CHWE Chinawe Com Inc (CE)

 

 

FORM 10-Q/A

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

(Mark One)

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2009

OR

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 000-29169

Chinawe.com Inc.

(Exact name of registrant as specified in its charter)

California (State or other jurisdiction of incorporation or organization)		95-462728 (I.R.S. Employer Identification No.)

Room 1307, Block A
Fuk Keung Industrial Building
66-68 Tong Mei Road
Kowloon, Hong Kong
(Address of principal executive offices) (Zip Code)

(852) 23810818
(Registrant’s telephone number, including area code)

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 þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (check one):

Large accelerated filer o		Accelerated filer o		Non-accelerated filer o		Smaller reporting company þ
				(Do not check if a smaller reporting company)

Indicate by check whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes þ No o

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practical date:

Class of Common Stock		Outstanding at August 14, 2009
Common Stock, $.001 par value		43,800,000

 

 

TABLE OF CONTENTS

		PAGE
PART I — FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Condensed Consolidated Statements of Operations for the three months and six months ended June 30, 2009 and 2008 (Unaudited)			3
Condensed Consolidated Balance Sheets at June 30, 2009 (Unaudited) and December 31, 2008			4
Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2009 and 2008 (Unaudited)			5
Notes to Financial Statements			6
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			11
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			14
ITEM 4. CONTROLS AND PROCEDURES			14
PART II — OTHER INFORMATION
ITEM 6. EXHIBITS			15
SIGNATURES			16
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2

The purpose of this Amendment is to correct errors in the financial statements contained in the Company’s Quarterly Report on Form10-Q for the quarterly period ended June 30, 2009 (the “10-Q”) as filed with the Securities and Exchange Commission on August 14, 2009. Accordingly, the 10-Q is being re-filed in its entirety.

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements.

CHINAWE.COM INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

				Three months ended June 30,								Six months ended June 30,
		NOTE		2009				2008				2009				2008
				US$				US$				US$				US$
REVENUE FROM DISCONTINUED OPERATIONS
Asset management and related services					—				219,303				131,558				407,732
					—				219,303				131,558				407,732
Depreciation					(2,382	)			(10,420	)			(4,765	)			(25,655	)
Administrative and general expenses					(42,244	)			(260,352	)			(258,740	)			(491,832	)
LOSS FROM DISCONTINUED OPERATIONS					(44,626	)			(51,469	)			(131,947	)			(109,755	)
NON-OPERATING (EXPENSE) / INCOME
Interest					(980	)			(8,781	)			(1,961	)			(17,564	)
Surcharge on taxes		8			(25,824	)			(24,709	)			(51,524	)			(48,317	)
Other income					168				9,039				397				9,628
Provision for contract termination cost					—				—				(68,267	)			—
LOSS BEFORE INCOME TAXES					(71,262	)			(75,920	)			(253,302	)			(166,008	)
Income tax expense		7			—				(7,426	)			—				(7,426	)
NET LOSS FROM DISCONTINUED OPERATIONS					(71,262	)			(83,346	)			(253,302	)			(173,434	)
OTHER COMPREHENSIVE LOSS
Foreign currency translation					(188	)			(6,620	)			(88	)			(17,726	)
COMPREHENSIVE LOSS					(71,450	)			(89,966	)			(253,390	)			(191,160	)
Basic and diluted net loss per share of common stock					(0.002	)			(0.002	)			(0.006	)			(0.004	)
Weighted average number of shares of common stock outstanding					43,800,000				43,800,000				43,800,000				43,800,000

The financial statements should be read in conjunction with the accompanying notes.

CHINAWE.COM INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS

				As of				As of
		Note		Jun 30, 2009				Dec 31, 2008
				(Unaudited)
				US$				US$
ASSETS
Current assets:
Cash and cash equivalents					230,372				339,538
Prepayments, deposits and other debtors					18,110				30,419
Total current assets of discontinued operations					248,482				369,957
Property, plant and equipment, net		4			7,976				12,741
TOTAL ASSETS OF DISCONTINUED OPERATIONS					256,458				382,698
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Accrued expenses and other creditors					219,973				294,208
Customer deposits received					78,923				134,952
Current portion of long-term debt		5			15,981				20,100
Due to related parties		6			1,091,119				920,193
Income tax payable		7			453,947				457,618
Surcharge on taxes		8			304,932				253,335
Provision		10			48,613				—
Total current liabilities of discontinued operations					2,213,488				2,080,406
Long term liabilities:
Non-current portion of long-term debt		5			1,290				7,222
Contingencies and commitments		8
Stockholders’ deficit:
Preferred stock, par value US$0.001 per share; authorized 20,000,000 shares; none issued
Common stock, par value US$0.001 per share; authorized 100,000,000 shares; issued and outstanding 43,800,000 shares					43,800				43,800
Capital in excess of par					85,948				85,948
Accumulated losses					(2,081,760	)			(1,828,458	)
Accumulated other comprehensive loss					(6,308	)			(6,220	)
Total stockholders’ deficit					(1,958,320	)			(1,704,930	)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT OF DISCONTINUED OPERATIONS					256,458				382,698

The financial statements should be read in conjunction with the accompanying notes.

CHINAWE.COM INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

		Six months ended Jun 30, 2009
		2009				2008
		US$				US$
CASH FLOWS FROM OPERATING ACTIVITIES OF DISCONTINUED OPERATIONS
Net loss from discontinued operations			(253,302	)			(173,434	)
Adjustments to reconcile net loss to net cash used in operating activities:
Gain on disposal of property, plant and equipment			—				(9,016	)
Depreciation			4,765				25,655
Changes in operating assets and liabilities:
Accounts receivable, net			—				2,365
Prepayments, deposits and other debtors			12,313				6,378
Customer deposits received			(56,070	)			(25,889	)
Accrued expenses and other creditors			(74,285	)			(55,775	)
Surcharge on taxes			51,519				48,318
Income tax payable			(3,795	)			6,079
Provision			48,613				—
NET CASH USED IN OPERATING ACTIVITIES OF DISCONTINUED OPERATIONS			(270,242	)			(175,319	)
CASH FLOWS FROM INVESTING ACTIVITIES OF DISCONTINUED OPERATIONS
Proceeds from disposal of property, plant and equipment			—				9,141
Purchase of property, plant and equipment			—				(5,914	)
NET CASH PROVIDED BY INVESTING ACTIVITIES OF DISCONTINUED OPERATIONS			—				3,227
CASH FLOWS FROM FINANCING ACTIVITIES OF DISCONTINUED OPERATIONS
Repayment of long-term debt			(10,050	)			(10,050	)
Net advance from related parties			171,028				148,502
Increase in loan from a director			—				2,442
NET CASH PROVIDED BY FINANCING ACTIVITIES OF DISCONTINUED OPERATIONS			160,978				140,894
NET DECREASE IN CASH AND CASH EQUIVALENTS			(109,264	)			(31,198	)
Cash and cash equivalents, beginning of period			339,538				301,695
Effect of exchange rate changes			98				17,560
CASH AND CASH EQUIVALENTS, END OF PERIOD			230,372				288,057
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest			1,961				17,564

The financial statements should be read in conjunction with the accompanying notes.

CHINAWE.COM INC. AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

1. Basis of Presentation

The accompanying financial statements present the financial position of the Company as of June 30, 2009 and December 31, 2008, and its results of operations for the three months and six months ended June 30, 2009 and 2008. All inter-company accounts and transactions have been eliminated on consolidation.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the six months ended June 30, 2009 are not necessarily indicative of the results that may be expected for the year ending December 31, 2009.

The balance sheet at December 31, 2008 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. These financial statements should be read in conjunction with the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008.

Recently issued accounting pronouncements

In December 2007, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 141(R), “Business Combinations” (“SFAS 141(R)”), which replaces SFAS No. 141. The statement retains the fundamental requirements in SFAS No. 141 that the acquisition method of accounting (previously referred to as the purchase method of accounting) be used for all business combinations, but requires a number of changes, including changes in the way assets and liabilities are recognized as a result of business combinations. It also requires the capitalization of in-process research and development at fair value and requires the expensing of acquisition-related costs as incurred. In April 2009, the FASB issued Staff Position (“FSP”) No. FAS 141(R)-1 (“FAS 141(R)-1”) which amends SFAS 141(R) by establishing a model to account for certain pre-acquisition contingencies. Under FAS 141 (R) -1, an acquirer is required to recognize at fair value an asset acquired or a liability assumed in a business combination that arises from a contingency if the acquisition-date fair value of that asset or liability can be determined during the measurement period. If the acquisition-date fair value cannot be determined, then the acquirer should follow the recognition criteria in SFAS No. 5, “Accounting for Contingencies”, and FASB Interpretation No. 14, “Reasonable Estimation of the Amount of a Loss – an interpretation of FASB Statement No. 5”. SFAS 141(R) and FAS 141(R)-1 are effective beginning July 1, 2009, and will apply prospectively to business combinations completed on or after that date. The impact of the adoption of SFAS 141(R) and FAS 141(R)-1 will depend on the nature of acquisitions completed after the date of adoption.

In February 2008, the FASB issued FSP FAS 157-2, Effective Date of FASB Statement No. 157, which delays the effective date of SFAS No. 157, “Fair Value Measurements” (“SFAS No. 157”), to July 1, 2009, for all nonfinancial assets and nonfinancial liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). Management believes the adoption of the delayed items of SFAS No. 157 will not have a material impact on our financial statements.

In May 2009, the FASB issued SFAS No. 165, “Subsequent Events” (“SFAS No. 165”), which established general accounting standards and disclosure for subsequent events. The Company adopted SFAS No.165 during the second quarter of 2009. In accordance with SFAS No. 165, the Company has evaluated subsequent events through the date the financial statements were filed on August 14, 2009.

In June 2009, the FASB issued SFAS No. 168, “The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles- a replacement of FASB Statement No. 162” (“SFAS No. 168”). SFAS 168 establishes the FASB Accounting Standards Codification as the single source of authoritative US generally accepted accounting principles recognized by the FASB to be applied to nongovernmental entities. SFAS 168 is effective for financial statements issued for interim and annual periods ending after September 15, 2009. The adoption of SFAS 168 will not have an impact on the Company’s financial position, results of operations or cash flows.

2. Organization

Chinawe.com Inc. (“Chinawe”) was incorporated under the laws of the State of California. Chinawe’s principal business activity was providing professional management services relating to non-performing loans (“NPLs”) in the People’s Republic of China (“PRC”), as well as other consulting services. During the first quarter of 2009, the Company’s sole customer, Huizhou One Limited (“HOL”) issued a notice of termination to terminate the services contracts with effect from March 26 and March 27, 2009. Effective March 27, 2009, the Company has become a non-operating company.

The consolidated financial statements include the accounts of Chinawe and the following subsidiaries (collectively referred to as the “Company”):

Officeway Technology Limited; a company incorporated in the British Virgin Islands in December 1999, which was formed for the purpose of acquiring (in March 2000) its wholly-owned subsidiary, Chinawe Asset Management Limited (“CAM (HK)”).

CAM (HK); a company incorporated in Hong Kong in June 1997, which is an investment holding company.

Chinawe Asset Management (PRC) Limited (“CAM (PRC)”) was established in the PRC in April 2005 to service the NPLs under services agreements with HOL, which accounted for 100% of the revenue from assets management and related services for the six months ended June 30, 2009 and 2008 and has become non-operating since the termination of aforesaid service contracts with HOL in March 2009.

3. Going concern consideration

The Company’s financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As of June 30, 2009, the Company had negative working capital and stockholders’ deficit of US$1,965,006 and US$1,958,320, respectively, which raise substantial doubt about its ability to continue as a going concern. The Company has relied on private financing by cash inflow from the principal stockholders of the Company, who have agreed not to demand repayment of amounts due to them as long as the Company has negative working capital. These stockholders have indicated their intention to finance the Company for a “reasonable” period of time to enable the Company to continue as a going concern, assuming that in such a period of time the Company would not be able to raise additional capital to support its continuation. However, it is uncertain for how long or to what extent such a period of time would be “reasonable” and there can be no assurance that the financing from these stockholders will be continued. The accompanying financial statements do not include or reflect any adjustments that might result from the outcome of these uncertainties.

4. Property, plant and equipment, net

Property, plant and equipment are summarized as follows:

		As of				As of
		June 30, 2009				December 31, 2008
		(Unaudited)
		US$				US$
Office equipment			10,337				10,741
Computer equipment			11,362				11,646
Leasehold improvement			46,830				62,921
Motor vehicles			96,174				96,174
Total cost			164,703				181,482
Accumulated depreciation			(142,134	)			(153,202	)
Accumulated impairment loss			(14,593	)			(17,882	)
Currency translation adjustment			—				2,343
Net			7,976				12,741

5. Long term debt

Long term debt consists of obligations under capital leases for purchases of vehicles with US$17,271 and US$27,322 outstanding as of June 30, 2009 and December 31, 2008, respectively. The debt is collateralized by two motor vehicles with an aggregate net book value of US$7,742 and US$12,387 as of June 30, 2009 and December 31, 2008, respectively, bearing interest at 3-5% per annum and is repayable by monthly installments of US$2,002 with the final installments due in February 2010 and January 2011. Maturity of the debt is as follows:

		As of				As of
		June 30, 2009				December 31, 2008
		(Unaudited)
		US$				US$
Within 1 year			19,087				24,023
Over 1 year but not exceeding 2 years			1,534				8,610
			20,621				32,633
Less: Amount representing interest			(3,350	)			(5,311	)
Present value of net minimum lease payments			17,271				27,322
Current portion			15,981				20,100
Non-current portion			1,290				7,222
			17,271				27,322

6. Related party transactions

The balances with related parties are as follows:

				As of				As of
		Note		June 30, 2009				December 31, 2008
				(Unaudited)
				US$				US$
At cost:
Advances from stockholders		(a)			1,091,119				920,193

In addition, during the six months ended June 30, 2009 and 2008, the Company paid US$7,742 and US$7,742, respectively, to a director in respect of operating lease charges for premises.

7. Income taxes

It is management’s intention to reinvest all the income attributable to the Company earned by its operations outside the United States. Accordingly, no United States corporate income taxes are provided for in these financial statements.

The Company is subject to income taxes on an entity basis on income arising in or derived from the tax jurisdiction in which each entity is domiciled.

Under the current laws of the British Virgin Islands (the ‘‘BVI’’), dividends and capital gains arising from the Company’s investments in the BVI are not subject to income taxes and no withholding tax is imposed on payments of dividends to the Company.

Companies that carry on business and derive income in Hong Kong are subject to Hong Kong Profits Tax at 16.5% for the six month periods ended June 30, 2009 and 2008, respectively. Companies that carry on business and derive income in the PRC are subject to income tax at 25% for the six months ended June 30, 2009 and 2008.

No income taxes have been provided for the subsidiary in Hong Kong as it incurred losses for taxation purposes during the six months ended June 30, 2009 and 2008. No income tax have been provided for the subsidiary in the PRC as it incurred losses for taxation purpose during the six months ended June 30, 2009 and taxation was provided for at income tax rate of 25% for the six months ended June 30, 2008.

8. Contingencies

One of the subsidiaries in the PRC is subject to the PRC enterprise income tax and business tax. However, the Company in previous years only submitted tax returns and made payments for a portion of the total tax liabilities, which was not in compliance with the tax laws and regulations in the PRC. For this reason, the Company has made full provision for all tax liabilities in accordance with the relevant tax laws and regulations, together with a surcharge that may be levied on the Company at a daily rate of 0.05% of the underpaid taxes.

Despite the fact that the Company has fully accrued for the taxes and related surcharges in the financial statements, the Company may be subject to penalties ranging from 50% to 500% of the underpaid tax amounts. The exact amount of the penalty cannot be estimated with any reasonable degree of certainty.

The Company is currently suspended in the State of California due to failure to file reports with the Franchise Tax Board. The Company is in the process of preparing the relevant reports and expects to be back in good standing in the coming future. The Company believes that the amount of taxes and penalties owed will not be material to the financial statements. The Company is also delinquent in filing its U.S. Federal tax returns. The Company is in the process of preparing the relevant returns and does not believe that the amount of taxes owed will be material.

There was no litigation brought against the Company as of June 30, 2009 and December 31, 2008.

9. Stock Plan

On July 25, 2001 the Board of Directors approved the Chinawe.com Inc. 2001 Restricted Stock Plan (the “Plan”), under which 5,000,000 shares of the Company’s common stock have been reserved for award under the Plan.

Pursuant to the Plan, stock awards may be granted to eligible officers, directors, employees and consultants of the Company. As of June 30, 2009 and December 31, 2008, no awards have been made under the Plan.

10. Discontinued Operations

The Company’s principal business was the provision of professional management services relating to NPLs in the PRC. Effective March 27, 2009, the Company ceased providing professional management services relating to NPLs in the PRC. All business activities of the Company were ceased on March 27, 2009. As a result, for the periods presented, the results of operations, total assets, total liabilities, and cash flows of the Company are reported as discontinued operations.

Following the discontinuance of the Company’s sole business, management has closed down all offices and terminate all employees in the PRC. Certain unavoidable costs in respect of severance payments for the termination of employees and a non-cancellable operating lease in connection with the discontinuance have been provided which has been included in other current liabilities. A summary of the provision for contract termination costs is summarized below:

		As of
		June 30, 2009
		(Unaudited)
		US$
Severance payments			15,775
Operating lease			32,838
			48,613

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion should be read in conjunction with the Consolidated Condensed Financial Statements and notes thereto appearing elsewhere in this Form 10-Q. The following discussion contains forward-looking statements. Our actual results may differ significantly from those projected in the forward-looking statements. Factors that might cause future results to differ materially from those projected in the forward-looking statements include, but are not limited to, those discussed elsewhere in this document.

Overview — Results of Operations

Effective March 27, 2009, the Company ceased providing professional management services relating to non-performing loans (“NPLs”) in the People’s Republic of China (“PRC”). The Company has terminated its employees and closed down its offices. The Company has not identified a specific line of business or territory for any new business. There can be no assurance that the Company will be successful in identifying a new line of business that it can enter into or that if such new line of business is identified, that the Company will have adequate funding to commence operations of a new line of business. The principal stockholders of the Company currently intend to continue to fund the expenses of the Company until a new line of business has been identified.

The following table sets forth selected income data as a percentage of total operating revenue for the periods indicated.

		Three months ended June 30,								Six months ended June 30,
		2009				2008				2009				2008
Operating revenues			—				100				100				100	%
Total operating expenses			—				(123	)			(200	)			(127	)%
Operating loss			—				(23	)			(100	)			(27	)%
Loss before income taxes			—				(35	)			(193	)			(41	)%
Provision for income taxes			—				(3	)			—				(2	)%
Net loss			—				(38	)			(193	)			(43	)%

THREE MONTHS ENDED JUNE 30, 2009 (UNAUDITED) COMPARED TO THREE MONTHS ENDED JUNE 30, 2008 (UNAUDITED)

OPERATING REVENUES. Operating revenues for the second quarter of 2009 was US$0 compared to US$219,303 for the comparable period last year. As the Company has discontinued its sole business with Huizhou One Limited from March 2009, no further revenue has been earned since the second quarter of 2009.

OPERATING EXPENSES. The Company’s operating expenses totaled US$44,626 for the second quarter of 2009 compared to US$270,772 for the second quarter of 2008. This represented a decrease of US$226,146 mainly due to the decrease in professional fee, rental expenses and salary paid to employees following the discontinuation of the Company’s business.

PROVISION FOR INCOME TAXES. No income tax expense for the three months ended June 30, 2009 was incurred because the Company and its subsidiaries incurred losses for taxation purposes. For the three months ended June 30, 2008, income tax of US$7,426 was provided for profit earned by the Company’s subsidiary in the PRC.

NET LOSS FROM DISCONTINUED OPERATIONS. The Company has recorded a net loss from discontinued operations of US$71,262 for the second quarter of 2009, compared to a net loss from discontinued operations of US$83,346 for the second quarter of 2008. Following the discontinuance of the Company’s business, the Company suffered a net loss in the second quarter of 2009 lower than the loss for the same period in 2008.

SIX MONTHS ENDED JUNE 30, 2009 (UNAUDITED) COMPARED TO SIX MONTHS ENDED JUNE 30, 2008 (UNAUDITED)

OPERATING REVENUES. Operating revenues for the first two quarters of 2009 totaled US$131,558 compared to US$407,732 for the comparable period last year. This represented a decrease of 68% mainly due to the decrease in the scale of business. The operating revenue has decreased significantly since the termination of all service contracts in March 2009.

OPERATING EXPENSES. The Company’s operating expenses totaled US$263,505, or 200% of operating revenues, for the first two quarters of 2009, compared to US$517,487, or 127% of operating revenues, for the first two quarters of 2008. This represented a decrease of US$253,982 mainly due to the decrease in rental expenses and salary paid to employees following the termination of contracts in March 2009.

NET NON-OPERATING EXPENSES. Net non-operating expenses for the first two quarters of 2009 totaled US$121,355 compared to US$56,253 in the first two quarter of 2008. The increase was mainly attributable to the provision for contract termination cost of US$68,267.

PROVISION FOR INCOME TAXES. No income tax expense for the six months ended June 30, 2009 was incurred because the Company and its subsidiaries incurred losses for taxation purposes. For the six months ended June 30, 2008, income tax of US$7,426 was provided for profit earned by the Company’s subsidiary in PRC.

NET LOSS FROM DISCONTINUED OPERATIONS. The Company has recorded a net loss from discontinued operations of US$253,302 for the first two quarters of 2009, compared to a net loss from discontinued operations of US$173,434 for the first two quarters of 2008. Resulting from the decrease in revenue accompanied by the expenses provided for the discontinuance of the Company’s termination of business, the Company suffered a net loss in the first half of 2009 larger than the loss for the same period in 2008.

LIQUIDITY AND CAPITAL RESOURCES

The Company is currently financing its operations primarily through cash generated from financing activities.

Cash and cash equivalent balances as of June 30, 2009 and December 31, 2008 were US$230,372 and US$339,538, respectively. The decrease in cash and cash equivalent balances was mainly a result of the increase in cash used in operations.

Net cash used in operating activities of discontinued operations was US$270,242 and US$175,319 for the six months ended June 30, 2009 and 2008, respectively. The cash outflow from operations mainly resulted from the payment of operating expenses in connection with the Company’s business.

Net cash provided by financing activities of discontinued operations was US$160,978 and US$140,894 in the six months ended June 30, 2009 and 2008, respectively. The increase in net cash provided by financing activities of discontinued operations mainly resulted from the increase in net advances from related parties.

During the six months ended June 30, 2009, the Company did not enter into any transactions using derivative financial instruments or derivative commodity instruments nor held any marketable equity securities of publicly traded companies. Accordingly, the Company believes its exposure to market interest rate risk and price risk is not material.

During the six months ended June 30, 2009 and 2008, the Company had no material purchases or investments.

CRITICAL ACCOUNTING POLICIES

Our financial statements reflect the selection and application of accounting policies which require management to make significant estimates and assumptions. We believe that the following are some of the more critical judgment areas in the application of our accounting policies that currently affect our financial condition and results of operations.

Revenue recognition and valuation.

The Company generally recognizes asset management and related services income (which have been discontinued since April 2009) when persuasive evidence of an arrangement exists, services are rendered in accordance with the terms of agreements, the fee is fixed or determinable, and collectability is probable.

We maintain allowances for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required which would result in an additional general and administrative expense in the period such determination was made.

Related party transactions

We do not have any of the following:

•		Trading activities that include non-exchange traded contracts accounted for at fair value.
•		Relationships and transactions with persons or entities that derive benefits from any non-independent relationships other than related party transactions discussed herein.

Off-Balance Sheet Arrangements

The Company has no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to the Company.

Future Operations

The Company is seeking investment opportunities that may provide revenues for the Company. However, the Company has not identified a specific line of business or territory for any such new business. There can be no assurance that the Company will be successful in identifying a new line of business that it can enter into or that if such new line of business is identified, that the receipt of revenues is probable.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are not exposed to a material level of market risk due to changes in interest rates, since we have never registered or issued debt instruments. Our outstanding long term liabilities are mostly loans from a director or other related parties, which are unsecured and interest rate fixed or interest-free. Currently we do not maintain a portfolio of interest-sensitive debt instruments or any fixed-income derivatives. Management has continuously paid great attention to the financial leverage in business development and interest expenses in operations.

ITEM 4. CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this report, the Company conducted an evaluation, under the supervision and with the participation of its Chief Executive Officer and Chief Financial Officer, of its disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Securities Exchange Act of 1934, as amended (“Exchange Act”)). Based upon this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and which also are effective in ensuring that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

Management’s assessment of the effectiveness of the Company’s internal control over financial reporting is as of the six months ended June 30, 2009. We believe that our internal control over financial reporting is effective. We have not identified any current material weaknesses considering the nature and extent of our current operations and any risks or errors in financial reporting under current operations.

(b) Changes in Internal Controls

There were no changes in the Company’s internal control over financial reporting for the six months ended June 30, 2009 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II — OTHER INFORMATION

Item 6. Exhibits.

31.1		Rule 13a-14(a) / 15d-14(a) Certification of Chief Executive Officer
31.2		Rule 13a-14(a) / 15d-14(a) Certification of Chief Financial Officer
32.1		Section 1350 Certification of Chief Executive Officer
32.2		Section 1350 Certification of Chief Financial Officer

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: February 5, 2010

EXHIBIT INDEX

Exhibit No.		Description
31.1		Rule 13a-14(a) / 15d-14(a) Certification of Chief Executive Officer
31.2		Rule 13a-14(a) / 15d-14(a) Certification of Chief Financial Officer
32.1		Section 1350 Certification of Chief Executive Officer
32.2		Section 1350 Certification of Chief Financial Officer

Chinawe Com (CE) (USOTC:CHWE)
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