UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 20-F
Amended
[X] REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES
EXCHANGE ACT OF 1934
OR
[ ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended_________________________________________________
OR
[ ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ___________________ to ____________________
Commission file number 000-33051
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CHINESEWORLDNET.COM INC.
(Exact name of registrant as specified in its charter)
CAYMAN ISLANDS
(Jurisdiction of incorporation or organization)
THE HUNTLAW BUILDING, P.O. BOX 1350GT, GRAND CAYMAN, CAYMAN ISLANDS
(Address of principal executive offices)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
NONE
Securities registered or to be registered pursuant to Section 12(g) of the Act:
Title of each class: Name of each exchange on which registered:
COMMON SHARES, U.S. $0.001 PAR VALUE NONE
Securities for which there is a reporting obligation pursuant to Section 15(d)
of the Act: NONE
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: 8,000,000
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
[ ] Yes [X] No
Indicate by check mark which financial statement item the registrant has elected
to follow.
[X] Item 17 [ ] Item 18
Page i
TABLE OF CONTENTS
PART I 1
ITEM 1. IDENTIFY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS 1
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE 2
ITEM 3. KEY INFORMATION 2
ITEM 4. INFORMATION ON THE COMPANY 7
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS 18
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES 20
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PART TRANSACTIONS 24
ITEM 8. FINANCIAL INFORMATION 25
ITEM 8B. SIGNIFICANT CHANGES 25
ITEM 9. THE OFFER AND LISTING 26
ITEM 10. ADDITIONAL INFORMATION 26
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK 31
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES 31
PART II 31
ITEM 13. DEFAULTS, DIVIDENDS ARREARS AND DELINQUENCIES 31
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS and
USE OF PROCEEDS 31
PART III 31
ITEM 15. FINANCIAL STATEMENTS 31
ITEM 16. FINANCIAL STATEMENTS 31
ITEM 17. FINANCIAL STATEMENTS AND EXHIBITS 31
Page 1
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. As used herein,
except as the context otherwise requires, the term "CWN" or the "Company" refers
to ChineseWorldNet.Com Inc. and its subsidiaries. The Company's consolidated
financial statements are prepared in accordance with United States generally
accepted accounting principles ("US GAAP") and are presented in United States
dollars. All monetary amounts contained in this Registration Statement are in
United States dollars unless otherwise indicated.
The registered and executive office of the Company is located at Huntlaw
Corporate Services Limited, The Huntlaw Building, P.O. Box 1350, Grand Cayman,
Cayman Islands. The Company's North American office and principle place of
business is located at Suite 620 - 1090 West Pender Street, Vancouver, British
Columbia, Canada V6E 2N7.
FORWARD-LOOKING STATEMENTS
The information set forth in this Form 20-F is as of October 31, 2001 unless
otherwise indicated.
The following discussion contains forward-looking statements regarding events
and financial trends, which may affect the Company's future operating results
and financial position. Such statements are subject to risks and uncertainties
that could cause the Company's actual results and financial position to differ
materially from those anticipated in forward-looking statements. These factors
include, but are not limited to, the fact that the Company is a development
stage, Internet based provider of news and information on small and micro cap
public companies, will need additional financing to develop its activities and
will be subject to certain technological and risks doing business in China, all
of which factors are set forth in more detail in the section entitled "Risk
Factors" at Item 3 and "Operating and Financial Review and Prospects" at Item 9.
PART I
ITEM 1. IDENTIFY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS
================================================================================
The following table sets forth the names, business addresses and functions of
CWN's directors and senior management.
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NAME BUSINESS ADDRESS POSITION
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Joe K. F. Tai #620 - 1090 West Pender Street President, Chief Executive
Vancouver, British Columbia, Canada V6E 2N7 Officer and Director
- -------------------------------------------------------------------------------------------------------------------
Kelvin Szeto #620 - 1090 West Pender Street Chief Operating Officer
Vancouver, British Columbia, Canada V6E 2N7
- -------------------------------------------------------------------------------------------------------------------
Yan Li #620 - 1090 West Pender Street Vice President - Editing
Vancouver, British Columbia, Canada V6E 2N7
- -------------------------------------------------------------------------------------------------------------------
Michael Hui #620 - 1090 West Pender Street Vice President - Website
Vancouver, British Columbia, Canada V6E 2N7 Development
- -------------------------------------------------------------------------------------------------------------------
Gilbert Chan #620 - 1090 West Pender Street Vice President - Project
Vancouver, British Columbia, Canada V6E 2N7 Development
- -------------------------------------------------------------------------------------------------------------------
Ken Cai #1200 - 543 Granville Street Director
Vancouver, British Columbia, Canada V6E 2N7
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Chi Cheong Liu 822 Man Tai House Secretary / Treasurer and Director
Tai Heng Sai Estate, Kowloon, Hong Kong
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Chi Kong Liu 2/F Flat D, Block 15, Director
Classical Garden, Tai Po, New Territories, Hong Kong
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Page 2
The Company's legal advisors are Catalyst Corporate Finance Lawyers. Their
address is 1400 - 1055 West Hastings Street, Vancouver, British Columbia, V6E
2E9.
The Company's auditors are Ellis Foster, Chartered Accountant. Their address is
1650 West 1st Avenue, Vancouver, British Columbia, Canada V6J 1G1. Ellis Foster
have been appointed the auditors since the Company's inception on January 12,
2000.
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
================================================================================
Not applicable.
ITEM 3. KEY INFORMATION
================================================================================
Selected Financial Data
- -----------------------
The Company was incorporated on January 12, 2000 and therefore has no historical
information to compare to the audited financial statements for the eleven-month
period ended December 31, 2000. The following table sets forth selected
consolidated financial information for the Company which has been derived from
the consolidated financial statements of the Company prepared in accordance with
US GAAP. The financial data should be read in conjunction with the Company's
consolidated financial statements and notes thereto and "Results of Operations"
under "Item 5 - Operating and Financial Review and Prospectus".
Eleven Months Ended
December 31, 2000
Operating revenues $ 320,548
Operating income before income taxes $ (337,839)
Net income for the period $ (336,867)
Earnings per share $ (0.06)
Common shares used in calculation 6,000,000
Consolidated Balance Sheet
Total assets $ 863,509
Capital assets $ 27,842
Total liabilities $ 97,764
Share capital $ 1,101,961
Page 3
Capitalization And Indebtedness
- -------------------------------
The Company's consolidated capitalization as at September 30, 2001 was as
follow:
Nine Months Ended
Consolidated Balance Sheet September 30, 2001
- -------------------------- ------------------
Long-Term Debt $ 0
Shareholders' Equity $ 736,303
Total Capitalization $ 736,303
===========
Forward Looking Statements Risk Factors
- ---------------------------------------
The following is a brief overview of some of the risk factors to be considered
in relation to the Company's business. Specific risk factors to be considered
include, but are not limited to, the following:
CWN's limited operating history makes it difficult for purchasers to judge the
Company's prospects.
CWN which was incorporated on January 12, 2000 has a limited operating history
upon which an evaluation of its current business and prospects can be based.
Purchasers should consider any purchase of CWN's shares in light of the risks,
expenses and problems frequently encountered by all companies in the early
stages of development. As at October 31, 2001 the Company lost $70,133 for the
ten month period and had a deficit of $407,000.
Uncertainties relating to early stage of development.
The Company is at an early stage of development. The Company has not completed
the full development of all of its commercial products and, accordingly, has no
profitable operating history upon which investors may rely. The Company has
received limited revenues from its operations and expects that most of its
revenues in the foreseeable future are dependant upon the implementation of its
business plan. In creating the suite of services that the Company proposes to
offer through its financial portals, the Company will need to rely upon
partnerships or collaborations with other companies such as on-line trading
facilities and there can be no guarantees that the Company will be able to enter
into such collaborations or partnerships to provide these services. There can
be no assurances that the Company will ever achieve profitability.
CWN's recent revenue growth may not continue in the future.
There can be no assurance that the revenue growth CWN has experienced in the
eleven month period ended December 31, 2000, from nil at incorporation to
$320,548, will continue or increase. CWN's limited operating history makes the
prediction of future results difficult or impossible, and therefore, the
Company's recent revenue growth should not be taken as an indication of any
growth that can be expected in the future. To date, all of the Company's
revenues have been derived from the operations of its wholly owned subsidiary
NAI-Interactive Ltd. ("NAI") and not through the operations of CWN's website
"www.chineseworldnet.com". See Item 4 "Information on the Company and NAI".
CWN, as an early stage company, is reliant upon a continued increase in the
number of members that subscribe to its financial portals
www.chineseworldnet.com and www.na-investor.com. See Item 4 - "Information on
the Company and NAI - Business of CWN" and "Business of NAI". This increase is
dependant on the Company's' ability to implement all of the services it proposes
to offer under its business plan which will require the Company to expend
capital on an on-going basis. The Company is reliant on revenues to support
this capital requirement. See Item 4 - "Information of the Company and NAI -
Corporate Strategy and Strategic Business Plan".
Page 4
CWN anticipates losses for the foreseeable future.
It is anticipated that the Company will incur net losses for the foreseeable
future. The extent and duration of these losses will depend, in part, on the
amount of CWN's growth in revenues from advertising sales, client products,
marketing services and transactional fees. The Company expects that its
operating expenses will increase during the next several years, especially in
the areas of sales and marketing, product development and general and
administrative expenses. Thus, the Company will need to generate increased
revenue to achieve profitability. There can be no assurance that the Company
will ever achieve or sustain profitability or that its operating losses will not
increase in the future. See Item 4 - "Information on the Company and NAI -
Business of CWN".
CWN's success depends upon the widespread acceptance of the Internet as a key
source of information.
Traditionally, the investing public obtains current information on public
companies from brokers, securities analysts, newspapers and magazines. CWN's
business is based on the premise that a significant portion of the investing
public will seek to obtain that information via the Internet. If that does not
occur, or if it occurs more slowly than expected, the Company will not be able
to generate sufficient revenue from its Internet based business model which may
impede the Company from being able to implement its strategic business plan.
See Item 4 - "Information on the Company and NAI - Strategic Business Plan".
CWN's long-term liquidity and capital resources are uncertain.
The Company believes revenues from current operations combined with its cash
resources are adequate to fund the Company's current marketing program in North
America. The Company believes that it will need to secure additional financing
to implement its planned expansion into Asia. The Company has not entered into
any agreements with respect to this additional financing but expects to raise
such funds through debt or the offering of stock to accredited investors.
However, there can be no assurance that revenue will increase in the foreseeable
future. In the event that there is an opportunity for an acquisition and
additional funds are needed, there is no assurance that the Company will be
successful in raising a sufficient amount of additional capital or in internally
generating a sufficient amount of capital to fund this purpose. See "Information
on the Company and NAI - Business of NAI" and "Business of CWN".
CWN may not be able to generate sufficient advertising revenue.
CWN derives a significant portion of its revenues from the sale of
advertisements on its websites, and the Company plans to continue to do so for
the foreseeable future. If the Company's advertising revenues decrease or
remain static while costs increase, it will not be able to generate a
significant proportion of its overall revenues which may impede the Company from
being able to implement its strategic business plan. See Item 4 "Information on
the Company and NAI - Strategic Business Plan". The Company's ability to
generate advertising revenues is subject to a number of risks, including the
following:
- CWN not being able to develop or maintain a large enough membership
database from its website, which would result in the Company not having
a large enough market for potential advertisers;
- advertisers may not accept the Internet as a viable advertising medium;
and
- CWN may have to provide its advertisers with additional advertising to
fulfill its contracts, if the Company is unable to show sufficient
audience usage of its website.
Computer equipment problems and failures could adversely affect CWN's business.
Problems or failures in CWN's Internet-related equipment, including its file
servers, computers and software could result in interruptions or slower response
times on the Company's websites, which could reduce the attractiveness of its
websites to advertisers and users. Equipment problems and failures could result
from a number of causes, including an increase in the number of users of the
Company's websites, computer viruses, outside programmers penetrating and
disrupting its software systems, human error, fires, floods, power and
telecommunications failures, and internal breakdowns. In addition, any
Page 5
disruption in Internet access provided by third parties could have an adverse
effect on the Company's ability to provide the services that it proposes to
offer to its members which in turn may have an adverse effect on the number of
members the Company and NAI are able to attract to their websites.
CWN may not be able to compete successfully against current and future
competitors.
CWN will encounter competition from other Internet companies targeting the
Chinese community and operating in the Company's target markets of Hong Kong,
Taiwan and China. Many of its present and future competitors in the Asian
Internet market have substantially greater financial, marketing and technical
resources, name recognition and experience in the Asian markets. CWN's
competitors may be able to respond more quickly to new or emerging trends and
technologies. In addition, current and potential competitors may make strategic
acquisitions or establish cooperative relationships among themselves or with
third parties that could increase their ability to reach customers in China.
This type of existing and future competition could affect the Company's ability
to form and maintain agreements with its marketing partners. No assurances can
be given that the Company will be able to compete successfully against current
and future competitors, and any failure to do so would result in the Company
being unable to attract new members to its websites to meet its revenue
projections and therefore to successfully achieve the objectives of its
strategic business plan. See Item 4 - "Information on the Company and NAI -
Strategic Business Plan".
CWN's future performance is dependent on its ability to retain key personnel.
CWN's performance is substantially dependent on the performance of its senior
management and key technical personnel. In particular, the Company's success
depends on the continued effort of its senior management team, especially the
President and Chief Executive Officer, Joe Tai; the Chief Financial Officer,
Kelvin Szeto; the Vice President - Editing, Yan Li; the Vice President - Website
Development, Michael Hui; and the Vice President - Project Development, Gilbert
Chan. The loss of the services of any of the Company's executive officers or
other key employees could have an adverse effect on the long term management and
day to day operations and therefore financial condition of CWN's business. The
above mentioned senior management of the Company beneficially own or have
control over an aggregate of 500,000 common shares of CWN representing 6.25% of
its issued and outstanding share capital. CWN has employment agreements in
place with its senior management and key employees. See Item 6 - "Directors,
Senior Management and Employees".
Doing business outside of the United States may subject the Company to
additional risks.
It is possible that a substantial portion of CWN's business will be conducted
outside of the United States. In this event, its operations could be subject to
various risks such as the possibility of the loss of revenue, property or
equipment due to expropriation, nationalization, war, insurrection, terrorism or
civil disturbance, the instability of foreign economies, currency fluctuations
and devaluations, adverse tax policies and governmental activities that may
limit or disrupt markets, restrict payments or the movement of funds or result
in the deprivation of contract rights. Additionally, the Company's ability to
compete could be adversely affected by foreign governmental regulations that
encourage or mandate the hiring of local contractors, or by regulations that
require foreign contractors to employ citizens of, or purchase supplies from
vendors in a particular jurisdiction. The Company could also be subject to
taxation in a number of jurisdictions, and the final determination of its tax
liabilities might involve the interpretation of the statutes and requirements of
various domestic and foreign taxing authorities.
The following represent the specific risk factors involved in doing business
outside of the United States in markets that CWN focuses on.
The laws and regulations in China, Taiwan and Hong Kong may not be favourable to
- --------------------------------------------------------------------------------
the Company's business.
- -----------------------
The laws and regulations in China, Taiwan and Hong Kong impose liability for
content retrieved from the Company's portals or require that it obtain specific
licenses, approvals or consents. For example, Internet law in the People's
Republic of China ("PRC") is relatively new and untested. Its interpretation
and the enforcement of what is deemed to be socially destabilizing by Chinese
authorities may involve significant uncertainty or risk. In addition, the
Page 6
Chinese legal system is a civil law system in which decided legal cases have
little precedential value. As a result, in many cases it is difficult to
determine the type of content that may result in liability.
There are no assurance that the Internet market will expand in China, Taiwan and
- --------------------------------------------------------------------------------
Hong Kong.
- ----------
Were the Internet market not to expand in the future as the Company anticipates
then the risks to the Company include:
(a) The failure to realize expected growth in Asian Internet usage and low
Internet penetration rates in Asia;
(b) The lack of a sophisticated Internet infrastructure and limited
Internet access in some markets, such as the PRC, that is necessary to
deliver many of the Company's products and services;
(c) The intense competition from existing and potential competitors with
longer operating histories, greater name recognition, larger customer
bases and greater resources which may reduce CWN's user traffic; and
(d) Advertising targeting the Asian market may not increase unless a
significant amount of local language content is developed on the
Internet. Also, expenditures for advertisements may decrease due to
the results of slowing domestic demand and deflation.
Currency prices and convertibility may adversely affect the Company.
- --------------------------------------------------------------------
China's currency, the Renminbi ("RMB"), is not fully convertible into foreign
currency. China's central bank publishes daily the RMB exchange rate against
the U.S. dollar and other major international currencies, largely but not
entirely, based on supply and demand of foreign currency. In recent years,
there has been significant devaluation of the RMB against the U.S. dollar.
Economic and legal restrictions on the availability of foreign currency and the
right to repatriate funds may adversely affect the performance of the Company
when measured in terms of U.S. dollars. All established joint venture companies
operating in China register as members of a "currency swap centre". Through the
operation of the swap centres, foreign investors are given priority in
converting amounts invested, plus profit thereon, into their home currency of
repatriation, with no limits on the amounts.
Doing business in the People's Republic of China will expose the Company to
- --------------------------------------------------------------------------------
additional risks.
- -----------------
Virtually all of the Company's market is in Hong Kong, Taiwan and China.
Consequently, investment in the Company may be adversely affected by an unstable
political, social and economic environment in the PRC. Under its current
leadership, the PRC has been pursuing economic reform policies, including the
encouragement of private economic activity and greater economic
decentralization. There can be no assurance, however, that the PRC government
will continue to pursue such policies, that such policies will be successful if
pursued, or that such policies will not be significantly altered from time to
time. Moreover, economic reforms and growth in the PRC have been more successful
in certain provinces than others, and the continuation or increase of such
disparities could affect the political or social stability of the PRC which in
turn would make any potential investment in the Company less attractive.
CWN's business and prospects are dependent in part upon present and future
agreements with various entities controlled by the PRC government. Failure of
such governmental entities to honour these contracts would make it difficult for
the Company to maintain its operations and develop its business in the PRC.
Additionally, contracts that are breached might be difficult to enforce in the
PRC. Furthermore, the Company's activities in the PRC are by law subject, in
some circumstances, to administrative review and approval by various national
and local agencies of the PRC government. The inability to obtain such
approvals could have a material adverse effect on the Company's business,
financial condition and results of operations.
The PRC does not have a well-developed, consolidated body of law governing
foreign investment enterprises. As a result, the administration of laws and
regulations by government agencies may be subject to considerable discretion and
Page 7
variation. In addition, the legal system of the PRC relating to foreign
investments is both new and continually evolving, and currently there can be no
certainty as to the application of its laws and regulations in particular
instances. If, for any reason, CWN were required to discontinue or move its
operations outside of the PRC, CWN's profitability, competitiveness and market
position could be materially jeopardized, and there can be no assurance that we
could continue the Company's operations elsewhere.
Potential liability from electronic and hard copy publishing.
CWN is paid by companies to produce company reviews, which are published on its
website. CWN's users may request and receive directly from CWN a hard copy of
any such review. CWN makes no recommendation for the purchase of securities in
any of its public company clients' securities and each report contains a
disclaimer to that effect. CWN does not send out unsolicited copies of the
reports on its client companies' behalf. CWN receives a fee from the client
company for preparing the report but receives no underlying interest in the
client company's securities nor does it take any position in those securities.
Although CWN has a disclaimer on each review, it may be perceived by users that
the Company is endorsing its client companies as an investment. Potential
liability issues may arise should the Company's users invest in these companies
and lose money based upon an inaccurate perception that the Company has endorsed
such an investment. Liability issues include the defence of a law suit that
could be brought by a user seeking compensation for the losses it has suffered
which could involve the Company in costly and time-consuming litigation in
defending such a suit. CWN has no liability insurance in place to protect the
Company against such a potential suit.
Potential failure of planned technology applications and partners.
Should the platform that CWN intends to design and launch for its main portal
website not function, it will have a very significant negative effect on the
Company's projected revenues which could result in a negative cash flow and loss
of profitability. Without this platform the Company cannot provide a
personalized portal to each member or access to worldwide financial products.
If the Company cannot partner with trading engine partners and financial
information partners to provide stock trading capability in its different target
locations, the Company will have to obtain its own licenses. This will cause a
delay and additional expense in the Company's ability to provide worldwide
trading capability on its Internet platform. Furthermore there is no guarantee
that CWN will succeed in these efforts and the Company's projected revenues
could be significantly adversely affected.
No Dividends have been paid which will effect a shareholder's return on
investment.
To date, the Company has not paid a dividend on its common shares and does not
intend to do so in the foreseeable future as any excess funds will be reinvested
in implementing the Company's business plan. Investors seeking a return on
their investment in the form of a dividend should not expect to receive such a
return for the foreseeable future, if ever.
ITEM 4. INFORMATION ON THE COMPANY AND NAI
================================================================================
History and Development of CWN
- ------------------------------
ChineseWorldNet.Com Inc. ("CWN" or the "Company") was incorporated on January
12, 2000 under the Company Law (1998 revision) of the Cayman Islands. The
Company is principally based in the Cayman Islands and its operations are
primarily conducted in North America and Asia. The address of the Company's
principle registered and executive head office is that of its agent, Huntlaw
Corporate Services Limited, being: The Huntlaw Building, P.O. Box 1350GT, Grand
Cayman, Cayman Islands, Telephone (345) 949-4900. The Company's North American
office and principle place of business is located at Suite 620 - 1090 West
Pender Street, Vancouver, British Columbia, Canada V6E 2N7. Telephone (604)
488-8878.
CWN, through its website "www.chineseworldnet.com", is an Internet-based
provider of financial news and information on North American blue chip and large
cap public companies listed or quoted on the NYSE, AMEX and NASDAQ. CWN's
website is a subscription based financial portal that provides up-to-date
financial information and financial management tools to its membership which is
Page 8
currently comprised of the Chinese community in North America. CWN plans to
expand these services into Hong Kong, China and Taiwan. See Item 4 -
"Information on the Company and NAI - Business of CWN" and Item 4 - "Information
on the Company and NAI - Corporate Strategy and Business Plan".
As part of the Company's proposed expansion into Asia, on October 13, 2000, the
Company acquired, through subscription, 100,000 common shares in the capital of
Technology City Holdings Limited ("TCHL"), a Hong Kong incorporated company,
representing 4.167% of the then issued and outstanding shares of TCHL, for
US$100,000. TCHL is a multi-media, Internet-based financial information
provider focusing on listed securities in Hong Kong. The purpose of this
investment is to facilitate TCHL providing content information to the
www.chineseworldnet.com website. The Company's investment in TCHL will also
enable CWN to provide market and content information focusing on public
companies listed on the Growing Enterprise Market ("GEM") in Hong Kong.
On November 2, 2000, the Company completed a private placement with certain
individuals who purchased 2,000,000 common shares of the Company at a price of
$0.40 per common share for gross proceeds to the Company of $800,000. The
proceeds from this private placement are being used for general working capital
purposes.
Business of CWN
- ---------------
CWN is an Internet-based financial services company that provides financial news
and information to fee paying subscribers through its Internet based financial
portal, "www.chineseworldnet.com". "www.chineseworldnet.com" provides financial
information, in Chinese, focused on large cap and blue chips public companies on
the NYSE, AMEX and NASDAQ and on Asian public companies as content from NAI and
TCHL, respectively, are incorporated into the website. CWN's financial portal
focuses on financial information on North American and Asian stock exchanges and
other financial services. Financial information includes daily market
commentaries, streaming videos, news releases, real-time quotes and other
corporate information of publicly traded companies from North America and Asia.
While the website is operating with limited features, the target launch date for
the full feature platform is June, 2002.
In addition to the provision of financial news and corporate information on
North American public companies, the Company also intends to offer to its
members, through partnerships and affiliations, which are still under
negotiation, additional services such as online trading, online investment tools
and applications such as portfolio tracking which management believes can
generate other sources of revenue. The Company intends to provide three
additional services by developing a platform on www.chineseworldnet.com to be
called the "My Financial Portal" which will enable members to create a
personalized portal to manage their stock portfolios and to facilitate the sale
of other financial products, including stocks, mutual funds, options and bonds,
insurance and on-line banking. Members will be able to customize their personal
stock portfolio and financial news and information, which will be automatically
updated. Trades will also be relayed from CWN's website, through to its
alliance partners' trading engines as discussed below.
www.chinesworldnet.com is in the beta stage in that the working prototype is
being evaluated and tested by individuals prior to the commercial launch of the
site next year.
As it is not yet fully operational as a commercial product, it has not generated
any revenues to date. It is CWN's intention to generate direct revenues from
the website through a monthly membership subscription fee which CWN estimates
will be $9.95.
The services that the Company provides are delivered through the Company's
Internet based financial portal and include:
- Online Stock Trading Marketing Services
CWN is in negotiation with one U.S. based and one Hong Kong based on-
line securities trading companies to effect an affiliation or
partnership whereby these companies will be able to provide CWN members
Page 9
with the ability to conduct on-line trading via a "click through" from
the www.chineseworldnet.com website to the securities trading companies.
Though this product is in the development stage, it is the Company's
intention that its members will be able to direct on-line trades through
the Company's Internet portal by directing these members to log onto
independent on-line Internet based trading platforms of the Company's
proposed partners in order to trade securities. In order to do so, the
Company's members would have to independently register with the on-line
trading partner.
For example, the procedure is proposed to be as follows:
1. When a CWN member in North America wishes to trade securities, for
example, on the Hong Kong Stock Exchange, the CWN member first
needs to log onto CWN's "www.chineseworldnet.com" website.
2. The member then needs to open an account with one of CWN's on-line
trading partners.
3. The member then needs to go to a specific button dependent on what
exchange the member wants to trade securities e.g. (Trade NA
stock), for North American markets, in CWN's website; and will be
automatically directed to one of CWN's trading partner's trading
platforms at which point the member will log in independently to
this site.
4. The member will then place the order and the order will then be
sent to the requisite brokerage firm by the North America trading
partner.
5. After the North America trading partner receives the confirmation
of the trade from the Hong Kong brokerage firm, this confirmation
is sent to the member.
6. At the end of the each day, CWN will receive a list of trading
information which is pre-authorized by each CWN member from the
trading partner.
7. CWN will then put all of the trading information in the member's
international trading portfolio which is accessible from CWN's
website.
CWN proposes that revenues will be generated by payments from the on-
line trading partners for each CWN member that uses its services. A
revenue structure for their product has yet to be finalized.
- - Banner Advertising
Companies may place corporate banner ads on CWN's web pages through a
service contract of, generally, six month duration for a fee ranging from
$480 to $680 per month based upon on estimate of how many times the banner
ad will be seen by users of the www.chineseworldnet.com website.
- - Website Design, Hosting & Maintenance
CWN can create websites for companies that require them. The fee for
creating a website varies depending upon the size and complexity of the
desired site and ranges from $980 to $1,480 based upon the complexity of the
design of the website. In addition, a flat fee of $20 is charged monthly for
maintenance and hosting of the site on CWN's network.
Page 10
- - Online Marketing Service
The Company provides services to increase the publicity and website traffic
to targeted audiences for public and private companies. Services include
creation of a search criteria for Internet based search engines to enable
quick access to the companies sites, email messages to CWN members and other
services that can help increase Internet traffic to company sites.
- - ASP Service
The Company also provides Application Service Provider ("ASP") services to
corporate clients which includes custom software program tools that allow
the corporation to manage their corporate communication and website content
via the Internet independently of CWN. CWN proposes to charge a $500
installation fee for their software and a monthly fee of $20 to use the
service.
To date, www.chineseworldnet.com is still in its development and testing
phase and as such it has not generated any revenues to CWN.
History and Development of NAI
- ------------------------------
On January 15, 2000 CWN acquired 100% of the issued and outstanding common
shares of NAI-Interactive Ltd. ("NAI"), a Canadian company incorporated under
the laws of British Columbia, from Tin Yee Lau, the wife of CWN's President and
Chief Executive Officer, Joe Tai. The purchase price was 112,500 common shares
of the Company valued at $5,625. NAI operates the "www.na-investor.com"
website, which provides public relation services for client companies, financial
news, website design, investment seminars, translation of financial information
and company review writing for micro cap and small cap public companies listed
on North American stock exchanges to Chinese investors.
Business of NAI
- ---------------
NAI provides a complimentary but separate service from that provided by CWN,
being the provision of promotional and investor relations services to corporate
clients that consist of small cap and micro cap public companies based solely in
North America through various media including the Internet, newsprint and person
to person meetings. NAI's rational is to provide focused public relations and
investor relations services to the Chinese community in North America for these
companies.
www.na-investor.com
NAI operates the www.na-investors.ca website which provides public and investor
relation services to fee paying North American public company clients who are
listed or quoted on small and micro public markets in North America, such as the
Canadian Venture Exchange, NASD OTC Bulletin Board and the Toronto Stock
Exchange. All information on this website is in Chinese and the website also
offers stock quotes, company generated reports and reviews, newsletters and
independent analysts reports for review by the North American Chinese community.
Currently, there are over 50,000 registered members and the website receives
over 750,000 viewer visits each month.
Unlike www.chineseworldnet.com, www.na-investors.com is not a financial portal
for fee paying members but an Internet based medium for the dissemination of
information on fee paying public companies that would like to obtain increased
exposure to the public by accessing NAI's website members. Consequently, no
subscription fee is charged to members accessing this website.
The services provided solely through www.na-investors.com are as follows:
Page 11
- - Banner Advertisements
Companies place their company banner in the homepage of
"www.na-investor.com" in order to increase public awareness. Each company
pays a monthly fee to rent the space in the homepage of the
www.na-investor.com" website. Companies using this service includes:
-------------------
- Dragon Pharmaceuticals, Inc.
- Minco Mining and Metals Corp.
- Nevada Pacific Gold Corp.
- - Chinese Webpage Hosting and Maintenance
For companies with an existing website, CWN will create a Chinese web page for
the company on its website, linked to the featured company section on the CWN
website and in addition it will provide a Chinese button for the company in
their English website. NAI charges a one-time fee of $1,480 for this service.
- - Company Review
The Company's in-house editors translate information and write periodic reviews
of individual company's using NAI's services. This company review will then be
sent to all NAI members by email and by mail. NAI provides a clear disclaimer at
the end of the review that this is a paid service by the public companies being
featured and that the information provided is not the view of or endorsed by
NAI. The fee charged for this services is $2,500 per review.
- - Translation Service
The Company's in-house editors translate financial information to Chinese for
public and private companies and mutual fund companies. The Company charges $75
per page for this service.
- - Chinese Investment Seminar
CWN markets and organizes Chinese investment seminars four times a year at which
public companies pay a sponsorship fee to the Company to enable them to make 40
minute presentations to potential Chinese investors about their companies. NAI
charges a fee of $4,000 per presenting company for organizing these seminars.
Chinese Financial Newspaper
Commencing August 2001 the Company began publishing a bi-weekly Chinese
financial newspaper in Canada written in Chinese. The revenue for the newspaper
comes mainly from advertisement. The newspaper will be run by the Company's
editorial team of which three senior officers have extensive experience in this
industry having previously worked for newspaper companies in China. The cost of
each edition will be approximately US$10,000. The newspaper will be free to
readers for the first six months of its publication and thereafter will be sold
at $0.75 per copy to generate additional revenue for NAI. The newspaper
provides another medium for the dissemination of public relations and investor
relations information for client companies, as set out above.
Many of NAI's clients are small or micro cap public companies which have
commissioned NAI to either prepare a company profile report or translate their
news releases and corporate information to target the relatively untapped
Chinese investment community.
Currently, NAI accounts for 100% of the Company's revenues, which totalled
$320,548 from the Company's inception on January 12, 2000 to Dec 31, 2000.
Sources of revenue were from banner advertisements, Chinese website hosting and
maintenance, company reviews, translation and Chinese investment seminars and
sponsorship of online promotional events such as a "Fantasy Stock Challenge" and
the Chinese Financial Newspaper.
Page 12
NAI's revenues for the period January 12, 2000 to December 31, 2000 are broken
down as follows:
Revenues
- --------
Banner Advertisement - Existing Customer $ 31,920
Banner Advertisement - Public Company $ 5,669
Banner Advertisement - Corporate $ 6,502
Company Report $ 13,645
Banner Design Fees $ 4,971
Logo Design Fees $ 814
Consulting Fees $ 3,129
Fantasy Stock Challenge Sponsorship $ 82,869
Company database $ 13,731
Email News Release $ 515
Printing Fees $ 13,952
Translation & Website Production $ 9,033
Website Design Fees $ 1,711
Programming Setup $ 10,053
Website Design & Development $ 75,191
Translation $ 1,214
Advertising $ 258
Online promotion $ 4,029
Website Hosting $ 729
Investment Seminar $ 12,623
Webpage Hosting $ 17,669
Fantasy Euro Maintenance Fees $ 1,380
Web page Maintenance $ 6,510
Interest Revenue $ 1,265
Other Revenue $ 1,166
----------
TOTAL $ 320,548
Corporate Strategy and Strategic Business Plan
- ----------------------------------------------
The Company's goal is to become a global leader in the Internet-based financial
community by providing a diverse range of financial information and news on
public companies to Chinese investors in North America and Asia. In addition,
the Company also intends to provide its members with the ability to trade
securities in these companies on North American and Asian markets through its
stock trading partners in different cities. The Company believes its growth
will come in two phases - firstly by building a presence in North America and
secondly by expanding its services into Asia.
Phase One - Building a Presence in North America
The first phase of the Company's business plan has been to strengthen the
Company's presence in North America through the acquisition of NAI, on January
15, 2000.
As previously mentioned, NAI's client base is solely made up of North American
small and micro cap companies using NAI's services to access the Chinese
investment community in North America. The Company believes that NAI is the
only North American based provider of financial news and information on North
American micro cap and small cap public companies listed or quoted on junior
exchanges or quotation services and targeting the Chinese investor community in
North America. Prior to its acquisition, NAI had four employees and was
under-funded, making it very difficult for it to expand its business. After the
acquisition, the Company, including NAI, moved to larger premises located at
Suite 620 - 1090 West Pender Street, Vancouver, British Columbia V6E 2N7,
strengthened its management team, hired additional website designers and
programmers and upgraded NAI's computer network system. NAI currently employs
16 full-time employees and one part-time employee at this location and one
full-time and one part-time employee at its branch office in Toronto at 1000-145
King Street West, Toronto, Ontario, M5H 1J8, Canada.
Page 13
Phase Two - Expansion into Asia and development of other products and services
Phase two of the Company's strategic business plan will commence with the
commercialization of www.chineseworldnet.com. While this website will initially
focus on large cap and blue chip companies listed on senior U.S. exchanges, it
is the Company's intention to broaden the websites focus to (1) provide
additional web-based services to those contemplated by NAI under Phase One and
(2), to provide information on public companies listed on Asian stock exchanges.
These plans are described below:
Additional Web-Based Services
-----------------------------
CWN intends to develop management and communication applications for use
by proposed client company members (listed on senior U.S. exchanges) via
internet downloads from www.chineseworldnet.com, at a fee which has yet
to be determined. These tools and applications will be created by the
Company's in-house team of programmers or licensed from third party
developers and will enable members to update and amend their information
directly on CWN's websites without requiring this work to be done by
the Company's programmers and therefore reducing website maintenance
costs. One such proposed service is a communications manager,
"commManager", an on-line corporate communications and data access web
application. The application will allow employees to access company e-
mail, update company data and records, allow employees to communicate
with the company and one another via instant messaging or bulletin
boards and provide other services customized by CWN to the company's
needs.
Expansion into Asia
(a) Taiwan
The Company also intends to expand into Taiwan and build a
Chinese community network. The Company anticipates launching
its Taiwan website in the fourth quarter of 2002 and entering
into partnerships with local brokerage firms, local content
providers and financial institutions at this time. Website
design and programming applications will be maintained at the
Company's Canadian office.
(b) China
The Company intends to establish a direct presence in China by
the second quarter of 2002 through incorporating a company
under the laws of the PRC. This future company will seek to
form joint ventures and/or alliance partners with other
Internet content providers and financial institutions in China
to provide financial news, information and stock trading
capability to the Company's members. These partners will
include newsletter writers, brokerage firms and other "Chinese"
financial portals who will be paid by selling and distributing
their articles, financial products and/or services through the
Company's websites to its members.
The Company intends to develop a platform to be called "My
Financial Portal" which will enable members to create a
personalized portal to manage their stock portfolios and to
facilitate the sale of other financial products, including
stocks, mutual funds, options and bonds, insurance and on-line
banking. Members will be able to customize their personal stock
portfolio and financial news and information, which will be
automatically updated. Trades will also be executed from CWN's
website, through its alliance partners' trading engines. CWN's
financial portal focuses on financial information on North
American stock exchanges and other financial services.
Financial information includes daily market commentaries,
streaming videos, news releases, real-time quotes and other
corporate information of publicly traded companies from North
America and Asia. The target launch date for this platform is
June, 2002.
Page 14
(c) Hong Kong
The Company also intends to expand into Hong Kong and build a
Chinese community network. The Company anticipates launching
its Hong Kong website in the fourth quarter of 2002 and
entering into partnerships with local brokerage firms, local
content providers and financial institutions at this time.
Website design and programming applications will be maintained
at the Company's Canadian office. The Company has incorporated
a wholly owned company ChineseWorldNet.com (HK) Limited.
Suppliers
The Company currently has contracts in place with the following Internet working
partners:
- --------------------------------------------------------------------------------
Company Name Services Provided to CWN
- --------------------------------------------------------------------------------
Yahoo Chinese (www.chinese.yahoo.com) CWN provides small cap public
companies information to Yahoo in
return for access to CWN's website
through Yahoo Chinese.
- --------------------------------------------------------------------------------
Newsgurus.com Inc. (www.newsgurus.com) Newsguru provides newsletter writers'
articles for translation and
transmission on the Company's website.
- --------------------------------------------------------------------------------
China Infobank Limited China Infobank provides China financial
information.
- --------------------------------------------------------------------------------
Investrend Research (www.investrend.com) Investrend provides financial research
reports for translation and
transmission on the Company's website.
- --------------------------------------------------------------------------------
Emerging Growth Stocks EGS provides financial related articles
for translation and transmission on the
Company's website.
- --------------------------------------------------------------------------------
CWN's and NAI's Technology
- --------------------------
None of the Company's and NAI's application technologies are proprietary to the
Company. The technologies used by the Company are incorporated from different
commercially available software programs. CWN's application technology includes
a collaborative authoring environment to enable different users such as CWN's
in-house programs to work together on creating and managing content for the
Company's web-sites. It enables those who use CWN's communication applications
and content management applications to work together on creating and managing
content to CWN's websites. All users have their own accounts and can belong to
any number of sites.
All administrative and authoring functionality (such as the ability for CWN's
company editors to submit financial articles to the Company's website or for
CWN's clients to use the Company's content management application) can be
delivered via a computer, anywhere in the world. All content is structured in
user-designed content templates. These templates impose a content structuring
methodology that gives meaning or context to information and prevents against
"information overload" which can occur, for example, when someone clicks on an
article in a webpage which, without the content being shared between users can
result in the website servers overworking to continually download the same
information. Using the Company's structure of user-designed content templates,
content can be shared between sites and other sites or external databases or
Internet content. Sites can subscribe to specific content and display that
content on-line as if it was native to that site.
CWN's built-in services make it easier for application users such as public or
private company clients to solve web-programming problems like e-commerce,
database access, and html coding. Users can add external content or e-commerce
objects to sell goods and services through their site.
The Company has two servers to serve its websites in North America. If one of
the servers malfunctions, all other traffic is re-directed to the other server.
Both servers synchronize with each other every 30 seconds.
Page 15
The Company's Primary Markets
- -----------------------------
Internet Market
According to the International Data Corporation ("IDC") (March 1999 survey),
China had approximately 2.4 million Internet users at the end of 1998 and is
forecast to have 16.1 million by the year 2003. The number of Internet users in
China (including Hong Kong) has reached 12.3 million people, according to
findings released in 1999 by Internet analyst company Interactive Audience
Measurement Asia ("Iamasia"). The Internet is still a relatively new phenomenon
in China, and its use is consequently growing extremely fast, with 56 percent of
current users having begun using the Internet within the last 12 months. By
contrast, more than 70 percent of Internet users in Hong Kong have been doing so
for more than a year, according to the Iamasia survey. The Company's internal
research indicates the recent volatility in Asian financial markets has
increased the demand for reliable, around the clock financial news and
information, often available only through the Internet.
It is expected that China will be the largest Internet market in the
Asian-Pacific region (except Japan) by 2001. E-Trade Group is intending to
exploit this trend by establishing partnerships and alliances in this region.
The current Internet penetration rate in urban China is 3.5%, expected to rise
to 11% (2002). In 1999, there were 3.8 million Internet users in China, with 16
million expected by 2003, "Stockhouse Media Inc. (December 1999)"
(http://www.stockhouse.com/shfn/dec99/120899com_etrade.asp)). With its large
population and government commitment to the development of the Internet, China
represents enormous growth long term potential for Internet use.
According to research data released in 1999 by the official China Internet
Network Information Centre ("CCNIC"), Internet users in China have grown from
620,000 in 1997 to about 4 million in 1999. The 1999 CNNIC's annual survey of
Internet users reported that over 80% of Internet users are between 20 to 35
years old with high income and are highly educated. The survey also reported
that the two most used Internet services are e-mail and search engines,
representing 90% and 65.5% respectively and that 45.5% of all Chinese users
would prefer more information in Chinese, and 78.1% would purchase products over
the Internet, if available.
Hong Kong has a well- educated, technologically sophisticated population. With a
population of 6.7 million and a 1998 Internet penetration rate of approximately
10.6%, "Hong Kong Trade and Development Council (May 2001)"
(http://www.tdctrade.com/main/si/internet.htm). The Company believes Hong Kong
will rapidly increase its utilization of Internet technologies.
Taiwan has a well- educated, technologically sophisticated population of
approximately 21.9 million and 4.2 million Internet users representing a 2000
Internet penetration rate of approximately 19.2%, "U. S. Department of Commerce
- - National Trade Data Bank, (November 2000)". (www.tradeport.org/ts/countries/
taiwan/mrr/mark000.2.html). The Company believes that Taiwan will also quickly
adopt Internet technologies for business, entertainment and communication.
The Internet as a New Business Medium
New software -based authoring tools have lowered the cost of publishing content
on the Internet relative to conventional publishing methods and enable new,
exciting forms of multimedia content. The cost of accumulating, storing and
delivering content to a large audience is lower than that of conventional media,
consisting only of the cost of maintaining and operating computer equipment.
Content is readily accessible by any Internet user and most information is
available free of charge.
CWN's management believes that through the operation of its portal network,
targeted at the Chinese audience, it will be able to help satisfy member demand
for Chinese language financial services. Although the Company does not intend to
provide all the services that may be available on the multitude of web sites
that are currently online, it believes that the offerings that it will provide
are competitive against other web sites providing similar services in English.
Page 16
Internet Advertising Market
The Internet allows advertisers to present messages to specific, targeted
audiences, and to enable users to interact with advertising information
presented in web pages. This characteristic of the Internet also permits
advertisers to measure more precisely the number of impressions, or times that
an advertisement appears in page views downloaded by users, through verification
by independent third- party auditors. Advertisers can also measure the
effectiveness of advertising in generating "click -throughs" or user requests
for additional information made by clicking on the advertiser's banner linking
the user to the advertiser's web site. The Company believes increases in
transmission bandwidth through higher speed Internet connections, and wider
adoption of advanced content delivery technologies for the Internet, such as
Java, VRML and other multimedia enabling technologies, will increase the
functionality of advertising, and will make the Internet an even more attractive
advertising medium. The Company also believes technological developments may
result in a greater ability to provide information and analysis about the
effectiveness of Internet advertising, the demographic profiles of users, as
well as the ability of advertisers to frequently modify and more closely tailor
their messages. The Company believes that this should result in more targeted,
higher impact advertising opportunities, and greater integration of web--based
advertising into the range of marketing channels available to advertisers.
However, there is no guarantee this will occur.
This year Forrester Research Inc. forecasted that Internet advertising revenues
outside the U.S. will grow from the current US$0.5 billion to US$10 billion by
2004, an annual compounding rate of 83% per year, "Forrester Research Inc.
(December 2000)" Much of this growth is expected to be fuelled from Asia.
Research by Goldman Sachs projects Internet advertising in Asia could be worth
as much as US$1.5 billion by 2001, and represent 5% of total advertising
spending, "Goldman Sachs (March 1999)". A.C. Nielsen estimates that advertising
expenditures for traditional media in Asia was over $50 billion in 1998,
"ACNielsen (March 1999)". In 1998, advertising expenditures for television,
newspapers and magazines in China, Hong Kong and Taiwan was $5.3 billion, $2.5
billion and $2.5 billion, respectively, representing a 44.7%, 2.6% and 20.7%
increase over 1997 despite economic difficulties experienced in the Chinese
market, "Forrester Research Inc. (December 2000)".
Internet E-Commerce
The Internet provides online businesses with global reach, the ability to
operate with minimal infrastructure, reduced overhead and greater economies of
scale. At the same time, it provides consumers with a broad selection,
increased pricing power and unparalleled convenience. In IDC's 1999 bi-annual
report for the Asia/Pacific region, E-commerce represented $722.7 million in
1998. IDC forecasts this figure would reach $87.5 billion by 2004, a forecasted
compound annual growth rate of 261%.
Market Size
The market size for CWN is the combination of Internet e-commerce, advertising
revenue and the Company's ASP model to the global Chinese community.
The Company's marketing strategy is to promote its financial portals in Asia
through the efforts of its marketing team and the use of Chinese media. CWN
will utilize its online marketing team to promote its online web content, use
its Chinese financial newspaper to target Chinese individuals in North American
and promote its financial portal through different media in Asia such as
financial TV, radio programs and financial magazines. The Company proposes to
use 25%-35% of its revenue to promote its financial portal in order to increase
the awareness and publicity of CWN.
The Company intends to direct its marketing efforts across all of its services
as it believes each has its own market potential.
Competition
- -----------
The Internet based financial services industry is very competitive. The Chinese
and Asian Internet markets have an increasing number of entrants because
Internet start-up costs are so low. In addition, the Internet industry is
relatively new and subject to continuing definition. As a result, the Company's
competitors may better position themselves to compete in the market as the
Page 17
Internet market matures. Although the Company believes it does not have
comparable and existing competitors, the Company believes that taken separately
each of its services have competition most of which have longer operating
histories in the Internet market, greater name recognition, larger customer
bases and databases and significantly greater financial, technical and marketing
resources than CWN. Any of the Company's present or future competitors may
provide products and services that provide significant performance, price,
creative or other advantages over those offered by us. The Company can provide
no assurance that we will be able to compete successfully against our current or
future competitors.
There are two primary competitors offering websites that contain financial
services in Chinese (as well as other services) although neither is offering
exactly the same-targeted financial services.
China.com Inc. operates the "www.china.com" website, and is the only NASDAQ
listed Chinese Internet company. Their current market capitalization is
approximately US$3 billion. China.com services are portal websites in English,
Traditional and Simplified Chinese as well as a website specially designed for
users in China. Their sites offer news and information on finance, business,
community, travel, culture and life. CWN's portal currently receives 1% of the
amount of hits that China.com's portal receives. In order to achieve their
significantly larger user base, China.com has incurred approximately US$11
million in net losses as of December 31, 1998, including expenditures on a
series of acquisitions. Although CWN's management believes that it is possible
to achieve a high volume of users without incurring such losses, there is no
assurance this can be achieved. However, as the Asian global Internet community
is so large and is projected to grow so rapidly, CWN's management believes the
market is large enough to enable CWN to capture a significant portion of the
market share.
Sina.com is the most established Chinese news and media website, with over one
million registered users. Sina.com offers websites for Chinese in North
America, Taiwan, China and Hong Kong, as well as news, information on finance,
life, shopping, chat, e-mail, games, horoscope and a search engine.
Additionally, CWN's competition with respect to user traffic, ease of use and
functionality also include:
This autonumbering uses the List Number styles (shortcut keys are Alt G1, Alt G2
etc.)
1. Chinese language based web search and retrieval companies such as Yahoo!
China, Sina.com, Netease, Sohu, Shanghai Online, ChinaByte and Netvigator
(which is owned by Hong Kong Telecom).
2. CWN's competition with respect to strategic expertise, technical knowledge
and problem solving skills for web design include, as well as many unknown
smaller companies who may offer this service, Internet integrators and web
site design and development companies such as iXL Inc., Modem Media,
Proxicom, Inc., One to One Media Limited, Eureka Digital Limited, Dragon
Creative International and Core Solutions Limited.
CWN's competitors may be able to undertake more extensive marketing campaigns,
adopt more aggressive pricing policies and make more attractive offers to
qualified personnel, distribution partners, advertisers and content providers.
Further, there can be no assurance that ISP's, web browsers and web content
providers will not be perceived by advertisers as having more desirable web
sites for placement of advertisements. Additionally, some or all of these
competitors may develop web search and retrieval services that are equal or
superior to those CWN offers our users and may achieve greater market acceptance
than CWN's offerings in the area of performance, ease of use and functionality.
Intellectual Property, Government Approvals and Regulations
- -----------------------------------------------------------
CWN's application technology is not protected by any patents or copyrights nor
does the Company intend to seek any such protection. However, without patent or
copyright protection, the Company may not be able to prevent duplication of its
technology by competitors.
Page 18
Organizational Structure
- ------------------------
-----------------------------
Chineseworldnet.com Inc.
------------------------------
----------------------------------------
100% 100%
--------------------------------- ---------------------------------
NAI Interactive Ltd. ChineseWorldNet.com (HK) Ltd.
--------------------------------- ---------------------------------
ChineseWorldNet.Com Inc. is a corporation incorporated under the Company Law
(1998 revision) of the Cayman Islands on January 12, 2000. The principal
executive and registered office of the Company is located at Huntlaw Corporate
Services Limited, The Huntlaw Building, P.O. Box 1350, Grand Cayman, Cayman
Islands. The Company's North American office and principle place of business is
located at Suite 620 - 1090 West Pender Street, Vancouver, British Columbia,
Canada V6E 2N7.
NAI Interactive Ltd. ("NAI") is a British Columbia company incorporated on
November 13, 1998. It was acquired by CWN on January 15, 2001. NAI's head
office is located at 620-1090 West Pender Street, Vancouver, B.C., V6E 2N7.
Chineseworldnet.com (HK) Ltd. ("CWNHK") is a Hong Kong company incorporated on
December 22, 1999. CWNHK's head office is located at Flat A, 19/F, Kyoto
Plaza, 491-499 Lockhart Road, Causeway Bay, Hong Kong. CWNHK provides the
Company with a local operations base for CWN's penetration and expansion in the
Asian market.
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
================================================================================
This discussion and analysis is of the operating results and the financial
position of the Company from the period January 12, 2000 (inception) to December
31, 2000, and should be read in conjunction with the Consolidated Financial
Statements and the related Notes thereto provided at Item 18.
Results of Operations
- ---------------------
The Company has focused much of its efforts to create a Chinese financial portal
targeting Chinese investors. The first stage of the Company's growth was the
acquisition of NAI on January 15, 2000. NAI is a Canadian, Internet company and
its business address is Suite 620 - 1090 West Pender Street, Vancouver, British
Columbia V6E 2N7. The purchase price was 112,500 common shares of the Company
valued at $5,625. The Company strengthen NAI's management team, hired
additional website designers, programmers and translators and upgraded NAI's
computer network system. NAI now employs 18 people.
The Company was incorporated on January 12, 2000 and has only eleven months of
operating history to report. For the eleven month period ended December 31,
2000, operating loss was $336,867 on revenue of $320,548. Revenues were derived
from the following sources: banner advertising, company report services and
sponsorships which are broken down in the following table. Expenses totalled
$669,371, which includes the hiring of an additional 13 employees at a cost of
$79,031 and $62,282 in consulting fees. Outlined below are the results of
operations for the period January 12, 2000 (inception) to December 31, 2000.
Included in the Company's expenses is a stock compensation charge of $288,487
made by the Company against the founders shares issued by the Company to certain
insiders of the Company at $0.001 per share. This charge represents the
Page 19
difference in the value of the founders shares issued by the Company and assumed
cost on the financial books of the Company of $0.05 per share. Additionally,
the Company incurred consulting fees of $60,282 which included a consulting fee
of $30,000 payable to Goldpac Investments Ltd., a company owned by Chi Cheong
Liu and the spouse of Joe Tai. See "Item 10 - Director's, Senior Management and
Employees - Compensation".
Revenues
- --------
Banner Advertisement - Existing Customer $ 31,920
Banner Advertisement - Public Company $ 5,669
Banner Advertisement - Corporate $ 6,502
Company Report $ 13,645
Banner Design Fees $ 4,971
Logo Design Fees $ 814
Consulting Fees $ 3,129
Fantasy Stock Challenge Sponsorship $ 82,869
Company database $ 13,731
Email News Release $ 515
Printing Fees $ 13,952
Translation & Website Production $ 9,033
Website Design Fees $ 1,711
Programming Setup $ 10,053
Website Design & Development $ 75,191
Translation $ 1,214
Advertising $ 258
Online promotion $ 4,029
Website Hosting $ 729
Investment Seminar $ 12,623
Webpage Hosting $ 17,669
Fantasy Euro Maintenance Fees $ 1,380
Web page Maintenance $ 6,510
Interest Revenue $ 1,265
Other Revenue $ 1,166
----------
TOTAL $ 320,548
Expenses
- --------
Advertising and promotion 40,078
Accounting and legal 20,244
Consulting 60,282
Depreciation 6,702
Financial charges - related parties 288,487
Interest (imputed) - related parties 1,961
Incorporation costs 3,402
Office and miscellaneous 24,883
Printing 1,623
Rent and operating costs 17,721
Salaries and benefits 159,032
Telephone 10,900
Travel and entertainment 34,056
----------
TOTAL 669,371
==========
Operating (loss) $ (336,867)
==========
The Company maintains its accounting records in its functional currency: U.S.
dollars. The Company classifies NAI, its Canadian subsidiary, as
self-sustaining and uses the current rate method of translation. The Company
translates its assets and liabilities at exchange rate prevailing at the balance
sheet date. Revenues and expenses are translated at the average exchange rate
Page 20
for the year. Foreign exchange gains and losses are deferred and shown
separately in shareholders' equity.
The Company does not believe the impact of foreign currency fluctuations has a
material impact on its financial condition. The Company does not engage in
foreign currency hedge transaction.
Inflation
The Company does not believe that inflation will have a material adverse effect
on its financial condition. Traditionally, China and Canada have not been
countries that experienced a substantial increase in inflation.
Liquidity and Capital Resources
- -------------------------------
As of December 31, 2000, the Company had cash and cash equivalents of $720,641
and working capital of $637,903. The Company believes that there are sufficient
cash reserves to satisfy its cash requirements for the next 12 months. The
Company anticipates that additional funds will need to be raised to further its
expansion into Asia and for acquisition purposes though no specific acquisition
or expansion plans have been determined yet. Such additional funds will be
raised through debt or private placements of common shares. However, there is
no assurance that any private offering of the Company's common shares will be
successful. If CWN is unable to raise additional capital through a private
placement offering, it will likely seek financing from lending institutions. A
lack of financing may require the Company to delay or abandon plans for
expansion or acquisitions.
On November 2, 2000 the Company arranged an $800,000 private placement with
certain private individuals. On February 5, 2001 the Company issued 2,000,000
common shares at $0.40 per share. The proceeds from this private placement are
being used to finance the development and expansion of the Company's business
into Asia and the continued development of its technology application over the
next 12 months. As a result of this increased business activity, CWN
anticipates that its general and administrative expenses will increase from
current levels.
On October 13, 2000, the Company acquired, through subscription, 100,000 common
shares of TCHL at $1.00 per share at an aggregate cost of $100,000. This
represents 4.167% of the issued and outstanding shares of TCHL. TCHL is a
multi-media, Internet-based financial information provider focusing on listed
securities in Hong Kong. The purpose of this investment in TCHL is to
facilitate TCHL providing content information to the Company's websites.
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
================================================================================
Directors and Senior Management
- -------------------------------
The following table sets forth all current directors and executive officers of
CWN as of October 31, 2001, with each position and office held by them in CWN,
their terms of office and the period of service as such. Each director's terms
of office expires at the next annual general meeting of shareholders.
- -----------------------------------------------------------------------------------------------------------------
Number of common shares
beneficially owned, directly or Principal Occupation During
Name, Age and indirectly, or over which control or the Past Five Years
Position Held Director since direction is exercised
- -----------------------------------------------------------------------------------------------------------------
Joe K.F. Tai (1) January 2000 250,000(2) President and Director, Goldpac
Age 36 Investments Ltd.; Director,
President, Chief Executive Aquasol Environtech Ltd.
Officer and Director
- -----------------------------------------------------------------------------------------------------------------
Page 21
- -----------------------------------------------------------------------------------------------------------------
Number of common shares
beneficially owned, directly or Principal Occupation During
Name, Age and indirectly, or over which control or the Past Five Years
Position Held Director since direction is exercised
- -----------------------------------------------------------------------------------------------------------------
Kelvin Szeto(4) 150,000 Investment advisor, Goldpac
Age 40 Investments Ltd.; President and
Chief Operating Officer Director, DMT Consulting
Limited; Director of NAI
Interactive Ltd.
- -----------------------------------------------------------------------------------------------------------------
Yan Li (5) Nil Vice President Editing of CWN and
Age 27 NAI Interactive Ltd.
Vice President - Editing
- -----------------------------------------------------------------------------------------------------------------
Chi Cheong Liu (3) January 2000 1,730,000(2) President, Chigo Engineering
Age 40 Company.
Secretary/Treasurer and
Director
- -----------------------------------------------------------------------------------------------------------------
Ken Cai March 2000 Nil President, Chief Executive Office
Age 36 and Director, Minco Mining &
Director Metals Corporation; Director &
CFO, Dragon Pharmaceuticals Inc.;
Director, Aquasol Environtech
Ltd.; President & Director,
Kaisun Investment & Development;
President & Director, Pacific
Canada Resources Inc.
- -----------------------------------------------------------------------------------------------------------------
Chi Kong Liu (3) January 2000 570,000(2) President, S & B Trading
Age 39 Company Limited.
Director
- -----------------------------------------------------------------------------------------------------------------
Michael Hui (6) Nil Vice President Website
Age 23 Development of CWN and NAI
Vice President - Website Design Interactive Ltd.
- -----------------------------------------------------------------------------------------------------------------
Gilbert Chan 100,000 VP Marketing and Project
Age 25 Development of NAI Interactive
Vice President - Project Development Ltd.
- -----------------------------------------------------------------------------------------------------------------
(1) Includes 112,500 common shares held by Tim Yee Lau, spouse of Joe Tai,
which was acquired in exchange for all issued and outstanding shares of
NAI Interactive Ltd.
(2) Represents founder shares.
(3) Two Directors of the Company, Chi Cheong Liu and Chi Kong Liu are
brothers. There are no other family relationships between directors and
executives of the Company.
(4) Mr. Szeto was appointed Chief Operating Officer on September 1, 2001
(5) Ms. Li was appointed Vice President - Editing on October 1, 2001
(6) Mr. Hui was appointed Vice President - Website Design on October 1, 2001
Page 22
The business background and principal occupations of CWN's officers and
directors for the preceding five years are as follows:
Joe K. F. Tai
Mr. Tai has served as President, Chief Executive Officer and a director of CWN
since January 12, 2000. Mr. Tai has 12 years of experience in international
business and for the past five years has served as President of Goldpac
Investments Ltd., a venture capital company. Mr. Tai was also involved with a
start-up of an international computer manufacturing company with its corporate
office in Vancouver, British Columbia, sales office in Calgary, Alberta, and
manufacturing facilities in Hong Kong and China and annual sales exceeding
Cdn$30 million. In addition, Mr. Tai is a director of Aquasol Environtech Ltd.
Ken Z. Cai
Dr. Cai has been a director of CWN since March, 2000 and he has served as
President, Chief Executive Officer and a director of Minco Mining and Metals
Corporation since February 29, 1996 and a director of Dragon Pharmaceuticals
Inc. a company whose common shares are registered under the Securities Exchange
Act of 1934. Dr. Cai holds a Ph.D. in mineral economics from Queens University
in Kingston, Ontario, Canada. Dr. Cai, a Chinese national now living in Canada,
has 15 years experience in mineral exploration, project evaluation, corporate
financing and company management. Dr. Cai has served as a director of several
publicly traded and private Canadian and Chinese companies.
Kelvin Szeto
Mr. Szeto has served as CWN's Vice President Operation from January 12, 2000 to
August 31, 2001 and since that date has been CWN's Chief Operating Officer. Mr.
Szeto is currently the President of DMT Consulting Ltd., a computer consulting
firm. Mr. Szeto previously served as a director of NAI Interactive Ltd. and was
involved in the start up of an international computer manufacturing company with
its corporate office in Vancouver, British Columbia, sales office in Calgary,
Alberta and manufacturing facilities in Hong Kong and China and annual sales
exceeding Cdn$30 million.
Yan Li
Ms. Li has been with the Company since February 2000 and has served as the Vice
President- Editing of CWN and NAI since October 1, 2001. Ms. Li has extensive
editorial experience in North America and China and holds a Bachelor Degree in
Arts from the Shanghai International Studies University, China.
Michael Hui
Mr. Hui has been with the Company since November 2000 and has served as CWN and
NAI's Vice President - Website Development since October 1, 2001. Mr. Hui has
worked in website development in both North America and Hong Kong since 1995 and
holds a Bachelor degree in computer sciences from the University of British
Columbia, Canada.
Chi Cheong Liu
Mr. Liu has served as President of Chigo Engineering Company, a security
engineering firm, for the last 15 years. In addition, Mr. Liu is also a venture
capitalist specializing in biotechnology and high technology investments.
Chi Kong Liu
Mr. Liu served as President and owner of S & B Trading Company Limited, a
diamond and jewellery wholesaler. In addition, Mr. Liu is also a venture
capitalist specializing in biotechnology and high technology investments.
Gilbert Chan
Mr. Chan has served as a Vice President - Project Development of CWN since its
inception. Mr. Chan also acts as the Vice President - Sales and Project
Development for NAI Interactive Ltd. He is now operating the branch office of
NAI Interactive Ltd. in Toronto. Mr. Chan has extensive experience working as a
project manager for different websites. Mr. Chan holds a Bachelor Degree in
Applied Science from University of British Columbia.
Page 23
Board Practices
- ---------------
The current directors of the board were elected to their position at the annual
meeting of shareholders held on January 12, 2000. The directors will continue
to serve as such until the next meeting of the shareholders to be held during
2001. The officers of the Company are elected by the board and serve at the
board's pleasure. Directors are appointed annually at the annual general
meeting of shareholders.
The Company has not entered into service contracts with any of its directors.
CWN does not have either an Audit Committee or a Compensation Committee.
Pension Plans
- -------------
The Company does not provide retirement benefits for directors, senior
management or employees.
Compensation
- ------------
The aggregate direct or indirect remuneration paid to the directors and officers
of CWN, including its subsidiaries, as a group during the year ended December
31, 2000 for services to CWN in all capacities, was $98,800. Certain
information about payments to particular officers and directors is set out in
the following table:
- --------------------------------------------------------------------------------------------------------------
Annual Compensation Long Term Compensation
--------------------------------------------------------------------
Awards Payouts
------------------------------------
Securities Restricted
Other Under Shares or
Name and Year Annual Options/ Restricted All Other
Principal Ended Compen- SAR's(1) Share LTIP(2) Compen-
Position Dec. 31 Salary Bonus sation granted Units Payouts ation
- --------------------------------------------------------------------------------------------------------------
Joe K. F. Tai 2000 $0(3) Nil Nil Nil Nil Nil Nil
President, Chief
Executive Officer
and Director
- --------------------------------------------------------------------------------------------------------------
Kelvin Szeto 2000 $25,000 Nil Nil Nil Nil Nil Nil
Chief Technology
Officer
- --------------------------------------------------------------------------------------------------------------
Mathew Lee 2000 $14,600 Nil Nil Nil Nil Nil Nil
VP Marketing
Chief Financial
Officer
- --------------------------------------------------------------------------------------------------------------
Nikkie Hu 2000 $14,600 Nil Nil Nil Nil Nil Nil
VP Corporate
Development
- --------------------------------------------------------------------------------------------------------------
Gilbert Chan 2000 $14,600 Nil Nil Nil Nil Nil Nil
VP Project
Development
- --------------------------------------------------------------------------------------------------------------
Page 24
(1) All securities are under options granted during the year covered. No
"SARs" or "stock appreciation rights" have been granted. SAR means a right
granted by the Company, as compensation for services rendered or in
connection with office or employment, to receive a payment of cash or an
issue or transfer of securities based wholly or in part on changes in the
trading price of publicly traded securities of the Company.
(2) "LTIP" or "long term incentive plan" means any plan which provides
compensation intended to serve as incentive for performance to occur over
a period longer than one fiscal year, but does not include option or stock
appreciation right plans or plans for compensation through restricted
shares or restricted share units. The Company does not currently have an
LTIP.
(3) $30,000 accrued to Goldpac Investments Ltd., a company owned by Chi
Cheong Liu and the spouse of Joe Tai.
(4) Mr. Lee left the employment of the Company on September 1, 2001 but has
retained his common shares.
(5) Ms. Hu left the employment of the Company on September 17, 2001 but has
retained her common shares.
Employees
- ---------
The Company has 17 full-time (seven marketing employees, nine editorial staff
and one accounts clerk) and two part-time employees. All of the Company's
employees are located in Vancouver, British Columbia.
Stock Options
- -------------
The Company has not established incentive stock options plans for its directors,
senior officers or employees. However, the Company may establish an incentive
stock option plan in the future.
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
================================================================================
Major shareholders
- ------------------
As far as is known to the Company, and except as disclosed herein, the Company
is not directly or indirectly owned or controlled by another corporation, by any
foreign government or any other person or entity.
The following table sets forth, as at June 30, 2001, certain information with
respect to the beneficial ownership of the Company's common shares by each
shareholder known by the Company to be the beneficial owner of more than 5% of
the Company's outstanding common shares including the executive officers and
directors as a group. Unless otherwise indicated by footnote, the Company
believes 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. The Company has no
options or warrants outstanding.
- --------------------------------------------------------------------------------
Number of Percentage of
Title of Class Identity of Holder Common Shares Beneficially Owned
- --------------------------------------------------------------------------------
Common shares Chi Cheong Liu 1,730,000 21.63%
- --------------------------------------------------------------------------------
Common shares Fong Mei Yu 787,500 9.84%
- --------------------------------------------------------------------------------
Common shares Cairich Capital Inc. 712,500 8.90%
- --------------------------------------------------------------------------------
Common shares Chi Kong Liu 570,000 7.13%
- --------------------------------------------------------------------------------
Common shares Wai Yee Lai 580,000 7.25%
- --------------------------------------------------------------------------------
Common shares Szeto Fong 570,000 7.13%
- --------------------------------------------------------------------------------
Common shares Monica Law 570,000 7.13%
- --------------------------------------------------------------------------------
Common shares Wai Mun Yeung 420,000 5.25%
- --------------------------------------------------------------------------------
Page 25
United States Shareholders
- --------------------------
As of October 31, 2001, the Company had no registered shareholders with
addresses in the United States. Residents of the United States may beneficially
own common shares registered in the names of non-residents of the United States.
Related party transactions
- --------------------------
On January 15, 2000, the Company entered into a Share Exchange Agreement with
the sole shareholder of NAI, Tin Yee Lau, wife of CWN's President and Chief
Executive Officer, Joe Tai, to acquire all the issued and outstanding common
shares of NAI in exchange for 112,500 common shares of the Company valued at
$5,625.
The Company entered into a consulting agreement dated March 1, 2000, as amended,
with Goldpac Investments Ltd., a company owned by Chi Cheong Liu, the
Secretary/Treasurer and a director of the Company and the spouse of Joe Tai, the
President and a director of the Company, whereby Goldpac will receive $3,000 per
month in exchange for consulting, management and supervision services in
connection with the development of overall corporate strategy. As at October
31, 2001, the Company has accrued $60,000 in consulting expense with respect to
Goldpac's consulting services.
The Company entered into a consulting agreement dated January 15, 2000 with
Kelvin Szeto, Chief Operating Officer of the Company, whereby Mr. Szeto will
receive CAD$3,000 per month from January 2000 to May 2000 and CAD$3,200 from
June 2000 to December 2000 in exchange for technical support and technical
knowledge. As at December 31, 2000, the Company has accrued CAD$25,000 in
consulting expense with respect to Mr. Szeto's consulting services. Starting
from January 2001, the Company and Mr. Szeto have terminated the consulting
agreement and Mr. Szeto became an employee of the Company.
None of the directors or senior officers of the Company and no associates or
affiliates of any of them is or has been indebted to the Company or its
subsidiaries at any time.
ITEM 8. FINANCIAL INFORMATION
================================================================================
Financial Statements
- --------------------
The audited consolidated financial statements of the Company for the eleven
month period ended December 31, 2000, including the consolidated balance sheets
of the Company as at December 31, 2000, the consolidated statements of loss and
deficit for the eleven months ended December 31, 2000 and the notes to those
statements and the auditor's report thereon, are included in this Form 20-F. The
audited financial statements of NAI for the periods ended October 31, 1999 and
January 15, 2000 and the auditor's report thereon are also included in this Form
20-F.
ITEM 8B. SIGNIFICANT CHANGES
================================================================================
Business Strategy
- -----------------
There have been no significant changes in the Company's business in the period
from December 31, 2000 until the date of this document. The Company has made the
following changes to its management during that period:
Mathew Lee, Chief Financial Officer, left the Company on September 1, 2001
Nikkie Hu, Vice President - Corporate Development, left on the Company on
September 17, 2001
Kelvin Szeto was appointed Chief Operating Officer on September 1, 2001
Yan Li was appointed Vice President - Editing on October 1, 2001
Michael Hu was appointed Vice President - Website Development on October 1, 2001
Page 26
Legal Proceedings
- -----------------
CWN is not a party to any legal proceedings and is not aware of any contemplated
legal proceedings to which it may be a party.
The registrar for the common shares is Hunter and Hunter, Huntlaw Building, P.O.
Box 190 GT, Grand Cayman, Cayman Islands.
The following table sets forth a history of the share capital for the Company,
since inception.
- --------------------------------------------------------------------------------
DATE EVENT SHARES
- --------------------------------------------------------------------------------
January 12, 2000 Shares issued to founding shareholders 5,887,500
January 15, 2000 Shares issued on acquisition of NAI
Investments Ltd. 112,500
Balance at December 31, 2000 6,000,000
November 2, 2000 Shares allotted on Private Placement to
non-insiders of CWN and issued on
February 5, 2001 2,000,000
Balance at October 31, 2001 8,000,000
Memorandum and Articles of Association
- --------------------------------------
Common shares
All issued and outstanding common shares are fully paid and non-assessable.
Each holder of record of common shares is entitled to one vote for each common
share so held on all matters requiring a vote of shareholders, including the
election of directors. The holders of common shares will be entitled to
dividends on a pro-rata basis, if, as and when declared by the board of
directors. There are no preferences, conversion rights, pre-emptive rights,
subscription rights, or restrictions or transfers attached to the common shares.
In the event of liquidation, dissolution, or winding up of the Company, the
holders of common shares are entitled to participate in the assets of the
Company available for distribution after satisfaction of the claims of
creditors.
Dividend Policy
- ---------------
The Company has not declared or paid any dividends on its outstanding common
shares since its inception and does not anticipate that it will do so in the
foreseeable future. The declaration of dividends on the common shares of the
Company is within the discretion of the Company's board of directors and will
depend on the assessment of, among other factors, earnings, capital requirements
and the operating and financial condition of the Company. At the present time
the Company's anticipated capital requirements are such that it intends to
follow a policy of retained earnings in order to finance the further development
of its business.
ITEM 9. THE OFFER AND LISTING
================================================================================
Not applicable.
ITEM 10. ADDITIONAL INFORMATION
================================================================================
Share capital
- -------------
CWN has 100,000,000,000 common shares authorized, of which 8,000,000 common
shares were issued and outstanding as of October 31, 2001. See Item 4.
"Information on the Company and NAI - History and Development of CWN".
Each of the common shares has equal dividend, liquidation and voting rights.
Voters of the common shares are entitled to one vote per share on all matters
that may be brought before them. Holders of the common shares are entitled to
receive dividends as and when declared by the Board of Directors from funds
legally available therefore. The common shares are not redeemable, have no
Page 27
additional rights and carry no pre-emptive or other rights to subscribe for
additional shares. The outstanding common shares are fully paid and
non-assessable.
Powers and Duties of Directors
The directors shall manage or supervise the management of the affairs and
business of CWN and shall have authority to exercise all such powers of CWN that
are not required to be exercised by the shareholders of CWN in a general
meeting.
A director's term of office expires immediately prior to the next annual general
meeting. In general, a director who is, in any way, directly interested in an
existing or proposed contract or transaction with the Company whereby a duty or
interest might be created to conflict with his duty or interest director, shall
declare the nature and extent of his interest in such contract or transaction or
the conflict or potential conflict with his duty and interest as a director.
Such director shall not vote in respect of any such contract or transaction with
the director shall not vote in respect of any such contract or transaction with
the Company in which he is interested and if he shall do so, his vote shall not
be counted, but he shall be counted in the quorum presented at the meeting at
which such vote is taken. However, notwithstanding the foregoing, directors
shall have the right to vote on determining the remuneration of the directors.
The directors may from time to time on behalf of CWN (a) borrow money in such
manner and amount from such sources and upon such terms and conditions as they
think fit; (b) issue bonds, debentures and other debt obligation; or (c)
mortgage, charge or give other security on the whole or any part of the property
and assets of CWN.
Shareholders
An annual general meeting shall be held once in every calendar year at such time
and place as may be determined by the directors. A quorum at an annual general
meeting and special meeting shall be two shareholders or one or more proxy
holder representing two shareholders, or one shareholder and a proxy holder
representing another shareholder. The Company believes there is no limitation
imposed by the laws of Cayman Island or by the charter or other constituent
documents of CWN on the right of a non-resident to hold or vote the common
shares, other than as discussed below under Item 10. "Additional Information,
Exchange Controls".
In accordance with Cayman Island law, directors shall be elected by an "ordinary
resolution" which means (a) a resolution passed by the shareholders of CWN in
general meeting by a simple majority of the votes cast in person or by proxy, or
(b) a resolution that has been submitted to the shareholders of CWN who would
have been entitled to vote on it in person or by proxy at a general meeting of
CWN and that has been consented to in writing by such shareholders of CWN
holding shares carrying not less than of the votes entitled to be cast on it.
Under Cayman Island law certain items such as an amendment to CWN's articles or
entering into a merger, requires approval by a special resolution which shall
mean (a) a resolution passed by a majority of not less than 3/4 of the votes
cast by the shareholders of CWN who, being entitled to do so, vote in person or
by proxy at a general meeting of the Company, or (b) a resolution in writing
consented to by all of the shareholders entitled to vote in person or by proxy
at a general meeting of CWN, and a resolution so consented to is deemed to be a
special resolution passed at a general meeting of CWN.
Cayman Islands Company
Companies formed in the Cayman Islands are either ordinary or exempt. CWN is an
exempt company. An exempt company is formed in the same way as an ordinary
company, except that a director must make a declaration to the effect that the
company will not trade within the Cayman Islands for any reason other than the
maintenance of an administrative office or local bank and brokerage accounts.
Each Cayman Island exempted company must:
- have a registered office and agent in the Cayman Islands;
Page 28
- have a minimum of 1 director, corporate directors are permitted;
- have a minimum of 1 shareholder;
- hold a directors meeting on the Islands each year, usually conducted by
the directors appointing Cayman resident proxies to act on their behalf;
- submit an annual return;
- submit to the Cayman Island Companies Registrar particulars of the
directors, but this information is not available for public inspection;
- keep their statutory records and seal on the Island; and
- must provide Offshore Incorporations Limited with details of beneficial
ownership; this information is not provided to the Cayman Island
Companies Registrar.
There are no taxes in the Cayman Islands on income, capital gains, profits,
dividends, investments or capital transfers. The Company receives a twenty-year
guarantee against taxation from the Cayman Islands Government, which may be
extended to thirty years on application. Registered shares are permitted.
Details of the shareholders are not maintained on public record. Details of the
directors must be provided to the company registrar but this information is not
available for public inspection. Directors do not have to be resident in the
Cayman Islands but one statutory meeting of the directors must be held within
the islands every year. This may be done by the appointment of proxies. A
minimum of one director is required. Corporate directors are permitted. There is
no requirement to file accounts with the registrar. However, an annual return
must be filed. The return takes the form of a simple declaration.
The Cayman Islands has no double taxation treaties with any other part of the
world but have undertaken to assist foreign governments by giving them
information where a Cayman Island Company has been used or involved in
activities, which are mutually considered as criminal.
A Cayman Island company is required to pay an annual fee to the Cayman Island
Companies Registrar. Although there can be no assurance that annual fees will
not significantly increase, CWN does not anticipate that such increase will have
a material adverse effect on its operations.
Confidentiality of business transactions is strictly observed in the Cayman
Islands and is further enhanced by the Confidential Relationship Preservation
Law enacted in 1976. These laws are designed to protect bona fide business
dealings and impose strict penalties and sentences on those disclosing such
information. The Cayman Island's confidentiality laws are not designed to
accommodate criminal activity. In order to discourage the abuse of Cayman
Island's confidentiality laws to facilitate criminal activity, the Cayman
Islands Government has negotiated information treaties with foreign governments
in relation to matters which the Cayman Islands Courts view as criminal
according to Cayman Island law particularly with regard to matters concerning
narcotics and money laundering. Exchanges of information involving the tax
authorities of foreign countries are excluded from the above treaties.
CWN is subject to the laws and regulations applicable to Cayman Island based
corporations. Although Cayman Island law at present is structured to encourage
foreign investment, there is no guarantee that future laws and regulations will
not have a material negative impact on our operations. At present, CWN is not
aware of any special country risks, such as existing or probable government
regulations, that could materially affect CWN's operations.
Material Contracts
- ------------------
Please see "Item 4 - Information on the Company and NAI" and exhibits to this
registration statement.
Exchange Controls
- -----------------
The Company does not believe there are any decrees or regulations under the laws
of the Cayman Islands applicable to it 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 Incorporation or Memorandum of Association or under Cayman Island
Page 29
law as currently in effect that limits the right of non-resident owners to hold
or vote CWN's Common Stock or to receive dividends thereon. The Company is
organized under the laws of the Cayman Island. There is uncertainty as to
whether the Courts of Cayman Island would (i) enforce judgments of United States
Courts obtained against CWN 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 CWN
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.
Canadian Currency
There is no law, governmental decree or regulation in Canada that restricts the
export or import of capital or affects the remittance of dividends, interest or
other payments to a non-resident holder of common shares other than withholding
tax requirements. Any such remittances to Canadian residents are subject to
withholding tax. See "Item 10 - Taxation".
There is no limitation imposed by the laws of Canada or the charter or other
constituent documents of CWN on the right of a non-resident to hold or vote the
common shares, other than as provided in the Investment Act (Canada) (the
"Investment Act"). The following discussion summarizes the principal features
of the Investment Act for a non-resident who proposes to acquire the common
shares.
The Investment Act generally prohibits implementation of a reviewable investment
by an individual, government or agency thereof, corporation, partnership, trust
or joint venture (each an "entity") that is not a "Canadian" as defined in the
Investment Act (a "non-Canadian"), unless after review, the Director of
Investments appointed by the minister responsible for the Investment Act is
satisfied that the investment is likely to be of net benefit to Canada. An
investment in the common shares by a non-Canadian other than a "WTO Investor"
(as that term is defined by the Investment Act, and which term includes entities
which are nationals of or are controlled by nationals of member states of the
World Trade Organization) when CWN was not controlled by a WTO Investor, would
be reviewable under the Investment Act if it was an investment to acquire
control of CWN and the value of the assets of CWN, as determined in accordance
with the regulations promulgated under the Investment Act, was $5,000,000
Canadian dollars or more, or if an order for review was made by the federal
cabinet on the grounds that the investment related to Canada's cultural heritage
or national identity, regardless of the value of the assets of CWN. An
investment in the common shares by a WTO Investor, or by a non-Canadian when CWN
was controlled by a WTO Investor, would be reviewable under the Investment Act
if it was an investment to acquire control of CWN and the value of the assets of
CWN, as determined in accordance with the regulations promulgated under the
Investment Act was not less than a specified amount, which for 1996 was any
amount in excess of Cdn$168 million. A non-Canadian would acquire control of
CWN for the purposes of the Investment Act if the non-Canadian acquired a
majority of the common shares. The acquisition of one third or more, but less
than a majority of the common shares would be presumed to be an acquisition of
control of CWN unless it could be established that, on the acquisition, CWN was
not controlled in fact by the acquirer through the ownership of the common
shares.
Certain transactions relating to the common shares would be exempt from the
Investment Act, including: (a) an acquisition of the common shares by a person
in the ordinary course of that person's business as a trader or dealer in
securities; (b) an acquisition of control of CWN in connection with the
realization of security granted for a loan or other financial assistance and not
for a purpose related to the provisions of the Investment Act; and (c) an
acquisition of control of CWN by reason of an amalgamation, merger consolidation
or corporate reorganization following which the ultimate direct or indirect
control in fact of CWN, through the ownership of the common shares, remained
unchanged.
Currently ninety percent of the Company's operations are in Canadian dollars.
Chinese Currency
The Chinese currency is the Renminbi ("RMB"). It is not freely convertible
although the Chinese government has emphasized that full convertibility is the
long-term goal. Full convertibility, probably after some transitional period,
will be a condition precedent to membership in the World Trade Organization, for
which China has applied. The People's Bank of China, China's central banking
authority, publishes the Renmini exchange rate against the U.S. dollar every day
Page 30
based on the trading price between the two currencies of the previous day on the
Inter-Bank Foreign Exchange Market established in Shanghai in 1994. In
addition, the People's Bank of China publishes the Renminbi exchange rates
against other major foreign currencies. Designated banks participate on the
Inter-Bank Foreign Exchange Market through a computer network connected with
major cities in China.
Foreign exchange is administered by the State Administration Bureau of Exchange
Control ("SAEC"), and its local branch offices, all of which are subject to the
supervision of the People's Bank of China. The SAEC has established regulations
relating to outward remittance by foreign investors of their share of net
profits or dividends and final repatriation of their investments, in foreign
currency. Subject to payment of applicable taxes, foreign investors may remit
out of China, in foreign exchange, profits or dividends derived from a source
within China. Swap centres have been established to assist foreign investment
enterprises to balance their foreign currency income and expenses by converting
surplus local currency earnings into foreign exchange and vice versa without
their having to wait for central allocation. The central foreign exchange
adjustment centre is in Beijing and other centres have been established in the
coastal cities, Special Economic Zones and other major cities, municipalities
and autonomous regions. Remittances by foreign investors of any other amounts
(including, for instance, principal and interest on debt and proceeds of sale
arising from a disposal by a foreign investor of any of its or his investments
in China) out of China is subject to the approval of the SAEC.
The Company expects that once a subsidiary is established in China, thirty
percent of the Company's overall operation will be in RMB.
Taxation
- --------
Cayman Island Income Tax Consequences
CWN is organized under the laws of Cayman Island. At present, there is no Cayman
Island income on profits 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 Cayman Island. There is
currently no reciprocal tax treaty between Cayman Island and the United States
regarding withholding taxes.
United States Income Tax Consequences
The following summarizes the principal Canadian federal income tax consequences
applicable to the holding and disposition of common shares in the capital of
CWN's Canadian subsidiary, NAI Interactive Ltd. by a United States resident, and
who hold common shares sold as capital property (a "U.S. Holder"). This summary
is based on the current provisions of the Income Tax Act (Canada) (the "Tax
Act"), the regulations thereunder, all amendments thereto publicly proposed by
the government of Canada, the published administrative practices of Canada
Customs and Revenue Agency, and on the current provisions of the Canada-United
States Income Tax Convention, 1980, as amended (the "Treaty"). Except as
otherwise expressly provided, this summary does not take into account any
provincial, territorial or foreign (including without limitation, any U.S.) tax
laws or treaty. It has been assumed that all currently proposed amendments will
by enacted substantially as proposed and that there is no other relevant changes
in any governing law or practice, although no assurance can e given in these
respects.
Each U.S. Holder is advised to obtain tax and legal advice applicable as to such
U.S. Holder's particular circumstances.
Every U.S. Holder is liable to pay a Canadian withholding tax on every dividend
that is or is deemed to be paid or credited to the U.S. Holder on the U.S.
Holder's common shares. The statutory rate of withholding tax is 25% of the
gross amount of dividend paid. The Treaty reduces the statutory rate with
respect to dividends paid to a U.S. Holder for the purposes of the Treaty.
Where applicable, the general rate of withholding tax under the Treaty is 15% of
the gross amount of the dividend, but if the U.S. Holder is a company that owns
at least 10% of the voting stock of CWN and beneficially owns the dividend, the
rate of withholding tax is 5% for dividends paid or credited after 1996 to such
corporate U.S. Holder. The Company is required to withhold the applicable tax
from the dividend payable to the U.S. Holder, and to remit the tax to the
Receiver General of Canada for the account of the U.S. Holder.
Page 31
Pursuant to the Tax Act, a U.S. Holder will not be subject to Canadian capital
gains tax on any capital gain realized on an actual or deemed disposition of a
common share, including a deemed disposition of death, provided that the U.S.
Holder did not hold the common shares as capital property used in carrying on a
business in Canada, and that neither the U.S. Holder nor persons with whom the
U.S. Holder did not deal at arms length (alone or together) owned or had the
right or an option to acquire 25% or more of the issued shares of any class the
Company's Canadian subsidiary at any time in the five years immediately
preceding the disposition.
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
================================================================================
Not applicable.
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
================================================================================
Not applicable.
PART II
ITEM 13. DEFAULTS , DIVIDENDS ARREARS AND DELINQUENCIES
================================================================================
Not Applicable.
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF
================================================================================
PROCEEDS
========
Not Applicable.
PART III
ITEM 15. FINANCIAL STATEMENTS
================================================================================
The financial statements filed as part of this annual report are listed in "Item
17 - Financial Statements and Exhibits".
ITEM 16. FINANCIAL STATEMENTS
================================================================================
The Company has elected to provide financial statements pursuant to "Item 17 -
Financial Statements and Exhibits".
ITEM 17. FINANCIAL STATEMENTS AND EXHIBITS
================================================================================
The following financial statements are incorporated by reference to this Item.
All financial statements herein are stated in accordance with accounting
principles generally accepted in the United States.
(a) The following Financial Statements pertaining to the consolidated
financial statements of CWN are filed as part of this Registration
Statement:
Page 32
- --------------------------------------------------------------------------------
Exhibit
Reference # Page #
- --------------------------------------------------------------------------------
N/A Report of Independent Accountants F-2
- --------------------------------------------------------------------------------
Year-end Consolidated Balance Sheet F-3
- --------------------------------------------------------------------------------
Year-end Consolidated Statements of Operations F-4
- --------------------------------------------------------------------------------
Year-end Consolidated Statements of Stockholders' Equity F-5
- --------------------------------------------------------------------------------
Year-end Consolidated Statements of Cash Flows F-6
- --------------------------------------------------------------------------------
Notes to Consolidated Financial Statements F-7 to F-13
- --------------------------------------------------------------------------------
(b) The following Financial Statements pertaining to the financial
statements of NAI are filed as part of this Registration Statement:
- --------------------------------------------------------------------------------
Exhibit
Reference # Page #
- --------------------------------------------------------------------------------
N/A Report of Independent Accountants F-15
- --------------------------------------------------------------------------------
Balance Sheet F-16
- --------------------------------------------------------------------------------
Statement of Stockholder's Equity F-17
- --------------------------------------------------------------------------------
Statement of Operations F-18
- --------------------------------------------------------------------------------
Statement of Cash Flows F-19
- --------------------------------------------------------------------------------
Notes to the Financial Statements F-20 to F-24
- --------------------------------------------------------------------------------
The following exhibits are incorporated by reference to this Item. None of the
following Exhibits have been previously filed with the Securities and Exchange
Commission. The following Exhibits are filed with this Registration Statement:
- --------------------------------------------------------------------------------
Exhibit
Reference # Page #
- --------------------------------------------------------------------------------
2(a) Share Exchange Agreement with NAI Interactive Ltd.
- --------------------------------------------------------------------------------
2(a) Private Placement subscription agreement for common
shares of CWN.
- --------------------------------------------------------------------------------
10 Letter Agreement between NAI and Rampart Securities Inc.
- --------------------------------------------------------------------------------
10 News Letter Content Agreement between NAI and Emerging
Growth Stocks.
- --------------------------------------------------------------------------------
10 Content Partnership Agreement between NAI and Yahoo Chinese.
- --------------------------------------------------------------------------------
10 Content Partnership Agreement between NAI and China
Infobank Limited.
- --------------------------------------------------------------------------------
10 Content Partnership Agreement between NAI and Investrend
Research.
- --------------------------------------------------------------------------------
10 Content Partnership Agreement between NAI and
NewsGurus.com Inc.
- --------------------------------------------------------------------------------
2(a) Subscription Agreement for common shares of Technology
City Holdings Ltd.
- --------------------------------------------------------------------------------
4(b)(i) Consulting Agreement between CWN and Joe Tai.
- --------------------------------------------------------------------------------
4(b)(i) Amendment to the Consulting Agreement between CWN and
Goldpac Investments Ltd.
- --------------------------------------------------------------------------------
4(b)(i) Consulting Agreement between NAI and Kelvin Szeto.
- --------------------------------------------------------------------------------
1 Articles of Incorporation, Memorandum of Association
and Certificate of Incorporation of CWN.
- --------------------------------------------------------------------------------
9 Consent of Ellis Foster, Chartered Accountants.
- --------------------------------------------------------------------------------
9 Financial Data Schedule (filed herewith).
- --------------------------------------------------------------------------------
Page 33
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, we certify that we meet all of the requirements for filing on Form 20-F
and have duly caused this Registration Statement to be signed on CWN's behalf by
the undersigned duly authorized officer.
Dated: December 6, 2001
----------------
ChineseWorldNet.com Inc.,
a Cayman Islands Corporation
/s/ Kin Foon Tai
------------------------------------
KIN FOON TAI
President and Director
CHINESEWORLDNET.COM INC.
& SUBSIDIARIES
Consolidated Financial Statements
(Expressed in U.S. Dollars)
December 31, 2000
Index
-----
Report of Independent Accountants
Consolidated Balance Sheet
Consolidated Statement of Stockholders' Equity
Consolidate Statement of Operations
Consolidated Statement of Cash Flows
Notes to Consolidated Financial Statements
Page F-2
MOORE STEPHENS ELLIS FOSTER LTD.
CHARTERED ACCOUNTANTS
1650 West 1st Avenue
Vancouver, BC Canada V6J 1G1
Telephone: (604) 734-1112 Facsimile: (604) 714-5916
E-Mail: generaldelivery@ellisfoster.bc.ca
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
CHINESEWORLDNET.COM INC. AND SUBSIDIARIES
We have audited the consolidated balance sheet of ChineseWorldNet.com Inc. and
subsidiaries ("the Company") as at December 31, 2000, the related consolidated
statement of stockholders' equity, operations and cash flows for the period from
January 12, 2000 (inception) to December 31, 2000. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform an audit
to obtain reasonable assurance whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provide a reasonable basis for our
opinion.
In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the Company as at December 31, 2000
and the results of its operations and its cash flows for the period January 12,
2000 (inception) to December 31, 2000 in conformity with generally accepted
accounting principles in the United States.
Vancouver, Canada /s/ MOORE STEPHENS ELLIS FOSTER LTD.
March 6, 2001 Chartered Accountants
- --------------------------------------------------------------------------------
MS An independently owned and operated member of Moore Stephens North America,
Inc. Members in principal cities throughout North America. Moore Stephens
North America, Inc. is a member of Moore Stephens International Limited,
members in principal cities throughout the world.
Page F-3
CHINESEWORLDNET.COM INC. & SUBSIDIARIES
Consolidated Balance Sheet
December 31, 2000
(Expressed in U.S. Dollars)
================================================================================
ASSETS
Current
Cash and cash equivalents $ 720,641
Accounts receivable 9,730
Income taxes recoverable 945
Prepaid expenses and deposits 4,351
- --------------------------------------------------------------------------------
Total current assets 735,667
Investment in Technology City Holdings Limited 100,000
Fixed assets 27,842
- --------------------------------------------------------------------------------
Total assets $ 863,509
================================================================================
LIABILITIES
Current
Accounts payable and accrued liabilities $ 49,901
Income taxes payable 945
Due to a stockholder, non-interest bearing 26,321
Due to a director, non-interest bearing 2,036
Deferred revenue 18,561
- --------------------------------------------------------------------------------
Total current liabilities 97,764
- --------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
Share capital
Authorized:
100,000,000,000 common shares with a par value of
$0.001 per share
Issued and outstanding:
6,000,000 common shares 6,000
Additional paid-in capital 1,095,961
Accumulated other comprehensive income
Deferred foreign exchange gain 651
(Deficit) (336,867)
- --------------------------------------------------------------------------------
Total stockholders' equity 765,745
- --------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 863,509
================================================================================
The accompanying notes are an integral part of these financial statements.
MOORE STEPHENS ELLIS FOSTER LTD.
Page F-4
CHINESEWORLDNET.COM INC. & SUBSIDIARIES
Consolidated Statement of Stockholders' Equity
January 12, 2000 (inception) to December 31, 2000
(Expressed in U.S. Dollars)
- -----------------------------------------------------------------------------------------------------------------------------------
Accumulated
Compre- other Total
Additional hensive Retained compre- Stock-
Common stock paid-in income earnings hensive holders'
----------------------
Shares Amount capital (loss) (deficit) income (loss) equity
- -----------------------------------------------------------------------------------------------------------------------------------
Allotted 5,887,500 common
shares at $0.05 per share
for cash and compensation
(Note 8d) - $ - $ 294,375 $ - $ - $ - $ 294,375
Allotted 112,500 common
shares at $0.05 per share
for the acquisition of NAI - - 5,625 - - - 5,625
Issued 5,887,500 common
shares (previously
allotted) on May 15, 2000 5,887,500 5,888 (5,888) - - - -
Issued 112,500 common
shares (previously
allotted) on May 15, 2000 112,500 112 (112) - - - -
Allotted 2,000,000 common
shares for cash at $0.40
per share - - 800,000 - - - 800,000
Imputed interest on amount
due to a stockholder and
a director - - 1,961 - - - 1,961
Other comprehensive income
- foreign currency
translation adjustment - - - 651 - 651 651
Comprehensive income
- net (loss) for the
period - - - (336,867) (336,867) - (336,867)
- -----------------------------------------------------------------------------------------------------------------------------------
Comprehensive income
(loss) $ (336,216)
============
Balance, December 31, 2000 6,000,000 $ 6,000 $ 1,095,961 $ (336,867) $ 651 $ 765,745
============================================================================= ===========================================
The accompanying notes are an integral part of these financial statements.
MOORE STEPHENS ELLIS FOSTER LTD.
Page F-5
CHINESEWORLDNET.COM INC. & SUBSIDIARIES
Consolidated Statement of Operations
January 12, 2000 (inception) to December 31, 2000
(Expressed in U.S. Dollars)
================================================================================
Revenue $ 320,548
- --------------------------------------------------------------------------------
Expenses
Advertising and promotion 40,078
Audit and legal 20,244
Consulting fees 60,282
Depreciation 6,702
Financing charges - related parties 288,487
Interest (imputed) - related parties 1,961
Incorporation costs 3,402
Office and miscellaneous 24,883
Printing 1,623
Rent and operating 17,721
Salaries and benefits 159,032
Telephone 10,900
Travel and entertainment 34,056
- --------------------------------------------------------------------------------
669,371
- --------------------------------------------------------------------------------
Operating (loss) (348,823)
Other income
Interest income 10,984
- --------------------------------------------------------------------------------
Net (loss) before income taxes (337,839)
Income taxes (benefit) (972)
- --------------------------------------------------------------------------------
Net (loss) for the period (336,867)
================================================================================
(Loss) per share
- basic and diluted $ (0.06)
================================================================================
Weighted average number of
common shares outstanding - basic and diluted 6,000,000
================================================================================
The accompanying notes are an integral part of these financial statements.
MOORE STEPHENS ELLIS FOSTER LTD.
Page F-6
CHINESEWORLDNET.COM INC. & SUBSIDIARIES
Consolidated Statement of Cash Flows
January 12, 2000 (inception) to December 31, 2000
(Expressed in U.S. Dollars)
================================================================================
Cash flows from (used in) operating activities
Net (loss) for the period $ (336,867)
Adjustment to reconcile net (loss)
to net cash used in operating activities:
- depreciation 6,702
- financing charges - related parties 288,487
- interest (imputed) - related parties 1,961
Changes in assets and liabilities, net of
effects of acquisition of subsidiary:
- accounts receivable 9,456
- prepaid expenses and deposits (3,606)
- accounts payable and accrued liabilities
39,492
- income taxes (972)
- deferred revenue 18,561
- --------------------------------------------------------------------------------
23,214
- --------------------------------------------------------------------------------
Cash flows from financing activities
Shares issued and allotted for cash 805,888
Advances from a director 2,036
- --------------------------------------------------------------------------------
807,924
- --------------------------------------------------------------------------------
Cash flows from (used in) investing activities
Purchase of fixed assets (24,677)
Investment in Technology City Holdings Limited
(100,000)
Cash acquired from subsidiary 14,215
- --------------------------------------------------------------------------------
(110,462)
- --------------------------------------------------------------------------------
Foreign exchange (loss) on
cash held in foreign currency (35)
- --------------------------------------------------------------------------------
Increase in cash and cash equivalents
being cash and cash equivalents, end of period $ 720,641
================================================================================
The accompanying notes are an integral part of these financial statements.
MOORE STEPHENS ELLIS FOSTER LTD.
Page F-7
CHINESEWORLDNET.COM INC. & SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2000
(Expressed in U.S. Dollars)
================================================================================
1. Nature of Operations
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") (see Note 3), a company
incorporated under the laws of British Columbia, Canada. The Company also
incorporated a wholly-owned subsidiary ChineseWorldNet.com (HK) Limited
under the laws of Hong Kong.
The principal business activity of the Company is to provide internet
services through its Chinese world-wide web site.
2. Significant Accounting Policies
(a) Basis of Consolidation
These consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the
United States, include the accounts of the Company and its wholly-
owned subsidiaries. Significant inter-company accounts and
transactions have been eliminated.
(b) Accounting Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles 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 period. Actual results may differ from those
estimates.
(c) Fixed Assets
Fixed assets are stated at cost, net of accumulated amortization.
Amortization is provided in the declining-balance basis on fixed
assets over the expected useful lives of the assets at the following
annual rates:
Furniture and equipment 20%
Computer equipment 30%
Computer software 100%
(d) Cash Equivalents
Cash equivalents usually consist of highly liquid investments which
are readily convertible into cash with maturities of three months or
less when purchased. As at December 31, 2000, cash equivalents consist
of term deposits.
Page F-8
CHINESEWORLDNET.COM INC. & SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2000
(Expressed in U.S. Dollars)
================================================================================
2. Significant Accounting Policies (continued)
(e) Foreign Currency Transactions
The parent company and NAI maintain their accounting records in their
functional currencies (i.e., U.S. dollars and Canadian dollars,
respectively). They translate foreign currency transactions into their
functional currency in the following manner.
At the transaction date, each asset, liability, revenue and expense is
translated into the functional currency by the use of the exchange
rate in effect at that date. At the period end, monetary assets and
liabilities are translated into the functional currency by using the
exchange rate in effect at that date. The resulting foreign exchange
gains and losses are included in operations.
(f) Foreign Currency Translations
Assets and liabilities of the foreign subsidiary (whose functional
currency is Canadian dollars) is translated into 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.
(g) Advertising Expenses
The Company expensed advertising costs as incurred.
(h) Income Taxes
The Company has adopted Statement of Financial Accounting Standards
("SFAS") No. 109, "Accounting for Income Taxes", which requires the
Company to recognize deferred tax liabilities and assets for the
expected future tax consequences of events that have been recognized
in the Company's financial statements or tax returns using the
liability method. Under this method, deferred tax liabilities and
assets are determined based on the temporary differences between the
financial statement and tax bases of assets and liabilities using
enacted tax rates in effect in the years in which the differences are
expected to reverse. The effect on deferred income tax assets and
liabilities of a change in income tax rates is included in the period
that includes the enactment date.
Page F-9
CHINESEWORLDNET.COM INC. & SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2000
(Expressed in U.S. Dollars)
================================================================================
2. Significant Accounting Policies (continued)
(i) Comprehensive Income
The Company adopted SFAS No. 130, "Reporting Comprehensive Income",
which establishes standards for reporting and display of comprehensive
income, its components and accumulated balances. The Company is
disclosing this information on its Statement of Stockholders' Equity.
Comprehensive income comprises equity except those resulting from
investments by owners and distributions to owners. SFAS No. 130 did
not change the current accounting treatments for components of
comprehensive income.
(j) Financial Instruments and Concentration of Risks
Fair value of financial instruments are 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 judgement,
they cannot be determined with precision. Changes in assumptions can
significantly affect estimated fair values.
It is not practical to determine the fair value of amount due to a
stockholder with sufficient reliability due to the nature of the
financial instruments, the absence of secondary markets and the
significant cost of obtaining outside appraisals.
The carrying value of cash and cash equivalents, accounts receivable,
income taxes recoverable, accounts payable and accrued liabilities and
income taxes payable approximate their fair value because of the short
-term nature of these instruments. Management is of the opinion that
the Company is not exposed to significant interest, credit, or
currency risks arising from these financial statements.
Financial instruments that potentially subject the Company to
concentration of credit risk consist principally of cash, the balances
of which are stated on the balance sheet. The Company places its cash
in high credit quality financial institutions. The Company does not
require collateral or other security to support financial instruments
subject to credit risk.
(k) Investments
The Company has an investment in a non-publicly company in which it
has less than 20% of the voting rights and in which it does not
exercise significant influence. This investment is carried at cost.
The Company monitors this investment for impairment, and makes
appropriate reductions in carrying value when necessary.
Page F-10
CHINESEWORLDNET.COM INC. & SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2000
(Expressed in U.S. Dollars)
================================================================================
2. Significant Accounting Policies (continued)
(l) Revenue Recognition
Revenue includes banner advertisement fees, webpage hosting and
maintenance fees, company review fees, translation service fees,
Chinese investment seminar revenue, Fantasy Stock Challenge revenue
and Chinese financial newspaper revenue which are generally recognized
when all significant contractual obligations have been satisfied and
collection of the resulting receivable is reasonably assured.
Revenue from banner advertisements fees and maintenance fees is
recognized ratably over the contract term which is normally one year.
Revenue from webpage hosting set-up fees is recognized over the
estimated period the hosting services are provided to customers, which
is typically twelve (12) months.
In December 1999, the SEC issued Staff Accounting Bulletin No. 101,
"Revenue Recognition in Financial Statements" ("SAB 101"). SAB 101
outlines the basic criteria that must be met to recognize revenue
and provides guidance for disclosures related to revenue recognition
policies. Management believes that the Company's revenue recognition
policy is in compliance with the provisions of SAB 101 and that the
adoption of SAB 101 had no material effect on the financial position
or result of operations of the Company.
(m) Stock-Based Compensation
The Company has adopted the disclosure-only provisions of SFAS No.
123, "Accounting for Stock-based Compensation". SFAS No. 123
encourages, but does not require, companies to adopt a fair value
based method for determining expense related to stock-based
compensation. The Company accounts for stock-based compensation
issued to employees and directors using the intrinsic value method as
prescribed under Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" and related
interpretations.
(n) Earnings (Loss) Per Share
Earnings (loss) per share is computed using the weighted average
number of common shares outstanding during the period. The Company has
adopted SFAS No. 128, "Earnings per share". Diluted loss per share is
equal to the basic loss per share.
(o) Impairment
Certain long-term assets of the Company are reviewed when changes in
circumstances require as to whether their carrying value has become
impaired pursuant to guidance established in Statement of Financial
Accounting Standards ("SFAS") No. 121, Accounting for the Impairment
of Long-lived Assets and for Long-lived Assets to be Disposed of.
Management considers assets to be impaired if the carrying value
exceeds the future projected cash flows from related operations
(undiscounted and without interest charges). If impairment is deemed
to exist, the assets will be written down to fair value.
Page F-11
CHINESEWORLDNET.COM INC. & SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2000
(Expressed in U.S. Dollars)
================================================================================
3. Acquisition of NAI Interactive Ltd. ("NAI")
Pursuant to a share exchange agreement on January 15, 2000, the Company
agreed to issue 112,500 common shares with a fair value of $5,625 as
consideration to acquire all of the issued and outstanding shares of NAI.
The acquisition of NAI has been accounted for by using the purchase method
of accounting. The fair value of net assets acquired from NAI, which equals
to the fair value of the consideration, is as follows:
---------------------------------------------------------------------------
Cash and cash equivalents $ 14,215
Accounts receivable 19,187
Prepaid expense 745
Capital assets 9,868
Accounts payable and accrued liabilities (10,410)
Income tax payable (972)
Due to a shareholder (27,008)
---------------------------------------------------------------------------
Total purchase cost $ 5,625
===========================================================================
The operating results of NAI from January 16, 2000 to December 31, 2000 are
included in the consolidated statement of operations.
The following summarized proforma information which assumes that the
acquisition had occurred on January 1, 1999:
---------------------------------------------------------------------------
Year ended
December 31
1999
---------------------------------------------------------------------------
Revenue $ 109,090
Net income $ 5,448
Earnings per share - basic and diluted $ 0.00
---------------------------------------------------------------------------
4. Fixed Assets
---------------------------------------------------------------------------
Accumulated Net book
Cost Amortization value
---------------------------------------------------------------------------
Furniture and office equipment $ 6,583 $ 1,520 $ 5,063
Computer equipment 30,041 7,291 22,750
Computer software 127 98 29
---------------------------------------------------------------------------
Total $ 36,751 $ 8,909 $ 27,842
===========================================================================
Page F-12
CHINESEWORLDNET.COM INC. & SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2000
(Expressed in U.S. Dollars)
================================================================================
5. Investment in Technology City Holdings Limited
The Company subscribed 100,000 shares with a par value of $1.00 each for
$100,000 in a private company which was incorporated in the British Virgin
Islands with a business in providing financial information on listed
securities in Hong Kong through internet and other peripheral media such as
paging and television. The 100,000 shares subscribed by the Company
represent 4.167% of the total issued share capital of the private company.
The investment is carried at cost (Note 2k)
6. Income Taxes
(a) Income tax (benefit) provision reflected in the consolidated statement
of operations are as follows:
---------------------------------------------------------------------------
January 12
2000 to
December 31
2000
---------------------------------------------------------------------------
Current tax (benefit) $ (972)
===========================================================================
(b) Reconciliation of the applicable income tax rate (45%) applied to
pre-tax accounting (loss) compared to the expense (benefit) for income
tax in the consolidated statement of operations:
---------------------------------------------------------------------------
January 12
2000 to
December 31
2000
---------------------------------------------------------------------------
Income tax (benefit) at the applicable rate $ (152,028)
Adjustment resulting from:
- non-taxable loss 135,048
- non-deductible loss 1,149
- unused tax loss carryforward 14,859
---------------------------------------------------------------------------
$ (972)
===========================================================================
Page F-13
CHINESEWORLDNET.COM INC. & SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2000
(Expressed in U.S. Dollars)
================================================================================
6. Income Taxes (continued)
(c) The tax effect of temporary difference that give rise to the Company's
deferred tax assets are as follows:
---------------------------------------------------------------------------
January 12
2000 to
December 31
2000
---------------------------------------------------------------------------
Estimated tax loss carryforward $ 6,700
Less: Valuation allowance (6,700)
---------------------------------------------------------------------------
$ -
===========================================================================
(d) The parent company is not subject to income taxes. NAI has an
estimated tax loss carryforward of $14,900 which will expire in 2007.
7. Non-cash Investing Activities
(a) The Company issued 112,500 common shares to purchase all of the issued
and outstanding shares in NAI.
(b) See Note 8(d).
8. Related Party Transactions
(a) The Company accrued $30,000 in consulting fees to a company jointly
owned by a director of the Company and an individual related to the
president of the Company.
(b) The Company issued 112,500 common shares for all of the issued and
outstanding shares in NAI. NAI was then owned by an individual related
to a director and senior officer of the Company (see Note 3).
(c) The Company accrued imputed interest of $1,961 at an interest rate of
7% per annum on the amounts due to a stockholder and a director.
(d) The Company granted and issued 5,887,500 shares to the founders of the
Company for cash consideration of $0.001 per share, totalling $5,888.
In accordance with the provisions of Accounting Principle Board
("APB") Opinion 25, the Company recorded additional compensation
expenses of $0.049 per share, totalling $288,487, for the 5,887,500
shares granted and issued. The $0.05 per share value is based upon the
intrinsic value of $0.05 per share issued for the acquisition of NAI.
Page F-14
NAI INTERACTIVE LTD.
Financial Statements
(Expressed in U.S. Dollars)
January 15, 2000 and October 31, 1999
Index
-----
Report of Independent Accountants
Balance Sheet
Statement of Stockholders' Equity
Statement of Operations
Statement of Cash Flows
Notes to Financial Statements
Page F-15
MOORE STEPHENS ELLIS FOSTER LTD.
CHARTERED ACCOUNTANTS
1650 West 1st Avenue
Vancouver, BC Canada V6J 1G1
Telephone: (604) 734-1112 Facsimile: (604) 714-5916
E-Mail: generaldelivery@ellisfoster.bc.ca
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
NAI INTERACTIVE LTD.
We have audited the balance sheets of NAI Interactive Ltd. ("the Company") as at
January 15, 2000 and October 31, 1999, the related statement of stockholders'
equity for the period from November 13, 1998 (inception) to January 15, 2000 and
the statements of operations and cash flows for the periods from November 1,
1999 to January 15, 2000 and from November 13, 1998 (inception) to October 31,
1999. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform an audit
to obtain reasonable assurance whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the Company as at January 15, 2000 and
October 31, 1999 and the results of its operations and cash flows for the
periods from November 1, 1999 to January 15, 2000 and from November 13, 1998
(inception) to October 31, 1999 in conformity with generally accepted accounting
principles in the United States.
Vancouver, Canada /s/ MOORE STEPHENS ELLIS FOSTER LTD.
March 6, 2001 Chartered Accountants
- --------------------------------------------------------------------------------
MS An independently owned and operated member of Moore Stephens North America,
Inc. Members in principal cities throughout North America. Moore Stephens
North America, Inc. is a member of Moore Stephens International Limited,
members in principal cities throughout the world.
Page F-16
NAI INTERACTIVE LTD.
Balance Sheet
(Expressed in U.S. Dollars)
================================================================================
January 15 October 31
2000 1999
- --------------------------------------------------------------------------------
ASSETS
Current
Cash and cash equivalents $ 14,215 $ 52,894
Accounts receivable 19,187 15,754
Prepaid expenses and deposits 745 755
- --------------------------------------------------------------------------------
Total current assets 34,147 69,403
Fixed assets 12,369 10,008
- --------------------------------------------------------------------------------
Total assets $ 46,516 $ 79,411
================================================================================
LIABILITIES
Current
Accounts payable and accrued liabilities $ 10,410 $ 6,744
Income taxes payable 972 -
Due to a shareholder, non-interest bearing 27,008 27,008
Due to an investor, non-interest bearing - 51,057
Deferred revenue - 4,610
- --------------------------------------------------------------------------------
Total current liabilities 38,390 89,419
- --------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY (DEFICIENCY)
Share capital
Authorized:
10000 Class A common voting shares
without par value
10000 Class B common non-voting shares
without par value
10000 Class C preferred voting shares
without par value
10000 Class D preferred non-voting shares
without par value
Issued:
100 Class A common shares - -
Additional paid-in capital 879 474
Retained earnings (deficit) accumulated
during the development stage 7,247 (10,482)
- --------------------------------------------------------------------------------
Total stockholders' equity (deficiency) 8,126 (10,008)
- --------------------------------------------------------------------------------
Total liabilities and stockholders'
equity (deficiency) $ 46,516 $ 79,411
================================================================================
The accompanying notes are an integral part of these financial statements.
MOORE STEPHENS ELLIS FOSTER LTD.
Page F-17
NAI INTERACTIVE LTD.
Statement of Stockholders' Equity
November 13, 1998 (inception) to January 15, 2000
(Expressed in U.S. Dollars)
- -----------------------------------------------------------------------------------------------------------------------------------
Accumulated
Compre- other Total
Additional hensive Retained compre- Stock-
Common stock paid-in income earnings hensive holders'
----------------------
Shares Amount capital (loss) (deficit) income (loss) equity
- -----------------------------------------------------------------------------------------------------------------------------------
Issued 100 class A common
shares at $0.69 per share 100 $ - $ 69 $ - $ - $ - $ 69
Imputed interest on amount
due to a stockholder - - 405 - - - 405
Comprehensive (loss)
- net (loss) for the period - - - (10,482) (10,482) - (10,482)
- -----------------------------------------------------------------------------------------------------------------------------------
Comprehensive (loss) (10,482)
============
Balance, October 31, 1999 100 - 474 (10,482) - (10,008)
Imputed interest on amount
due to a stockholder - - 405 - - - 405
Comprehensive income
- net income for the period - - - 17,729 17,729 - 17,729
- -----------------------------------------------------------------------------------------------------------------------------------
Comprehensive income $ 17,729
============
Balance, January 15, 2000 100 $ - $ 879 $ 7,247 $ - $ 8,126
========================================================================== ========================================
The accompanying notes are an integral part of these financial statements.
MOORE STEPHENS ELLIS FOSTER LTD.
Page F-18
NAI INTERACTIVE LTD.
Statement of Operations
(Expressed in U.S. Dollars)
================================================================================
November 13
November 1 1998
1999 to (inception) to
January 15 October 31
2000 1999
- --------------------------------------------------------------------------------
Revenue $ 47,541 $ 85,269
- --------------------------------------------------------------------------------
Expenses
Advertising and promotion - 1,230
Audit and legal 130 3,216
Consulting fees 4,140 30,052
Depreciation 708 1,488
Interest (imputed) 405 405
Office and miscellaneous 1,367 5,773
Printing 919 2,078
Rent and operating 2,346 6,210
Salaries and benefits 14,179 32,883
Telephone 444 3,936
Travel and entertainment 4,202 8,480
- --------------------------------------------------------------------------------
28,840 95,751
- --------------------------------------------------------------------------------
Net income (loss) before income taxes 18,701 (10,482)
Income taxes 972 -
- --------------------------------------------------------------------------------
Net income (loss) for the period $ 17,729 $ (10,482)
================================================================================
The accompanying notes are an integral part of these financial statements.
MOORE STEPHENS ELLIS FOSTER LTD.
Page F-19
NAI INTERACTIVE LTD.
Statement of Cash Flows
(Expressed in U.S. Dollars)
================================================================================
November 13
November 1 1998
1999 to (inception) to
January 15 October 31
2000 1999
- --------------------------------------------------------------------------------
Cash flows from (used in) operating activities
Net income (loss) for the period $ 17,729 $ (10,482)
Adjustment to reconcile net income (loss)
to net cash used in operating activities:
- depreciation 708 1,488
- interest (imputed) 405 405
Changes in assets and liabilities, net of
effects of acquisition of subsidiary:
- accounts receivable (3,433) (15,754)
- prepaid expenses and deposits 10 (755)
- accounts payable and accrued liabilities 3,666 6,744
- income taxes 972 -
- deferred revenue (4,610) 4,610
- --------------------------------------------------------------------------------
15,447 (13,744)
- --------------------------------------------------------------------------------
Cash flows from (used in) financing activities
Shares issued for cash - 69
Advance from an investor (51,057) 51,057
Advances from a stockholder - 27,008
- --------------------------------------------------------------------------------
(51,057) 78,134
- --------------------------------------------------------------------------------
Cash flows (used in) investing activities
Purchase of fixed assets (3,069) (11,496)
- --------------------------------------------------------------------------------
Increase (decrease) in cash
and cash equivalents (38,679) 52,894
Cash and cash equivalents,
beginning of period 52,894 -
- --------------------------------------------------------------------------------
Cash and cash equivalents,
end of period $ 14,215 $ 52,894
================================================================================
The accompanying notes are an integral part of these financial statements.
MOORE STEPHENS ELLIS FOSTER LTD.
Page F-20
NAI INTERACTIVE LTD.
Notes to Financial Statements
January 15, 2000 and October 31, 1999
(Expressed in U.S. Dollars)
================================================================================
1. Nature and Continuance of Operations
The Company was incorporated under the laws of British Columbia, Canada on
November 13, 1998. The principal business activity of the Company is to
provide internet services through its Chinese world-wide web site.
2. Significant Accounting Policies
(a) Currency of Presentation
These financial statements, which were originally presented in
Canadian dollars, the currency of the Company's primary economic
environment, are being translated into U.S. dollars at the exchange
rate of US$1-Cdn$1.4493 for the convenience of the readers.
(b) Accounting Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles 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 period. Actual results may differ from those
estimates.
(c) Fixed Assets
Fixed assets are stated at cost, net of accumulated amortization.
Amortization is provided in the declining-balance basis on fixed
assets over the expected useful lives of the assets at the following
annual rates:
Furniture and equipment 20%
Computer equipment 30%
Computer software 100%
(d) Cash Equivalents
Cash equivalents usually consist of highly liquid investments which
are readily convertible into cash with maturities of three months or
less when purchased. As at January 15, 2000, cash and cash equivalents
consist cash only.
Page F-21
NAI INTERACTIVE LTD.
Notes to Financial Statements
January 15, 2000 and October 31, 1999
(Expressed in U.S. Dollars)
================================================================================
2. Significant Accounting Policies (continued)
(e) Foreign Currency Transactions
The Company maintains its accounting records in its functional
currencies (i.e., Canadian dollars). It translates foreign currency
transactions into its functional currency in the following manner.
At the transaction date, each asset, liability, revenue and expense is
translated into the functional currency by the use of the exchange
rate in effect at that date. At the period end, monetary assets and
liabilities are translated into the functional currency by using the
exchange rate in effect at that date. The resulting foreign exchange
gains and losses are included in operations.
(f) Advertising Expenses
The Company expensed advertising costs as incurred.
(g) Income Taxes
The Company has adopted Statement of Financial Accounting Standards
("SFAS") No. 109, "Accounting for Income Taxes", which requires the
Company to recognize deferred tax liabilities and assets for the
expected future tax consequences of events that have been recognized
in the Company's financial statements or tax returns using the
liability method. Under this method, deferred tax liabilities and
assets are determined based on the temporary differences between the
financial statement and tax bases of assets and liabilities using
enacted tax rates in effect in the years in which the differences are
expected to reverse. The effect on deferred income tax assets and
liabilities of a change in income tax rates is included in the period
that includes the enactment date.
(h) Comprehensive Income
The Company adopted SFAS No. 130, "Reporting Comprehensive Income",
which establishes standards for reporting and display of comprehensive
income, its components and accumulated balances. The Company is
disclosing this information on its Statement of Stockholders' Equity.
Comprehensive income comprises equity except those resulting from
investments by owners and distributions to owners. SFAS NO. 130 did
not change the current accounting treatments for components of
comprehensive income.
Page F-22
NAI INTERACTIVE LTD.
Notes to Financial Statements
January 15, 2000 and October 31, 1999
(Expressed in U.S. Dollars)
================================================================================
2. Significant Accounting Policies (continued)
(i) Financial Instruments and Concentration of Risks
Fair value of financial instruments are 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 judgement,
they cannot be determined with precision. Changes in assumptions can
significantly affect estimated fair values.
It is not practical to determine the fair value of amount due to a
stockholder with sufficient reliability due to the nature of the
financial instruments, the absence of secondary markets and the
significant cost of obtaining outside appraisals.
The carrying value of cash and cash equivalents, accounts receivable,
accounts payable and accrued liabilities, income taxes payable and
amount due to an investor approximate their fair value because of the
short-term nature of these instruments. Management is of the opinion
that the Company is not exposed to significant interest, credit, or
currency risks arising from these financial statements.
Financial instruments that potentially subject the Company to
concentration of credit risk consist principally of cash, the balances
of which are stated on the balance sheet. The Company places its cash
in high credit quality financial institutions. The Company does not
require collateral or other security to support financial instruments
subject to credit risk.
(j) Revenue Recognition
Revenue includes banner advertisement fees, webpage hosting and
maintenance fees, company review fees, translation service fees,
Chinese investment seminar revenue, Fantasy Stock Challenge revenue
and Chinese financial newspaper revenue which are generally recognized
when all significant contractual obligations have been satisfied and
collection of the resulting receivable is reasonably assured. Revenue
from banner advertisements fees and maintenance fees is recognized
ratably over the contract term which is normally one year. Revenue
from webpage hosting set-up fees is recognized over the estimated
period the hosting services are provided to customers, which is
typically twelve (12) months.
In December 1999, the SEC issued Staff Accounting Bulletin No. 101,
"Revenue Recognition in Financial Statements" ("SAB 101"). SAB 101
outlines the basic criteria that must be met to recognize revenue and
provides guidance for disclosures related to revenue recognition
policies. Management believes that the Company's revenue recognition
policy is in compliance with the provisions of SAB 101 and that the
adoption of SAB 101 had no material effect on the financial position
or result of operations of the Company.
Page F-23
NAI INTERACTIVE LTD.
Notes to Financial Statements
January 15, 2000 and October 31, 1999
(Expressed in U.S. Dollars)
================================================================================
2. Significant Accounting Policies (continued)
(k) Stock-Based Compensation
The Company has adopted the disclosure-only provisions of SFAS No.
123, "Accounting for Stock-based Compensation". SFAS No. 123
encourages, but does not require, companies to adopt a fair value
based method for determining expense related to stock-based
compensation. The Company accounts for stock-based compensation issued
to employees and directors using the intrinsic value method as
prescribed under Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" and related
interpretations.
(l) Earnings (Loss) Per Share
Earnings (loss) per share is computed using the weighted average
number of common shares outstanding during the period. The Company has
adopted SFAS No. 128, "Earnings per share". Diluted loss per share is
equal to the basic loss per share.
(m) Impairment
Certain long-term assets of the Company are reviewed when changes in
circumstances require as to whether their carrying value has become
impaired pursuant to guidance established in Statement of Financial
Accounting Standards ("SFAS") No. 121, Accounting for the Impairment
of Long-lived Assets and for Long-lived Assets to be Disposed off.
Management considers assets to be impaired if the carrying value
exceeds the future projected cash flows from related operations
(undiscounted and without interest charges). If impairment is deemed
to exist, the assets will be written down to fair value.
3. Fixed Assets
------------------------------------------------------------------------------------------
October 31
January 15, 2000 1999
----------------------------------------------- -------------
Accumulated Net book Net book
Cost Amortization value value
------------------------------------------------------------------------------------------
Furniture and office equipment $ 4,153 $ 566 $ 3,587 $ 3,526
Computer equipment 10,384 1,609 8,775 6,468
Computer software 27 20 7 14
------------------------------------------------------------------------------------------
Total $ 14,564 $ 2,195 $ 12,369 $ 10,008
==========================================================================================
Page F-24
NAI INTERACTIVE LTD.
Notes to Financial Statements
January 15, 2000 and October 31, 1999
(Expressed in U.S. Dollars)
================================================================================
4. Income Taxes
(a) Income tax (benefit) provision reflected in the statement of
operations are as follows:
---------------------------------------------------------------------------
November 1 November 13
1999 to 1998 to
January 15 October 31
2000 1999
---------------------------------------------------------------------------
Current tax expense $ 972 $ -
===========================================================================
(b) Reconciliation of the statutory income tax rate (45%) applied to pre-
tax accounting income (loss) compared to the expense (benefit) for
income tax in the consolidated statement of operations:
---------------------------------------------------------------------------
November 1 November 13
1999 to 1998 to
January 15 October 31
2000 1999
---------------------------------------------------------------------------
Income tax (benefit) at the statutory rate $ 8,415 $ (4,717)
Adjustment resulting from:
- tax loss utilized (3,479) -
- small business deduction (3,964) -
- non-deductible loss - 1,238
- unused tax loss carryforward - 3,479
---------------------------------------------------------------------------
$ 972 $ -
===========================================================================
(c) The tax effect of temporary difference that give rise to the Company's
deferred tax assets are as follows:
---------------------------------------------------------------------------
November 1 November 13
1999 to 1998 to
January 15 October 31
2000 1999
---------------------------------------------------------------------------
Estimated tax loss carryforward $ - $ 3,479
Less: Valuation allowance - (3,479)
---------------------------------------------------------------------------
$ - $ -
===========================================================================
5. Acquisition by ChineseWorldNet.com Inc.
Pursuant to a share exchange agreement on January 15, 2000,
ChineseWorldNet.com Inc., a company incorporated in the Cayman Island,
agreed to issue 112,500 common shares to acquire all of the issued and
outstanding shares of the Company.
Exhibit 2(a)
SHARE EXCHANGE AGREEMENT
DATED AS AT January 15th, 2000
AMONG:
CHINESEWORLDNET.COM INC.
AND:
NAI INTERACTIVE LTD.
AND:
THE SHAREHOLDERS OF NAI INTERACTIVE LTD.
Table of Contents
-----------------
Section Title Page
- ------- ----- ----
1. PURCHASE AND SALE 1
2. VENDORS' REPRESENTATIONS AND WARRANTIES 2
3. VENDORS' ACKNOWLEDGEMENTS 6
4. PURCHASER'S REPRESENTATIONS AND WARRANTIES 7
5. CONDITIONS PRECEDENT 10
6. COVENANTS OF THE PURCHASER AND THE VENDORS 12
7. CLOSING 14
8. PROPRIETARY INFORMATION 14
9. INDEMNIFICATION 15
10. GENERAL 16
Schedules
---------
The following are Schedules to this Agreement, and are incorporated herein by
reference:
SCHEDULE "A" List of Shareholders of NAI Interactive Ltd
THIS SHARE EXCHANGE AGREEMENT made and dated and the following terms and
conditions are effective as of tile January 15th, 2000.
AMONG:
CHINESEWORLDNET.COM INC., a company incorporated pursuant to the laws
-----------------------
of Cayman Islands and having a registered office at Huntlaw Building,
Fort St., Grand Cayman, Cayman Islands.
(the "Purchaser")
AND:
NAI INTERACTIVE LTD., a company incorporated pursuant to the laws of
--------------------
the Province of British Columbia and having an office 201-1118 Homer
Street, Vancouver, B.C., Canada V613 6L5
(the "Company" or "NAI Interactive Ltd.'")
AND:
THE SHAREHOLDERS OF THE COMPANY SET OUT IN SCHEDULE "A" ATTACHED
----------------------------------------------------------------
HERETO
------
(Collectively, the "Vendors")
WITNESSES THAT WHEREAS:
A. The Vendors are the legal and beneficial owners of all of the issued and
outstanding shares in the capital of the Company;
B. The Purchaser has agreed to acquire from the Vendors, and the Vendors
have agreed to transfer to the Purchaser, the Company Shares in
accordance with the terms and conditions of this Agreement;
NOW THEREFORE in consideration of the recitals, the following agreements
and the payment of $1.00 made by each party to the other, the receipt and
sufficiency of which is acknowledged by each party, the parties agree on
the following, terms:
1. PURCHASE AND SALE
-----------------
1.1 On the Closing Date (as defined in section 7.1 of this Agreement),
subject to the terms and conditions hereof, the Purchaser will purchase
from the Vendors and the Vendors will assign, sell and transfer to the
Purchaser the Company Shares.
Page 2
1.2 The Purchaser will, on the Closing Date, issue to tile Vendors, pro rata
in accordance with their respective security holdings in the Company as
set out in Schedule "A", 112,500 common shares of the Purchaser (tile
"NAI CI Shares"').
1.3 In no event shall the Purchaser be required to purchase less than 90% of
the NAI Interactive Ltd. Shares.
2. NAT INTERACTIVE LTD.'S REPRESENTATIONS AND WARRANTIES
-----------------------------------------------------
2.1 In order to induce the Purchaser to enter into and consummate this
Agreement, NAI Interactive Ltd. represents and warrants to the Purchaser,
and acknowledges that the Purchaser is relying on such representations
and warranties in entering into this Agreement and completing the
transactions contemplated hereby, that:
(a) the Company was duty incorporated under the laws of the province of
British Columbia and is validly Subsisting and in good standing
hereunder;
(b) the authorized capital of the Company consists of 40,000 common
shares without par value, Of Which 100 common shares are, or at the
Time of Closing will be, duly and validly issued and outstanding, as
fully paid, to the parties set out in Schedule "A" attached hereto.
(c) Except as provided for in the agreement set out in Schedule "C", the
Company does not currently own, directly or indirectly, any shares or
interests in any other company or firm;
(d) the Vendors have due and sufficient right and authority to enter into
this Agreement oil the terms and conditions herein set out and all
necessary action has been taken by or on the part of the Vendors to
authorize the execution, delivery and performance of this Agreement
and all other documents contemplated hereby;
(e) this Agreement constitutes a valid and legally binding contract,
enforceable against the Vendors in accordance with its terms, subject
to equitable remedies and the rights of creditors generally;
(f) the NAI Interactive Ltd. Shares are not subject to or affected by any
actual, or, to the best of NAI Interactive Ltd.'s knowledge after
having made due inquiry, pending or threatened investigation or
proceeding by or before, any securities regulatory authority, Court,
administrative agency or other tribunal;
(g) to the best of NAI Interactive Ltd.*s knowledge, the NAI Interactive
Ltd. Shares were originally issued in full compliance with all
applicable securities laws;
(h) NAI Interactive Ltd. does not have any information or knowledge of
any material facts pertaining, to the Company which., if known to the
Purchaser, might reasonably be expected to deter the Purchaser from
completing the transactions contemplated hereby;
Page 3
(i) other than the NAI Interactive Ltd. Shares, no person, firm or
corporation has any right, agreement or option, whether oral or in
writing, or a right capable of becoming a right, agreement or option:
(i) for the purchase of the NAI Interactive Ltd. Shares,
(ii) for the purchase, subscription Or issuance of any of the
unissued shares in the capital of the Company, or
(iii) to require NAI Interactive Ltd. to purchase, redeem or
otherwise acquire the NAI Interactive Ltd. Shares.
except as set out in Schedule "A" attached hereto:
(j) the Company has the corporate capacity and power to carry on the
business presently carried on by it;
(k) the Company owns, holds, possesses or lawfully uses in the operation
of its business all material permits, approvals, waivers, licences or
similar authorizations ("Authorizations") of any governmental entity
having jurisdiction which are necessary for it to conduct its
business as presently conducted in compliance with all applicable
laws. All such Authorizations are valid, subsisting and in good
standing, the Company is not in material default or breach thereof
and, to the best of NAI Interactive Ltd.'s knowledge. no proceeding
is pending or threatened to revoke or limit any Authorization. All
Authorizations are renewable by their terms or in the ordinary course
of business without the need to comply with any special rules or
procedures, agree to any materially different terms or conditions or
pay any amounts other than routine filing fees. None of the Vendors
nor any affiliate thereof owns or has any proprietary, financial or
other interest (direct or indirect) in any such Authorization;
(1) the Company is not in material breach of, and the business of the
Company is and has been conducted in material compliance with, all
applicable statutes, ordinances, bylaws, regulations, decrees or
court orders to which it is subject;
(m) the Company has not guaranteed, or agreed to guarantee, an), material
debt, liability, or other obligation of any person, firm or
corporation:
(n) the Company is not indebted to the Vendors or to any affiliate of the
Company, or associate of the Vendors, other than as set forth in the
Company's Financial Statements;
(o) neither the Vendors nor any directors, officers, shareholders or
consultants of the Company are now indebted or under obligation to
the Company on any account whatsoever:
(p) no dividends or other distribution of any kind on any shares in the
capital of the Company and no distribution of assets in any form or
Page 4
manner have been made, declared or authorized not will any be
declared, paid or authorized until after the Closing Date;
(q) there are no material actions, Suits, judgements, investigations or
proceedings Outstanding or pending, or, to the best of tile Company's
knowledge, threatened against or affecting the Company at law or in
equity or before or by any federal., provincial, state, municipal,
County or regional government or governmental authority, domestic or
foreign, including any department, commission, bureau, board,
administrative agency or regulatory body of any of the foregoing
(Individually, a "Governmental Authority");
(r) no authorization, approval, order, license, permit, consent,
certificate or registration of any Governmental Authority, court or
arbitrator, or any-other party, and no registration, declaration or
filing by the Company or the Vendors with any Governmental Authority,
court or arbitrator, or any other party, is required in order for the
Company and the Vendors to execute and deliver this Agreement and all
other documents and instruments to be delivered by the Company and
the Vendors pursuant hereto;
(s) no material action, Suit, judgement, investigation, inquiry,
assessment, reassessment, litigation, determination or administrative
or other proceeding or arbitration before or of any court, arbitrator
or Governmental Authority or dispute with any Governmental Authority
is in process or, to the best of the Company's knowledge, threatened,
against or relating to the business of the Company and, to the best
of the Company's' knowledge, no state of facts exists which could
constitute the basis therefore;
(t) there are no violations or, to the best of the Company's knowledge,
potential violations, of any material patents, trademarks, trade
names, copyrights or trade secrets or other proprietary rights of any
person which has been or may be caused by the conduct of the
Company's business in the manner in which it has heretofore been
conducted;
(u) to the best of the Company's knowledge, the business of the Company
complies in all material respects with all applicable laws,
judgements, decrees, orders, injunctions, rules, statutes and
regulations of all courts, arbitrators or Governmental Authority,
including all environmental, health and safety statutes and
regulations;
(v) the business of the Company is not subject to any judicial or
administrative proceeding alleging the violation of any applicable
environmental, health or safety law, judgement, decree, order,
injunction, rule, statute or regulation;
(w) to the best of the Company's knowledge., the conduct of the business
of the Company does not infringe the rights or interests in the
patents, trade-marks, trade names, trade secrets, industrial designs,
copyrights, or any other industrial or intellectual property whether
domestic or foreign, of any other person;
Page 5
(x) all material contracts entered into by the Company (including without
limitation employment agreements, change of control agreements,
collective agreements, finders' fee agreements, agreements to pay
bonuses, agreements in respect of gifts or donations, agreements
regarding dividends or distributions or containing restrictions on
dividends or distributions, agreements with respect to borrowings,
agreements with respect to loans or advances, agreements with respect
to investments, guarantees or other financial Support for the
obligations of others, management or consulting agreements, leases of
real property, leases of personal property, non-competition or non-
solicitation agreements, confidentiality agreements, and licensing or
royalty agreements relating to intellectual property) are listed in
Schedule "D" attached hereto and are in good standing and have not
been assigned or encumbered, and neither the Company nor any-other
party thereto is in default thereunder in any material respect;
(y) the Company has no employees and has not yet commenced business
operations;
(z) neither the Company nor the Vendors have retained, employed or
introduced any broker, finder or other person who would be entitled
to a brokerage commission or finder's fee arising out of the
transactions contemplated hereby;
(aa) there are no material liabilities of the Company of any kind
whatsoever, contingent or otherwise, existing on the date hereof in
respect of which the Company has knowledge and which the Company or
the Purchaser may be liable on or after the completion of the
transactions contemplated hereby;
(bb) all material transactions of the Company have been properly recorded
in the books and records of the Company, and the minute books of the
Company contain, or at the Time of Closing will contain, records of
all material contracts and meetings and proceedings of shareholders
and directors thereof,
(cc) the directors and officers of the Company are as follows:
Name Title
---- -----
Miss Tim Yee Lau Director
(dd) the Company owns or possesses all assets, rights and property
necessary to the conduct of its business after the Closing
substantially in the same manner as it was conducted prior to the
Closing, and none of the Vendors has any claim in respect thereof.
2.2 The representations and warranties of the Company contained in this
Agreement or any certificates or documents delivered pursuant to the
provisions hereof or in connection with the transactions contemplated
hereby will be true at and as of the Time of Closing as though such
representations and warranties were made at and as of such time.
Notwithstanding any investigations or inquiries made by the Purchaser
prior to the Closing or the waiver of any condition by the Purchaser, the
representations and warranties of the Company will survive the Closing
Date and, notwithstanding the Closing, will continue in full force and
Page 6
effect for one year from the Closing, except those relating to tax
matters which will Survive until the expiration of any statutory
limitation period and those relating to fraud or intentional
misrepresentation which will survive indefinitely.
3. VENDORS' ACKNOWLEDGEMENTS
-------------------------
3.1 In order to induce the Purchaser to enter into and consummate this
Agreement, the Vendors acknowledge, knowing that tile Purchaser is
relying on such acknowledgements in entering into this Agreement and
completing the transactions contemplated hereby, that:
(a) the Vendors are resident in the jurisdictions set out under their
respective names in Schedule "A" to this Agreement;
(b) the NAI CI Shares are Subject to restrictions on resale and may not
be resold by the Vendors until all applicable hold periods have
elapsed, except in compliance with all applicable securities laws and
stock exchange requirements;
(c) no prospectus will be filed by the Purchaser with any securities
regulatory authority in connection with the distribution of the NAI
CI Securities and, as a result:
(i) the Vendors are restricted from using most of the civil
remedies available under applicable securities laws;
(ii) the Vendors may not receive information that would otherwise
be required to be provided to them under applicable
securities laws; and
(iii) the Purchaser is relieved from certain obligations that would
otherwise apply under applicable securities laws;
(d) The Purchaser has no current intention of becoming a reporting issuer
under applicable Securities laws in any province of Canada and,
accordingly, any Vendor resident in those jurisdictions will be
required to hold the NAI CI Securities for an indefinite period of
time:
(e) this Agreement is made with the Vendors in reliance upon the Vendors'
representations to the Purchaser, which by the Vendors' execution of
this Agreement, the Vendors hereby confirm that the NAI CI Shares to
be purchased by Vendors will be acquired for investment purposes for
the Vendors' own accounts and not with a view to the resale or
distribution of any part thereof in violation of the applicable
United States federal and state securities laws;
(f) the Vendors represent that they are experienced in evaluating and
investing in securities of companies in the development stage and
acknowledge that they are able to fend for themselves, can bear the
economic risk of tile investment, and have such knowledge and
experience in financial and business matters that they are capable of
Page 7
evaluating the merits and risks of the investment in the NAI CI
Shares;
4. PURCHASER'S REPRESENTATIONS AND WARRANTIES
------------------------------------------
4.1 In order to induce the Vendors to enter into and consummate this
Agreement, the Purchaser represents and warrants to the Vendors, and
acknowledges that the Vendors are relying on Such representations and
warranties in entering into this Agreement and in completing the
transactions contemplated hereby, that:
(a) the Purchaser is duly incorporated pursuant to the laws of Cayman
Islands and is in good standing with respect to the filing of annual
reports thereunder;
(b) the authorized capital of the Purchaser consists of 100,000,000
common shares with a par value of US $0.01, of which 100 common
shares are issued and outstanding as fully paid and non-assessable;
(c) the Purchaser will issue the NAI CI Shares against payment for same
pursuant to section 1. 1 of this Agreement, free of all liens,
claims, charges, restrictions on transfer, voting agreements, voting
trusts, escrow conditions and encumbrances whatsoever, other than
statutory hold periods or other restrictions imposed by applicable
securities laws or securities regulatory bodies;
(d) the Purchaser has due and sufficient right and authority to enter
into this Agreement on the terms and conditions herein set out and
all necessary corporate action has been taken by or on the part of
the Purchaser to authorize the execution and delivery of this
Agreement and all other documents contemplated hereby;
(e) this Agreement constitutes a valid and legally binding contract,
enforceable against the Purchaser in accordance with its terms,
subject to equitable remedies and the rights of creditors generally;
(f) other than the NAI CI Securities, no person, firm or corporation has
any right, agreement or option, whether oral or in writing, or a
right capable of becoming a right., agreement or option:
(i) for the purchase of the NAI Interactive Ltd. CI Securities,
(ii) for the purchase, subscription or issuance of any of the
unissued shares in the capital of the Purchaser, or
(iii) to require the Purchaser to purchase, redeem or otherwise
acquire the NAI CI Securities,
(g) no dividends or other distribution on any shares in the capital of
the Purchaser has been made, declared or authorized since its
incorporation nor will any be declared, paid or authorized after the
date hereof and up to the Closing Date;
Page 8
(h) except as set out in the Public Record, no payments of any kind have
been made or authorized by or on behalf of the Purchaser to or on
behalf of officers, directors, shareholders or employees of the
Purchaser or under any management agreements with the Purchaser,
other than in the ordinary course of business;
(i) the Purchaser has not entered into any material contracts (including
without limitation employment agreements, change of control
agreements, collective agreements, finders' fee agreements,
agreements to pay bonuses, agreements in respect of gifts or
donations, agreements regarding dividends or distributions or
containing restrictions on dividends or distributions, agreements
with respect to borrowings., agreements with respect to loans or
advances, agreements with respect to investments, guarantees or
other financial support for the obligations of others, management or
consulting agreements, cases of real property, leases of personal
property, non-competition or non-solicitation agreements,
confidentiality agreements, and licensing or royalty agreements
relating to intellectual property);
(j) there are no material actions, Suits, judgements, investigations or
proceedings outstanding or pending or. to the best of the Purchaser's
knowledge, threatened against or affecting the Purchaser at law or in
equity or before or by any federal, provincial, state, municipal or
other governmental department, commission, board, bureau, agency,
court or tribunal;
(k) there are no pensions, profit sharing, group insurance or similar
plans or other deferred compensation plans affecting the Purchaser;
(1) no shareholders, directors, officers, employees or consultants of the
Purchaser are now indebted or Linder obligation to the Purchaser on
any account whatsoever;
(m) the Purchaser is not indebted to any of its shareholders, directors,
officers, employees or consultants, other than in the ordinary course
of business;
(n) the performance of this Agreement will not be in violation of the
Articles or By-laws of the Purchaser or of any agreement to which the
Purchaser is a party and will not give any person any right to
terminate or cancel any agreement or any right enjoyed by the
Purchaser and will not result in the creation or imposition of any
lien, encumbrance or restriction of any nature whatsoever in favour
of a third party upon or against the assets of the Purchaser;
(o) the Purchaser has not retained, employed or introduced any broker,
finder or other person who would be entitled to a brokerage
commission or finder's fee arising out of the transactions
contemplated hereby;
(p) there are no liabilities of the Purchaser of any kind whatsoever,
contingent or otherwise, existing on the date hereof in respect of
which the Purchaser may be liable on or after the completion of the
transactions contemplated hereby other than:
(i) liabilities disclosed or referred to in this Agreement, and
Page 9
(ii) liabilities incurred in the ordinary Course of business, none
of which are materially adverse to tile business, operations,
affairs or financial condition of the Purchaser.
(q) to the best of the Purchaser's knowledge, all currently issued and
outstanding common shares of the Purchaser were originally issued in
full compliance with all applicable securities laws;
(r) the Purchaser does not have any information or knowledge of ally
material facts pertaining to it which, if known to the Vendors, might
reasonably be expected to deter the Vendors from completing the
transactions contemplated hereby;
(s) no authorization, approval, order, license, permit, consent,
certificate or registration of any Governmental Authority, court or
arbitrator, or any other party, and no registration, declaration or
filing by the Purchaser with any Governmental Authority, court or
arbitrator, or any other party, is required in order for the
Purchaser to execute and deliver this Agreement and all other
documents and instruments to be delivered by it pursuant hereto;
(t) no action, suit, judgement, investigation, inquiry, assessment,
reassessment, litigation, determination or administrative or other
proceeding or arbitration before or of any Court, arbitrator or
Governmental Authority or dispute with any Governmental Authority is
in process or, to the best of the Purchaser's knowledge, threatened,
against or relating to the business of the Purchaser or any of its
assets or properties and, to the best of the Purchaser's knowledge,
no state of facts exists which could constitute the basis therefore;
(u) to the best of the Purchaser's knowledge, the business of the
Purchaser complies in all material respects with all applicable laws,
judgements, decrees, orders, injunctions, rules, statutes and
regulations of all Courts, arbitrators or Governmental Authority,
including all environmental, health and safety statutes and
regulations;
(v) the Purchaser does not have any contracts, agreements, pension plans,
benefit plans, profit sharing plans, bonus plans, undertakings or
arrangements, whether oral, written., or implied, with employees,
lessees, licensees, managers, accountants, suppliers, agents,
distributors, officers, lawyers, or others which cannot be terminated
on not more than one month's notice and for an amount not in excess
of $1,000;
(w) the Purchaser has complied with all laws, rules, regulations and
orders applicable to it relating to employment, including those
relating to wages, hours, collective bargaining, occupational health
and safety, workers' hazardous materials, employment standards, pay
equity and workers' compensation;
(x) all material transactions of the Purchaser have been properly
recorded in the books and records of the Put-chaser, and the minute
Page 10
books of the Purchaser contain records of all material contracts and
meetings and proceedings of shareholders and directors thereof;
(y) the Purchaser owns, holds, possesses or lawfully uses in the
operation of its business all Authorizations of an), governmental
entity having jurisdiction which are necessary for it to conduct its
business as presently conducted In compliance with all applicable
laws. All such Authorizations are valid, Subsisting and in good
standing, the Purchaser is not in material default or breach thereof
and, to the best Of tile Purchaser's knowledge, no proceeding is
pending or threatened to revoke or limit any Authorization. All
Authorizations are renewable by their terms or in the ordinary Course
of business without the need to comply with any special rules or
procedures, agree to any materially different terms or conditions or
pay any amounts other than routine filing fees. Neither the Purchaser
nor any affiliate thereof owns or has any proprietary, financial or
other interest (direct or indirect) in any such Authorization; and
(z) the Purchaser has not granted a power of attorney to any person.
4.2 Tile representations and warranties of the Purchaser contained in this
Agreement or any certificates or documents delivered pursuant to the
provisions hereof or ill connection with the transactions contemplated
hereby will be true at and as of the Time of Closing as though such
representations and warranties were made at and as of such time.
Notwithstanding any investigations or inquiries made by the Purchaser
prior to the Closing or the waiver of any condition by the Purchaser,
the representations and warranties of the Purchaser will survive the
Closing Date and, notwithstanding the Closing, will continue in full
force and effect for one year from the Closing, except those relating to
tax matters which will survive until the expiration of any statutory
limitation period and those relating to fraud or intentional
misrepresentation which will survive indefinitely.
5. CONDITIONS PRECEDENT
--------------------
5.1 All obligations of the Vendors and the Purchaser under this Agreement
are subject to:
(a) the receipt of all necessary consents, approvals, orders and
authorizations from any regulatory or Governmental Authority or
stock exchange having jurisdiction over the transactions contemplated
hereby, and
(b) there being no injunction or restraining order issued preventing, and
no pending or threatened claim, action, litigation or proceeding,
judicial or administrative, or investigation against, the Vendors,
the Purchaser or the Company by any regulatory or Governmental
Authority or stock exchange for the purpose of enjoining or
preventing the consummation of the transactions contemplated hereby
or otherwise claiming that this Agreement or the consummation of this
Agreement is improper or would give rise to proceedings Linder any
statute or rule of law, which would have a material adverse impact on
the business of the Company or tile Purchaser, as the case may be.
Page 11
5.2 All obligations of the Vendors under this Agreement are further subject
to the fulfilment, at or before the Time of Closing, of each of the
following conditions:
(a) the Vendors carrying out a due diligence review of the business of
the Purchaser to their satisfaction;
(b) the representations and warranties of the Purchaser being true and
correct ill all material respects as of the Closing Date;
(c) the Purchaser having complied in all material respects with all
covenants to be performed by it hereunder;
(d) the Purchaser delivering to the Vendors at the Time of Closing:
(i) a certified copy of the resolution of the directors of the
Purchaser approving this Agreement and the transactions
contemplated hereby;
(ii) a certified copy of the resolution of the directors of the
Purchaser authorizing the issuance of the NAI CI Securities;
(iii) certificates representing the NAI CI Shares and NAI CI
Warrants registered in the names of the Vendors in
accordance with section 1.1 of this Agreement;
5.3 The conditions set out in section 5.2 of this Agreement are for the
exclusive benefit of the Vendors and the Vendors may waive the conditions
in whole or in part by delivering to the Purchaser at or before the Time
of Closing a written waiver to that effect stated to be made pursuant to
this subsection and executed by each of the Vendors.
5.4 All obligations of the Purchaser under this Agreement are further subject
to the fulfilment, at or before the Time of Closing, of each of the
following conditions:
(a) the Purchaser carrying out a due diligence review of the business of
the Company to its satisfaction;
(b) the representations and warranties of the Company and the Vendors
being true and correct in all material respects as of the Closing
Date;
(c) the Company and the Vendors having complied in all material respects
with all covenants to be performed by them hereunder;
(d) the Vendors delivering to the Purchaser at the Time of Closing:
(i) a certified copy of the resolution of the directors of the
Company consenting to the transfer of the NAI Interactive
Ltd. Shares from the Vendors to the Purchaser and authorizing
the issuance of a new share certificate in the name of the
Purchaser,
Page 12
(ii) certificates representing the NAI Interactive Ltd. Shares
registered in tile names of the Vendors, duly endorsed for
transfer to the Purchaser or transfer documents transferring
the NAI Interactive Ltd. Shares to the Purchaser.
(iii) a certificate representing the NAI Interactive Ltd. Shares
registered in the name of the Purchaser,
(iv) a certificate of the Vendors certifying, as of the Date of
Closing, that:
(A) the representations and warranties of the Company and
the Vendors Set Out in this Agreement were true and
correct as of the date of this Agreement and are true
and correct in all material respects as of the Date of
Closing as if made by the Company or the Vendors, as
the case may be, on the Closing Date,
(B) the Company and the Vendors have complied in all
material respects with all covenants to be performed by
them hereunder;
5.5 The conditions set out in section 5.4 of this Agreement are for the
exclusive benefit of the Purchaser and the Purchaser may waive the
conditions in whole or in part by delivering to the Vendors, at or before
the Time of Closing, a written waiver to that effect stated to be made
pursuant to this subsection and executed by the Purchaser.
6. COVENANTS OF THE PURCHASER AND THE VENDORS
------------------------------------------
6.1 The Purchaser covenants with the Vendors that up to and including the
Closing or the termination of this Agreement:
(a) it will provide the Vendors with full and complete access to its
books, records, financial statements, and other documents, articles
of incorporation, by-laws, minutes of its board of directors and its
committees, investment agreements, material contracts, as well as
such other documents and materials as the Vendors or their legal
counsel may deem reasonable and necessary to conduct an adequate due
diligence investigation of the Purchaser, its operations and
financial condition prior to the Closing;
(b) it will use all reasonable efforts to obtain all consents, approvals
or waivers that may be necessary or desirable in connection with the
transactions contemplated hereby, and execute and deliver all such
further documents and assurances and take such steps or measures as
may be reasonably appropriate to enable it to be able to satisfy its
obligations hereunder and put itself in a position where the
transactions contemplated hereby can be closed on or about August 15,
1998; and
(c) up to and including the Closing, the Purchaser will not, without the
written consent of the Vendors:
Page 13
(i) declare or pay any dividend, or make any distribution of its
assets to its shareholders, or purchase or retire any of its
shares,
(ii) allot, issue, grant or enter into any agreement for the
allotment or issuance of any shares or securities, other
rights to acquire shares or securities, securities
convertible into, exchangeable for, or which otherwise carry
the right to acquire, directly or indirectly, any shares or
Securities in its capital, except as contemplated by this
Agreement or referred to herein;
(iii) sell all or any part of its assets, or agree to do or perform
any act or enter into any transaction or negotiation which
could reasonably be expected to interfere with or be
contemplated by this Agreement, or which would render
inaccurate any of the representations and warranties set out
in section 4 of this Agreement, or
(iv) merge, amalgamate or consolidate into or with any entity, or
enter into any other corporate reorganization.
6.2 The Company covenants with the Purchaser that LIP to and including the
Closing or the termination of this Agreement:
(a) it will provide the Purchaser with full and complete access to the
Company's books, records, financial statements, and other documents,
articles of incorporation, by-laws, minutes of its board of directors
and its committees, investment agreements, material contracts, as
well as Such other documents and materials as the Purchaser or its
legal Counsel may deem reasonable and necessary to conduct an
adequate due diligence investigation of the Company, its operations
and financial condition prior to the Closing;
(b) it will use all reasonable efforts to obtain all consents, approvals
or waivers that may be necessary or desirable in connection with the
transactions contemplated hereby, and execute and deliver all such
further documents and assurances and take such steps or measures as
may be reasonably appropriate to enable them to be able to satisfy
their obligations hereunder and put themselves in a position where
the transactions contemplated hereby can be closed by on or about
January 2000; and
(c) it will carry on its businesses in the usual and ordinary course in
compliance with all applicable laws and will not, without the prior
written consent of the Purchaser:
(i) declare or pay any dividend, or make any distribution of its
assets to its shareholders, or purchase or retire any of its
shares;
(ii) allot, issue, grant or enter into any agreement for the
allotment or issuance of any shares or securities, other
rights to acquire shares or securities, or securities
convertible into exchangeable for, or which otherwise carry
the right to acquire. directly or indirectly any shares or
securities in its capital;
Page 14
(iii) sell or otherwise dispose of all or any part of its assets or
agree to do or perform any act or enter into any transaction
or negotiation which could reasonably be expected to
interfere with this Agreement, or which would render
inaccurate any of the representations and warranties set out
in section 2 of this Agreement;
(iv) merge, amalgamate or consolidate into or with any entity, or
enter into any other corporate reorganization;
(v) increase its indebtedness for borrowed money other than trade
obligations entered into in the ordinary course of business;
or
(vi) enter into any arrangements or transactions with any
director, former director, officer, shareholder or employee
of the Company, or any other person that is not dealing at
"arm's length" with the Company (as such term is defined in
the Income Tax Act (Canada));
7. CLOSING
-------
7.1 The purchase and sale of the NAI Interactive Ltd. Shares and the
issuance of the NAI CI Shares contemplated by this Agreement will be
closed on the third business day following the satisfaction or waiver, as
applicable, of the conditions precedent set Out in section 5 of this
Agreement, or on such other date as may be agreed upon in writing by the
President of the Company and the President of the Purchaser, which date
is referred to herein as the "Date of Closing" and "Closing Date" and
which time is referred to herein as the "Closing" and "Time of Closing".
8. PROPRIETARY INFORMATION
-----------------------
8.1 Each of the parties hereto covenants with the others that prior to the
Closing Time and, if the transactions contemplated hereby are not
completed, at all times after the Closing Time, it will keep confidential
all information obtained by it relating to the others, except such
information which prior to the date hereof was already in the possession
of that party, as demonstrated by written records, is generally available
to the public, other than as a result of a disclosure by that party, or
is made available to that party on a non-confidential basis from a source
other than the other parties to this Agreement or their representatives
(the "Confidential Information"). The parties further agree that the
Confidential Information will be disclosed only to those of its employees
and representatives of its advisors who need to know Such information for
the purposes of evaluating and implementing the transactions contemplated
hereby.
8.2 Notwithstanding the foregoing provisions of this section, the obligation
to maintain the confidentiality of the Confidential Information will not
apply to the extent that disclosure of such information is required under
applicable securities laws and regulations, stock exchange by-laws or
rules, or judicial order, provided, however, that to the extent
reasonably practicable, the party disclosing the Confidential Information
consults with the others respecting, such disclosure.
Page 15
8.3 If the transactions contemplated hereby are not consummated for any
reason, each of the parties hereto will return forthwith, without
retaining any copies thereof, all information and documents obtained from
the others.
9. INDEMNIFICATION
---------------
9.1 The Vendors severally (and not jointly) and agree to indemnify and save
harmless the Purchaser of and from any loss, cost, damage or expense
whatsoever arising out of or resulting from, under or pursuant to:
(a) all debts, liabilities, contingent or otherwise, contracts or
engagements of the Company whatsoever, including, without limitation,
liabilities for federal, provincial, sales, excise, income, corporate
or other taxes of the Company or any re-assessment therefore,
interest thereon or penalties with respect thereto existing at the
Closing and not disclosed on or included in the Company's Financial
Statements:
(b) the inaccuracy of any representation or warranty or the breach of any
covenant made by the Company or tile Vendors herein or in an),
instrument or certificate delivered by the Company or the Vendors
pursuant hereto except as contemplated by this Agreement: and
(c) all claims, actions, suits, proceedings, demands, costs and expenses
in respect of or incidental to any of the foregoing.
9.2 The Purchaser hereby indemnifies and saves harmless the Vendors of and
from any loss, cost, damage or expense whatsoever arising out of or
resulting from, under or pursuant to:
(a) the inaccuracy of any representation or warranty or the breach of any
covenant made by tile Purchaser contained herein or any instrument or
certificate delivered by the Purchaser pursuant hereto except as
contemplated by this Agreement; and
(b) all claims, actions, Suits, proceedings, demands, costs and expenses
in respect of or incidental to any of the foregoing.
9.3 No claim for indemnification will arise until notice thereof is given to
the party (the "Indemnitor") from whom indemnity is sought. Such notice
shall be sent within a reasonable time following the determination by a
party (the "Claimant") that a claim for indemnity exists. In the event
that any legal proceedings shall be instituted or any claim or demand is
asserted by any third party in respect of which the Indemnitor may have
an obligation to indemnify the Claimant, the Claimant shall give or cause
to be given to the Indemnitor written notice thereof and such party shall
have the right, at its option and expense, to be present at the defence
of such proceedings, claim or demand, but not to control the defence,
negotiation or settlement thereof, which control shall at all times rest
with the Claimant, unless the Indemnitor irrevocably acknowledges full
and complete responsibility for indemnification of Claimant, in which
case the Indemnitor may assume such control through Counsel of its
choice, provided however, the at no settlement shall be entered into
without tile Claimant's written consent (which shall not be unreasonably
Page 16
withheld). The parties hereto agree to cooperate fully with each other in
connection with the defence, negotiation or settlement of any such third
party legal proceeding, claim or demand.
9.4 Notwithstanding anything in this Agreement to the contrary, the indemnity
provided for in this section shall apply to any loss, liability, damage,
deficiency or expense, whether or not tile actual amount thereof shall
have been ascertained prior to the final day upon which a claim for
indemnity with respect thereto may be made hereunder, so long as written
notice thereof shall have been given to the Indemnitor prior to said
date, setting forth specifically and in reasonable detail, so far as is
known, the matter as to which indemnification is being sought, the
quantum of tile claim (if ascertainable) and the provision of this
Agreement under which the Indemnitor is liable, but nothing herein shall
be construed to require payment of any claim for indemnity until the
actual amount payable shall have been finally ascertained.
10. GENERAL
-------
10.1 Unless otherwise specified, all monetary amounts set out in this
Agreement are in reference to lawful Currency of the United States of
America.
10.2 Time is of the essence of this Agreement.
10.3 Each of the parties hereto shall bear all expenses incurred by it in
connection with this Agreement Including, without limitation, the charges
of their respective counsel, accountants and financial advisors.
10.4 This Agreement constitutes the entire agreement between the parties and
supersedes all prior agreements and understandings, oral or written, by
and between any of the parties with respect to the subject matter hereof.
There are no pre-contractual representations and warranties except as set
out in this Agreement and any certificates or documents delivered
pursuant to the provisions hereof.
10.5 This Agreement will be governed by, construed and enforced in accordance
with tile laws of the Province of British Columbia and tile parties
submit and attorn to the non-exclusive jurisdiction of the Courts of the
Province of British Columbia.
10.6 This Agreement and each of its terms and provisions will enure to the
benefit of and be binding upon the parties to this Agreement and their
respective heirs, executors, administrators, personal representatives,
successors and permitted assigns.
10.7 If any one or more of the provisions contained in this Agreement should
be invalid, illegal or unenforceable in any respect in any jurisdiction,
the validity, legality and enforceability of such provision or provisions
will not in any way be affected or impaired thereby in any other
jurisdiction and the validity, legality and enforceability of the
remaining provisions contained herein will not in any way be affected or
impaired thereby, unless in either case as a result of such determination
this Agreement would fail in its essential purpose.
Page 17
10.8 This Agreement is not transferable or assignable without the prior
written consent of the other parties.
10.9 Any notice tinder this Agreement must be
(a) in writing,
(b) delivered, telecopied or mailed by prepaid post, and
(c) addressed to the party to which notice is to be given at the address
for such party indicated herein or at another address designated by
such party in writing.
Notice which is delivered or telecopied will be deemed to have been given
at the time of transmission or delivery. If notice is by mail it will be
deemed to have been given five business days following the date of
mailing. If there is all interruption in normal mail service at or prior
to the time a notice is mailed, the notice must be delivered or
telecopied.
10.10 The parties will do all Such things and provide all such reasonable
assurances as may be required to consummate the transactions contemplated
hereby, and each party to this Agreement will execute and deliver such
further documents or instruments required by the other party as may be
reasonably necessary or desirable for the purposes of giving effect to or
perfecting the transactions contemplated hereby and obtaining any
required regulatory approvals, whether before or after the Closing.
10.11 This Agreement may be executed in as many counterparts as may be
necessary or by facsimile and each such facsimile or counterpart so
executed shall be deemed to be an original and such counterparts together
shall constitute one and the same instrument and notwithstanding the date
of execution shall be deemed to bear the date as set out on the first
page of this Agreement.
IN WITNESS WHEREOF the parties have hereunto duly executed this Agreement as of
the day and year first above written.
CHINESEWORLDNET.COM INC. NAI INTERACTIVE LTD.
Per: /s/ Ken Cai Per: /s/ Tim Yee Lau
----------------------------- ----------------------------
Authorized Signatory Authorized Signatory
Mr. Ken Cai (Director) Miss Tim Yee Lau (Director)
Page 18
Schedule "A"
Miss Tim Yee Lai (Director)
SUBSCRIPTION AGREEMENT
----------------------
To: ChineseWorldNet.com Inc.
The Huntlaw Building
P.O. Box 1350GT
Grand Cayman
Cayman Islands
Gentlemen:
The undersigned Subscriber (the "Subscriber") desires to become a
shareholder of ChineseWorldNet.com Inc., a Cayman Islands corporation (the
"Company"), by purchasing the number of common shares designated in and upon
the terms and conditions of this subscription agreement (Subscription
Agreement"). In this regard, the Subscriber hereby represents and warrants to,
and agrees with the Company as follows:
1. Subscription
Subject to the terms and conditions of this Subscription Agreement, the
Subscriber hereby agrees to purchase, and irrevocably tenders this
Subscription Agreement for the purchase of, the number of shares of the
Company designated on the signature page of this Subscription Agreement,
at a subscription price of US $0.60 per share. The Subscriber hereby
makes full payment for such shares by cheque or money order payable to
"ChineseWorldNet.com Inc."
2. Representations
The Subscriber hereby represents and warrants to the company that:
(a) the Subscriber has received a copy of the Company's business plan and has
been given the opportunity to have the proposed investment and all
aspects thereof examined by and explained by the Subscriber's own legal
counsel, tax advisor and/ or financial consultant, or that the Subscriber
has experience in business enterprises or investments entailing risk of a
type or to a degree substantially similar to that entailed in an
investment in the Company;
(b) the Subscriber will be the sole beneficial owner of the Shares issued in
the Subscriber's name pursuant to this Subscription Agreement, and will
hold such beneficial interest without intent of resale;
(c) the Subscriber understands that in the event that the Subscriber desires
to transfer the Shares, the Subscriber will be required to comply with
the Memorandum of Association and the Articles of Association of the
Company;
(d) the Subscriber is purchasing the Shares solely for the Subscriber's own
account and not for the benefit or the account of any other person or
entity, and that the Subscriber is purchasing the Shares for purposes of
investment only and has no present intention of distributing or reselling
the Shares purchased, or any part thereof;
(e) the Subscriber recognizes that the Company has not commenced business
operations, and the Subscriber fully understands that an investment in
the Shares involves a substantial degree of risk and may result in the
total loss of the Subscriber's investment;
(f) the Subscriber is aware that no federal, provincial or state agency has
made any findings or determination as to the merits of this investment,
nor any recommendation or endorsement, of the Shares subscribed hereby;
(g) the Subscriber is aware that there is currently no public or private
market for the Shares and that there is no assurance that any such market
will be established at any time and that, accordingly, it may not be
possible for the Subscriber readily to liquidate the Subscriber's
investment in the Company and that, in this regard, the Subscriber has
adequate means to provide for the Subscriber's current needs and personal
contingencies and has no need for liquidity of this investment;
(h) the Subscriber understands that the Company has the right to accept or
reject this Subscription Agreement, in whole or in part;
(i) the Subscriber agrees not to transfer or assign this Subscription
Agreement or any interest herein, and that, if this Subscription
Agreement is accepted by the Company the assignment and transferability
of the Shares subscribed for by the Subscriber will be governed by all
applicable laws;
(j) the Shares have not been, and will not be, registered under the United
States Securities Act of 1933, as amended. Accordingly, the Shares may
not be offered or sold, directly or indirectly, in the United States
(including its territories and possessions and territories subject to its
jurisdiction) or to nationals or citizens or residents thereof or to
persons normally resident therein, unless a registration statement has
been filed or there is an available exemption from registration
requirements. Any offer or sales in the United States or to such
nationals or residents thereof must be pursuant to the registration
requirements of the Securities Act of 1933, as amended, or an exemption
therefrom. The Company has not made any representation of the Shares or
the availability of any exemption for the Subscriber's resale of the
Shares; and the Company does not make any representation as to when, if
at any time, the Shares may be resold in the United States to such
nationals or residents thereof,
(k) this subscription has not been solicited in any manner contrary to the
United States Securities Act of 1933, as amended, or any applicable state
securities laws, or the laws of any other applicable jurisdiction;
(1) the Shares were not offered to the Subscriber through an advertisement
in printed media of general and regular paid circulation, radio, or
television, and no person has made to the Subscriber any written or oral
representations;
(i) that any person will resell or repurchase the Shares;
(ii) that any person will refund the purchase price of the Shares;
(iii) as to the future price or value of the Shares;
(iv) that the Shares will be listed and posted for trading on a stock
exchange or that applicable has been made to list and post the
Shares for trading on a stock exchange.
The Subscriber understands that the Company is acting in reliance upon
this Subscription Agreement and the representations and warranties of the
Subscriber contained herein to determine that the Shares might be sold in
reliance upon applicable exemptions from registration and prospectus
requirements.
3. Suitability Standards
The Subscriber hereby represents and warrants to the Company that the
Subscriber has a pre-existing personal or business relationship with the
Company, or one or more of its officers or Directors, which relationship
is of such a nature and duration so as to enable the Subscriber to be
aware of the general business and financial circumstances of the Company.
4. Irrevocability and Survival of Subscription
The Subscriber hereby acknowledges and agrees that the Subscriber is not
entitled to cancel, terminate or revoke this Subscription Agreement or
any agreements of the Subscriber hereunder and that such Subscription
Agreement and agreements shall survive the death or disability of the
Subscriber.
5. Pooling Agreement
The Subscriber hereby acknowledges that the shares must be subject to
pooling restrictions imposed voluntarily or otherwise as a result of the
Company conducting equity financial to the public. In this regard, the
Subscriber agrees to execute and deliver to the Company a pooling
agreement in the form prescribed by any regulatory authority or public
stock exchange having jurisdiction.
I also understand that prior to the date hereof the Company may have
allotted and issued shares to others.
I UNDERSTAND THAT THE FOREGOING SHARES SHALL BE ISSUED PURSUANT TO AN EXEMPTION
GRANTED UNDER APPLICABLE SECURITIES LEGISLATION AND SHALL BE HELD BY ME SUBJECT
TO THE RESALE RESTRICTIONS, IF ANY, UNDER SUCH LEGISTRATION. I FURTHER
ACKNOWLEDGE THAT IT IS MY OBLIGATION TO ENSURE THAT I COMPLY WITH THE FOREGOING
RESALE RESTRICTIONS, IF ANY, AT THE TIME I WISH TO TRADE ANY OF THE SHARES
SUBSCRIBED FOR HEREUNDER AND THAT IT IS NOT THE OBLIGATION OF THE COMPANY OR ITS
SOLICITORS TO KEEP ME INFORMED IN THIS REGARD.
IN WITNESS WHEREOF, the Subscriber has executed this Subscription Agreement on
the date set forth hereinafter.
TOTAL NUMBER OF SHARES SUBSCRIBED FOR: ___________________ shares
Amount of cheque or money order enclosed: US$ ________________________
DATED this ___________________________ day of _____________________, 2000
X
---------------------------------
Signature of Subscriber
_________________________________
Print Name of Subscriber
_________________________________
_________________________________
_________________________________
Address of Subscriber
Acceptance
The Company hereby accepts this Subscription Agreement.
Dated: _______________________________________________
CHINESEWORLDNET.COM INC.
Per:
Exhibit 10
NAI Interactive Ltd.
Content Partner Agreement
This Agreement dated as of June 21, 2000
Between:
NAI Interactive Ltd.
Suite 201, 1118 Homer Street, Vancouver,
B.C, V613 61-5, Canada
(called "NAI")
And:
Mr. Ian Thomson
Rampart Securities Inc.
Suite 2000
421 7th Ave. S.W.
Calgary, Alberta
T2P 4K9, Canada
(called "Ian Thomson")
This AGREEMENT witnesses that in consideration of the respective mutual promises
and agreements, the Company and Ian Thomson promise and agree each with the
other as follows:
A. NAI hereby agrees to summarize and translate part of your research
articles and presented at www.na-investor.com. This translated part will
--------------------
represent a link back to www.exacttrade.com or the full article in
------------------
English.
B. Ian Thomson will forward his research article to letter@na-investor.com.
----------------------
C. NAI will only provide the accurate translation of partly Ian Thomson
research articles. NAI will not be responsible for any legal action
towards Ian Thomson.
D. Both parties have the right to terminate the agreement by a written
notice 60 days in advance.
E. Any amendments or alteration made to this Agreement may only be made by
mutual consensus and put in writing and signed by both parties.
G. Applicable Laws:
This Agreement is governed by the laws of the Province of British
Columbia.
H. Assignment:
Neither party to this Agreement may assign or delegate its duties under
this Agreement without the prior written consent of the other,
I. Arbitration:
If there is a disagreement of dispute between the parties with respect
to this agreement of the interpretation thereof, such disagreement of
dispute will be referred to binding arbitration to be conducted by a
single arbitrator pursuant to the provisions of the Commercial
Arbitration Act (British Columbia) and any amendments thereto, and the
determination of such arbitrator will be final and binding upon the
parties.
IN WITNESS WHEREOF, the parties have entered into this Agreement as of the
Effective date written above.
NAI Interactive LTD
/s/ signature /s/ Ian Thomson
- ---------------------------- ----------------------------
Witness Ian Thomson
By it's authorized signatory
/s/ signature /s/ signature
- ---------------------------- ----------------------------
Witness NAI Interactive Ltd.
By it's authorized signatory
NAI Interactive Ltd.
News Letter Content Agreement
This Agreement dated as of Apr 27, 2000
Between:
NAI Interactive Ltd.
Suite 201, 1118 Homer Street, Vancouver,
B.C. V6B 6L5, Canada
(called "NAI")
And:
Emerging Growth Stocks
102-2020 Comox Street,
Vancouver, B.C.
V6G IR9, Canada
(called "EGS")
This AGREEMENT witnesses that in consideration of the respective mutual promises
and agreements, the Company and EGS promise and agree each with the other as
follows:
A. NAI hereby agrees to summarized and translate part of EGS newsletter into
Chinese and post it on the website www.na-investorcom.
-------------------
B. EGS agrees to provide EGS newsletter content to NAT.
C. NAT will also provide a link to EGS's website.
D. NAT will only provide the translation of partly EGS newsletter. NAT will
not be responsible for any legal action towards EGS newsletter.
E. Both parties have the right to terminate the agreement by notice
one-month in advance.
F. Any amendments or alteration made to this Agreement may only be made by
mutual consensus and put in writing and signed by both parties.
G. Applicable Laws:
This Agreement is governed by the laws of the Province of British
Columbia.
H. Assignment:
Neither party to this Agreement may assign or delegate its duties under
this Agreement without the prior written consent of the other.
I. Arbitration:
If there is a disagreement of dispute between the parties with respect to
this agreement of the interpretation thereof, such disagreement of
dispute
will be referred to binding, arbitration to be conducted by a single
arbitrator pursuant to the provisions of the Commercial Arbitration Act
(British Columbia) and any amendments thereto, and the determination of
such arbitrator will be final and binding upon the parties.
IN WITNESS WHEREOF, the parties have entered into this Agreement as of the
Effective date written above.
NAI Interactive LTD.
/s/ signature /s/ signature
- -------------------------- --------------------------
Witness Emerging Growth Stocks
By it's authorized signatory
/s/ signature /s/ signature
- -------------------------- --------------------------
Witness NAI Interactive Ltd.
By it's authorized signatory
EXECUTION COPY
YAHOO! HOLDINGS (HONG KONG) LIMITED
CONTENT LICENSE AGREEMENT
(CO-BRANDING)
THIS CONTENT LICENSE AGREEMENT (the "Agreement")is made as of this January 2001
---------
(the "Effective Date")between YAHOO! HOLDINGS (HONG KONG) LIMITED, a corporation
--------------
of Hong Kong Special Administration Region, the People's Republic of China, with
offices at 2802, 28/F, Sunning Plaza, 10 Hysan Avenue, Causeway Bay, Hong Kong
("Yahoo") and ChineseWorldnet.com Inc., ("Licensor"), with registered offices at
----- --------
The Huntlaw Building P.O. Box 1350 GT, Grand Cayman, Cayman Island.
In consideration of the mutual promises contained herein, the parties agree as
follows:
SECTION 1: DEFINITIONS.
- -----------------------
Unless otherwise specified, capitalized terms used in this Agreement
shall have the meanings attributed to them in Exhibit A hereto.
SECTION 2: GRANT OF LICENSES
- ----------------------------
2.1 Grant of Licenses. Subject to the terms and conditions of this
-----------------
Agreement, Licensor hereby grants to Yahoo, under Licensor's
Intellectual Property Rights:
(a) A non-exclusive, worldwide license to use, modify, reproduce,
distribute, display and transmit the Licensor Content in electronic
form in connection with Yahoo Properties via the Internet or any
Wireless Device (including, without limitation, transmitting the
Licensor Content in either the traditional Chinese (Big 5 code) or the
simplified Chinese (GB code) format), and to permit users of the Yahoo
Properties to download and print the Licensor Content for personal use.
Yahoo's license to modify the Licensor content shall be limited to
modifying the Licensor Content to fit the format and look and feel of
the Yahoo Property.
(b) A non-exclusive, worldwide, fully paid license to use, reproduce and
display the Licensor's Brand Features: (i) in connection with the
presentation of the Licensor Content on the Content Pages in the Yahoo
Properties which is substantially similar in content, appearance, layout
and page design to the page attached hereto as Exhibit E; and (ii) in
---------
connection with the marketing and promotion of the Yahoo Properties.
(c) Yahoo shall be entitled to sublicense the rights set forth in this
Section 2.1: (i) to its Affiliates only for inclusion in Yahoo
Properties; and (ii) in connection with any mirror site, derivative
site, or distribution arrangement concerning a Yahoo Property.
(d) Not limiting any other rights provided Yahoo pursuant to this Agreement,
Yahoo shall have the right, at its sole discretion, to display Teaser
Content on pages that link to pages containing Licensor Content.
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2.2 Co-branding. For the Term of this Agreement, and in consideration of the
------------
licenses and rights granted in Section 2.1 hereto, Yahoo shall co-brand
the pages containing Licensor Content with Licensor Brand Features and
Yahoo Brand Features.
SECTION 3: PRESENTATION OF LICENSOR CONTENT, ADVERTISING REVENUE.
- -----------------------------------------------------------------
3.1 Yahoo's Responsibilities. In addition to any responsibilities that may
be set forth in Exhibit C, Yahoo will be responsible for the design,
---------
layout, posting, and maintenance of the Content Pages. In no event is
Yahoo under any obligation, express or implied, to post or otherwise
include any of the Licensor Content in any Yahoo Property, including
without limitation, in any Content Pages.
3.2 Licensor Assistance. In addition to any responsibilities that may be set
forth in Exhibit C, Licensor will provide on-going assistance to Yahoo
---------
with regard to technical, administrative and service-oriented issues
relating to the utilization, transmission and maintenance of the
Licensor Content, as Yahoo may reasonably request. Licensor will use its
reasonable best efforts to ensure that the Licensor Content is accurate,
comprehensive and updated regularly as set forth in Exhibit C.
---------
3.3 Advertising Rights. Yahoo shall have the sole right to sell or license
all Advertising Rights with respect to Content Pages.
3.4 Notices. Yahoo will not alter or impair any acknowledgment of copyright
or other Intellectual Property Rights of Licensor that may appear in the
Licensor Content and the Licensor Brand Features, including all
copyright, trademark and similar notices that Licensor may reasonably
request.
3.5 Links. The parties will maintain the hypertext links specified in
Exhibit D.
---------
SECTION 4: DELIVERY OF LICENSOR CONTENT
- ---------------------------------------
During the term of this Agreement, Licensor shall deliver updates of the
Licensor Content to Yahoo in accordance with the Delivery Specifications
set forth in Exhibit C. Licensor also shall provide Yahoo with
---------
reasonable prior notice of any significant Enhancements that generally
affect the appearance, updating, delivery or other elements of the
Licensor Content, and shall make such Enhancements available to Yahoo
upon commercially reasonable terms.
SECTION 5: INDEMNIFICATION
- --------------------------
Licensor, at its own expense, will indemnify, defend and hold harmless
Yahoo, its Affiliates and their employees, representatives, agents and
affiliates, against any claim, suit, action, or other proceeding brought
against Yahoo or an Affiliate based on or arising from a claim that the
Licensor Content as delivered to Yahoo or any Licensor Brand Feature
infringes in any manner any Intellectual Property Right of any third
party or contains any material or information that is obscene,
defamatory, libelous, slanderous, that violates any person's right of
publicity, privacy or personality, or has otherwise resulted in any
tort, injury, damage or harm to any person; provided, however, that in
-----------------
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any such case: (x) Yahoo provides Licensor with prompt notice of any
such claim; (y)Yahoo permits Licensor to assume and control the defense
of such action, with counsel chosen by Licensor (who shall be reasonably
acceptable to Yahoo); and (z) Licensor does not enter into any
settlement or compromise of any such claim without Yahoo's prior written
consent, which consent shall not be unreasonably withheld Licensor will
pay any and all costs, damages, and expenses, including, but not limited
to, reasonable attorneys' fees and costs awarded against or otherwise
incurred by Yahoo or an Affiliate in connection with or arising from any
such claim, suit, action or proceeding. It is understood and agreed that
Yahoo does not intend and will not be required to edit or review for
accuracy or appropriateness any Licensor Content.
SECTION 6: LIMITATION OF LIABILITY.
- -----------------------------------
EXCEPT AS PROVIDED IN SECTION 5, UNDER NO CIRCUMSTANCES SHALL LICENSOR,
YAHOO, OR ANY AFFILIATE BE LIABLE TO ANOTHER PARTY FOR INDIRECT,
INCIDENTAL, CONSEQUENTIAL, SPECIAL OR EXEMPLARY DAMAGES ARISING FROM
THIS AGREEMENT, EVEN IF THAT PARTY HAS BEEN ADVISED OF THE POSSIBILITY
OF SUCH DAMAGES, SUCH AS, BUT NOT LIMITED TO, LOSS OF REVENUE OR
ANTICIPATED PROFITS OR LOST BUSINESS.
SECTION 7: TERM AND TERMINATION
- -------------------------------
7.1 Initial Term and Renewals. This Agreement will become effective as of
-------------------------
the Effective Date and shall, unless sooner terminated as provided below
or as otherwise agreed, remain effective for an initial term of twelve
(12) months following the first date of public availability of the
Licensor Content on a Content Page within a Yahoo Property (the "Initial
Term"). After the Initial Term, this Agreement will be automatically
renewed for successive additional one year periods ("Extension Terms"),
---------------
unless otherwise terminated by either party by giving notice to the
other party not less than sixty (60) days prior to the end of a Term. As
used herein, the "Term" means the Initial Term and any Extension
Term(s).
7.2 Termination for Cause. Notwithstanding the foregoing, this Agreement may
---------------------
be terminated by either party immediately upon notice if the other
party: (w) becomes insolvent; (x) files a petition in bankruptcy; (y)
makes an assignment for the benefit of its creditors; or (z) breach any
of its obligations under this Agreement in any material respect, which
breach is not remedied within thirty (30) days following written notice
to such party.
7.3 Effect of Termination. Any termination pursuant to this Section 7 shall
---------------------
be without any liability or obligation of the terminating party, other
than with respect to any breach of this Agreement prior to termination.
The provisions of Sections 5, 6, 7, 8, 9, 10, and this Section 7.3 shall
survive any termination or expiration of this Agreement.
SECTION 8: OWNERSHIP.
- ---------------------
8.1 By Licensor. Yahoo acknowledges and agrees that: (i) as between Licensor
-----------
on the one hand, and Yahoo and its Affiliates on the other, Licensor
owns all right, title and interest in the Licensor Content and the
Licensor Brand Features; (ii) nothing in this Agreement shall confer in
Yahoo or an Affiliate any right of ownership in the Licensor Content or
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the Licensor Brand Features; and (iii) neither Yahoo or its Affiliates
shall now or in the future contest the validity of the Licensor Brand
Features. No licenses are granted by either party except for those
expressly set forth in this Agreement.
8.2 By Yahoo. Licensor acknowledges and agrees that: (i) as between Licensor
--------
on the one hand, and Yahoo and its Affiliates on the other, Yahoo or the
Affiliates own all right, title and interest in any Yahoo Property and
the Yahoo Brand Features; (ii) nothing in this Agreement shall confer in
Licensor any license or right of ownership in the Yahoo Brand Features;
and (iii) Licensor shall not now or in the future contest the validity
of the Yahoo Brand Features. No licenses are hereby granted by Yahoo.
Yahoo or its Affiliates shall own all derivative works created by Yahoo
from the Licensor Content, including the Content Pages, pursuant to this
Agreement, to the extent such is separable from the Licensor Content.
SECTION 9: PUBLIC ANNOUNCEMENTS.
- --------------------------------
The parties will cooperate to create any and all appropriate public
announcements relating to the relationship set forth in this Agreement.
Neither party shall make any public announcement regarding the existence
or content of this Agreement without the other party's prior written
approval and consent.
SECTION 10: NOTICE-, MISCELLANEOUS PROVISIONS
- ---------------------------------------------
10.1 Notices. All notices, requests and other communications called for by
-------
this Agreement shall be deemed to have been given immediately if made by
telecopy or electronic mail (confirmed by concurrent written notice sent
airmail, postage prepaid), if to Yahoo at Room 2802, 28/F, Sunning
Plaza, 10 Hysan Avenue, Causeway Bay, Hong Kong, Fax: (852) 2915-2126
Attention: Managing Director (e-mail: savio@yahoo-inc.com), with a copy
to its Corporate Counsel (e-mail: may@yahoo-ine.com), and if to Licensor
at the physical and electronic mail addresses set forth on the signature
page of this Agreement, or to such other addresses as either party shall
specify to the other. Notice by any other means shall be deemed made
when actually received by the party to which notice is provided.
10.2 Miscellaneous Provisions. This Agreement will bind and inure to the
benefit of each party's permitted successors and assigns. Neither party
may assign this Agreement, in whole or in part, without the other
party's written consent; provided, however, that: (i) either party may
assign this Agreement without such consent in connection with any
merger, consolidation, any sale of all or substantially all of such
party's assets or any other transaction in which more than fifty percent
(50%) of such party's voting securities are transferred; and (ii) Yahoo
may assign this Agreement without such consent to an Affiliate. Any
attempt to assign this Agreement other than in accordance with this
provision shall be null and void. This Agreement will be governed by and
construed in accordance with the laws of the Hong Kong Special
Administrative Region of People's Republic of China, without reference
to conflicts of laws rules, and without regard to its location of
execution or performance. If any provision of this Agreement is found
invalid or unenforceable, that provision will be enforced to the maximum
extent permissible, and the other provisions of this Agreement will
remain in force. Neither this Agreement, nor any terms and conditions
contained herein may be construed as creating or constituting a
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partnership, joint venture or agency relationship between the parties.
No failure of either party to exercise or enforce any of its rights
under this Agreement will act as a waiver of such rights. This Agreement
and its exhibits are the complete and exclusive agreement between the
parties with respect to the subject matter hereof, superseding and
replacing any and all prior agreements, communications, and
understandings, both written and oral, regarding such subject matter.
This Agreement may only be modified, or any rights under it waived, by a
written document executed by both parties. This Agreement may be
executed in any number of counterparts, all of which taken together
shall constitute a single instrument. Execution and delivery of this
Agreement may be evidenced by facsimile transmission.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their duly authorized representatives as of the date first written above.
YAHOO! HOLDINGS LICENSOR
(HONG KONG) LIMITED
Signature: /s/ Savio Chow Signature: /s/ Mathew Lee
------------------- --------------------
Name: Savio Chow Name: Mathew Lee
------------------- --------------------
Title: Vice President & Managing Title: Senior Vice President of
------------------------- ------------------------
Director of Yahoo! Asia Marketing & Business Development
----------------------- --------------------------------
Address: 2802, 28/F, Sunning Plaza, Address: Suite 620, 1090 West
-------------------------- --------------------
10 Hysan Avenue, Causeway Bay, Pender Street, Vancouver
------------------------------ ------------------------
Hong Kong B.C. Canada V6E 2N7
------------------------------ ------------------------
Fax: 604-488-0868
------------
E-mail: mlee@na-investor.com
--------------------
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EXHIBIT A
---------
DEFINITIONS
"Advertising Rights" shall mean the advertising and promotional rights sold or
- -------------------
licensed with respect to Content Pages.
"Affiliates" shall mean Yahoo! Inc. any company or any other entity world-wide
- -----------
owned by Yahoo! Inc., including, without limitation, corporations, partnerships,
joint ventures, and Limited Liability Companies, in which Yahoo! Inc. owns at
least a 19.9% ownership, equity, or financial interest.
"Confidential Information" shall mean all information concerning Yahoo,
- -------------------------
including, without limitation, all commercial, financial, sales, marketing,
technological, customer and software information, that may be deemed to be
proprietary and confidential information of Yahoo.
"Content Pages" shall mean those pages in the Yahoo Property that contain
- --------------
Licensor Content and that are co-branded with both Licensor Brand Features and
Yahoo Brand Features. Content Pages shall not include pages containing Teaser
Content.
"Enhancements" shall mean any updates, improvements or modifications made to, or
- -------------
derivative works created from, the Licensor Content by Licensor.
"Intellectual Property Rights" shall mean all rights in and to trade secrets,
- -----------------------------
patents, copyrights, trademarks, know-how, as well as moral rights and similar
rights of any type under the laws of any governmental authority, domestic or
foreign.
"Internet" shall mean the collection of computer networks commonly known as the
- ---------
Internet, and shall include, without limitation, the World Wide Web.
"Licensor Brand Features" shall mean all trademarks, service marks, logos and
- ------------------------
other distinctive brand features of Licensor that are used in or relate to the
Licensor Content, including, without limitation, the trademarks, service marks
and logos described in Exhibit B hereto.
"Licensor Content" shall mean, collectively, all materials, text, data, other
- -----------------
similar information, graphics and/or photographs collected and owned by
Licensor, which is a collection of HTML files and certain related scripts or gif
or jpeg files or other similar file format for graphic or image displaying, as
further described in Exhibit B attached hereto, including, without limitation,
all Enhancements.
"Teaser Content" shall mean unmodified headlines and/or the first sentence of
- ---------------
articles from Licensor Content.
"Wireless Devices" shall mean various devices, including, but not limited to,
- -----------------
cellular phones, personal digital assistants and pagers, that receive and/or
transmit voice, data or video signals through the radio spectrum exclusively and
in connection with other technologies (such as the Internet).
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"Wireless Device Carriers" shall mean various carriers that use the radio
- -------------------------
spectrum, both exclusively and in connection with other technologies (such as
the Internet), for transmitting and receiving voice, data or video signals for
communications.
"Yahoo Brand Features" shall mean all trademarks, service marks, logos and other
- ---------------------
distinctive brand features of Yahoo that are used in or relate to a Yahoo
Property, including, without limitation, the trademarks, service marks and logos
described in Exhibit B.
----------
"Yahoo! Inc." shall mean a corporation incorporated in the State of Delaware,
- -------------
United States of America, a parent company of Yahoo.
"Yahoo Properties" shall mean any Yahoo! Inc. branded or co-branded media
- -----------------
properties, including, without limitation, Internet guides, developed in whole
or in part by Yahoo! Inc or its Affiliates and distributed or made available by
Yahoo! Inc. or its Affiliates over the Internet, and any Wireless Device
Carrier.
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EXHIBIT B
---------
LICENSOR CONTENT
Licensor Content shall be content available from Licensor's website at
http://www.ChineseWorldnet.comfrom time to time and shall include the following:
- ------------------------------
(Graphic Omitted due to lack of Chinese Character capability)
LICENSOR BRAND FEATURES
Licensor logo
Licensor related logos
YAHOO BRAND FEATURES
Yahoo!
Yahoo related logos
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EXHIBIT C
---------
DELIVERY AND TECHNICAL SPECIFICATIONS
A. Licensor's Responsibilities:
----------------------------
1. Licensor will deliver Licensor Content in batch update before 8:00 pin on
a daily basis with no more than 30 minutes delay.
2. Licensor will throughout the term of this agreement, provide ongoing
assistance to Yahoo with regard to technical, administrative and services
-oriented issues related to the utilization, transmission, and
maintenance of the Licensor Content, as Yahoo may reasonably request.
3. Licensor will use its reasonable efforts to ensure that Licensor Content
is accurate, comprehensive, and updated regularly.
4. Licensor will bear the cost of preparing and transmitting Licensor
Content to Yahoo.
B. Yahoo's Responsibilities:
-------------------------
1. Yahoo will be responsible for providing equipment and software necessary
to incorporate the Licensor Content into Yahoo properties, provided that
the Licensor Content is provided in accordance with the Format of Content
Delivery below.
2. Yahoo will host Licensor Content on its servers.
3. Yahoo will present the information specific on pages consistent with
Yahoo's user interface.
4. Yahoo will use commercially reasonable efforts to sell the advertising
inventory created by this partnership. Yahoo will be responsible for
tracking advertising banners served to the Content Pages, advertising
production and rotation.
C. Format of Content Delivery:
---------------------------
The Licensor Content shall be delivered by ftp to the address designated
by Yahoo for linking servers serving pages to the Yahoo properties.
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EXHIBIT D
---------
LINKS
During the Term of this Agreement, the following links will be maintained:
LOCATION OF LINK LINK TO WHERE SPECIFICS OF LINK
- ---------------- ------------- -----------------
Pages display Licensor's homepage http://www.chineseworldnet.com
only Licensor's
content
CONFIDENTIAL
Page 12
EXECUTION COPY
Exhibit E
---------
CONTENT PAGES MOCK-UP
---------------------
CONFIDENTIAL
PRIVATE AND CONFIDENTIAL
October 3, 2000
China Infobank Limited,
21 [F, Asia Orient Tower, Town Place,
33 Lockhart Road, Wanchai, Hong Kong.
Attention: Mr. Stephen Chow
----------------
Dear Sir,
Re: Content Partner
- -----------------------
Reference is made to the proposed China Infobank Limited (CIFB) as a content
partner for ChineseWorldNet.com Inc. (CWN) to provide China financial
information in Chinese.
This letter serves to identify the fundamental understanding between CWN and
CIFB and forms a basis for the drafting of a content partner agreement.
Scope of Business
CWN is a company incorporated in the Cayman Islands and is art Internet
financial services company, Its objective is to become a leading financial
information portal web site in Chinese using ChineseWorldNet.corn Inc.'s
Internet platform. CWN currently has three Internet Web sites offering a variety
of financial services in Chinese and hosting banner advertisements arid
information on public companies.
China Infobank- Limited is a China content provider providing all kind of China
- -related information on the Internet. China Infobank has focused on building its
information archive. It is now recognized as one, of the most authoritative
source of China related information and currently comprises over three million
business reports and articles - a figure which is increasing daily. It provides
a range of economics, business, scientific and governmental data to business
community.
Joint Venture
CIFB has agreed in principle to provide China financial information (including
financial news) in Chinese to CWN. as an initial stage. When the financial
portal of CWN is launched with the personalization portal, C)A Ni will have all
of the CIFB financial information for CWN members to choose. CIFB and CWN will
evenly share the subscription fee for the CIFB information in the
personalization portal.
Page 2
This letter summarizes the fundamental understanding of the proposed content
partner between CWN and CIFB as at the date of this letter. Please acknowledge
by signing and returning the attached copy of this letter to us.
Yours faithfully, Agreed and accepted by
For and on behalf of For and on behalf of
china Infobank Limited ChinaWorldNet.com, Inc.
/s/ Stephen Chow /s/ Mathew Lee
- ------------------------------- -------------------------------
Stephen Chow Mathew Lee
Sales Manager VP Marketing & Business Development
December 7, 2000
Investrend Research NAI Interactive Ltd.
CONTENT PARTNER AGREEMENT
This licensing agreement, dated December 7, 2000, 2000, is between Investrend
Research, a division of Investrend Communications, a Nevada corporation with
offices located at 801 S. Figueroa, Suite 1120, Los Angeles, CA 90017 ("Invest
rend ") and NAI Interactive Ltd., a Vancouver, BC corporation located at
620-1090 W. Pender Street. Vancouver, BC, WE 2N7, Canada ("NAI").
INTRODUCTION
This letter of agreement states the terms and conditions under which Investrend
and NAI Interactive Ltd. will enter into a content partnership relationship.
Investrend is a leader in providing objective securities research to individual
and institutional investors. Investrend issues a detailed initial report on
covered companies, and subsequently three quarterly updates. It also issues
research notes on its companies when developments warrant.
NAI produces a web site located at http://www,na-investor.com that provides
financial information services to online Chinese investors worldwide.
A. DEFINITION OF TERMS
-------------------
"Information" means all manner of numeric and textual material provided by
Investrend to NAI Interactive Ltd. clients and visitors. Included Without
limitation in this definition are Titled, Pre-Formatted Reports, numeric data,
logos of Investrend and copyright notices of Investrend and its third party
suppliers.
A "Content Provider" is defined as a web site location created and hosted by NAI
Interactive Ltd. specifically for the visitors of NAI Interactive Ltd. for the
purpose of providing them access to Investrend Research*s Information. NAI
Interactive Ltd. will display the Investrend Research logo near the top of the
page at a mutually agreeable location and also provide a link to Investrend
(www.investrend.com)
"Host" refers to the party that maintains and displays the information.
B. RIGHTS GRANTED
--------------
Subject to all of the terms and conditions contained herein, Investrend
grants, and NAI Interactive Ltd. accepts a worldwide, non-exclusive license to
access and display the Information described below.
B.1 Investrend grants NAI Interactive Ltd. the rights to use and translate
all of the articles and reports in www.investrend.com and place in a specific
section of www.na-investor.com.
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C. RIGHTS OF LICENSEE
------------------
Neither NAI Interactive Ltd. nor its clients or subscribers shall acquire
any interest in or rights to the Information provided by Investrend except the
right to receive such Information in accordance with the provisions of this
Agreement. No Information shall be duplicated, re-transmitted, resold or
redistributed, except in conformance with this license.
D: REPRESENTATIONS AND WARRANTIES BY Investrend
--------------------------------------------
Investrend represents and warrants to NAI Interactive Ltd. as follows:
D.1 Investrend has all rights and licenses necessary to deliver tile
Information to NAI Interactive Ltd. in a co-branded format and to grant NAI
Interactive Ltd. all rights granted in this agreement to market, promote and
advertise the Information as specified herein.
D.2 The Information does not infringe upon or otherwise violate any
copyright, trade secret, trademark, patent, invention, right of privacy, known
third party rights, or non-disclosure requirements of any third party. In
furtherance of these representations and NAI Interactive Ltd.'s reliance
thereon, Investrend shall indemnify and hold NAI interactive Ltd., their
officers, directors, agents and employees harmless against all claims, demands
or liabilities of or to third parties arising from or in connection with
Investrend's breach of its representations or warranties hereunder.
D.3 Investrend will obtain the information from sources it considers
reliable and will run reasonable control checks on the Information, but will not
be Subject to liability for truth or accuracy of the information conveyed or for
its completeness or for errors or mistakes made by humans or machines.
Investrend shall take reasonable steps to control continuing quality of the
Information. Application of such quality control procedures constitutes the full
extent of warranty with regard to the information provided. NAI Interactive Ltd.
acknowledges that it may be necessary or advisable from time to time, in the
ordinary course of Investrend's business, for Investrend to add, delete and
substitute information it makes available to co-brand partners, including NAI
Interactive Ltd. Should such changes be necessary, Investrend will notify NAI
Interactive Ltd. in advance so that proper modifications to the page can be
made. NO WARRANTIES, EXPRESSED OR IMPLIED, INCLUDING IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE WILL APPLY TO THE
INFORMATION PROVIDED EXCEPT AS SET FORTH ABOVE.
E. LICENSEE OBLIGATIONS REGARDING PROTECTIONS AND USE OF INFORMATION
-----------------------------------------------------------------
E.1 If NAI Interactive Ltd. becomes aware of any improper use of the
information by a visitor to its website, NAI Interactive Ltd. shall bring it to
Investrend's attention and cooperate with Investrend in its attempt to stop such
practice.
E.2 NAI will display a disclaimer on its site where visitors reach the
Investrend information to the effect that NAI will use its best effort for the
translation of Investrend's English reports to Chinese; however neither
Investrend nor NAI will be responsible for the accuracy, appropriateness and
completeness of any translation.
E.3 NAI agrees that it will use great care and diligence in the faithful
translation of Investrend's reports into Chinese.
Investrend Confidential --more--
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F. MARKETING & CUSTOMER SUPPORT ISSUES
-----------------------------------
F.1 NAI Interactive Ltd. may, at its own expense, actively promote the use
of the information licensed herein oil its web site and as it otherwise
advertises and markets its product offerings.
F.2 NAI Interactive Ltd. shall be responsible for providing all front-line
customer service and technical Support to NAI Interactive Ltd. visitors
accessing tile Investrend data hosted at NAI Interactive Ltd.'s servers.
Investrend shall be responsible for providing all front-line customer service
and technical Support to visitors of the Investrend.com site.
G. CONFIDENTIALITY
---------------
Each party acknowledges and agrees that any and all information emanating from
the other party's business in any form, including but not limited to data
concerning the design, development and marketing of electronic information
distribution technology, computer program development and designs, costs,
marketing information, prospective plans, activities of technical and other
personnel, Customer lists and any compilations of otherwise non-public
information, including the terms of this Agreement, are "confidential and
proprietary information". Each party agrees that it will not, during or after
the term of this Agreement, permit the duplication, use or disclosure of any
such confidential and proprietary information to or by any person (other than
any of its employees, agents or representatives who must have such information
for the performance of Such Party's obligations hereunder), unless such
duplication, use or disclosure is specifically authorized by the other party.
H. CO-BRANDED INFORMATION
----------------------
The following identifies the Information provided under this agreement:
H.1 Distribution to Other Web Sites:
Investrend data may not be redistributed to other web sites or email lists
without the written permission of Investrend.
I. REVENUE SHARE
-------------
I.1 NAI Interactive Ltd. agrees to share with Investrend a 50-50 advertising
revenue. The advertising revenue is shared only on the sections that NAI
Interactive Ltd. have translated the information from Investrend. Investrend
will provide to NAI short summaries of its research to be placed on the free
portion of NAI's site that are lead into the Investrend reports.
I.2 NAI Interactive Ltd. agrees to share with Investrend 40% for the
subscription revenue.
J. TERM AND TERMINATION
--------------------
J.1 This Agreement shall be effective for a term of 6 months beginning in
the month this agreement is last signed by both parties. 'File agreement shall
be automatically renewed for successive 6 months term upon the expiration of the
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original term unless a party to this agreement shall otherwise notify the other
in writing, at least thirty (30) days before the then current term of the
agreement ends.
J.2 Upon any material breach of or material default under this agreement by
either party, the other party shall give written notice of such breach or
default. Unless the same shall be cured within thirty (30) days after delivery
of such notice, or if such cure is not possible in such time, or if such party
shall not have begun to undertake this cure within such time, then, without
limitation of any other remedy available hereunder, the non-defaulting party may
terminate this agreement forthwith by delivery of a notice of termination at any
time before such breach or default has been cured.
K. NOTICES
-------
All notices given under this agreement must be in writing and sent by registered
or certified or express mail, return receipt requested and postage prepaid, or
delivered personally to:
Investrend, Inc: NAI INTERACTIVE LTD. Inc:
Attention: John M. Dutton Attention: Mr. Mathew Lee
President Senior VP of Marketing
Investrend NAI Interactive Ltd., Inc.
Los Angeles, CA 90017 Canada V6E 2N7
Phone: 213-929-2616 (604) 488-8878
E-mail: jmdutton@investrend.com E-mail: mlee@na-investor.com
or to such other persons or addresses as either party may designate by written
notice to the other.
L. MISCELLANEOUS
-------------
L.1 This Agreement shall be binding upon the parties, their successors, and
assigns. Neither this agreement nor any interests or duties hereunder may be
assigned by either party without the express written consent of the other.
L.2 The information and formats are acknowledged by NAI Interactive Ltd. to
be the exclusive property and creation of Investrend and/or its independent data
providers. Nothing contained herein shall be construed as creating any ownership
rights in such information for NAI Interactive Ltd. or any person or entity,
obtaining same through NAI Interactive Ltd.
L.3 No waiver of any term or condition of this agreement shall be deemed to
be a waiver of any subsequent breach of any term or condition.
L.4 If any part of this agreement shall be held unenforceable, the remainder
of this agreement will nevertheless remain in full force and effect.
L.5 Neither party will be liable for any failure or delay in performance due in
whole or in part to any cause beyond its reasonable control. In no event will
Investrend be responsible for any loss or damage incurred by any person or party
as a result of the use of or reliance on the information supplied, or for
consequential, indirect or incidental damages of any kind. In no event will
Investrend be liable for loss or damage incurred by any person or party as a
result of the use of NAI Interactive Ltd. software, data, or equipment, or for
any incidental, indirect, special or consequential damages.
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Co-Branding Partnership Between Investrend and NAI Interactive Ltd. Page 5 of 6
L.6 Headings in this agreement are included for convenience of reference
only and shall not constitute a part of this agreement for any other purpose.
L.7 Each party represents and warrants that its respective representative
whose signature appears below is duly authorized by all necessary corporate
actions to execute this agreement.
L.8 This agreement contains the entire understanding between Investrend and
NAI Interactive Ltd. and supersedes all prior written and oral
understandings relating to the subject hereof.
L.9 Tile provisions contained in Sections D and G hereof shall survive the
termination or expiration of this agreement.
IN WITNESS WHEREOF the parties have executed the, Agreement on the dates
written.
Investrend Communications, Inc. NAI Interactive Ltd., Inc.
By: /s/ John M. Dutton By: /s/ Mathew Lee
----------------------------- -----------------------------
Print Name: John M. Dutton Print Name: Mathew Lee
-------------------- --------------------
Title: Chief Financial Officer Title: Senior VP of Marketing
------------------------- --------------------------
Date: Dec. 8, 2000 Date: Dec. 7, 2000
-------------------------- --------------------------
Investrend Confidential --more--
NAI Interactive Ltd.
Content Partnership Agreement
This Agreement dated as of May 23, 2000
Between:
HAI Interactive Ltd.
Suite 201, 1118 Homer Street, Vancouver,
B.C. V6B 6L5, Canada
(called "NAF)
And:
NewsGurus.com Inc.
5774 Deadpine Drive,
Kelowna, B.C.
V1P IA3, Canada
(called "NewsGurus.com")
This AGREEMENT witnesses that in consideration of the respective mutual promises
and agreements, the Company and NewsGurus.com promise and agree each with the
other as follows:
A. NAI hereby agrees to translate a summary of all free and premium articles
available at NewsGurus.com and forwarded by NewsGurus.com to NAI. Each
translated summary will represent a link back to NewsGurus.com for the full
article in English.
2. NewsQurus.com will forward summary text for all premium and free articles
to: nai@na-investor.com.
--------------------
3. Both parties have the right to terminate the agreement by a written notice
60 days in advance.
4. Any amendments or alteration made to this Agreement may only be made by
mutual consensus and put in writing and signed by both parties.
5. Applicable Laws:
This Agreement is governed by the laws of the Province of British Columbia,
6. Assignment:
Neither party to this Agreement may assign or delegate its duties under
this Agreement.
7. Arbitration:
If there is a disagreement or dispute between the parties with respect to
this agreement, or the interpretation thereof, such disagreement of dispute
will be referred to being arbitration to be conducted by a single
arbitrator pursuant to the provisions of the, Commercial Arbitration Act
(British Columbia) and any amendments thereto, and the determination of
such arbitrator will be final and binding upon the parties.
IN WITNESS WHEREOF, the parties have entered into this Agreement as of the
Effective date written above.
NAI Interative LTD
/s/ Signature /s/ Signature
- -------------------------------------- --------------------------------------
By it's authorized signatory NewsGurus.com
By it's authorized signatory
/s/ Signature /s/ Signature
- -------------------------------------- --------------------------------------
Witness NAAI Interactive Ltd.
By it's authorized signatory
Exhibit 2(a)
November 15, 2000.
SUBSCRIPTION
AGREEMENT
Between
ChineseWorldNet.com Inc.
as (investor]
and
Technology City Holdings Limited
as Company
relating to
the subscription for shares in Technology City Holdings
Limited
CONTENTS
1. INTERPRETATION 1
2. SUBSCRIPTION 2
3. CONDITIONS PRECEDENT 2
4. COMPLETION 2
5. CONFIDENTIALITY 3
6. ANNOUNCEMENTS 3
7. NOTICES 3
8. COSTS 3
9. SEVERABILITY 4
10. GENERAL 4
11. WHOLE AGREEMENT 4
12. GOVERNING LAW AND JURISDICTION 4
SCHEDULE 1 - PARTICULARS OF THE COMPANY 5
SIGNATURE PAGE 6
Page 1
THIS AGREEMENT is dated June 30, 2000 and made
- --------------
BETWEEN:
- --------
(1) ChineseWorldNet.comInc., ("Investor"). a company incorporated in Cayman
----------------------- --------
Islands and whose registered office is at The Huntlaw Building, Fort
Street, George Town, PO Box 135OGT. Grand Cayman. Cayman Islands, and
(2) Technology City Holdings Limited,(the "Company"), a company incorporated
--------------------------------- -------
in the British Virgin Islands and whose registered office is at P.O. Box
957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin
Islands.
WHEREAS:
- --------
(A) The Company is a private company limited by shares, short particulars of
which are set out in Schedule 1, having an authorised share capital of
US $5,000,000 divided into 5,000,000 shares of US$ 1.00 each.
(B) The Company 'is a multi-media financial information provider focusing on
listed securities in Hong Kong. The mission of Technology City is to
establish itself as a leading content provider on the Internet and in
other peripheral media such as paging and television.
(C) ChineseWorANet.com Inc. will subscribe for share capital of the Company
on the terms and subject to the conditions set out in this agreement.
IT IS AGREED as follows:
1. INTERPRETATION
1.1 In this agreement:
"Business Day" means a day (other than a Saturday or Sunday) on which
------------
banks are generally open for normal business in Hong Kong:
"Completion" means the implementation of the matters described in clause
----------
"Hong Kong" means the Hong Kong Special Administrative Region of the
---------
People's Republic of China; and
"Shares" means shares in the share capital of the Company.
------
1.2 Any reference, express or implied, to an enactment includes references
to:
(A) that enactment as re-enacted, amended, extended or applied by or
under any other enactment (before or after the signature of this
agreement);
(B) any enactment which that enactment re-enacts (with or without
modification); and
(C) any subordinate legislation made (before or after this agreement)
under any enactment, as amended, extended or applied as described
in paragraph (A) above or under any enactment referred to in
paragraph (B) above.
1.3 In this agreement:
(A) references to a person include a body corporate and an
unincorporated association of persons;
Page 2
(B) references to a natural person include his estate and personal
representatives; and
(C) references to a party to this agreement include references to the
successors or assigns (immediate or otherwise) of that party.
1.4 The singular shall include the plural and vice versa and words denoting
a person shall include a body corporate and an unincorporated
association of persons and, unless otherwise stated, include that
person's successors or assigns.
1.5 Words importing a gender shall include other gender.
1.6 Sub-clauses 1.1 to 1.5 apply unless the contrary intention appears.
1.7 The headings in this agreement do not affect its interpretation.
1.8 Any schedule or annex or appendix to this agreement shall take effect as
if set out in this agreement and references to this agreement shall
include its schedules, annexes and appendices.
2. SUBSCRIPTION
------------
Subject to clause 3, ChineseWorldNet.com Inc. shall subscribe, and the
Company shall allot to ChineseWorldNet.com Inc. 100,000 Shares for the
total subscription price of US $100,000 (the "Subscription Price") which
------------------
will be equal to 4.167 percent of the total issued share capital of
2,400,000 shares.
3. CONDITIONS PRECEDENT
--------------------
3.1 The obligations of the parties in respect of the subscription and
allotment of the Shares under clause 2, are conditional on:
(A) the receipt by the Company of the Subscription Price; and
(B) the Company delivering to ChineseWorldNet.com Inc. a copy of
the minutes of a meeting of the directors of the Company
approving the entry into this agreement, the subscription of
Shares by and the allotment of Shares to ChineseWorldNet.com
Inc.
3.2 If the conditions in clause 3.1 are not fulfilled on or before June 30,
2000, this agreement shall cease to have effect and none of the pates
shall have any rights or obligations under this agreement.
4. COMPLETION
----------
4.1 Completion shall take place on June 30, 2000 at the offices of
Technology City Holdings Limited at 15/F., Dotcom House, 128 Wellington
Street, Central, Hong Kong or at such other date and time as the parties
may agree.
4.2 At Completion the Company shall procure that a meeting of the directors
of the Company is held at which it is resolved that, subject only to
receipt by the Company of the Subscription Price for the Shares:
(A) ChineseWorldNet com Inc. be allotted 100,000 Shares for the
Subscription Price; and
(B) the name of ChineseWorldNet.com Inc. be entered in the register
of members as the holders of the Shares so allotted and share
certificates be issued accordingly.
Page 3
4.3 At Completion the Company shall procure the delivery to [investor] a
copy of the minutes' of the meeting of the directors of the Company
referred to in sub-clause 4.2.
4.4 Against delivery of the documents referred to in sub-clause 4.3
ChineseWorldNet.com Inc. shall pay to the Company the Subscription
Price.
4.5 If for any reason the provisions of sub-clauses 4.2, 4.3 or 4.4 are not
fully complied with the parties shall fix a new date for Completion.
5. CONFIDENTIALITY
---------------
5.1 Subject to Sub-clause 5.2, each party to this agreement undertakes with
the others that it shall use all reasonable endeavour to ensure that any
information received by it relating to the other party to this agreement
or any persons connected with the other party shall be treated as
confidential and shall not be disclosed to any third party.
5.2 Sub-clause 5.1 does not apply to the disclosure of information to the
extent that such information is in the public domain (other than through
a breach of that sub-clause) or as required by law or any regulatory
body, or to any disclosure by any party to this agreement to any
professional adviser which that party has engaged for itself.
6. ANNOUNCEMENTS
-------------
No party shall make or permit any person connected with it to make any
announcement concerning this agreement or any ancillary matter before,
on or after Completion except as required by law or any competent
regulatory body or with the prior written approval of the other party,
such approval not to be unreasonably withheld or delayed.
7. NOTICES
-------
7.1 Any notice or other document to be served under this agreement may be
delivered or sent by first class recorded delivery post or telex or
facsimile process to the party to be served at its address appearing in
this agreement or at such other address as it may have notified to the
other party in accordance with this clause.
7.2 Any notice or document shall be deemed to have been served:
(A) if delivered, at the time of delivery; or
(B) if posted, at 10:00 a.m. on the second Business Day after it was
put into the post; or
(C) if sent by telex or facsimile process, at the expiration of two
hours after the time of despatch, if despatched before 3.00 p.m.
on any Business Day, and in any other case at 10.00 a.m. on the
Business Day following the date of despatch.
7.3 In proving service of a notice or document it shall be sufficient to
prove that delivery was made or that the envelope containing the notice
or document was properly addressed and posted as a prepaid first class
recorded delivery letter or that the telex or facsimile message was
properly addressed and despatched as the case may be.
8. COSTS
-----
Each party shall bear its own costs and expenses incidental to the
negotiation, preparation and completion of this agreement.
Page 4
9. SEVERABILITY
------------
The provisions contained in each clause and/or sub-clause of this
agreement shall be enforceable independently of each of the others and
its validity shall not be affected if any of the others is invalid. If
any of those provisions is void but would be valid if some pail of the
provision were deleted, the provision in question shall apply with such
modification as may be necessary to make it valid.
10. GENERAL
-------
10.1 ChineseWorldNet.com Inc. agrees that it shall procure the convening of
all meetings, the giving of all waivers and consents and the passing of
all resolutions and shall otherwise exercise all powers and rights
available to it in order to give effect to the provisions of this
agreement.
10.2 The receipt of any party's solicitor for any sum or document to be paid
or delivered to that party shall discharge the obligor's obligation to
pay or deliver it to that party.
10.3 None of the rights or obligations under this agreement may be assigned
or transferred without the prior written consent of the other party.
10.4 Nothing in this agreement shall be deemed to constitute a partnership
between the parties nor constitute any party the agent of the other
party for any purpose.
10.5 This agreement may be executed in any number of counterparts, all of
which taken together shall constitute one and the same agreement, and
any party may enter into this agreement by executing a counterpart.
11. WHOLE AGREEMENT
---------------
11.1 This agreement and the documents referred to in it contain the whole
agreement between the parties relating to the transactions contemplated
by this agreement and supersede all previous agreements between the
parties relating to these transactions.
11.2 Each party acknowledges that, in agreeing to enter into this agreement,
it has not relied on any representation, warranty, collateral contract
or other assurance (except those set out in this agreement and the
documents referred to in it), made by or on behalf of the other party
before the signature of this agreement. Each of the parties waives all
rights and remedies which, but for this sub-clause, might otherwise be
available to it in respect of any such representation, warranty,
collateral contract or other assurance, provided that nothing in this
clause shall limit or exclude any liability for fraud.
12. GOVERNING LAW AND JURISDICTION
------------------------------
12.1 This agreement is governed by and shall be construed in accordance with
the laws of Hong Kong.
12.2 The parties submit to the jurisdiction of the Hong Kong courts for all
purposes relating to this agreement.
AS WITNESS the hands of the duly authorised officers of the parties on the date
which appears first on page 1.
Page 5
SCHEDULE 1: PARTICULARS OF THE COMPANY
Registered office: P.O. Box 957, Offshore Incorporations Centre, Road Town,
Tortola, British Virgin Islands
Date and place of incorporation: 14 December, 1999, British Virgin Islands
Directors: Mr. Koo, Kwok Tai
Miss Law, Pui Chu Monica
Secretary: Miss Law, Pui Chu Monica
Share Capital:
Class Authorised Issued
- ----- ---------- ------
Ordinary US$5,000,000 US$1,000
Page 6
Signed by Mathew Lee )
for and on behalf of )
ChineseWorldNet.com Inc. ) /s/ Mathew Lee Oct 13th, 2000
-----------------------------------
Signed by )
for and on behalf of )
Technology City Holdings Limited ) /s/ Signature
-----------------------------------
Exhibit 4(b)(i)
Consulting Agreement
This Agreement made as of the March 1st of 2,000 (the "Effective Date").
------------ -------
Between:
Chineseworldnet.com Inc., a company incorporated in the Cayman Islands
and whose registered office is at P.O. Box 13 50, the Huntlaw Building,
Fort Street, George Town, Grand Cayman, Cayman Islands.
(Hereinafter called the "Company")
And:
Joe Tai. having a business at 630-1090 West Pender Street, Vancouver,
B.C., V6E 2N7. Canada
(Hereinafter called the "Consultant")
WHEREAS the Consultant is a businessman with significant experience, who
represents the Company as an Advisor to the Company.
AND WHEREAS the Consultant has , through his practice and by other means,
developed business, corporate finance, management and operations expertise (the
"Consultant's Expertise"),
AND WHEREAS the Company, would like access to the Consultant's Expertise;
AND WHEREAS, in this regard, the Company has agreed to retain the consulting
services of the Consultant and the Consultant has agreed to provide consulting
services to the Company on the terms and conditions hereinafter set forth;
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the mutual
covenants and agreements herein contained, the parties hereto agree (the
"Agreement") as follows:
1. Engagement
----------
1.1 The Consultant hereby agrees to make available to the Company, from time
to time, the Consultant's Expertise., such to be provided upon the terms
and conditions contained in this Agreement
2. Duration
--------
2.1 This Agreement shall be in effect until terminated by either party on 30
days advance written notice to the other.
3. Remuneration
------------
3.1 The remuneration of the Consultant is US $3000 per month.
4. Duties of Consultant
--------------------
4.1 The Consultant shall:
i. Provide business directions to the Company and help to expand
the Company's business and network in North America and Asia;
ii. Devote sufficient time and attention to the business and affairs
of the Company;
iii. Faithfully serve the Company and use its best efforts to promote
the interests of the Company;
5. Confidentiality
---------------
5.1 Unless permitted by resolution of the Directors (excluding the Consultant
if he is Director), the Consultant shall not, during the term of this
Agreement or at any time thereafter, use for his own purposes or for any
purposes other than those of the Company any intellectual property or
knowledge or confidential information of any kind whatsoever he may
acquire in relation to the Company's business or the business of its
subsidiaries, and such shall be and remain the property of the Company.
6. General
-------
6.1 The headings and section references in this Agreement are for convenience
of reference only and do not form a part of this Agreement and are not
intended to interpret, define or limit the scope, extent or intent of
this Agreement or any provision thereof.
6.2 Time is hereby expressly made of the essence of this Agreement with
respect to the performance by the parties of their respective obligations
under this Agreement.
6.3 This Agreement shall enure to the benefit of and be binding upon the
parties hereto and their respective heirs, executors, administrators,
personal representatives., successors and permitted assigns. This
Agreement may not be assigned by either party hereto without the prior
express written consent of the other party.
6.4 This Agreement constitutes the entire agreement between the parties
hereto relating to the subject matter hereof and may not be amended,
waived or discharged except by an instrument in writing executed by the
party against whom enforcement of such amendment, waiver or discharge is
sought and this Agreement supersedes all prior agreements between the
parties.
6.5 Each of the parties hereto hereby covenants and agrees to execute such
further and other documents and instruments and do such further acts and
other things as may be necessary to implement and carry out the intent of
this Agreement.
6.6 All notices, requests, demands and other communications hereunder shall
be in writing and shall be deemed to have been duly given if delivered by
hand or mailed by postage prepaid double registered mail addressed as
follows:
To the Company:
P.O. Box 1350, the Huntlaw Building, Fort Street, George Town, Grand
Cayman, Cayman Islands
Attention: Director
To the Consultant:
630-1090 West Pender Street, Vancouver. B.C., V6E 2N7, Canada
Attention: Joe Tai
Or to such other address as may be given in writing by the Company or the
Consultant and shall be deemed to have been received, if delivered, on the date
of delivery and if mailed then on the fifth business day following the posting
thereof.
IN WITNESS WHEREOF this Agreement has been duly executed by the parties hereto
effective as of the day and year first above written.
_______________________________________
Chineseworldnet.com Inc.
Per: /s/ Ken Cai
--------------------
Ken Cai
Per: /s/ Joe Cai
--------------------
Joe Cai
Amended Consulting Agreement
This agreement is made as of March 2, 2000 (the "Effective Date").
Between:
Chineseworldnet.com Inc.: a company incorporated in the Cayman Islands and whose
registered is at P.O. Box 1350, the Huntlaw Building, Fort Street, George Town,
Grand Cayman, Cayman Islands.
(Hereinafter called the "Company")
And:
Joe Tai, having a business at 630 1090 West Pender Street, Vancouver, B.C., V6E
2N7, Canada
(Hereinafter called the "Tai")
And:
Goldpac Investments Ltd, a company incorporated in British Columbia and whose
registered office is at 630 1090 West Pender Street, Vancouver, B.C., V6E 2N7,
Canada
(Hereinafter called the "Goldpac")
WHEREAS the Company and Tai have entered into a consulting agreement effective
March 1, 2000, a copy of which is attached as Appendix A;
AND WHEREAS Tai is the President and Director of Goldpac, and both Tai and
Goldpac are desirous of Tai fulfilling his obligations under the consulting
agreement as agent and representative of Goldpac;
AND WHEREAS the Company has agreed to amend the consulting agreement with Tai so
long as Tai is made available by Goldpac to perform the duties required under
the consulting agreement:
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the mutual
covenants and agreements herein contained, the parties hereto agree (the
"Amended Agreement") as follows:
- - Tai agrees to assign all of his -rights and obligations under the
consulting agreement to Goldpac and acknowledges that there are no payments to
be made to him by the Company under the original consulting agreement;
- - Goldpac agrees to accept all of the rights and obligations of Tai under
the consulting agreement and agrees to make Tai available to the Company to
perform the duties as stipulated under the consulting agreement;
- - The Company agrees to the assignment by Tai to Goldpac, of his nights and
obligations under the consulting agreement and agrees to make payment of the
remuneration as specified in the consulting agreement to Goldpac;
- - All notices, requests, demands and other communications hereunder shall be
in writing and shall be deemed to have been duly given if delivered by hand or
mailed by postage prepaid double registered mail addressed as follows:
To the Company:
P.O. Box 1350, the Huntlaw Building
Fort Street, George Town
Grand Cayman, Cayman Islands.
Attention: Director
To Tai:
630 1090 West Pender Street
Vancouver, B.C.
Canada V6E 2N7
Attention: Joe Tai
To Goldpac:
630 1090 West Pender Street
Vancouver, B.C.
Canada V6E 2N7
Attention: Director
Or to such other address as may be given in writing by the Company, Tai or
Goldpac and shall be deemed to have been received, if delivered, on the date of
delivery and if mailed on the fifth business day following the posting thereof.
IN WITNESS WHEREOF this agreement has been duly executed by the parties hereto
effective as of the day and year first above written.
/s/ Kevin Szeto
______________________________________
Chineseworldnet.com Inc.
Per: COO
---------------------------------
/s/ Joe Tai
______________________________________
Joe Tai
/s/
______________________________________
Goldpac Investments Ltd.
Per: Director
----------------------------------
APPENDIX A
Consulting Agreement
This Agreement made as of the MARCH 1st of 2000 (the "Effective Date").
Between:
Chineseworldnet.com Inc.: a company incorporated in the Cayman Islands and whose
registered is at P.O. Box 1350, the Huntlaw Building, Fort Street, George Town,
Grand Cayman, Cayman Islands.
(Hereinafter called the "Company")
And:
Joe Tai, having a business at 630 1090 West Pender Street, Vancouver, B.C., V6E
2N7, Canada
(Hereinafter called the "Consultant")
WHEREAS the Consultant is -- businessman with significant experience who
represents the Company as an Advisor to the Company.
AND WHEREAS the Consultant has, through his practice and by other means,
developed business, corporate finance, management and operations expertise (the
"Consultant's Expertise");
AND WHEREAS the Company would like access to the Consultant's Expertise;
AND WHEREAS, in this regard, the Company has agreed to retain the consulting
services of the Consultant and the Consultant has agreed to provide consulting
services to the Company on the terms and conditions hereinafter set forth;
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the mutual
covenants and agreements herein contained, the parties hereto agree (the
"Agreement") as follows;
1. Engagement
----------
1.1 The Consultant hereby agrees to make available to the Company, from time
to time, the Consultant's Expertise, such to be provided upon the terms and
conditions contained in this Agreement.
2. Duration
--------
2.1 This Agreement shall be in effect until terminated by either party on 30
days advance written notice to the other.
3. Remuneration
------------
3.1 The remuneration of the Consultant is US$3000 per month.
4. Duties of Consultant
--------------------
4.1 The Consultant shall:
i. Provide business directions to the Company and help to expand the
Company's business and network in North America and Asia;
ii. Devote sufficient time and attention to the business and affairs of
the Company:
iii. Faithfully serve the Company and use its best efforts to promote
the interests of the Company:
5. Confidentiality
---------------
5.1 Unless permitted by resolution of the Directors (excluding the
Consultant if he is Director). The Consultant shall not, during the term of this
Agreement or at any time thereafter, use for his own purposes or for any
purposes other than those of the Company any intellectual property or knowledge
or confidential information of any kind whatsoever he may acquire in relation to
the Company's business or the business of its subsidiaries, and such shall be
and remain the property of the Company.
6. General
-------
6.1 The headings and section references in this Agreement are for
convenience of reference only and do not form a part of this Agreement and are
not intended to interpret, define or limit the scope, extent or intent of this
Agreement or any provision thereof.
6.2 Time is hereby expressly made of the essence of this Agreement with
respect to the performance by the parties of their respective obligations under
this Agreement.
6.3 This Agreement shall enure to the benefit of and be binding upon the
parties hereto and their respective heirs, executors, administrators, personal
representatives, successors and permitted assigns. This Agreement may not be
assigned by either party hereto without the prior express written consent of the
other party.
6.4 This Agreement constitutes the entire agreement between the parties
hereto relating to the subject matter hereof and may not be amended, waived or
discharged except by an instrument in writing executed by the party against whom
enforcement of such amendment, waiver or discharge is sought and this Agreement
supersedes all prior agreements between the parties.
6. 5 Each of the parties hereto hereby covenants and agrees to execute such
further and other documents and instruments and do such further acts and other
things as may be necessary to implement and carry out the intent of this
Agreement.
6.6 All notices, requests, demands and other communications hereunder shall
be in writing and shall be deemed to have been duly given if delivered by hand
or mailed by postage prepaid double registered mail addressed as follows:
To the Company:
P.O. Box 1350, the Huntlaw Building, Fort Street. George Town, Grand
Cayman,
Cayman Islands
Attention: Director
To the Consultant:
630-1090 West Pender Street, Vancouver. B.C., V6E 2N7, Canada
Attention: Joe Tai
Or to such other address as may be given in writing by the Company or the
Consultant and shall be deemed to have been received, if delivered, on the date
of delivery and if mailed then on the fifth business day following the posting
thereof.
IN WITNESS WHEREOF this Agreement has been duly executed by tile Panics hereto
effective as of the day and year first above written.
_____________________________________________
Chineseworldnet.com Inc.
Per: /s/ Ken Cai
__________________________________________
Ken Cai
Joe Tai
- -----------------------------------------------
Per: Joe Tai
Consulting Agreement
This Agreement made as of the Jan 15th of 2000 (the "Effective Date").
------------ --------
Between:
Chineseworldnet.com Inc., a company incorporated in the Cayman Islands
and whose registered office is at P.O. Box 1350, the Huntlaw Building,
Fort Street, George Town, Grand Cayman, Cayman Islands.
(Hereinafter called the "Company")
And:
Kelvin Szeto, having a business at 630-1090 West Pender Street,
Vancouver, B.C., V6E 2N7, Canada
(Hereinafter called the "Consultant")
WHEREAS the Consultant is a businessman with significant experience, who
represents the Company as an Advisor to the Company.
AND WHEREAS the Consultant has, through his practice and by other means,
developed business, corporate finance, management and operations expertise (the
"Consultant's Expertise"):
AND WHEREAS the Company would like access to the Consultant's Expertise;
AND WHEREAS, in this regard, the Company has agreed to retain the consulting
services of the Consultant and the Consultant has agreed to provide consulting
services to the Company on the terms and conditions hereinafter set forth;
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the mutual
covenants and agreements herein contained, the parties hereto agree (the
"Agreement") as follows:
1. Engagement
----------
1.1 The Consultant hereby agrees to make available to the Company, from time
to time, the Consultant's Expertise, such to be provided upon the terms
and conditions contained in this Agreement
2. Duration
--------
2.1 This Agreement shall be in effect until terminated by either party on 30
days advance written notice to the other.
3. Remuneration
------------
3.1 The remuneration of the Consultant is CAD $3,000 per month starting from
January 2000 to May 2000 and CAD $3,200 per month starting from June to
December 2000.
4. Duties of Consultant
--------------------
4.1 The Consultant shall:
i. Provide technical support and knowledge to the Company;
ii. devote sufficient time and attention to the business and affairs
of the Company;
iii. faithfully serve the Company and use its best efforts to promote
the interests of the Company;
5. Confidentiality
---------------
5.1 Unless permitted by resolution of the Directors (excluding the Consultant
if he is Director), the Consultant shall not, during the term of this
Agreement or at any time thereafter, use for his own purposes or for any
purposes other than those of the Company any intellectual property or
knowledge or confidential information of any kind whatsoever he may
acquire in relation to the Company's business or the business of its
subsidiaries, and such shall be and remain the property of the Company.
6. General
-------
6.1 The headings and section references in this Agreement are for convenience
of reference only and do not form a part of this Agreement and are not
intended to interpret, define or limit the scope, extent or intent of
this Agreement or any provision thereof.
6.2 Time is hereby expressly made of the essence of this Agreement with
respect to the performance by the parties of their respective obligations
under this Agreement.
6.3 This Agreement shall enure to the benefit of and be binding upon the
parties hereto and their respective heirs, executors, administrators,
personal representatives, successors and permitted assigns. This
Agreement may not be assigned by either party hereto without the prior
express written consent of the other party.
6.4 This Agreement constitutes the entire agreement between the parties
hereto relating to the subject matter hereof and may not be amended,
waived or discharged except by an instrument in writing executed by the
party against whom enforcement of Such amendment, waiver or discharge is
sought and this Agreement supersedes all prior agreements between the
parties.
6.5 Each of the parties hereto hereby covenants and agrees to execute such
further and other documents and instruments and do such further acts and
other things as may be necessary to implement and carry out the intent of
this Agreement.
6.6 All notices, requests, demands and other communications hereunder shall
be in writing and shall be deemed to have been duly given if delivered by
hand or mailed by postage prepaid double registered mail addressed as
follows:
To the Company:
P.O. Box 1350, the Huntlaw Building, Fort Street, George Town, Grand
Cayman, Cayman Islands
Attention: Director
To the Consultant:
630-1090 West Pender Street, Vancouver, B.C., V6E 2N7, Canada
Attention: Kelvin Szeto
Or to such other address as may be given in writing by the Company or the
Consultant and shall be deemed to have been received, if delivered, on the date
of delivery and if mailed then on the fifth business day following the posting
thereof.
IN WITNESS WHEREOF this Agreement has been duly executed by the parties hereto
effective as of the day and year first above written.
/s/ Joe Tai
- ------------------------
Chineseworldnet.com Inc.
Per: Joe Tai
--------------------
/s/ Kelvin Szeto
- ------------------------
Per: Kelvin Szeto
--------------------
Exhibit 1
REGISTERED AND FILED
AS NO. 95825 THIS 24TH DAY
OF January 2000
/s/ Signature
-------------
ASST. REGISTRAR OF COMPANIES
CAYMAN ISLANDS
THE COMPANIES LAW
Company Limited by Shares
ARTICLES OF ASSOCIATION
OF
CHINESEWORLDNET.COM INC.
INTERPRETATION
1. The Regulations contained or incorporated in Table A of the First
Schedule of the Companies Law (1998 Revision) shall not apply to this
Company.
2. (a) In these Articles the following terms shall have the meanings set
opposite unless the context otherwise requires:-
(i) Articles these Articles of Association as from time
to time amended by Special Resolution
(ii) Auditors the Auditors for the time being of the
Company, if any
(iii) Company Chineseworldnet.com Inc.
(iv) Directors the directors of the Company for the time
being or, as the case may be, the directors
assembled as a board
(v) the Law the Companies Law (1998 Revision) of the
Cayman Islands and any amendment or other
statutory modification thereof and where in
these Articles any provision of the Law is
referred to, the reference is to that
provision as modified by any law for the time
being in force
(vi) Member a person who is registered in the Register of
Members as the holder of any Share in the
Company
c/s
Page 2
(vii) Month a calendar month
(viii) Ordinary a resolution of a general meeting passed by a
Resolution majority of the Members entitled to vote
present at the meeting in person or by proxy
or a written resolution signed by all Members
entitled to vote
(ix) Registered the registered office of the Company as
Office provided in Section 50 of the Law
(x) Register of the register of Members -to be kept pursuant
Members to section 40 of the Law
(xi) Secretary any person appointed by the Directors to
perform any of the duties of the secretary of
the Company and including any assistant
secretary
(xii) Seal the common seal of the Company (if
applicable) or any facsimile or official seal
(if applicable.) for the use outside of the
Cayman Islands
(xiii) Special a resolution of a general meeting passed by a
Resolution two thirds majority of the Members entitled
to vote thereat present at the meeting in
person or by proxy or a written resolution
signed by all Members entitled to vote and
otherwise in accordance with section 60 of
the Law
(b) Unless the context otherwise requires, expressions defined in the
Law and used herein shall have the meanings so defined.
(c) In these Articles unless the context otherwise requires:-
(i) words importing the singular number shall include the
plural number and vice-versa;
(ii) words importing, the masculine gender only shall include
the feminine gender;
Page 3
(iii) words importing persons only shall include companies or
associations or bodies of persons whether incorporated or
not;
(iv) a notice provided for herein shall be in writing unless
otherwise specified and all reference herein to "in
writing" and "written" shall include printing, lithography,
photography and other modes of representing or reproducing
words in permanent visible form; and
(v) "may" shall be construed as permissive and "shall" shall be
construed as imperative.
(d) Headings used herein are intended for convenience only and shall
not affect the construction of these Articles,
SHARES
3. (a) Subject to the provisions, if any, in that behalf in the
Memorandum of Association, and without prejudice to any special
rights previously conferred on the holders of existing Shares, any
Share may be issued with such preferred, deferred, or other
special rights, or such restrictions, whether in regard to
dividend, voting, return of Share capital or otherwise, as the
Company may from time to time by Special Resolution determine, and
subject to the provisions of section 37 of the Law, any Share may,
with the sanction of a Special Resolution, be issued on the terms
that it is, or at the option of the Company or the holder is
liable, to be redeemed.
(b) If at any time the share capital is divided into different classes
of Shares, the rights attached to any class (unless otherwise
provided by the terms of issue of the Shares of that class) may be
varied with the consent in writing of the holders of three-fourths
of the issued Shares of that class or with the sanction of a
resolution passed by not less than three-fourths of such holders
of the Shares of that class as may be present in person or by
proxy at a separate general meeting of the holders of the Shares
of that class. To every such separate general meeting, the
provisions of these Articles relating to general meetings shall
mutatis mutandis apply, but so that the necessary quorum shall be
any two or more holders of the issued Shares of the class present
in person or by proxy and that any holder of Shares of the class
present in person or by proxy may demand a poll.
4. (a) Every person whose name is entered as a Member in the Register of
Members shall be entitled, without payment, to a certificate of
the Company specifying the Share or Shares held by him and the
amount paid up thereon, provided that in respect of a Share or
Shares held jointly by several persons, the Company shall not be
bound to issue more than one certificate, and delivery of a
certificate for a Share to one of several joint holders shall be
sufficient delivery to all.
Page 4
(b) If a Share certificate is defaced, lost or destroyed it may be
renewed oil payment of such fee, if any, and on such terms, if
any, as to evidence and indemnity, as the Directors think fit.
5. Except as required by law, no person shall be recognised by the Company
as holding any Share upon any trust, and the Company shall not be bound
by or be compelled in any way to recognise (even when having notice
thereof) any equitable, contingent, future or partial interest in any
Share (except only as by these Articles or by law otherwise provided or
under an order of a court of competent jurisdiction) or any other rights
in respect of any Share except an absolute right to the entirety thereof
in the registered holder, but the Company may in accordance with the Law
issue fractions of Shares.
6. The Shares shall be at the disposal of the Directors, and they may
(subject to the provisions of the Law) allot, grant options over, or
otherwise dispose of them to such persons, on such terms and conditions,
and at such times as they think fit, but so that no Share shall be
issued at a discount, except in accordance with the provisions of the
Law.
7. No Shares shall be issued unless fully paid for in cash, bona fide debt,
property or past services. Payment for Shares in the form of promissory
notes shall not be permitted, unless payment by way of a promissory note
is contemplated and permitted by an employee incentive stock option plan
acceptable to any stock exchange on which the Company's Shares are listed
and posted for trading, and such employee incentive stock option plan
provides for a pledge and lien in favour of the Company on any Shares
issued in consideration of a promissory note and such Shares are held by
the Company until full payment has been received therefor by the Company.
8. In accordance with the Law, as an exempted company, the Company may
maintain its Register of Members at such place within or without the
Cayman Islands and under the control of such registrar or other agent as
the Directors shall from time to time determine.
TRANSFER AND TRANSMISSION OF SHARES
9. The instrument of transfer of any Share shall be executed by or on behalf
of the transferor, and the transferor shall be deemed to remain a holder
of the Share until the name of the transferee is entered in the Register
of Members in respect thereof.
10. Shares shall be transferred in the following form, or in any usual or
common form approved by the Directors:
I/we, ____________________________ of ____________________________ (hereinafter
called "the Transferor") in consideration of the sum of $_______________________
paid to me/us by ____________________________, of ______________________________
(hereinafter called "the Transferee") do hereby transfer to the Transferee the
______________Share (or Shares) numbered ____________________ in the Company
called Chineseworldnet.com Inc. to hold the same unto the Transferee, subject to
Page 5
the several conditions on which I/we hold the same.
As witness our hands on the _____________ day of ____________________, 19____.
_______________________________
Transferor
11. The instrument of transfer of Shares endorsed on the back of the
relevant share certificate (s) or accompanied by the relevant share
certificate(s) evidencing the Shares being transferred and further
accompanied by proper evidence of authority to transfer in the case of a
corporate transferor shall be delivered to the registrar or other agent
having control of the Register of Members pursuant to Article 8. It shall
be the duty of the Company and its relevant agents, subject to any proper
restrictions on transfer imposed by applicable securities law or
regulations, to register the transferee in the Register of Members and
record the transfer of Shares therein.
12. The legal personal representative of a deceased sole holder of a Share
shall be the only person recognised by the Company as having any title to
the Share. In case of a Share registered in the names of two or more
holders, the survivors or survivor, or the legal personal representatives
of the deceased survivor, shall be the only persons recognised by the
Company as having any title to the Share.
13. Any person becoming entitled to a Share in consequence of the death or
bankruptcy of a Member shall upon such evidence being produced as may
from time to time be properly required by the Directors, have the right
either to be registered as a Member in respect of the Share or, instead
of being registered himself, to make such transfer of the Share as the
deceased or bankrupt person could have made; but the Directors shall, in
either case, have the same right to decline or suspend registration as
they would have had in the case of a transfer of the Share by the
deceased or bankrupt person before the death or bankruptcy.
14. A person becoming entitled to a Share by reason of the death or
bankruptcy of the holder shall be entitled to the same dividends and
other advantages to which he would be entitled if he were the registered
holder of the Share, except that he shall not, before being registered as
a Member in respect of the Share, be entitled in respect of it to
exercise any right conferred by membership in relation to meetings of the
Company.
ALTERATION OF CAPITAL
15. The Company may from time to time by Ordinary Resolution increase the
share capital by such sum, to be divided into new Shares of such amount,
as the resolution shall prescribe.
16. Subject to any direction to the contrary that may be given by the
Company in general meeting, all new Shares shall be at the disposal of
the Directors in accordance with Article 6.
Page 6
17. The new Shares shall be subject to the same provisions with reference to
their full payment, transfer, transmission and otherwise as the Shares in
the original share capital.
18. The Company may by Special Resolution:
(a) consolidate and divide all or any of its Share capital into Shares
of larger amount than its existing Shares;
(b) sub-divide its existing, Shares, or any of them, into Shares of
smaller amount than is fixed by the Memorandum of Association,
subject nevertheless to the provisions of section 13 of the Law; and
(c) cancel any Shares which, at the date of the passing of the
resolution, have not been taken or agreed to be taken by any person.
19. Subject to the provisions of the Law and the Memorandum of Association,
the Company may purchase its own Shares, including any redeemable Shares,
provided that the manner of purchase has first been authorised by
Ordinary Resolution and may make payment therefor or for any redemption
of Shares in any manner authorised by the Law, including out of capital.
STATUTORY MEETINGS
20. The Directors shall hold at least one Directors meeting in the Cayman
Islands in each calendar year.
GENERAL MEETINGS
21. The Company shall hold a general meeting once in every calendar year at
such time and at such place (whether within or without Canada) as may be
resolved by the Company in general meeting or, in default, at such time
and place as the Directors may determine or, in default, at such time in
the third month following that in which the anniversary of the Company's
continuation occurs, and at such place as the Directors shall appoint. In
default of a general meeting being so held, a general meeting shall be
held in the month next following and may be convened by any one or more
Members holding in the aggregate not less than one-twentieth (1/20th) of
the total issued share capital of the Company entitled to vote and in the
same manner as nearly as possible as that in which meetings are to be
convened by the Directors. The above-mentioned general meetings shall be
called annual general meetings; all other general meetings shall be
called extraordinary general meetings.
22. The Directors may whenever they think fit, convene an extraordinary
general meeting. If at any time there are not sufficient Directors
capable of acting to form a quorum, any Director or any one or more
Members holding in the aggregate not less than one-twentieth (1/20th) of
the total issued share capital of the Company entitled to vote may
convene an extraordinary general meeting in the same manner as nearly as
possible as that in which meetings may be convened by the Directors. The
Page 7
Directors shall, upon the requisition in writing of one or more Members
holding in the aggregate not less than one-twentieth (1/20th) of the
total issued share capital of the Company as at the date of the
requisition carries the right of voting at general meetings, convene an
extraordinary general meeting. Any such requisition shall express the
object of the meeting proposed to be called, and shall be left at the
Registered Office of the Company. If the Directors do not proceed to
convene a general meeting within twenty-one days from the date of such
requisition being left as aforesaid, the requisitionists or any or either
of them or any other Member or Members holding in the aggregate not less
than one-twentieth (1/20th) of the total issued share capital of the
Company as at the date of the requisition carries the right of voting at
general meetings, may convene an extraordinary general meeting to be
held at the Registered Office of the Company or at some convenient place
within the Cayman Islands at such time, subject to the Company's Articles
as to notice, as the persons convening the meeting fix.
23. Twenty-one days notice at the least (exclusive of the day on which the
notice is served or deemed to be served, but inclusive of the day for
which the notice is given) specifying the place, the day and the hour of
meeting and, in the case of special business, the general nature of that
business shall be given in manner hereinafter provided, or in such other
manner (if any) as may be prescribed by the Company in general meetings,
to such persons as are entitled to vote or may otherwise be entitled
under the Articles of the Company to receive such notices from the
Company; but with the consent of all the Members entitled to receive
notice of some particular meeting, that meeting may be convened by such
shorter notice or without notice and in such manner as those Members may
think fit. Notice of general meetings accompanied by any relevant proxy
solicitation and information circular sent to Members shall be in
English.
24. The accidental omission to give notice of a meeting to, or the non-
receipt of a notice of a meeting by, any Member entitled to receive
notice shall not invalidate the proceedings at any meeting.
25. All business shall be deemed special that is transacted at an
extraordinary general meeting, and all that is transacted at an annual
general meeting shall be deemed special with the exception of the
consideration of the accounts, balance sheets, the report of the
Directors and Auditors, the election of Directors and other officers in
the place of those retiring and the appointment and fixing of
remuneration of Auditors.
26. (a) No business shall be transacted at any general meeting unless a
quorum of Members is present at the time that the meeting proceeds
to business; save as herein otherwise provided, two or more
Members present in person or by proxy and entitled to vote shall
be a quorum.
(b) An Ordinary Resolution or a Special Resolution (subject to the
provisions of the Law) in writing signed by all the Members for
the time being entitled to receive notice of and to attend and
vote at general meetings, (or being corporations by their duly
authorised representatives) including a resolution signed in
counterpart by or on behalf of such Members or by way of signed
Page 8
telefax transmission, shall be as valid and effective as if the
same had been passed at a general meeting of the Company duly
convened and held.
27. If within half an hour from the time appointed for the meeting a quorum
is not present, the meeting, if convened upon the requisition of Members,
shall be dissolved. In any other case it shall stand adjourned to the
same day in the next week, at the same time and place, and if at the
adjourned meeting a quorum is not present within half an hour from the
time appointed for the meeting, the Members present shall be a quorum.
28. The chairman, if any, of the Board of Directors shall preside as
chairman at every general meeting of the Company.
29. If there is no such chairman, or if at any meeting he is not present
within fifteen minutes after the time appointed for holding the meeting
or is Unwilling to act as chairman, the Members present shall choose one
of their number to be chairman.
30. The chairman may with the consent of any meeting at which a quorum is
present (and shall if so directed by the meeting) adjourn the meeting
from time to time and from place to place, but no business shall be
transacted at any adjourned meeting other than the business left
unfinished at the meeting from which the adjournment took place. When a
meeting is adjourned for ten days or more, notice of the adjourned
meeting shall be given as in the case of an original meeting. Save as
aforesaid it shall not be necessary to give any notice of an adjournment
or of the business to be transacted at an adjourned meeting. At any
general meeting a resolution put to the vote of the meeting shall be
decided on a show of hands, unless a poll is (before or on the
declaration of the result of the show of hands) demanded by the chairman
or any Member present in person or by proxy and entitled to vote, and,
unless a poll is so demanded, a declaration by the chairman that a
resolution has, on a show of hands, been carried or carried unanimously,
or by a particular majority, or lost and an entry to that effect in the
minutes of the proceedings of the Company, shall be conclusive evidence
of the fact, without proof of the number or proportion of the votes
recorded in favour of, or against, that resolution.
32. If a poll is duly demanded it shall be taken in such manner as the
chairman directs, and the result of the poll shall be deemed to be the
resolution of the meeting at which the poll was demanded.
33. In the case of an equality of votes, whether on a show of hands or on a
poll, the chairman of the meeting at which the show of hands takes place
or at which the poll is demanded, shall be entitled to a second or
casting vote.
34. A poll demanded on the election of a chairman or on a question of
adjournment shall be taken forthwith. A poll demanded on any other
question shall be taken at such time as the chairman of the meeting
directs.
Page 9
VOTES OF MEMBERS
35. On a show of hands ever~' Member present in person or by proxy and
entitled to vote shall have one vote. On a poll every Member present in
person or by proxy and entitled to vote shall have one vote for each
Share of which he is the holder.
36. In the case of joint holders the vote of the senior who tenders a vote
whether in person or by proxy, shall be accepted to the exclusion of the
votes of the other joint holders; and for this purpose seniority shall be
determined by the order in which the names stand in the Register of
Members.
37. A Member of unsound mind, or in respect of whom an order has been made
by any court having jurisdiction in lunacy, may vote, whether on a show
of hands or on a poll, by his committee or other person in the nature of
a committee appointed by that court, and any such committee or other
person may vote by proxy.
38. On a poll votes may be given either personally or by proxy.
39. The instrument appointing a proxy shall be in writing under the hand of
the Member or attorney of the Member duly authorised in writing or, if
the Member is a corporation, either under seat or under the hand of a
director or officer or attorney duly authorised in writing. A proxy need
not be a Member of the Company. A vote given in accordance with the terms
of an instrument of proxy shall be valid notwithstanding the previous
death or insanity of the principal or revocation of the proxy or of the
authority under which the proxy is given provided that no intimation in
writing of such death, insanity or revocation as aforesaid shall have
been received by the Company at its Registered Office before the
commencement of the general meeting, or adjourned meeting, at which it is
sought to use the proxy.
40. The instrument appointing a proxy shall be deposited at the Registered
Office of the Company or at such other place as is specified for that
purpose in the notice convening the meeting no later than the time for
holding the meeting or adjourned meeting at which the person named in the
instrument proposes to vote, and in default the instrument of proxy shall
not be treated as valid PROVIDED that the chairman of the meeting may in
his discretion accept an instrument of proxy sent by telex or telefax
upon receipt of telex or telefax confirmation that the signed original
thereof has been sent.
41. An instrument appointing a proxy may be in the following form or any
other form approved by the Directors:
CHINESEWORLDNET.COM INC.
"I, ______________________________ of ____________________________________,
hereby appoint ____________________________________ of _________________________
as my proxy, to vote for me and on my behalf at the [annual or extraordinary, as
Page 10
the case may be] general meeting of the Company to be held on the ______________
day of ________________, 19___.
Signed this __________________________ day of ________________________, 19 ___.
42. The instrument appointing a proxy shall be deemed to confer authority to
demand or join in demanding a poll.
REQUIRED SHAREHOLDER APPROVAL
43. The Company shall by Ordinary Resolution approve any contract where:-
(a) there is no disinterested Director who does not have a conflict
of interest; or
(b) all or substantially all of the undertaking of the Company is to
be sold or otherwise disposed of.
CORPORATIONS ACTING BY REPRESENTATIVES AT MEETING
44. Any corporation which is a Member of the Company may by resolution of its
directors or other governing body authorise such person as it thinks fit
to act as its representative at any meeting of the Company or of any
class of Members of the Company, and the person so authorised shall be
entitled to exercise the same powers on behalf of the corporation which
he represents as that corporation could exercise if it were an individual
Member of the Company.
DIRECTORS AND OFFICERS
45. The remuneration of the Directors shall from time to time be determined
by the Company in general meeting. The Directors shall also be entitled
to be paid their travelling, hotel and other expenses properly incurred
by them in going to, attending and returning from meetings of the
Directors, or any committee of the Directors, or general meetings of the
Company, or otherwise in connection with the business of the Company, or
to receive a fixed allowance in respect thereof as may be determined by
the Directors from time to time, or a combination partly of one such
method and partly the other.
46. No Share holding qualification shall be required for Directors unless
otherwise required by the Company by Ordinary Resolution.
47. Any Director may in writing appoint another person who is approved by
the majority of the Directors to be his alternate to act in his place at
any meeting of the Directors at which he is unable to be present. Every
such alternate shall be entitled to notice of meetings of the Directors
and to attend and vote thereat as a Director when the person appointing
him is not personally present and where he is a Director to have a
separate vote on behalf of the Director he is representing in addition to
Page 11
his own vote. A Director may at any time, in writing, revoke the
appointment of an alternate appointed by him. Every such alternate shall
be an officer of the Company and shall not be deemed to be the agent of
the Director appointing him. The remuneration of such alternate shall be
payable out of the remuneration of the Director appointing him and the
proportion thereof shall be agreed between them.
48. The Directors may by resolution appoint one of their number to be
Managing Director or President upon such terms as to duration of office
remuneration and otherwise as they may think fit.
49. The Directors may also by resolution appoint a Secretary, who is not
also the President, and such other officers as may from time to time be
required upon such terms as to duration of office, remuneration and
otherwise as they may think fit. Such Secretary or other officers need
not be Directors and in the case of the other officers may be ascribed
such titles as the Directors may decide.
POWERS AND DUTIES OF DIRECTORS
50. Subject to Article 43, the business of the Company shall be managed by
the Directors, who may pay all expenses incurred in setting up and
registering the Company and may exercise all such powers of the Company
as are not, by the Law or these Articles, required to be exercised by the
Company in general meeting, subject, nevertheless, to any clause of these
Articles, to the provisions of the Law, and to such regulations, being
not inconsistent with the aforesaid clauses or provisions, as may be
prescribed by the Company in general meeting but no regulation made by
the Company in general meeting shall invalidate any prior act of the
Directors which would have been valid if that regulation had not been
made.
51. Subject to Article 43, the Directors may exercise all the powers of the
Company to borrow money and to mortgage or charge its undertaking,
property and uncalled capital or any part thereof, to issue debentures,
debenture stock and other securities whenever money is borrowed or as
security for any debt, liability or obligation of the Company or of any
third party.
52. (a) The Directors may from time to time and at any time by power of
attorney appoint any company, firm or person or body of persons,
whether nominated directly or indirectly by the Directors, to be
the attorney or attorneys of the Company for such purposes and
with such powers, authorities and discretions (not exceeding those
vested in or exercisable by the Directors under these Articles)
and for such period and subject to such conditions as they may
think fit, and any such powers of attorney may contain such
provisions for the protection and convenience of persons dealing
with any such attorney as the Directors may think fit and may also
authorise any such attorney to delegate all or any of the powers,
authorities and discretions vested in him.
Page 12
(b) The Directors may delegate any of the powers exercisable by them
to a Managing Director or President or any other person or persons
acting individually or jointly as they may from time to time by
resolution appoint upon such terms and conditions and with such
restrictions as they may think fit, and may from time to time by
resolution revoke, withdraw, alter or vary all or any such powers.
(c) All cheques, promissory notes, drafts, bills of exchange and other
negotiable instruments, and all receipts for moneys paid to the
Company shall be signed, drawn, accepted, endorsed, or otherwise
executed, as the case may be, in such manner as the Directors
shall from time to time by resolution determine.
(d) No document or deed otherwise duly executed and delivered by or on
behalf of the Company shall be regarded as invalid merely because
at the date of delivery of the deed or document, the Director,
Secretary or other officer or person who shall have executed the
same and/or affixed the Seal (if any) thereto as the case may be
for an on behalf of the Company shall have ceased to hold such
office or to hold such authority on behalf of the Company.
53. The Directors shall cause minutes to be prepared:-
(a) of all appointments of officers made by the Directors;
(b) of the names of the Directors present at each meeting of the
Directors and of any committee of the Directors;
(c) of all resolutions and proceedings at all meetings of the Members
of the Company and of the Directors and of committees of
Directors; and the chairman of all such meetings or of any meeting
confirming the minutes thereof shall sign the same.
54. The Directors shall exercise their powers:
(a) honestly and in good faith with a view to the best interests of
the Company as a whole; and
(b) with the care, diligence and skill that a reasonably prudent
person would exercise in comparable circumstances.
DISQUALIFICATION AND CHANGES OF DIRECTORS
55. The office of Director shall be vacated if the Director:-
(a) becomes bankrupt or makes any arrangement or composition with his
creditors generally; or
(b) is found to be or becomes of unsound mind; or
Page 13
(c) resigns his office by notice in writing to the. Company; or
(d) if he ceases to be a Director by virtue of, or becomes prohibited
from being, a Director by reason of, an order made under any
provisions of any law or enactment.
56. At the annual general meeting of the Company in every year the whole of
the Directors shall retire from office, but shall be eligible for re-
election.
57. The Company at the general meeting at which a Director retires in manner
aforesaid may fill the vacated office by electing a person thereto
nominated by the Members and in default the retiring Director shall be
deemed to have been re-elected unless at such meeting it is resolved not
to fill such vacated office.
58. The number of Directors shall be not less than three, nor unless the
Company in general meeting may otherwise deter-mine, more than ten.
59. Any casual vacancy occurring in the Board of Directors between annual
general meetings may be filled by the Directors.
60. The Directors shall have the power at any time, and from time to time,
to appoint a person as an additional Director, or persons as additional
Directors Provided that such additional Directors so appointed shall not
exceed one-third (1/3rd) in number of the Directors elected at the last
annual general meeting of Members.
61. The Company may by Ordinary Resolution appoint a Director or Directors
and by Special Resolution remove a Director or Directors.
62. Only an individual (and not a company) shall be entitled to be nominated
and appointed as a Director of the Company. At least two Directors of the
Company from time to time must be neither an officer nor an employee of
the Company.
PROCEEDINGS OF DIRECTORS
63. The Directors may meet together (either within or without Canada) for
the dispatch of business, adjourn, and otherwise regulate their meetings
and proceedings, as they think fit. Questions arising at any meeting
shall be decided by a majority of votes. In case of an equality of votes
the chairman shall have a second or casting vote.
64. A Director or alternate Director may, and the Secretary on the
requisition of a Director or alternate Director shall, at any time,
summon a meeting of Directors by at least five days notice in writing to
every Director and alternate Director which notice shall set forth the
general nature of the business to be considered PROVIDED HOWEVER that
notice may be waived by all the Directors (or their alternates) either
at, before or after the meeting is held PROVIDED FURTHER that notice or
waiver thereof may be given by telex or telefax.
Page 14
65. The quorum necessary for the transaction of the business of the
Directors, may be fixed by the Directors and unless so fixed by the
Directors, shall be two Directors or their proxies, save where the
subscriber of the Memorandum of Association or the Members in general
meeting have appointed a sole Director when such Director acting alone
shall constitute a quorum. For the purpose of this Article, an alternate
appointed by a Director shall be counted in a quorum at a meeting at
which the Director appointing him is not present.
66. The continuing Directors may act not withstanding any vacancy in their
body, but, if and so long as their number is reduced below the number
fixed by or pursuant to the Articles of the Company as the necessary
quorum of Directors, the continuing Directors may act for the purpose of
increasing the number of Directors to that number, or of summoning a
general meeting of the Company, but for no other purpose.
67. Any Director or officer may act by himself or his firm in a professional
capacity for the Company, and he or his firm shall be entitled to
remuneration for professional services as if he were not a Director or
officer Provided that nothing herein contained shall authorise a Director
or officer or his firm to act as Auditor of the Company.
68. No person shall be disqualified from the office of Director or alternate
Director or prevented by such office from contracting with the Company,
either as vendor, purchaser or otherwise, nor shall any such contract or
any contract or transaction entered into by or on behalf of the Company
in which any Director or alternate Director shall be in any way
interested be or be liable to be avoided, nor shall any Director or
alternate Director so contracting or being so interested be liable to
account to the Company for any profit realised by any such contract or
transaction by reason of such Director holding office or of the fiduciary
relation thereby established. A Director (or his alternate Director in
his absence) shall be counted in the quorum of any relevant meeting which
he attends but shall not be at liberty to vote and shall abstain from so
voting in respect of any contract or transaction in which he is so
interested as aforesaid and the provisions of Article 43 shall otherwise
apply PROVIDED HOWEVER that the nature of the interest of any Director or
alternate Director in any such contract or transaction shall be disclosed
by him or the alternate Director appointed by him at or prior to its
consideration and any vote thereon and a general notice that a Director
or alternate Director is a shareholder of any specified firm or company
and/or is to be regarded as interested in any transaction with such firm
or company shall be sufficient disclosure hereunder and after such
general notice it shall not be necessary to give special notice relating
to any particular transaction.
69. A Director may appoint any person to act as his proxy to attend and vote
on his behalf at meetings of the Directors. Such appointment must be made
in writing under the hand of the appointor, and may at any time be
revoked in like manner, and may be general or for a specified period, or
for specified meetings, or for specified resolutions, and may authorize
and direct the appointee to be chairman if the appointor would, if
present, be entitled to preside. The form of appointment of proxy may
contain directions to the proxy to vote in accordance with instructions
given by that Director or, in the absence of such instructions, the proxy
may act in his discretion. Notice of every such appointment or revocation
Page 15
must be presented to the meeting of Directors at which the proxy is to be
used or first used prior to the commencement of such meeting. A proxy may
be given by telex or telefax. The appointee need not be a Director or
Member of the Company, but he must furnish the Company with his address.
70. The Directors may elect a chairman of their meetings and determine the
period for which he is to hold office; but if no such chairman is
elected, or if at any meeting the chairman is not present within five
minutes after the time appointed for holding the same, the Directors
present may choose one of their number to be chairman of the meeting.
71. The Directors may delegate any of their powers to committees consisting
of such member or members of their body as they think fit; any committee
so formed shall, in the exercise of the powers so delegated, conform to
any regulations that may be imposed on it by the Directors.
72. The Directors shall appoint an audit committee consisting of a minimum of
three Directors, the majority of whom shall not also be officers or
employees of the Company.
73. A committee may elect a chairman of its meetings; if no such chairman is
elected, or if at any meeting the chairman is not present within five
minutes after the time appointed for holding, the same, the members
present may choose one of their number to be chairman of the meeting.
74. A committee may meet and adjourn as it thinks proper. Questions arising
at any meeting shall be determined by a majority of votes of the members
present and in case of an equality of votes the chairman shall have a
second or casting vote.
75. All acts done by any meeting of the Directors or of a committee of
Directors, or by any person acting as a Director shall, notwithstanding
that it be afterwards discovered that there was some defect in the
appointment of any such Director or person acting as aforesaid, or that
they or any of them were disqualified, be as valid as if every such
person had been duly appointed and was qualified to be a Director.
76. When the Directors (being in number at least a quorum) sign the minutes
of a meeting of the Directors the same shall be deemed to have been duly
held notwithstanding that the Directors have not actually come together
or that there may have been a technical defect in the proceedings. A
resolution signed by all of the Directors, including a resolution signed
in counterpart by the Directors or by way of signed telefax transmission,
shall be as valid and effectual as if it had been passed at a meeting,
of the Directors duly called and constituted. To the extent permitted by
law, the Directors may also meet by telephone conference call where all
Directors are capable of speaking to and hearing the other Directors at
the same time.
Page 16
SEALS AND DEEDS
77. (a) If the Directors determine that the Company shall have a Seat,
the Directors shall provide for the safe Custody of the common
Seal and the common Seal of the Company shall not be affixed to
any instrument except by the authority of a resolution of the
Directors, and in the presence of a Director and of the Secretary
or, in place of the Secretary, by such other person as the
Directors may appoint for the purpose; and that Director and the
Secretary or other person as aforesaid shall sign every instrument
to which the common Seal of the Company is so affixed in their
presence. Notwithstanding the provisions hereof, annual returns
and notices filed under the Law may be executed either as a deed
in accordance with the Law or by the common Seal being affixed
thereto in either case without the authority of a resolution of
the Directors by one Director or the Secretary.
(b) The Company may maintain a facsimile of any common Seat in such
countries or places as the Directors shall appoint and such
facsimile Seal shall not be affixed to any instrument except by
the authority of the Directors and in the presence of such person
or persons as the Directors shall for this purpose appoint and
such person or persons as aforesaid shall sign every instrument to
which the facsimile Seal of the Company is so affixed in their
presence and such affixing of the facsimile Seal and signing as
aforesaid shall have the same meaning and effect as if the common
Seal had been affixed in the presence of and the instrument signed
by a Director and the Secretary or such other person as the
Directors may appoint for the purpose.
(c) In accordance with the Law, the Company may execute any deed or
other instrument which would otherwise be required to be executed
under Seal by the signature of such deed or instrument as a deed
by two Directors of the Company or by a Director and the Secretary
of the Company or, in place of the Secretary, by such other person
as the Directors may appoint or by any other person or attorney on
behalf of the Company appointed by a deed or other instrument
executed as a deed by two Directors of the Company or by a
Director and the Secretary or such other person as aforesaid.
DIVIDENDS AND RESERVE
78. The Directors may from time to time declare and pay to the Members such
annual or interim dividends as they shall consider appropriate.
79. No dividend shall be paid otherwise than out of profits or out of monies
otherwise available for dividend in accordance with the Law.
80. Subject to the rights of persons, if any, entitled to Shares with special
rights as to dividends, all dividends on any class of Shares not fully
paid shall be declared and paid according to the amounts paid on the
Shares of that class, but if and so long as nothing is paid-up on any of
the Shares in the Company, dividends may be declared and paid according
Page 17
to the number of Shares. No amount paid on a Share in advance of calls
shall, while carrying interest, be treated for the purposes of this
article as paid on the Share.
81. The Directors may, before recommending any dividend, set aside out of
the profits of the Company such sums as they think proper as a reserve or
reserves which shall, at the discretion of the Directors, be applicable
for meeting contingencies, or for equalizing dividends, or for any other
purpose to which the profits of the Company may be properly applied, and
pending such application may, at the like discretion, either be employed
in the business of the Company or be invested in such investments as the
Directors may from time to time think fit.
82. If several persons are registered as joint holders of any Share, any of
them may give effectual receipts for any dividend or other moneys payable
on or in respect of the Share.
83. Any dividend may be paid by cheque or warrant sent through the post to
the registered address of the Member or person entitled thereto or in the
case of joint holders to any one of such joint holders at his registered
address or to Such person and such address as the Member or person
entitled or such joint holders as the case may be may direct. Every such
cheque or warrant shall be made payable to the order of the person to
whom it is sent or to the order of such other person as the Member or
person entitled or such joint holders as the case may be may direct.
84. The Directors may declare that any dividend is paid wholly or partly by
the distribution of specific assets and in particular of paid-up shares,
debentures or debenture stock of any other company or in any one or more
of such ways, and the Directors shall give effect to such resolution, and
where any difficulty arises in regard to such distribution, the Directors
may settle the same as they think expedient, and in particular may issue
fractional certificates and fix the value for distribution of such
specific assets or any part thereof and may determine that cash payments
shall be made to any Members upon the footing of the value so fixed in
order to adjust the rights of all parties, and may vest any such specific
assets in trustees as may seem expedient to the Directors.
85. No dividend shall bear interest against the Company. All unclaimed
dividends may be invested or otherwise made use of by the Directors for
the benefit of the Company until claimed. Any dividend unclaimed by a
Member six years after the dividend payment date shall revert to the
Company.
CAPITALISATION OF PROFITS
86. The Company may upon the recommendation of the Directors by Ordinary
Resolution authorise the Directors to capitalise any sum standing to the
credit of any of the Company's reserve accounts (including share premium
account and capital redemption reserve fund) or any sum standing to the
credit of the profit and loss account or otherwise available for
distribution and to appropriate such sums to Members in the proportions
in which such sum would have been divisible amongst them had the same
been a distribution of profits by way of dividend and to apply such sum
Page 18
on their behalf in paying up in full unissued Shares for allotment and
distribution credited as fully paid-up to and amongst them in the
proportion aforesaid. In such event the Directors shall do all acts and
things required to give effect to such capitalisation, with full power to
the Directors to make such provision as they think fit for the case of
Shares becoming distributable in fractions (including provision whereby
the benefit of fractional entitlements accrue to the Company rather than
to the Members concerned). The Directors may authorise any person to
enter on behalf of all the Members interested into an agreement with the
Company providing for such capitalisation and matters incidental thereto
and any agreement made Linder such authority shall be effective and
binding on all concerned.
ACCOUNTS
87. The books of account relating to the Company's affairs shall be kept in
accordance with the Law and otherwise in such manner as may be determined
from time to time by the Company by Ordinary Resolution or failing such
determination by the Directors of the Company.
88. Such Auditors may be appointed and the accounts relating to the Company's
affairs may be audited in such manner as may be determined from time to
time by the Company by Ordinary Resolution or failing such determination
by the Directors.
WINDING UP
89. If the Company shall be wound up, the liquidator may, with the sanction
of a Special Resolution of the Company and any other sanction required by
the Law, divide amongst the Members in specie or kind the whole or any
part of the assets of the Company (whether they shall consist of property
of the same kind or not) and may for such purpose set such value as he
deems fair upon any property to be divided as aforesaid and may determine
how such division shall be carried Out as between the Members or
different classes of Members. The liquidator may with the like sanction,
vest the whole or any part of such assets in trustees upon such trusts
for the benefit of the contributories as the liquidator, with the like
sanction, shall think fit, but so that no Member shall be compelled to
accept any Shares or other securities whereon there is any liability.
90. If the Company shall be wound up and the assets available for
distribution amongst the Members as such shall be insufficient to repay
the whole of the paid-up capital, such assets shall be distributed so
that, as nearly as may be, the losses shall be borne by the Members in
proportion to the capital paid up, or which ought to have been paid up,
at the commencement of the winding up, on the Shares held by them
respectively. And if in a winding up the assets available for
distribution amongst the Members shall be more than sufficient to repay
the whole of the capital paid up at the commencement of the winding up,
the excess shall be distributed amongst the Members in proportion to the
capital paid up at the commencement of the winding up on the Shares held
Page 19
by them respectively. This Article is to be without prejudice to the
rights of the holders of Shares issued upon special terms and conditions.
NOTICES
91. (a) A notice may be given by the Company to any Member either
personally or by sending it by post, telex or telefax to him to
his registered address, or (if he has no registered address) to
the address, if any, supplied by him to the Company for the giving
of notices to him.
(b) Where a notice is sent by post, service of the notice shall be
deemed to be effected by property addressing, prepaying, and
posting a letter containing the notice (by airmail if the address
is outside the Cayman Islands) and to have been effected, in the
case of a notice of a meeting, at the expiration of three days
after the time at which the letter would be delivered in the
ordinary course of post.
(c) Where a notice is sent by telex or telefax, service of the notice
shall be deemed to be effected by property addressing and sending
such notice through the appropriate transmitting medium and to
have been effected on the day the same is sent.
92. If a Member has no registered address and has not supplied to the Company
an address for the giving of notice to him, a notice addressed to him and
advertised in a newspaper circulating in the Cayman Islands shall be
deemed to be duly given to him at noon on the day following the day on
which the newspaper is circulated and the advertisement appeared therein.
93. A notice may be given by the Company to the joint holders of a Share by
giving the notice to the joint holder named first in the Register of
Members in respect of the Share.
94. A notice may be given by the Company to the person entitled to a Share in
consequence of the death or bankruptcy of a Member by sending it through
the post in a prepaid letter addressed to them by name, or by the title
of representatives of the deceased, or trustee of the bankrupt, or by any
like description, at the address, if any, supplied for the purpose by the
persons claiming to be so entitled, or (until such an address has been so
supplied) by giving the notice in any manner in which the same might have
been given if the death or bankruptcy had not Occurred.
95. Notice of every general meeting shall be given in some manner
hereinbefore authorised to:
(a) every Member entitled to vote except those Members entitled to
vote who (having no registered address) have not Supplied to the
Company an address for the giving of notices to them; and
Page 20
(b) every person entitled to a Share in consequence of the death or
bankruptcy of a Member, who, but for his death or bankruptcy would
be entitled to receive notice of the meeting.
No other persons shall be entitled to receive notices of general
meetings.
RECORD DATE
96. The Directors may fix in advance a date as the record date for any
determination of Members entitled to notice of or to vote at a meeting of
the Members and, for the purpose of determining the Members entitled to
receive payment of any dividend, the Directors may, at or within 90 days
prior to the date of the declaration of such dividend, fix a subsequent
date as the record date for such determination.
AMENDMENT OF MEMORANDUM AND ARTICLES
97. Subject to and insofar as permitted by the provisions of the Law, the
Company may from time to time by Special Resolution alter or amend its
Memorandum of Association or these Articles in whole or in part Provided
however that no such amendment shall effect the rights attaching to any
class of Shares without the consent or sanction provided for in Article 3
(b).
ORGANISATION EXPENSES
98. The preliminary and organisation expenses incurred in forming or
continuing the Company shall be paid by the Company and may be amortised
in such manner and over such period of time and at such rate as the
Directors shall determine and the amount so paid shall in the accounts of
the Company, be charged against income and/or capital.
OFFICES OF THE COMPANY
99. The Registered Office of the Company shall be at such address in the
Cayman Islands as the Directors shall from time to time determine. The
Company, in addition to its Registered Office, may establish and maintain
an office in the Cayman Islands or elsewhere as the Directors may from
time to time determine.
INDEMNITY
100. Every Director and officer for the time being of the Company or any
trustee for the time being acting in relation to the affairs of the
Company and their respective heirs, executors, administrators, personal
representatives or Successors or assigns shall, in the absence of wilful
neglect or default, be indemnified by the Company against, and it shall
be the duty of the Directors out of the funds and other assets of the
Company to pay, all costs, losses, damages and expenses, including
travelling expenses, which any such Director, officer or trustee may
Page 21
incur or become liable in respect of by reason of any contract entered
into, or act or thing done by him as such Director, officer or trustee or
in any way in or about the execution of his duties and the amount for
which such indemnity is provided shall immediately attach as a lien on
the property of the Company and have priority as between the Members over
all other claims. No such Director, officer or trustee shall be liable or
answerable for the acts, receipts, neglects or defaults of any other
Director, officer or trustee or for joining in any receipt or other act
for conformity or for any loss or expense happening to the Company
through the insufficiency or deficiency of any security in or upon
which any of the moneys of the Company shall be invested or for any loss
of any of the moneys of the Company which shall be invested or for any
loss or damage arising from the bankruptcy, insolvency or tortious act of
any person with whom any moneys, securities or effects shall be
deposited, or for any other loss, damage or misfortune whatsoever which
shall happen in or about the execution of the duties of his respective
office or trust or in relation thereto unless the same happen through his
own wilful neglect or default.
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NAME OF SUBSCRIBER ADDRESS DESCRIPTION OF
SUBSCRIBER
- --------------------------------------------------------------------------------
Huntlaw Nominees Ltd P.O. Box 135OGT Company
Grand Cayman
/s/ Andrew J. Weaver Cayman Islands
- ----------------------
Sgd. Andrew J. Weaver
- --------------------------------------------------------------------------------
DATED the 12th day of January, Two Thousand.
Witness to the above signature:-
/s/ Lisa C. So-So
- -----------------------------
Sgd. Lisa C. So-So
c/s
REGISTERED AND FILED
AS NO. 95825 THIS 12TH DAY
OF January 2000
/s/ Signature
-------------
ASST. REGISTRAR OF COMPANIES
CAYMAN ISLANDS
MEMORANDUM OF ASSOCIATION
OF
CHINESEWORLDNET.COM INC.
1. The name of the Company is Chineseworldnet.com Inc.
2. The registered office will be situate at the offices of Huntlaw Corporate
Services Limited, P.O. Box 1350, the Huntlaw Bldg., Fort Street, George
Town in the Island of Grand Cayman or at such other place in the Cayman
Islands as the Directors may from time to time decide.
3. The objects for which the Company is established are unrestricted and
shall include, but without limitation, the following.-
(a) To carry on the business of providing internet, computer and
electronic data and commerce facilities and services including,
without limitation, services in internet and website design and
marketing in Chinese for applications in China and throughout the
world and internet connection, transmission and communication
facilities and services.
(b) (1) To carry on the business of an investment company and for
that purpose to acquire and hold, either in the name of the
Company or in that of any nominee, land and real estate,
gold and silver bullion, shares (including shares in the
Company), stocks, debentures, debenture stock, bonds,
notes, obligations and securities issued or guaranteed by
any company wherever incorporated or carrying on business
and debentures, debenture stock, bonds, notes, obligations
and securities issued or guaranteed by any government,
sovereign, ruler, commissioners, public body or authority,
supreme, dependent, municipal, local or otherwise in any
part of the world.
(2) To carry out exploration for minerals, metals, hydrocarbon
materials, precious stones and substances and any
activities required for the development of such natural
resources.
(3) To lend money with or without security either at interest
or without and to invest money of the Company in such
manner as the Directors think fit
c/s
Page 2
(4) To acquire by purchase, lease, exchange, wire or other-
wise, lands and hereditaments of any tenure or any interest
in the same in any part of the world.
(5) To sell, lease, let, mortgage or otherwise dispose of the
lands, houses, buildings, hereditaments and other property
of the Company.
(6) To carry on the business of a commodity, commodity futures
and forward contracts trader and for that purpose to enter
into spot, future or forward contracts for the purchase and
sale of any commodity including, but without prejudice to
the generality of the foregoing, any raw materials,
processed materials, agricultural products, produce or
livestock, gold and silver bullion, specie and precious or
semi-precious stones, goods, articles, services,
currencies, rights and interests which may now or in the
future be bought and sold in commerce and whether such
trading is effected on an organized commodity exchange or
otherwise and either to take delivery of, or to sell or
exchange any such commodities pursuant to any contract
capable of being entered into on any such commodities
exchange.
(7) To carry on the business of a building construction company
and to erect and construct either by the Company or through
other parties and for the Company's own use or investment
or for any other person, firm or company, houses, hotels,
apartment blocks, marinas, harbours, offices, roads,
buildings or works of every description on any land of the
Company or upon any other lands or hereditaments and to
pull down, build or rebuild, enlarge, alter and improve
existing houses, hotels, apartment blocks, marinas,
harbours, offices, roads, buildings or works thereon, to
convert and appropriate any such land into and for roads,
streets, squares, gardens and pleasure grounds and other
conveniences and generally to deal with and improve the
property of the Company and its clients.
(8) To carry on all or any of the businesses of tourist agents
and charter services and for such purposes to carry on the
safekeeping, cleaning, repairing, refuelling and the
general care of motor vehicles, boats, yachts, sport and
fishing craft of all kinds, whatever form of propulsion may
be used.
(9) To carry on all or any of the businesses of general
wholesale and/or retail merchants and dealers in hardware
and other building requisites, builders merchants, general
engineers, metal founders, shipwrights, wharfingers,
carriers by sea or land, forwarding agents and commission
and general agents, exporters, importers and merchants.
(10) To carry on whether as principals, agents or otherwise the
business of providing and supplying goods, equipment,
materials and services of whatsoever nature, and of
financiers, company promoters, realtors, financial agents,
Page 3
land owners and dealers in or managers of companies,
estates, lands, buildings, goods, materials, services,
stocks, leases, annuities and securities of whatsoever type
or kind.
(11) To purchase or otherwise acquire and hold any rights,
privileges, concessions, patents, patent rights, licences,
secret processes and any real or personal property of any
kind whatsoever.
(12) To build, equip, furnish, outfit, repair, purchase, own,
charter and lease steam, motor, sail or other vessels,
ships, boats, tugs, barges, lighters or other property to
be used in the business of shipping, transportation,
chartering and other communication and transport operations
for the use of the Company or for others, and to sell,
charter, lease, mortgage, pledge or transfer the same or
any interest therein to others.
(13) To carry on the business of importers, exporters and
merchants of goods, produce, stores and articles of all
kinds both wholesale and retail, packers, wharfingers,
customs brokers, ship agents, ship managers, warehousemen,
bonded or otherwise and carriers and to transact every kind
of agency factor and brokerage business or transaction
which may seem to the Company directly or indirectly
conducive to its interests.
(14) To carry on the business of consultants in connection with
all manner of services and advisers on all matters relating
to companies, firms, partnerships, charities, political and
non-political persons and organisations, governments,
principalities, sovereign and republican states and
countries and to carry on all or any of the businesses of
financial, industrial, development, architectural,
engineering, manufacturing, contracting, management,
advertising, professional business and personal consultants
and to advise upon the means and methods for extending,
developing, marketing and improving all types of projects,
developments, businesses or industries and all systems or
processes relating to such businesses and the financing,
planning, distribution, marketing and sale thereof.
(15) To carry on the business of manufacturers, producers,
refiners, developers and dealers in all kinds of metals,
materials, minerals chemicals, substances and products,
whether natural or artificial and of commodity traders,
importers, exporters, manufacturers' representatives,
wholesale and/or retail merchants, forwarding agents,
commission and general agents and brokers, and generally
to carry on and execute all kinds of commercial, hire
purchase, trading and other operations.
(c) To act as a management company in all branches of that activity
and without limiting the generality of the foregoing, to act as
managers of investments and hotels, estates, real property,
buildings and businesses of every kind and generally to carry on
Page 4
business as managers, consultants or agents for or representatives
of owners of property of every kind, manufacturers, funds,
syndicates, persons, firms and companies for any purpose
whatsoever.
(d) To carry on any other trade or business which may seem to the
Company capable of being carried on conveniently in connection
with any business of the Company.
(e) To acquire and take over or undertake all or any part of the real
estate, business assets or liabilities of any persons and
companies carrying on business of any kind.
(f) To purchase, take on lease or in exchange, hire or otherwise
acquire any real or personal property, patents, licences, rights
or privileges which the Company may think necessary or convenient
for the purposes of its business and to construct maintain and
alter any building or works necessary or convenient for the
purposes of the Company.
(g) To invest and deal with the moneys of the Company not immediately
required in such manner as may from time to time be determined.
(h) To borrow or raise money by the issue of ordinary debenture stock
or on mortgage or in such other manner as the Company shall think
fit.
(i) To draw, make, accept, endorse, discount, execute and issue all
instruments both negotiable and non-negotiable and transferable
including promissory notes, bills of exchange, bills of lading,
warrants, debentures and bonds.
(j) To take or otherwise acquire and hold shares in any other company
for the benefit of this Company and to sell, improve, repair,
lease or mortgage or in any way turn into account all or any part
of the property and rights of the Company.
(k) To make, accept or otherwise handle consignments of goods, wares
and merchandise or any of them.
(l) To establish branches or agencies in the Cayman Islands and
elsewhere and to regulate and to discontinue the same.
(m) To establish, promote and otherwise assist any company or
companies for the purposes of furthering any of the objects of
which company may seem to benefit this Company.
(n) To sell or dispose of, lease or let the undertaking of this
Company or any part there of for such consideration as the Company
may think fit and in particular for shares, fully or partly paid-
up debentures or securities of any other company.
(o) To distribute any of the property of the Company among the Members
in specie.
Page 5
(p) To acquire and take over the whole or any part of the business,
property and liabilities of any person or persons, firm or
corporation carrying on any business or possessed of any property
or rights Suitable for the purposes of this Company.
(q) To take or otherwise acquire and hold shares, stock, debentures or
other securities of or interest in any other company carrying on
any business capable of being conducted so as directly or
indirectly to benefit this Company.
(r) To grant pensions, allowances, gratuities and bonuses to employees
or ex-employees of the Company or the dependents of such persons
and to support, establish or subscribe to any charitable or other
institutions, clubs, societies or funds or to any national or
patriotic fund.
(s) To lend and advance moneys or give credit to such persons and on-
such terms as may be thought fit and to guarantee or stand surety
for the obligations of any third party whether such third party is
related to the Company or otherwise and whether or not such
guarantee or surety is to provide any benefits to the Company and
for that purpose to mortgage or charge the Company's undertaking,
property and uncalled capital or any part thereof, on such terms
and conditions as may be thought expedient in support of any such
obligations binding on the Company whether contingent or
otherwise.
(t) To enter into partnership or into any arrangements for sharing
profits, union of interests, co-operation, joint venture,
reciprocal concession, amalgamation or otherwise with any person
or persons or company engaged or interested or about to become
engaged or interested in the carrying on or conduct of any
business or enterprise from which this Company would or might
derive any benefit whether direct or indirect and to tend money,
guarantee the contracts of or otherwise assist any such person or
company and to take subscribe for or otherwise acquire shares and
securities of any such company and to sell, hold, re-issue with
or without guarantee or otherwise deal with the same.
(u) To enter into any arrangements with any authorities, municipal or
local or otherwise and to obtain from any such authority any
rights, privileges or concessions which the Company may think it
desirable to obtain and to carry out, exercise and comply with any
such arrangements, rights, privileges or concessions.
(v) To do all such things as are incidental to or which the Company
may think conducive to the attainment of the above objects or any
of them.
AND IT IS HEREBY DECLARED that each and every paragraph of this Clause 3 shall
be construed independently and shall be treated as an independent and main
object of the Company and the powers conferred on the Company by any paragraph
shall not be restricted by reference to any other paragraph or to the name of
the Company or by the juxtaposition of two or more objects and that in the event
of any ambiguity, this Clause and every other paragraph hereof shall be
Page 6
construed in such a way as to widen and not to restrict the powers of the
Company.
4. Except as prohibited or limited by the laws of the Cayman Islands, the
Company shall have full power and authority to carry out any object and
Shall have and be capable of from time to time and at all times
exercising any and all of the powers at any time or from time to time
exercisable by a natural person or body corporate in any part of the
world whether as principal, agent, contractor or otherwise.
5. The liability of the Members is limited.
6. The authorised share capital of the Company is One Hundred Million United
States Dollars (US$ 100,000,000) consisting of 10,000,000,000 ordinary
voting shares of US $0.01 each with the power for the Company to increase
or reduce the said capital and to issue-any part of its capital, original
or increased, with or without any preference, priority or special
privilege or subject to any postponement of rights or to any conditions
or restrictions; and so that, unless the condition of issue shall
otherwise expressly declare, every issue of shares, whether declared to
be preference or otherwise, shall be subject to the power hereinbefore
contained.
The Subscribers whose names and addresses are subscribed herein are desirous of
being formed into a Company limited by shares and in pursuance of this
Memorandum of Association, the Subscribers agree to take the shares in the
capital of the Company set opposite their names.
DATED the 12th day of January Two Thousand.
- --------------------------------------------------------------------------------
NO. OF SHARES
NAME OF TAKEN BY
SUBSCRIBER ADDRESS OCCUPATION SUBSCRIBER
- --------------------------------------------------------------------------------
Huntlaw Nominees Ltd P.O. Box 135OGT Company 1 Ordinary Share
Grand Cayman
/s/ Andrew J. Weaver Cayman Islands
- ---------------------
Sgd. Andrew J. Weaver
- --------------------------------------------------------------------------------
Witness to the above signature:-
/s/ Lisa C. So-So
- -------------------------
Sgd. Lisa C. So-So
c/s