UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 2001
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from ___________ to __________
Commission file number 000-26169
Chinawe.com Inc.
- --------------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
California 95-462728
- --------------------------------------------------------------------------------
State or other jurisdiction of incorporation (IRS Employer Identification No.)
or organization)
Chinawe.com Inc.
c/o Hartman & Craven LLP
Attn: Edward I. Tishelman, Esq.
460 Park Avenue
New York, New York 10022
- --------------------------------------------------------------------------------
(Address of principal executive offices)
c/o (212) 753-7500
- --------------------------------------------------------------------------------
(Issuer's telephone number)
NEO MODERN ENTERTAINMENT CORP.
442 N. La Cienega Blvd., Suite 206
West Hollywood, CA 90048
Fiscal year ending June 30th
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since
last report)
The number of shares outstanding of the issuer's common stock, par value $.001
per share, as of May 1, 2001 was 40,000,000.
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
Chinawe.com Inc.
PART I. FINANCIAL INFORMATION
Page No.
Item 1. Financial Statement:
Balance Sheet as of March 31, 2001 (Unaudited) F-3
Statements of Operations for the Three Months Ended F-4
March 31, 2001 and March 31, 2000 (Unaudited)
Statement of Stockholders' Deficit and Comprehensive
Income (Loss) (Unaudited) F-5
Statements of Cash Flows for the Three Months Ended F-6
March 31, 2001 and March 31, 2000 (Unaudited)
Notes to Financial Statements F-7
Item 2. Management's Discussion and Analysis or Plan of Operation 14
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 16
SIGNATURES 17
13
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements.
BALANCE SHEET
MARCH 31, 2001
(UNAUDITED)
(NOTE 2)
--------------- ------------
NOTE RMB US$
--------------- ------------
ASSETS
Current assets:
Cash and cash equivalents 481,166 58,126
Accounts receivable 27,498 3,322
Deposits 487,200 58,858
Other current assets 68,914 8,325
--------------- ------------
Total current assets 1,064,778 128,631
--------------- ------------
Property, plant and equipment, net 5 462,415 55,861
--------------- ------------
TOTAL ASSETS 1,527,193 184,492
=============== ============
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
Accounts payable 55,600 6,717
Finance lease obligation 229,450 27,718
Accrued expenses and other 532,276 64,300
Customer deposits 1,299,560 156,990
Convertible loan 6 1,602,194 193,548
Advances from related parties 7 1,553,849 187,708
--------------- ------------
Total liabilities (all current) 5,272,929 636,981
--------------- ------------
Shareholders' deficit:
Common stock, US$0.001 par value,
authorized 100,000,000 shares; 40,000,000 shares
issued and outstanding 320,000 40,000
Capital in excess of par (319,198) (39,900)
Accumulated deficit (3,731,994) (450,832)
Accumulated other comprehensive loss (14,544) (1,757)
--------------- ------------
Total shareholders' deficit (3,745,736) (452,489)
---------------- ------------
TOTAL LIABILITIES AND
SHAREHOLDERS' DEFICIT 1,527,193 184,492
=============== ============
See notes to the financial statements.
3
STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2001 AND 2000
(UNAUDITED)
(NOTE 2)
NOTE 2001 2000
------------------------ -----------------------
RMB US$ RMB US$
---------- -------- -------- -------
Membership fee income 609,698 73,653 359,472 43,425
Administrative and general
expenses (3,015,954) (364,330) (480,342) (58,026)
---------- -------- ---------- ---------
Loss from operations (2,406,256) (290,677) (120,870) (14,601)
Other income 1,552 187 7,838 947
---------- -------- ---------- ---------
Loss before income taxes (2,404,704) (290,490) (113,032) (13,654)
Income taxes 8 - - - -
---------- -------- ---------- ---------
Net loss (2,404,704) (290,490) (113,032) (13,654)
========== ======== ========== =========
Basic and diluted net
loss per share (0.08) (0.01) * *
========== ======== ========== == =======
Weighted average shares
outstanding 30,961,976 30,761,976 28,764,565 28,764,565
========== ========== ========== ==========
* Less than .01 per share.
See notes to the financial statements.
4
STATEMENTS OF SHAREHOLDERS' DEFICIT AND
COMPREHENSIVE INCOME (LOSS)
THREE MONTHS ENDED MARCH 31, 2001
(UNAUDITED)
(NOTE 2)
Capital Accumulated
Common Stock in other Total
---------------------- excess of Accumulated comprehensive shareholders'
Amount par (deficit) (loss) (deficit)
Shares RMB RMB RMB RMB RMB
---------- ------- -------- ---------- ------------- -------------
Balances, January 1, 2001 28,764,565 230,120 (229,318) (1,327,290) (14,544) (1,341,032)
Acquisition of Neo Modern
Entertainment Corp. by
Chinawe.com Inc. 11,235,435 89,880 (89,880)
Comprehensive loss:
Net loss for the three months
ended March 31, 2001 - (2,404,704) - (2,404,704)
Currency translation adjustments - - - -
---------- ------- -------- ---------- ------- ----------
Total comprehensive loss (2,404,704)
Balances, March 31, 2001 40,000,000 320,000 (319,198) (3,731,994) (14,544) (3,745,736)
========== ======= ======== ========== ======= ==========
Balances, March 31, 2001, US$ $40,000 $(39,900) $(450,832) $(1,757) $(452,489)
======= ======== ========= ======= =========
See notes to the financial statements.
5
STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 2001 AND 2000
(UNAUDITED)
(NOTE 2)
2001 2000
--------------------------------- ---------------------------
RMB US$ RMB US$
-------------- --------------- -------------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss (2,404,704) (290,490) (113,032) (13,654)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation 44,554 5,382 16,617 2,007
Changes in operating assets and liabilities,
net of effects of acquisition:
Decrease (increase) in accounts receivable 9,144 1,104 (3,887) (470)
Decrease (increase) in other accounts
receivable, deposits and prepayments 2,135,845 258,012 (62,326) (7,529)
(Decrease) increase in accounts payable (37,463) (4,525) 279 34
Increase (decrease) in other accounts payable
and accrued expenses 30,448 3,678 (83,260) (10,060)
Decrease in customer deposits (279,743) (33,793) (172,591) (20,849)
-------- ------- -------- -------
NET CASH USED IN OPERATING ACTIVITIES (501,919) (60,632) (418,200) (50,521)
--------- -------- --------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of plant and equipment (144,628) (17,471) (51,961) (6,277)
-------- ------- ------- ------
NET CASH USED IN INVESTING ACTIVITIES (144,628) (17,471) (51,961) (6,277)
-------- ------- ------- ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in advances from related parties (Note 6) 352,627 42,598 1,941,363 146,517
Repayments to related parties (Note 6) (181,185) (21,888) (2,553,275) (220,437)
Repayment of finance lease obligation (10,550) (1,275) - -
Issuance of common stock by subsidiary - - 2,220,998 268,301
Cash paid to acquire subsidiaries - - (561,853) (67,873)
--------- ------- --------- -------
NET CASH PROVIDED BY FINANCING ACTIVITIES 160,892 19,435 1,047,233 126,508
------- ------ --------- -------
NET (DECREASE) INCREASE IN
CASH AND CASH EQUIVALENTS (485,655) (58,668) 577,072 69,710
CASH AND CASH EQUIVALENTS, BEGINNING 966,821 116,794 1,054,236 127,016
EFFECT OF EXCHANGE RATE ON CASH - - (8,739) (716)
--------- ------- --------- -------
CASH AND CASH EQUIVALENTS, ENDING 481,166 58,126 1,622,569 196,010
========= ======= ========= =======
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
During the three months ended March 31, 2001, the company acquired equipment
under a capital lease obligation amounting to RMB240,000 as follows:
RMB US$
--- ---
Inception of finance lease obligation 240,000 28,993
Repayment (10,550) (1,275)
-------------- ---------------
Balance as at March 31, 2001 229,450 27,718
============== ===============
See notes to the financial statements.
6
NOTES TO THE FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND 2000
(UNAUDITED)
1. THE INTERIM FINANCIAL STATEMENTS
The interim financial statements have been prepared by Chinawe.com Inc.
(formerly known as Neo Modern Entertainment, Corp.) and in the opinion of
management, reflect all material adjustments which are necessary to a fair
statement of results for the interim periods presented, including normal
recurring adjustments. Certain information and footnote disclosures made
in the last annual report on Form 10-KSB have been condensed or omitted
for the interim statements. The financial statements presented are those
of the surviving entity from a merger which occurred on March 15, 2001
(see Note 2). It is the Company's opinion that, when the interim
statements are read in conjunction with the June 30, 2000, Annual Report
on Form 10-KSB, a Definitive Information Statement dated February 12,
2001, and a Form 8-K dated March 15, 2001, the disclosures are adequate to
make the information presented not misleading. The results of operations
for the three months ended March 31, 2001 and 2000, are not necessarily
indicative of the operating results for the full year.
2. ORGANIZATION AND MERGER
On March 15, 2001, Neo Modern Entertainment Corp. ("Neo Modern") completed
a merger with Chinawe.com Inc., a privately-held company incorporated in
Delaware in June 2000, pursuant to an Agreement and Plan of Merger dated
October 17, 2000 (the "Merger Agreement"). In conjunction with the terms
of the Merger Agreement, Neo Modern changed its name to Chinawe.com Inc.
("Chinawe", or the "Company"), and each outstanding share of Chinawe
common stock was converted into 2,876.4565 shares of the Neo Modern common
stock.
The purpose of the merger was to acquire a controlling interest in Chinawe
and to terminate the prior business of Neo Modern in favor of the Chinawe
business. Chinawe, through its subsidiaries based in Hong Kong and the
Peoples Republic of China (the "PRC"), is in the business of enabling
e-commerce transactions for small and medium-size producers of goods on
Mainland China for sale to overseas wholesale customers, and managing
assets located in the PRC by attempting to expedite transactions between
Chinese operators of these assets and overseas purchasers and
joint-ventures. This transaction has been recorded as an acquisition of
Neo Modern by Chinawe and a recapitalization of Chinawe.
The condensed consolidated financial statements include the accounts of
Chinawe and the following subsidiaries:
OFFICEWAY TECHNOLOGY LIMITED ("OFFICEWAY"); incorporated in the British
Virgin Islands in December 1999, formed for the purpose of acquiring its
wholly-owned subsidiary, Welcon Info-Tech Limited, in March 2000.
WELCON INFO-TECH LIMITED ("WIT(HK)"); incorporated in Hong Kong in June
1997, WIT(HK) provides subscriber services for the production of website
image and business-to-business e-marketplace for small to medium size
businesses.
WELCON INFO-TECH LIMITED ("WIT(GZ)"); a joint venture formed in March 2000
in which WIT(HK) entered into a joint venture agreement with Guangzhou
Welcon Info-Tech Limited (the "PRC Party") to establish a Sino-foreign
co-operative joint venture in Guangzhou for a period of 10 years. The PRC
Party was registered in Guangzhou in March 1998 and is principally engaged
7
NOTES TO THE FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND 2000
(UNAUDITED)
in providing subscriber services for the development of computer software
and networking, website design, technical consulting and
business-to-business e-marketplace for small to medium size businesses.
The joint venture agreement required WIT(HK) to invest RMB1,056,412 into
the joint venture. The PRC Party is to provide premises, facilities and
licensing agreements for an annual service fee of RMB100,000. All profits
or losses, net of service fees from the joint venture are to be allocated
to WIT(HK).
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of presentation
The accompanying financial statements present the financial position
of the Company, WIT (HK) and WIT (GZ) as of March 31, 2001, and the
results of their operations and cash flows for the three months
ended March 31, 2001, and the period from January 1, 2000 through
March 15, 2000 on a combined basis. Prior to March 15, 2000, the
Company, WIT (HK), and WIT (GZ) combined, represented the
predecessor operations of the Company. Subsequent to March 15, 2000,
the accompanying financial statements present the financial
position, results of operations and cash flows of the Company and
its subsidiaries WIT (HK) and WIT (GZ) on a consolidated basis. All
inter-company accounts and transactions have been eliminated in
combination and consolidation.
(b) Cash and cash equivalents
Cash and cash equivalents include cash on hand and deposits with
banks with an original maturity of three months or less.
(c) Property, plant and equipment
Property, plant and equipment which consists of computer equipment,
motor vehicle and leasehold improvement, are stated at cost less
accumulated depreciation.
Depreciation is calculated on a straight line basis over the
estimated useful life of the asset. The annual rate used for
computer equipment, motor vehicle and leasehold improvement is 30%,
30% and 50% respectively.
(d) Translation of foreign currencies
Monetary items denominated in foreign currencies are translated into
Renminbi at the rate of exchange in effect at the balance sheet
date. Non-monetary items denominated in foreign currencies are
translated into Renminbi at the approximate rate of exchange in
effect at the translation date. Any revenue or expense resulting
from a transaction made in a foreign currency is translated into
Renminbi at the approximate rate of exchange in effect on the date
of the transaction. Foreign exchange gains or losses resulting from
the
8
NOTES TO THE FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND 2000
(UNAUDITED)
translation or settlement of a monetary item in a foreign currency
are included in the determination of net earnings.
Translation of amounts from RMB into US$ for the convenience of the
reader has been made at the Exchange Rate on March 31, 2001 of
US$1.00 = RMB8.2780 and US$1.00 = RMB8.30 respectively. No
representation is made that the RMB amounts could have been, or
could be, converted into United States dollars at that rate on
March 31, 2001 or at any other date.
(e) Income taxes
Deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income
in the years in which those temporary differences are expected to be
recovered or settled.
(f) Revenue recognition
Subscription and service income receivable from members is
recognized over the period of subscription and to the extent of
services rendered in accordance with the terms of subscription and
membership agreements.
(g) Use of estimates
The preparation of consolidated financial statements in conformity
with accounting principles generally accepted in the United States
requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the consolidated
financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ
from those estimates.
(h) Comprehensive income
Statement of Financial Accounting Standard (SFAS) No. 130,
"Reporting Comprehensive Income" establishes standards for the
reporting and display of comprehensive income, its components and
accumulated balances in a full set of general purpose financial
statements. SFAS No. 130 defines comprehensive income to include all
changes in equity except those resulting from investments by owners
and distributions to owners. Among other disclosures, SFAS No. 130
requires that all items that are required to be recognized under
current accounting standards as components of comprehensive income
be reported in a financial statements that is presented with the
9
NOTES TO THE FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND 2000
(UNAUDITED)
same prominence as other financial statements. The Company's only
current component of comprehensive income are foreign currency
translation adjustments.
(i) Recently issued accounting pronouncements
In June 1998, the Financial Accounting Standards Board issued SFAS
No. 133, "Accounting for Derivative Instruments and Hedging
Activities". This statement, as amended, is effective for fiscal
years beginning after June 15, 2000. The Company currently does not
have any derivative instruments nor is it engaged in hedging
activities, thus the Company does not believe implementation of SFAS
No. 133 will have a material impact on its financial statements
presentation or disclosures.
In December 1999, the staff of the Securities and Exchange
Commission issued Staff Accounting Bulletin ("SAB") No. 101, Revenue
Recognition in Financial Statements. SAB No. 101, as amended by SAB
No. 101A and SAB 101B, is effective no later than the fourth quarter
of fiscal years beginning after December 15, 1999. SAB No. 101
provides the staff's views in applying general accepted accounting
principles to selected revenue recognition issues. Currently, the
Company believes that it complies with the accounting and disclosure
described in SAB No. 101; therefore, management believes that SAB
No. 101 will not impact the Company's financial statements.
(j) Risk considerations
(i) As a majority of the Company's operations are conducted in the
PRC, the Company is subject to special considerations and
significant risks not typically associated with investments in
equity securities of North American and Western European
companies. The Company's operations may be adversely affected
by significant political, economic and social uncertainties in
the PRC. Although the PRC government has been pursuing
economic reform policies for the past several years, no
assurance can be given that the PRC government will continue
to pursue such policies or that such policies may not be
significantly altered, especially in the event of a change in
leadership, social or political disruption or unforeseen
circumstances affecting the PRC's political, economic and
social life. There is also no guarantee that the PRC
government's pursuit of economic reforms will be consistent or
effective.
(ii) The Company expects that substantially all of its revenues
will be denominated in RMB. A portion of such revenues will
need to be converted into other currencies to meet foreign
currency obligations such as payment of any dividends
declared. Both the conversion of RMB into foreign currencies
and the remittance of foreign currencies abroad require PRC
government approval. No assurance can be given that the
operating subsidiaries within the Company will continue to be
able to convert sufficient amounts of foreign currencies in
the
10
NOTES TO THE FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND 2000
(UNAUDITED)
PRC's foreign exchange markets in the future for payment of
dividends.
4. ACQUISITION OF WIT(HK) AND WIT(GZ)
Effective March 15, 2000, the Company acquired the business of WIT (HK)
for US$67,873 (RMB561,853). On March 20, 2000, WIT(HK) acquired the
business of the PRC party by forming the joint venture, WIT(GZ). The
acquisitions were accounted for as purchases, and the results of WIT(HK)'s
and WIT(GZ)'s operations are included in the Company's 2000 consolidated
statement of operations from date of acquisition. The purchase price was
allocated to the assets acquired and liabilities assumed based on their
estimated fair values at the date of acquisition. The purchase price
equalled the carrying values of the net assets acquired.
5. PROPERTY, PLANT AND EQUIPMENT
March 31, 2001
-----------------------------------
RMB US$
--------------- ----------------
At cost:
Computer equipment 139,804 16,888
Leasehold improvement 40,904 4,941
Motor vehicle 346,158 41,817
--------------- ----------------
Accumulated depreciation 64,451 7,785
--------------- ----------------
462,415 55,861
=============== ================
6. CONVERTIBLE LOAN
On August 26, 2000, the Company entered into an agreement with a third
party whereby the third party loaned the Company HK$1,500,000
(RMB1,602,194) to support the Company's restructuring activity. The loan
is convertible into 6.37% of the shares of the listed company upon
completion of the acquisition and restructuring. The convertible loan is
unsecured and non-interest bearing.
7. RELATED PARTY TRANSACTIONS
The balances with related parties are as follows:
March 31, 2001
-----------------------------------
RMB US$
--------------- ----------------
Advances from related parties:
Shareholders 1,525,164 184,243
PRC party 28,685 3,465
--------------- ----------------
1,553,849 187,708
=============== ================
11
NOTES TO THE FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND 2000
(UNAUDITED)
All balances with related parties are unsecured, non-interest bearing
and payable on demand. During the three months ended March 31, 2001 and
2000, the Company received advances from related parties of RMB352,627
and RMB1,212,868, respectively. In addition, during the three months
ended March 31, 2001 and 2000, the Company repaid advances of
RMB181,185 and RMB1,824,780, respectively.
The Company occupied office space in a building leased by an affiliate
of the Company. Rent expense for each of the years ended March 31, 2001
and 2000 was approximately RMB32,100.
8. INCOME TAXES
It is management's intention to reinvest all the income attributable to
the Company earned by its operations outside the United States.
Accordingly, no U.S. corporate income taxes will be provided in these
financial statements.
The Company is subject to income taxes on an entity basis on income
arising in or derived from the tax jurisdiction in which each entity is
domiciled.
Under the current laws of the British Virgin Islands (the "BVI"),
dividends and capital gains arising from the Company's investments in
the BVI are not subject to income taxes and no withholding tax is
imposed on payments of dividends to the Company.
Companies that carry on business and derive income in Hong Kong are
subject to Hong Kong profits tax at 16%. Companies that carry on
business and derive income into the PRC are subject to national income
tax at 30% and local income tax at 3%.
No income taxes have been provided for WIT(HK) as it incurred tax
losses during 2000 and 1999. Losses of WIT(HK) can be carried forward
to offset future taxable income for an indefinite period. No income
taxes have been provided for WIT(GZ) as it has incurred losses since
it began operating in March 2000. Losses of WIT(GZ) can be carried
forward to offset future taxable income (if any) for a period of five
years.
The reconciliation between the effective tax rate and the statutory
U.S. federal income tax rate is as follows:
2001 2000
---- ----
% of Pre-tax % of Pre-tax
income income
U.S. federal income tax rate 34 34
Operating losses (34) (34)
---------------- ----------------
- -
================ ================
12
NOTES TO THE FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND 2000
(UNAUDITED)
At March 31, 2001, the Company's deferred tax assets are as follows:
RMB US$
Hong Kong operating loss carry forward 321,666 38,849
PRC operating loss carry forward 337,537 40,765
Deferred tax assets valuation allowance (659,203) (79,614)
-------- -------
Net deferred tax assets - -
======== =======
Management has provided a full allowance for deferred tax assets as
realization of the assets is not assured.
13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
On March 15, 2001, the merger of Chinawe.com Inc. with and into Neo
Modern Entertainment Corp. was effectuated and the name of the survivor was
changed to Chinawe.com Inc. Incident to the merger, the former operations of NEO
MODERN ENTERTAINMENT CORP., which dealt with the production and distribution of
motion picture clips, was spun off to an entity owned by the former managers of
that enterprise. Accordingly, the entire business theretofore continued by
Chinawe.com Inc. is the business now conducted by the public company. Incident
thereto, the fiscal year of the public company was changed to the year ended
December 31st, which is the same fiscal year as had previously been utilized
by Chinawe.com Inc.
General
The following discussion of the Company's financial condition and
results of operations should be read in conjunction with the Financial
Statements and Notes thereto appearing elsewhere in this Quarterly Report on
Form 10-QSB.
Certain statements set forth in the Company's Quarterly Report on Form
10-QSB for the quarter ended March 31, 2001 are made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995. Investors
are cautioned that forward looking statements involve risks and uncertainties,
including general economic conditions, delays and risks associated with the
performance of contracts, the process of regulatory approval and supervision,
potential acquisitions, consumer and industry acceptance, litigation and the
volatility of domestic securities markets.
Quarter Ended March 31, 2001 compared with Quarter ended March 31, 2000
Total revenues for the first quarter ended March 31, 2001 were $73,653,
a 70% increase from $43,425 reported for the corresponding quarter of the prior
fiscal year ending March 31, 2000. This increase is attributable mainly to an
increase in firms and persons signed up for the service provided by the Company.
Administrative and general expenses increased from $58,026 to $364,330, a change
of 528%, due to additional work performed on the Company's service and due to
approximately $243,000 of expenses related to the merger transaction. The loss
from operations accordingly increased from $14,601 to $290,677, representing an
increase of 1,890%. The Company expects its loss to continue to increase as it
establishes its network and engages in its various lines of business.
Viability of Operating Results
The Company is engaged in establishing its operating lines of business
and building its memberships. These factors have an impact on the Company's
operations and revenues. It is
14
expected that for the foreseeable future the Company will continue to develop
these areas and operate at a loss.
Liquidity and Capital Resources
The Company's statement of financial position reflects a liquid
financial position of cash representing 31.5% as at March 31, 2001.
The Company finances its operations primarily with existing capital,
funds generated from operations, and net cash provided by financing activities
(including amounts financed by the majority stockholders).
15
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
Exhibit Number:
(2) Agreement and Plan of Merger dated October 17, 2000 *
(11) Calculation of Earnings Per Share
(b) Reports on Form 8-K.
During the quarter ended March 30, 2001, a report on Form 8-K,
dated March 15, 2001, was filed with the Securities and
Exchange Commission on March 30, 2001 ("Report"). The
following items were reported on the Report:
Item 1. Changes in Control of Registrant; and
Item 2. Acquisition or Disposition of Assets.
--------
* Filed as appendix A-1 to the Definitive Information Statement filed
with the Securities and Exchange Commission on February 12, 2001 and
hereby incorporated by reference herein.
16
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Date: May 15, 2001 Chinawe.com Inc.
----------------
(Registrant)
By: /s/ Man Ying Ken Wai
----------------------
Man Ying Ken Wai
Vice President
17
EXHIBIT (11)
Chinawe.com Inc.
EPS Calculations for period January 1 to March 30
RmB US$ RmB US$
----- ----- ----- -----
Basic (0.08) (0.01) (*) (*)
------ ======= ------- -------
Diluted (0.08) (0.01) (*) (*)
------ ======= ------- -------
* Less than .01 per share
18