||
Telephone | - | 3,795 | 13,747 | |||||||||
Travel and entertainment | - | 23,809 | 113,293 | |||||||||
(39,214 | ) | (301,050 | ) | (1,195,775 | ) | |||||||
Other income (loss) | ||||||||||||
Interest and sundry income | 11 | 2,446 | 20,390 | |||||||||
Gain (loss) on available-for-sale securities | - | - | 6,451 | |||||||||
Foreign exchange gain (loss) and other losses | (128,606 | ) | (85,799 | ) | (89,108 | ) | ||||||
Equity pick up | - | (3,896 | ) | (197,276 | ) | |||||||
Imputed interest income | - | 45,766 | - | |||||||||
Gain (loss) on disposal of subsidiaries[note 3] | - | (422,565 | ) | - | ||||||||
Other income (loss), net | (128,595 | ) | (464,048 | ) | (259,543 | ) | ||||||
Loss before income taxes | (167,809 | ) | (606,346 | ) | (517,537 | ) | ||||||
Deferred tax recovery (expense) | - | - | (3,857 | ) | ||||||||
Net loss for the year | (167,809 | ) | (606,346 | ) | (521,394 | ) | ||||||
Other comprehensive income (loss) | ||||||||||||
Unrealized gain or loss on available –for-sale securities | - | - | (45,536 | ) | ||||||||
Currency translation adjustments | - | - | 1,216 | |||||||||
Comprehensive income (loss) | (167,809 | ) | (606,346 | ) | (565,714 | ) | ||||||
Net income (loss) attributable to: | ||||||||||||
Common stockholders | (167,809 | ) | (595,994 | ) | (490,238 | ) | ||||||
Non-controlling interests | - | (10,352 | ) | (31,156 | ) | |||||||
(167,809 | ) | (606,346 | ) | (521,394 | ) | |||||||
Net comprehensive income (loss) attributable to: | ||||||||||||
Common stockholders | (167,809 | ) | (595,994 | ) | (535,774 | ) | ||||||
Non-controlling interests | - | (10,352 | ) | (29,940 | ) | |||||||
(167,809 | ) | (606,346 | ) | (565,714 | ) | |||||||
Earning (loss) per share – basic | (0.02 | ) | (0.05 | ) | (0.05 | ) | ||||||
Earning (loss) per share – diluted | (0.02 | ) | (0.05 | ) | (0.05 | ) | ||||||
Weighted average number of common shares outstanding | ||||||||||||
- basic | 10,950,000 | 10,950,000 | 10,950,000 | |||||||||
- diluted | 10,950,000 | 10,950,000 | 10,950,000 |
See accompanying notes
- 29 - |
STATEMENTS OF CASH FLOWS
Year ended December 31
(Expressed in U.S. Dollars)
2015 | 2014 | 2013 | ||||||||||
$ | $ | $ | ||||||||||
OPERATING ACTIVITIES | ||||||||||||
Net income (loss) for the year | (167,809 | ) | (606,346 | ) | (521,394 | ) | ||||||
Adjustment to reconcile net loss to net cash used in operating activities: | ||||||||||||
Depreciation | - | (4,854 | ) | 7,776 | ||||||||
Deferred tax recovery | - | - | 3,857 | |||||||||
Stock based compensation | 1,056 | (74,955 | ) | 25,841 | ||||||||
Equity interest pick up | - | 3,896 | 197,276 | |||||||||
Gain on short term investment | - | (5,492 | ) | - | ||||||||
Write-down equipment | - | - | 506 | |||||||||
Imputed interest | - | (8,051 | ) | - | ||||||||
Loss on deconsolidation of subsidiaries | - | 422,565 | - | |||||||||
Foreign exchange gain (loss) | 128,606 | - | - | |||||||||
Changes in non-cash working capital items: | ||||||||||||
Accounts receivable | - | (21,278 | ) | (12,230 | ) | |||||||
Prepaid expenses and deposits | (32 | ) | 5,127 | (18,481 | ) | |||||||
Accounts payable and accrued liabilities | (41,979 | ) | 31,851 | (6,747 | ) | |||||||
Deferred revenue | - | (16,200 | ) | (15,520 | ) | |||||||
Net cash provided by (used in) operating activities | (80,158 | ) | (273,737 | ) | (339,116 | ) | ||||||
FINANCING ACTIVITIES: | ||||||||||||
Short term loan | - | (1,279,002 | ) | (1,178,746 | ) | |||||||
Due to related parties | - | (20,223 | ) | 331,125 | ||||||||
Net cash provided by financing activities | - | (1,299,225 | ) | 1,509,871 | ||||||||
INVESTING ACTIVITIES: | ||||||||||||
Purchase of equipment | - | - | - | |||||||||
Short term investments | - | 556,223 | (274,778 | ) | ||||||||
Cash received from deconsolidation of subsidiary | - | 239,427 | - | |||||||||
Cash reduced upon deconsolidation of subsidiary | - | (751,512 | ) | - | ||||||||
Net cash provided by (used in) investing activities | - | 44,138 | (274,778 | ) | ||||||||
Effect of exchange rate changes on cash and cash equivalents | (20,693 | ) | 281 | 13,449 | ||||||||
Increase (decrease) in cash and cash equivalents | (100,851 | ) | (1,528,543 | ) | 909,426 | |||||||
Cash and cash equivalents, beginning of year | 186,757 | 1,715,300 | 805,874 | |||||||||
Cash and cash equivalents, end of year | 85,906 | 186,757 | 1,715,300 | |||||||||
Supplemental disclosure of cash flow information | ||||||||||||
Cash paid for interest, net of interest capitalized | — | — | — | |||||||||
Cash paid for income taxes | — | — | — |
See accompanying notes
- 30 - |
The Company was incorporated under the laws of Cayman Islands on January 12, 2000. On January 15, 2000 the Company acquired 100% of the issued and outstanding shares of NAI Interactive Ltd. (“NAI”), a company incorporated under the laws of British Columbia, Canada. The Company also has a dormant wholly-owned subsidiary ChineseWorldNet.com HK Limited (“CWN HK”) incorporated under the laws of Hong Kong. ChineseWorldNet.com (Shanghai) Ltd. (“CWN China”) was incorporated under the laws of People’s Republic of China in April 2008. In fiscal year 2012, the Company’s ownership interests in CWN China increased from 80% to 83% after CWN HK invested an amount of $200,000 to CWN China’s registered capital. During the fiscal year 2013, the Company’s ownership interests in CWN China further increased from 83% to 85% after CWN HK invested an amount of $187,200 to CWN China’s registered capital. CWN China has a wholly-owned subsidiary, Weihai Consulting Investment Ltd (“Weihai”), a company incorporated under the laws of People’s Republic of China in September 2009. In year 2014, the company received shareholder approval and sold all issued and outstanding shares in NAI, all issued and outstanding shares of CWN HK and 23.8% of issued and outstanding shares of CWN Capital. For the consideration, the company received an aggregate of CAD $263,968 in funds and one non-interest bearing promissory notes in the aggregate principal amount of CAD $831,031with a maturity date of one year with the option to extend upon mutual agreement.
After disposal of all subsidiaries and long term investment on April 28, 2014, the core business activities and operations were discontinued. The Company is currently inactive with limited operations and is in the process of seeking business opportunities.
These consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. The Company has accumulated losses since its inception and requires additional funds to maintain and expand its intended business operations. Management’s plans in this regard are to raise debt or equity financing as required which the Company has been able to finance the operations through a series of equity and debt financings and additional funds is still required to fund the Company’s anticipated business expansion.
2. SIGNIFICANT ACCOUNTING POLICIES
Basis of consolidation
These consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and include the accounts of the Company and its wholly former owned subsidiaries and subsidiaries which the Company owns 85% interests and its investment in CWN Capital Inc through April 28, 2014(the date of deconsolidation of the subsidiaries). All material inter-company accounts and transactions have been eliminated upon consolidation.
- 31 - |
2. SIGNIFICANT ACCOUNTING POLICIES (cont’d.)
Use of estimates
The preparation of consolidated financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates and would impact the results of operations and cash flows.
Estimates and underlying assumptions are reviewed at each period end. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected. Significant areas requiring the use of management estimates relate to the determination of the net recoverable value of assets, fair value of financial instruments, deferred income tax assets and liabilities and stock based compensation.
Cash and cash equivalents
Cash equivalents usually consist of highly liquid investments which are readily convertible into cash with maturity of three months or less when purchased. The Company had no cash equivalents as of December 31, 2015 (2014 - $nil) .
Foreign currency translations
The Company, NAI, CWN HK, CWN China and Weihai maintain their accounting records in their functional currencies of U.S. dollars, Canadian dollars, HK dollars, Chinese Renminbi and Chinese Renminbi, respectively. However, the Company reports in U.S. dollars. Foreign currency transactions in the foreign subsidiaries are translated into their functional currency using the exchange rate in effect at that date for assets, liabilities, revenues and expenses. At the period end, monetary assets and liabilities denominated in the foreign currency are re-evaluated into the functional currency by using the exchange rate in effect for the period end. The resulting foreign exchange gains and losses are included in operations.
Assets and liabilities of the foreign subsidiaries are translated into the reporting U.S. dollars at exchange rates in effect at the balance sheet date. Revenues and expenses are translated at the average exchange rates. Gain and losses from such translations are included in stockholders’ equity, as a component of other comprehensive income.
Income taxes
Income taxes are accounted for under the liability method of accounting for income taxes. Under the liability method, deferred tax liabilities and assets are recognized for the estimated future tax consequences attributable to differences between the amounts reported in the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted income tax rates expected to apply when the asset is realized or the liability is settled. The effect of a change in income tax rates on deferred tax liabilities and assets is recognized in income in the period in which the change occurs. Deferred tax assets are recognized to the extent that they are considered more likely than not to be realized.
Per FASB ASC 740 “Income taxes” under the liability method, it is the Company’s policy to provide for uncertain tax positions and the related interest and penalties based upon management’s assessment of whether a tax benefit is more likely than not to be sustained upon examination by tax authorities. At December 31, 2015, the Company believes it has appropriately accounted for any unrecognized tax benefits. To the extent the Company prevails in matters for which a liability for an unrecognized benefit is established or is required to pay amounts in excess of the liability, the Company’s effective tax rate in a given financial statement period may be affected. Interest and penalties associated with the Company’s tax positions are recorded as Interest Expense.
Comprehensive income
The Company accounts for comprehensive income under the provisions of ASC Topic 220-10, Comprehensive Income - Overall, which establishes standards for reporting and display of comprehensive income, its components and accumulated balances. The Company is disclosing this information on its Statements of Operations and Comprehensive Loss.
- 32 - |
2. SIGNIFICANT ACCOUNTING POLICIES (cont’d.)
Financial instruments and concentration of risks
Fair value of financial instruments is made at a specific point in time, based on relevant information about financial markets and specific financial instruments. As these estimates are subjective in nature, involving uncertainties and matters of significant judgment, they cannot be determined with precision. Changes in assumptions can significantly affect estimated fair values.
The carrying value of cash and cash equivalents, accounts payable and accrued liabilities, and notes receivable approximates their fair value because of the short-term nature of these instruments. The Company is exposed to interest rates risk on its cash and cash equivalents. Management does not believe that the impact of interest rate fluctuate will be significant.
The Company has cash and cash equivalents with various financial institutions, which may exceed insured limits throughout the year. The Company is exposed to credit loss for amounts in excess of insured limits in the event of non-performance by the institution. However, the Company does not anticipate non-performance.
The Company operates and incurs significant expenditures outside of the United States of America and is exposed to foreign currency risks due to the currency exchange fluctuation between the subsidiaries’ functional currency and the Company’s reporting currency.
Fair value of financial instruments
The Company has adopted the provisions of ASC Topic 820, Fair Value Measurements, which defines fair value, establishes a framework for measuring fair value in GAAP, and expands disclosures about fair value measurements. ASC 820 does not require any new fair value measurements, but provides guidance on how to measure fair value by providing a fair value hierarchy used to classify the source of the information. The fair value hierarchy distinguishes between assumptions based on market data (observable inputs) and an entity’s own assumptions (unobservable inputs). The hierarchy consists of three levels:
· | Level one – Quoted market prices in active markets for identical assets or liabilities; |
· | Level two – Inputs other than level one inputs that are either directly or indirectly observable; and |
· | Level three – Unobservable inputs developed using estimates and assumptions, which are developed by the reporting entity and reflect those assumptions that a market participant would use. |
For the period ended December 31, 2015 and 2014, the fair value of cash and cash equivalents are recognized on the balance sheets as level one per the fair value hierarchy; and the fair value of share options and notes receivable are recognized in the balance sheets as level three per the fair value hierarchy.
Deconsolidation
The Company accounts for deconsolidation of subsidiaries in accordance with ASC Topic 810 “Consolidation”.
In accordance with ASC Topic 810-10-40-5, the parent shall account for the deconsolidation of a subsidiary by recognizing a gain or loss in net income attributable to the parent, measured as the difference between:
a. The aggregate of all of the following:
1. The fair value of any consideration received;
2. The fair value of any retained non-controlling investment in the former subsidiary at the date the subsidiary is deconsolidated;
3. The carrying amount of any non-controlling interest in the former subsidiary (including any accumulated other comprehensive income attributable to the non-controlling interest) at the date the subsidiary is deconsolidated.
b. The carrying amount of the former subsidiary’s assets and liabilities.
For the year ended December 31, 2014, the Company incurred approximately US$0.40 million loss on disposal of its former subsidiaries.
- 33 - |
2. SIGNIFICANT ACCOUNTING POLICIES (cont’d.)
Stock-based compensation
The Company has adopted the fair value method of accounting for stock-based compensation as recommended by ASC 718 (formerly SFAS 123R) Compensation –Stock Compensation. The Company has granted stock options to directors and certain employees for services provided to the Company under this method. The Company recognizes compensation expense for stock options awarded based on the fair value of the options at the grant date using the Black-Scholes option pricing model. The fair value of the options is amortized over the vesting period.
Commitment and Contingencies
The Company follows subtopic 450-20 of the FASB Accounting Standards Codification to report accounting for contingencies. Certain conditions may exist as of the date the consolidated financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or un-asserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or un-asserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.
If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s consolidated financial statements. If the assessment indicates that a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed.
Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. Management does not believe, based upon information available at this time, that these matters will have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows. However, there is no assurance that such matters will not materially and adversely affect the Company’s business, financial position, and results of operations or cash flows.
Earning (Loss) per share
Earning (loss) per share is computed using the weighted average number of common shares outstanding during the period. The Company has adopted ASC 260 (formerly SFAS128), Earnings Per Share. Diluted earning (loss) per share is equal to basic loss per share because there is no potential dilutive security.
- 34 - |
2. SIGNIFICANT ACCOUNTING POLICIES (cont’d.)
Recent Accounting Pronouncements
In June 2014, under ASC 718, Compensation—Stock Compensation, the FASB issued Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period. These amendments apply to all reporting entities that grant their employees share-based payments in which the terms of the award provide that a performance target that affects vesting could be achieved after the requisite service period. That is the case when an employee is eligible to retire or otherwise terminate employment before the end of the period in which a performance target could be achieved and still be eligible to vest in the award if and when the performance target is achieved. We are currently evaluating the impact on our consolidated financial statements of adopting this guidance.
In August 2014, the FASB issued Presentation of Financial Statements – Going Concern. This standard requires management to evaluate for each annual and interim reporting period whether it is probable that the reporting entity will not be able to meet its obligations as they become due within one year after the date that the financial statements are issued. If the entity is in such a position, the standard provides for certain disclosures depending on whether or not the entity will be able to successfully mitigate its going concern status. This guidance is effective for annual periods ending after December 15, 2016 and interim periods within annual periods beginning after December 15, 2016. Early application is permitted. We are currently evaluating the impact on our consolidated financial statements of adopting this guidance.
In April 2014, the FASB issued Accounting Standards Update ("ASU") 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued operations and Disclosures of Disposals of Components of an Entity. The amendments in ASU 2014-08 change the criteria for reporting discontinued operations while enhancing disclosures in this area. They also address sources of confusion and inconsistent application related to financial reporting of discontinued operations guidance in U.S. GAAP. Under the new guidance, only disposals representing a strategic shift in operations should be presented as discontinued operations. Those strategic shifts should have a major effect on the entity's operations and financial results. Examples include a disposal of a major geographic area, a major line of business, or a major equity method investment. In addition, the new guidance requires expanded disclosures about discontinued operations that will provide financial statement users with more information about the assets, liabilities, income, and expenses of discontinued operations. The amendments in this ASU are effective for the first quarter of 2015 for public entities with calendar year ends. The Company adopted ASU 2014-08 on January 1, 2015 and the adoption of this pronouncement did not have a material effect on the Company's consolidated financial position or results of operations.
In May 2014, the Financial Accounting Standards Board issued Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers (ASU 2014-09). This accounting standard supersedes all existing US GAAP revenue recognition guidance. Under ASU 2014-09, a company will recognize revenue when it transfers the control of promised goods or services to customers in an amount that reflects the consideration which the company expects to collect in exchange for those goods or services. ASU 2014-09 will require additional disclosures in the notes to the consolidated financial statements and is effective for annual and interim reporting periods beginning after December 15, 2016. The Company is evaluating the impact of ASU 2014-09 and an estimate of the impact to the consolidated financial statements cannot be made at this time. In June 2014, the FASB issued ASU 2014-12, Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period. The standard provides guidance that a performance target that affects vesting of a share-based payment and that could be achieved after the requisite service condition is aperformance condition. As a result, the target is not reflected in the estimation of the award's grant date fair value. Share-based compensation cost for such award would be recognized over the required service period, if it is probable that the performance condition will be achieved. ASU 2014-12 is effective for annual reporting periods beginning after December 15, 2015. Early adoption is permitted. The guidance should be applied on a prospective basis to awards that are granted or modified on or after the effective date of the standard. Companies also have the option to apply the guidance on a modified retrospective basis for awards with performance targets outstanding on or after the beginning of the first annual period presented after the effective date of the standard. The Company is evaluating the impact of ASU 2014-12 and an estimate of the impact to the consolidated financial statements cannot be made at this time.
In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements—Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern. The ASU provides guidance on determining when and how reporting entities must disclose going-concern uncertainties in their financial statements. The new standard requires management to perform interim and annual assessments of an entity's ability to continue as a going concern within one year of the date of issuance of the entity's financial statements (or within one year after the date on which the financial statements are available to be issued, when applicable). Further, an entity must provide certain disclosures if there is "substantial doubt about the entity's
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2. SIGNIFICANT ACCOUNTING POLICIES (cont’d.)
Recent Accounting Pronouncements (continued)
ability to continue as a going concern."
The ASU is effective for annual periods ending after December 15, 2016, and interim periods thereafter and early adoption is permitted. The Company is evaluating the impact of ASU 2014-15 and an estimate of the impact to the consolidated financial statements cannot be made at this time.
In January 2015, the FASB issued ASU 2015-01, Income Statement-Extraordinary and Unusual Items (Subtopic 225-20), Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items, which eliminates the concept of extraordinary items. Under this new guidance, entities will no longer be required to separately classify, present and disclose extraordinary events and transactions. The amendments in this update are effective for annual and interim periods beginning after December 15, 2015. The Company is evaluating the impact of ASU 2015-01 and an estimate of the impact to the consolidated financial statements cannot be made at this time.
In February 2015, the FASB issued ASU No. 2015-02, "Consolidation (Topic 810): Amendments to the Consolidation Analysis"("ASU 2015-02"). ASU 2015-02 makes several modifications to the consolidation guidance for variable interest entities ("VIEs") and general partners' investments in limited partnerships, as well as modifications to the evaluation of whether limited partnerships are VIEs or voting interest entities. It is effective for annual and interim periods beginning after December 15, 2015. Early adoption is permitted.
In April 2015, FASB issued ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs (“ASU 2015-03”). In August 2015, FASB issued ASU 2015-15, Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements (“ASU 2015-15”). ASU 2015-03 will require that debt issuance costs be presented in the balance sheet as a deduction from the carrying amount of the debt. ASU 2015-15 allows an entity to present debt issuance costs associated with a revolving line of credit arrangement as an asset, regardless of whether a balance is outstanding. The recognition and measurement guidance for debt issuance costs are not affected by ASU 2015-03 or ASU 2015-15. These ASU’s are effective for annual reporting periods beginning after December 15, 2015, including interim periods within that reporting period, with early adoption permitted. ASU 2015-03 will require the Company to reclassify its deferred financing costs associated with its long-term debt from other assets to long-term debt on a retrospective basis. The new standard will not affect the Company’s results of operations or cash flows.
On March 30, 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting, which amends ASC Topic 718, Compensation – Stock Compensation. The ASU simplifies several aspects of the accounting for employee share-based payment transactions.
The ASU also contains guidance under which nonpublic entities can use the simplified method to estimate the expected term of an award and make a one-time election to switch from fair value measurement to intrinsic value measurement for liability-classified awards.
ASU 2016-09 is effective for public business entities for annual reporting periods beginning after December 15, 2016, and interim periods within that reporting period. Early adoption will be permitted in any interim or annual period, with any adjustments reflected as of the beginning of the fiscal year of adoption.
The Company is evaluating the impact of the amended guidance on its consolidated financial statements. There have been no other accountings pronouncements issued but not yet adopted by the Company which are expected to have a material impact on the Company’s financial position, results of operations or cash flows.
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3. Deconsolidation and Discontinued Operations
In year 2014, the Company signed Share Purchase Agreement (the “Agreement”) with Ningbo International Limited, a non related party to sell all issued and outstanding shares in NAI, all issued and outstanding shares of CWN HK and 23.8% of issued and outstanding shares of CWN Capital. For the consideration, the company received an aggregate of CAD $263,968 in funds and one non-interest bearing promissory notes in the aggregate principal amount of CAD $831,031with a maturity date of one year with the option to extend upon mutual agreement. The financial statements of NAI, CWN HK and its 85% owned subsidiaries CWN China and CWN Weihei and long term investment of CWN Capital were deconsolidated from the consolidated financial statement of the Company effective April 28, 2014, because the Company lost its ability to impose significant influence, and control of operations and assets of subsidiaries and long term investment.
As a result of the deconsolidation of the subsidiaries and long term investment, the consolidated balance sheets as of December 31, 2014, reflect only the balances of the Company. The consolidated statement of operations contains the results of the operations of the Company for the year ended December 31, 2014 and NAI, CWN HK, CWN China, CWN Weihai and CWN Capital from January 1, 2014 to April 28, 2014.
A loss of $422,565 was recognized on our sale of the controlling interest and deconsolidation of subsidiaries and long term investment as follows:
$ | $ | |||||||
Cash | 239,427 | |||||||
Fair value of promissory note | 685,245 | |||||||
Fair value of proceeds that resulted in loss of control | 924,672 | |||||||
Carrying value of non-controlling interest in former subsidiary on the date the subsidiary was deconsolidated | 27,716 | |||||||
Subtotal | 952,388 | |||||||
Less: | ||||||||
Carrying value of NAI' s net assets | (636,157 | ) | ||||||
Carrying value of CWN HK's net assets | (1,145,495 | ) | ||||||
Carrying value of CWN Capital- long term investment | 135,231 | |||||||
Recognize realized foreign exchange gain or loss for disposal of subsidiary | 33,566 | |||||||
Intercompany balances | 2,987,808 | |||||||
1,374,953 | ||||||||
Loss on deconsolidation of subsidiaries and long term investment | (422,565 | ) |
5. NOTES RECEIVABLE
As at April 28, 2014, the Company received the promissory notes of CAD $831,031 from Ningbo International Limited, a non-related party, as result of disposal all issued and outstanding shares in NAI, all issued and outstanding shares of CWN HK and 23.8% of issued and outstanding shares of CWN Capital. The promissory note is non-interest bearing with a maturity date of one year with the option to extend upon mutual agreement. Subsequent to December 31, 2014, the Company extended the payment date of the notes receivable to April 28, 2016. During the year ended December 31, 2014, the Company recorded imputed interest income of $45,766 and foreign exchange loss of $37,715 in relation to the note. The effective interest rate of the note receivable is 10%. During the year ended December 31, 2015, the Company recorded foreign exchange loss of $110,912.
6. STOCKHOLDERS’ EQUITY
Stock Options
On June 10, 2010, the Company granted key officers and directors 1,090,000 stock options, which expire on June 10, 2015 with each stock option entitling its holder to purchase one common share at $0.60, which are vested 20% on the first anniversary of the grant date and remaining 80% shall become vested in four equal yearly installments on each of the four anniversary dates of the grant date subsequent to the first anniversary of the grant date.
Number of Options | Weighted Average Exercise Price | |||||||
Balance, December 31, 2013 | 1,020,000 | $ | 0.60 | |||||
Forfeited | (820,000 | ) | 0.60 | |||||
Balance, December 31, 2014 | 200,000 | 0.60 | ||||||
Expired | (200,000 | ) | 0.60 | |||||
Balance, December 31, 2015 | - | $ | - |
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As at December 31, 2015, there is no stock option outstanding:
Exercise price | Outstanding as at December 31, 2014 | Exercisable as at December 31, 2014 | ||||||||||||||||||||||||
Number of Options | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life (years) | Number of Options | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life (years) | |||||||||||||||||||||
$ | 0.60 | 200,000 | $ | 0.60 | 0.44 | 160,000 | $ | 0.60 | 0.44 | |||||||||||||||||
200,000 | $ | 0.60 | 0.44 | 160,000 | $ | 0.60 | 0.44 |
The fair value of each stock option granted in the fiscal year 2010 was calculated as $0.30. The Company recorded stock based compensation expense of $1,056 in fiscal year 2015 (2014 - $(74,955) and 2013 - $27,879) for options granted in the previous years. The fair value of each option granted is estimated on the date of the grant using the Black-Scholes option pricing model with weighted average assumptions for grants as follows:
2010 | ||||
Risk-free interest rate | 2.65 | % | ||
Expected life of options | 5 years | |||
Annualized volatility | 76.71 | % | ||
Dividend rate | 0 | % |
There was no stock option granted in fiscal year 2015 and 2014.
7. RELATED PARTY TRANSACTIONS
As at December 31, 2015, the Company has non-interest bearing loan from the stockholders in the amount of $2,628 [2014 - $2,628].
All related party transactions were entered into in the normal course of business and are recorded at the exchange amount established and agreed to between the related parties.
8. INCOME TAXES
The Company is subject to the tax laws of Cayman Islands and the tax rate is 0%. The Company’s former subsidiaries were subject to tax at various rates in the jurisdictions in which they operated. The reconciliation of the income tax expense is as follows:
2015 $ | 2014 $ | 2013 $ | ||||||||||
Net Income (loss) for the year | (170,223 | ) | (606,346 | ) | (517,537 | ) | ||||||
Statutory Cayman Islands corporate tax rate | 0 | % | 0 | % | 0 | % | ||||||
Anticipated tax recovery | — | — | — | |||||||||
Change in tax rates resulting from: | ||||||||||||
Non-deductible items | 1,667 | 8,962 | ||||||||||
Change in estimates | - | (2,268 | ) | |||||||||
Change enacted of tax rate | - | (2,702 | ) | |||||||||
Functional currency adjustments | 2,050 | (10,985 | ) | |||||||||
Foreign tax rate differential | - | (53,640 | ) | |||||||||
Disposition of subsidiaries | - | 410,964 | - | |||||||||
Change in valuation allowance | - | (414,681 | ) | 64,490 | ||||||||
Income tax expense (recovery) | - | - | 3,857 |
9. GEOGRAPHIC INFORMATION
The Company’s head office is located in Cayman Islands. The operations of the Company are primarily in two geographic areas: Canada and China. A summary of geographical information for the Company’s assets and net loss for the years is as follows:
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Year ended December 31, 2015 | Canada | China | Total | |||||||||
Revenue from external customers | $ | - | $ | - | $ | - | ||||||
Net income (loss) | (167,809 | ) | - | (167,809 | ) | |||||||
Total assets | $ | 673,204 | $ | - | $ | 673,204 | ||||||
Year ended December 31, 2014 | Canada | China | Total | |||||||||
Revenue from external customers | $ | 158,333 | $ | 419 | $ | 158,752 | ||||||
Net income (loss) | (542,476 | ) | (63,870 | ) | (606,346 | ) | ||||||
Total assets | $ | 884,935 | $ | - | $ | 884,935 |
10. SUBSEQUENT EVENTS
As agreed by both parties, the maturity date of the promissory note between the company and Ningbo International Limited was extended further 2 years to April 28, 2018. The effective interest rate of the note receivable is 8% per annum with repayment at any time without penalties.
Also see note 6.
11. COMPARATIVE FIGURES
Certain of comparative figures have been reclassified to conform with the presentation adopted in the current period.
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