UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549





FORM 20-F





CHINESEWORLDNET.COM INC.





 ̈
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934


OR





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


For the fiscal year ended December 31, 2010


OR





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


For the transition period from _______________ to _______________


OR





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


Date of event requiring this shell company report _______________





Commission file number: 000-33051





CHINESEWORLDNET.COM INC.


(Exact name of registrant as specified in its charter)





CAYMAN ISLANDS


(Jurisdiction of incorporation or organization)





Suite 368 – 1199 West Pender Street, Vancouver, British Columbia, Canada V6E 2R1


(Address of principal executive offices)





Mr. Joe Tai, President and Chief Executive Officer


Tel: +1 (604) 488-8878   Fax: +1 (604) 488-0868


Suite 368 – 1199 West Pender Street, Vancouver, British Columbia, Canada V6E 2R1


(Name, Telephone, Email and/or Facsimile number and Address of Company Contact Person)





Securities registered or to be registered pursuant to Section 12(b) of the Act.Not Applicable
Not Applicable(Title of each class)
(Name of each exchange on which registered)Securities registered or to be registered pursuant to Section 12(g) of the Act.Common Shares, Par Value of US$0.001 Per Share(Title of Class)Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.Not Applicable(Title of Class)





Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report: 10,950,000 Common Shares, Par Value of US$0.001 Per Share





Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.


 ̈ Yes
x No





If this report is an annual or transaction report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.


 ̈ Yes
x No


Note – Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligation under those Sections.





Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.


x Yes
 ̈ No




Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).*


 ̈ Yes
 ̈ No


* This requirement does not apply to the registrant until its fiscal year ending December 31, 2011.





Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.  See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act.


 ̈ Large accelerated filer

 ̈ Accelerated filer

x Non-accelerated filer





Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:


xU.S. GAAP

 ̈ International Financial Reporting Standards as issued by the International Accounting Standards Board

 ̈ Other





If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.


x Item 17
 ̈ Item 18





If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).


 ̈ Yes
x No





(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)


Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.


 ̈ Yes
 ̈ No







TABLE OF CONTENTS





INTRODUCTION AND USE OF CERTAIN TERMS

4CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS

4PART I


5ITEM 1.
IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS

5ITEM 2.
OFFER STATISTICS AND EXPECTED TIMETABLE

5ITEM 3.
KEY INFORMATION

5ITEM 4.
INFORMATION ON THE COMPANY

24ITEM 4A.
UNRESOLVED STAFF COMMENTS

36ITEM 5.
OPERATING AND FINANCIAL REVIEW AND PROSPECTS

36ITEM 6.
DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

45ITEM 7.
MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

49ITEM 8.
FINANCIAL INFORMATION

51ITEM 9.
THE OFFER AND LISTING

51ITEM 10.
ADDITIONAL INFORMATION

52ITEM 11.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

56ITEM 12.
DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

56PART II


56ITEM 13.
DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

56ITEM 14.
MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

56ITEM 15.
CONTROLS AND PROCEDURES

57ITEM 16A.
AUDIT COMMITTEE FINANCIAL EXPERT

58ITEM 16B.
CODE OF ETHICS

58ITEM 16C.
PRINCIPAL ACCOUNTANT FEES AND SERVICES

58ITEM 16D.
EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES

58ITEM 16E.
PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS

58ITEM 16F.
CHANGES IN REGISTRANT’S CERTIFYING ACCOUNTANT

59
  2
  ITEM 16G.
CORPORATE GOVERNANCE

59PART III

59ITEM 17.
FINANCIAL STATEMENTS

59ITEM 18.
FINANCIAL STATEMENTS

60ITEM 19.
EXHIBITS

60EX-4.2
STOCK OPTION PLAN AGREEMENT DATED JUNE 10, 2010EX-4.4
CONSULTING AGREEMENT BETWEEN CHINESEWORLDNET.COM INC. AND GOLDPAC INVESTMENTS LTD. DATED JANUARY 1, 2010EX-4.5
CONSULTING AGREEMENT BETWEEN CHINESEWORLDNET.COM INC. AND SILVER LAKE INVESTMENT PARTNERS, LTD. DATED JANUARY 1, 2010EX-31. 1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002EX-31. 2
CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002EX-32. 1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002EX-32. 2
CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002SIGNATURES

61INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

62


3


INTRODUCTION AND USE OF CERTAIN TERMS





ChineseWorldNet.Com Inc. is a corporation incorporated under the Company Law (1998 revision) of the Cayman Islands on January 12, 2000.  Except as the context otherwise requires, all references in this annual report (the “Report”) on Form 20-F to “we,” “us,” “our,” “CWN,” and the “Company” are to ChineseWorldNet.Com Inc. and our subsidiaries, including NAI Interactive Ltd. (“NAI”), a company incorporated under the laws of British Columbia, ChineseWorldNet.com (Hong Kong) Ltd. (“CWNHK”), a company incorporated under the laws of Hong Kong, 70% owned interest in ChineseWorldNet.com (Shanghai) Ltd. (“CWN China”), a company incorporated under the laws of People’s Republic of China, and 70% owned interest in Weihai Consulting Investment Ltd. (“Weihai”), a company incorporated under the laws of People’s Republic of China.





Our consolidated financial statements are prepared in accordance with the United States generally accepted accounting principles (“US GAAP”) and are presented in United States dollars (“US dollars”).  All monetary amounts contained in this Report are in US dollars unless otherwise indicated.  References to “Fiscal 2010” are to our fiscal year ended December 31, 2010, and other fiscal years of the Company are referred to in a corresponding manner.  References to “Common Shares” are to our Common Shares, par value of US$0.001 per share.





Our registered office is located at Appleby, Clifton House, 75 Fort Street, P.O. Box 190, Grand Cayman, Cayman Islands KY1-1104.  Our principal executive office is located at Suite 368 – 1199 West Pender Street, Vancouver, British Columbia, Canada V6E 2R1.





CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS





This Report contains forward-looking statements that reflect the management’s current expectations and assumptions with respect to the general economic and business conditions, the Company’s operation and business strategies, products, services and competition, future financial position and results, and various other factors, both referenced and not referenced in this Report.  All statements made in this Report other than statements of historical fact, including, among others, statements that address operating performance, events, circumstances, or developments that the management expects or anticipates will or may occur in the future, statements related to revenue and volume growth, profitability, new sales and marketing channels, adequacy of and ability to raise additional funding for operations, and statements expressing general optimism about future operating results and non-historical information, are forward-looking statements.  In particular, the words “believe,” “expect,” “intend,” “anticipate,” “estimate,” “plan,” “target,” “may,” “will,” variations of such words, and similar expressions identify forward-looking statements, but are not the exclusive means of identifying such statements and their absence does not mean that statements are not forward-looking.





These forward-looking statements are subject to risks and uncertainties that could cause our actual financial position and results to differ materially from those expressed in, anticipated or implied by these forward-looking statements for many reasons, including the risks and statements described in more detail under “Item 3. Key Information – Risk Factors,” “Item 5. Operating and Financial Review and Prospects” and“Item 11. Quantitative and Qualitative Disclosures about Market Risk”included elsewhere in this Report.  The information set forth in this Report is as of December 31, 2010 unless otherwise indicated.  We do not undertake any obligation to revise or update these forward-looking statements to reflect new information, future events or circumstances unless required by applicable legislation or regulation.  These forward-looking statements contained in this Report are expressly qualified by this cautionary statement.


4


PART I





ITEM 1.IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS








This Report on Form 20-F is being filed as an annual report under the Securities Exchange Act of 1934 (the “Exchange Act”) and, as such, there is no requirement to provide any information under this item.





ITEM 2.OFFER STATISTICS AND EXPECTED TIMETABLE








This Report on Form 20-F is being filed as an annual report under the Exchange Act and, as such, there is no requirement to provide any information under this item.





ITEM 3.KEY INFORMATION








A. Selected Financial Data





The following table sets forth selected consolidated financial information from our consolidated financial statements prepared in accordance with US GAAP for our five most recently completed fiscal periods consisting of the years ended December 31, 2010, 2009, 2008, 2007 and 2006.  The information for the last three fiscal years ended December 31, 2010, 2009 and 2008 have been extracted from the Company’s audited consolidated financial statements and the related notes included herein and should be read in conjunction with such in “Item 5 – Operating and Financial Review and Prospects”.  Information for the years ended December 31, 2007 and 2006 have been extracted from audited consolidated financial statements not disclosed elsewhere and presented below.





Year ended December 31,2010


2009


2008


2007


2006Consolidated Statements of Operations:Revenue

$
1,733,329


$
906,455


$
1,011,322


$
1,325,994


$
643,370Net income (loss) for the year


296,604



(402,209
)


(1,004,835
)


108,354



(209,883
)Net income (loss) attributable to non-controlling interest


107,858



(72,977
)


(54,712
)


—



—Net income (loss) attributable to common stockholders


188,746



(329,232
)


(950,123
)


108,354



(209,883
)Earning (loss) per share – basic


0.03



(0.03
)


(0.09
)


0.01



(0.03
)Earning (loss) per share – diluted


0.03



(0.03
)


(0.09
)


0.01



(0.03
)Weighted average common shares outstanding – basic


10,873,288



10,700,000



10,700,000



9,012,328



8,200,000Weighted average common shares outstanding – diluted


10,873,288



10,700,000



10,700,000



9,103,713



8,200,000Consolidated Balance Sheets:Total assets

$
2,171,219


$
1,933,021


$
2,104,383


$
2,780,226


$
226,896Equipment


50,521



73,012



46,526



22,001



22,677Total current liabilities


384,673



583,959



221,251



373,870



439,278Total stockholders’ equity (deficiency)


1,786,546



1,349,062



1,646,205



2,200,694



(212,382
)





No dividends have been declared or paid in Fiscal 2010.





B. Capitalization and Indebtedness





This Report on Form 20-F is being filed as an annual report under the Exchange Act and, as such, there is no requirement to provide any information under this item.




5


C. Reasons for the Offer and Use of Proceeds





This Report on Form 20-F is being filed as an annual report under the Exchange Act and, as such, there is no requirement to provide any information under this item.




D. Risk Factors





The following discussion in this Report on Form 20-F contains forward-looking statements regarding our business, prospects and results of operations that involve risks and uncertainties.  Our actual results may differ materially from the results that may be anticipated by such forward-looking statements and discussed elsewhere in this Report. Factors that could cause or contribute to such differences include, but are not limited to, those discussed below, as well as those discussed under the heading “Item 4–Information on the Company” and “Item 5–Operating and Financial Review and Prospects” and those discussed elsewhere in this Report.  In evaluating our business, prospects and results of operations, readers should carefully consider the following factors in addition to other information presented in this Report and in our other reports filed with the Securities and Exchange Commission that attempt to advise interested parties of the risks and factors that may affect our business, prospects and results of operations.  See “Cautionary Notice Regarding Forward Looking Statements” above.





RISK FACTORS RELATING TO OUR COMPANY AND OUR BUSINESSES





Our limited operating history in certain activities makes it difficult to judge our prospects.





Although we have an operating history of over 10 years, we may have a limited history in terms of certain aspects of our operation.  This includes those new strategies and business models we developed, such as our development as a financial content and information provider targeting potential investors in the Greater China in addition to building a network with various content and information distribution channels in the region, our institutional conference business, and our road show business etc.  Potential investors should be aware of the risks associated with such, and expect that most of our revenues in the foreseeable future be applied towards building and growing the Company and its businesses.





We may not be able to successfully implement our growth strategies.





We are pursuing a number of growth strategies. Externally, we endeavor to create sustainable partnerships, joint ventures and acquisitions with providers of financial products and services.  We seek out relationships with companies with customers in North America and Asia, offering new services for which there are no strong and well-established markets, or new services where we lack experience and expertise.  In light of this, we cannot guarantee that the new services will be commercially viable or delivered in a timely manner.





Internally, we require constant development and expansion of our content and knowledge base.  We intend to increase revenues from our Portal business, IR/PR business, Conference business, and financial content and information distribution business by increasing internal support staff and other resources.  There is no guarantee we may be able to achieve what we desire.  The increased associated costs may impede our results of operations and financial condition, with no guarantee of success or increase in revenue.





We may not be able to maintain our existing or enter into new successful partnerships or collaborations.





We offer a suite of services which we rely on partnerships and collaborations with external parties.  There is no guarantee that we will be able to maintain our existing or enter into new successful partnerships or collaborations.  As a result, we may not be able to maintain or achieve profitability.


6


Our future performance is dependent on the continuing and collaborative efforts of our senior management and key personnel, and our ability to retain them.





Our future performance is substantially dependent on the performance of our senior management and key personnel.  In particular, our success depends on the continued services and efforts of our senior management team.  If a member in the senior management team is unable or unwilling to continue in his or her position, we may not be able to replace the position easily, and our business may be disrupted, materially and adversely affected.  If any member in the senior management team joins a competitor or forms a competing company, we may lose customers, distributors and know-how.





We intend to grant incentive stock options to our senior management and key personnel in lieu of salary raise.  Due to potential fluctuation of our future share price, our employees may have their incentive stock options at strike prices far above the then current share price.  As a result, our employees may not consider their incentive stock options to be a valuable form of compensation, and we may need to provide other forms of compensation such as salary increase, bonuses or equities in an effort to retain them.  Our inability to retain employees, particularly our senior officers, and key financial and technical personnel could have a material adverse effect on businesses, results of operations and financial condition.





Our businesses may be adversely affected if we do not continue to expand and maintain an effective customer support force.





We offer our clients and users customer support in English, Cantonese and Mandarin through a North American toll free telephone number.  The purpose of customer support is to resolve our clients’ and users’ issues and questions as well as to explain our Company’s product and service offerings.  Most of our staff members involved in the customer support function are relatively new to the Company, and may not have sufficient training or experience to effectively serve our clients and users.  We will need to increase our customer support force as our businesses expand, as well as provide adequate training to them.  We may not be able to hire and retain employees without short-term disruptions to our operations, and locating multilingual workers may post a challenge.  Failure to maintain a working customer support team may have a material adverse effect on our businesses.





We face significant competition that could adversely affect our businesses, results of operations and financial condition.





The markets for our Portal, IR/PR, Conference, and our financial content and information distribution businesses are extremely competitive and rapidly changing.  The number of competitors competing for our potential clients and users’ attention and spending has increased significantly since we commenced operations and we expect that competition will continue to intensify.  As we continue to broaden our range of product and service offerings, we expect increasing competition from established players as well as less well-known players in the coming years.  Many of these competitors have longer operating histories, better brand recognition, larger customer bases and databases, and significantly greater financial, technical and marketing resources.  In addition, certain companies, especially early-stage venture-backed start-ups may be willing to compete for market share at the expense of generating revenues.  Any of our present or future competitors may provide products and services that provide significant better performance, price, creativity or other advantages over those offered by us.  Our competitors may be able to undertake more extensive marketing campaigns, adopt more aggressive pricing policies and make more attractive offers to qualified personnel, content providers, distribution partners, advertisers, sponsors, clients and users.  Our ability to compete successfully depends on many factors, including the quality of our content, the breadth, depth and ease of use of services, sales and marketing efforts, and performance of technology etc.  See Section titled “Competition” at “Item 4 – Information on the Company”.





We currently compete, directly and indirectly, for readers and subscribers with companies in the business of providing financial data and information services, including publishers and distributors of traditional media, Internet portals providing information on business, finance and investing, dedicated financial information websites, personal stock research software vendors and stock brokerage companies, especially stock brokerage companies with online trading capabilities.  We also compete, directly and indirectly, for clients and users with companies specialized in providing IR/PR services and for conference participants and attendees with companies specialized in hosting and organizing conferences.


7


Many of our existing competitors, as well as potential new competitors, may adopt our business model and devote greater resources than we can to the development and promotion of product and service offerings similar to or more advanced than our own.  These competitors may also engage in more extensive research and development, undertake more far-reaching marketing campaigns, and adopt more aggressive pricing policies and offer products and services that achieve greater market acceptance than ours.  They may also undercut us by making more attractive offers to our existing and potential employees, content providers, distribution partners, advertisers, sponsors, clients and users.  New and increased competition could result in price reductions in our product and service offerings, reduced margin or loss of market share, any of which could materially and adversely affect our businesses, results of operations and financial condition.





Difficulties associated with our brand development may harm our ability to attract clients and users.





We believe that a general increase in competition for online financial products and services companies has elevated the importance of brand building and brand awareness.  We also believe that maintaining and generating awareness about our websites, www.chineseworldnet.com, www.nai500.com, and www.gcff.ca, as well as their associate brands are important aspects in our efforts to continue to attract clients and users.  Our planned products and services may not be widely recognized, and we will need to increase awareness amongst potential users.  Despite continued efforts to generate brand awareness, it may be ineffective or unsuccessful in reaching potential users.  Potential users may not be receptive to our advertising campaigns and/or other efforts.  Accordingly, our efforts may be unsuccessful in raising awareness of our websites and their associate brands or in persuading potential clients and users to purchase or use our services.





We do not own the URLs for our principal websites.  If we lose the right to use our principal website addresses or URLs, our businesses could be seriously harmed.





Our principal website addresses or Uniform Resource Locators (URLs), www.chineseworldnet.com, www.nai500.com, and www.gcff.ca, are currently licensed from Register.com on a yearly basis.  As per our services agreements with Register.com, there is no guarantee that we can renew the services agreements with regard to our principal website addresses or URLs.  If we lose the right to use the www.chineseworldnet.com, www.nai500.com, and www.gcff.ca domain names, they may become the property of our competitors or other parties, either of which could have a material adverse effect on our businesses, results of operations and financial condition.





Unforeseen developmental difficulties with our technological infrastructure may hinder our efforts.





We have undertaken measures to enhance our design and technological infrastructure in order to improve our portals, websites and other product and service offerings, and we intend to continue doing so in the foreseeable future.  In the past, we have experienced unexpected web traffic, leading to slow upload times or other problems.  While we have worked towards resolving these problems, they can be expected to occur again in the future, hence, the need of our continual efforts to upgrade and improve our portals, websites and other product and service offerings.  Unforeseeable developmental difficulties may prevent us from implementing improvements or lead to higher than anticipated costs, and repeated problems in accessing our websites can deter visitors from future use.  All of these, and possibly other problems, will affect our businesses, operations and financial condition, unfavorably.





If we are not able to respond successfully to technological or industry developments, our businesses may be materially and adversely affected.





The online financial data and information services market is characterized by rapid advancements in technology, evolving industry standards and changes in customer needs.  New services or technologies may render our existing services or technologies less competitive or obsolete.  Responding and adapting to technological developments and standard changes in our industry, the integration of new technologies or industry standards, or the upgrading of our networks may require substantial time, effort and capital investment.  In the event that we are unable to respond successfully to technological industry developments, this may materially and adversely affect our businesses, results of operations and competitiveness.





In addition, changes in user behavior resulting from technological developments may also adversely affect us. For example, the number of people accessing the Internet through devices other than personal computers, including mobile phones and other hand-held devices, has increased in recent years, and we expect this trend to continue while 3G and more advanced mobile communications technologies are broadly implemented.  If we fail to develop products and technologies that are compatible with all mobile devices, or if the products and services we develop are not widely accepted and used by users of various mobile devices, we may not be able to penetrate the mobile markets.


8


Our ability to maintain and increase our readership depends on the continued growth in use and efficient operation of the Internet.





The web-based information market is rapidly evolving.  Our businesses would be adversely affected materially if web usage does not continue to grow or grows slowly.  Web usage may be inhibited for a number of reasons beyond our control, such as:





·
inadequate network infrastructure;


·
security and privacy concerns;


·
inconsistent quality of service; and


·
unavailability of cost-effective, high-speed access to the Internet.





Our users depend on Internet service providers, online service providers and other website operators for access to our websites.  Many of these companies providing such services have experienced service outages in the past and could experience service outages, delays and other difficulties unrelated to our systems.  These occurrences could cause our users to perceive the web in general or our websites in particular as an unreliable medium and, therefore, cause them to use other media to obtain their financial news and information.  We also depend on a number of information providers to deliver information and data feeds on a timely basis.  Our websites could experience disruptions or interruptions in service due to the failure or delay in the transmission or receipt of this information, which could materially and adversely affect our businesses, results of operations and financial condition.





We may be held liable for information retrieved from our website and such potential liability could harm our businesses.





Internet, technology and media companies are frequently involved in litigation based on allegations of infringement of intellectual property rights, unfair competition, invasion of privacy, defamation and other violations of other parties’ rights.  The validity, enforceability and scope of protection of intellectual property in Internet-related industries are uncertain and still evolving.  Because our services can be used to download and distribute information to others, there is a risk that claims may be made against us for defamation, negligence, copyright or trademark infringement or other claims based on the nature and content of that material.  In addition, we do not carry any liability insurance to indemnify us for all liability that may be imposed.  Any imposition of liability could have a material adverse effect on our businesses, results of operations and financial condition.





We may be held liable for the content of our electronic and hard copy publishing and such potential liability could harm our businesses.





We are paid by our client companies to produce company profiles, translated fact sheet and presentation materials, which are distributed to target investors by email, mail and published on our website.  Our users may request and receive directly from us a hard copy of any such review.  We make no recommendation for the purchase of securities in any of our public company clients’ securities and each report contains a disclaimer to that effect.  We do not send out unsolicited copies of the reports on our client companies’ behalf.  We receive a fee from the client company for preparing the report but receive no underlying interest in the client company’s securities nor do we take any position in those securities.





Although we have a disclaimer on each review, it may be perceived by users that we are endorsing our client companies as an investment.  Potential liability issues may arise should our users invest in these companies and lose money based upon an inaccurate perception that we have endorsed such an investment.  Liability issues include the defense of a lawsuit that could be brought by a user seeking compensation for the losses he or she has suffered which could involve us in costly and time-consuming litigation in defending such a suit.  We have no liability insurance in place to protect us against such a potential suit.


9


Failure of our internal security measures or breach of our privacy protections may cause us to lose users and subject us to liability.





Users who subscribe to our premium subscription-based products are required to supply certain personal information which we use to administer our services.  We also require users of some of our free products and features to provide us with certain personal information.  Additionally, we rely on security and authentication technology licensed from third parties to perform real-time credit card authorization and verification, and at times rely on third parties, including technology consulting firms, to help protect our infrastructure from security threats.  In this regard, our users depend on us to keep their personal information safe and private.  If users perceive that we are not protecting their privacy, or if the technology developed by these third parties does not function as anticipated and our information security measures are breached, our users could be discouraged from registering to use our services, which could have a material adverse effect on our businesses, results of operations and financial condition.





We may be involved in future litigation over our use of technology rights.





We currently own and license technology from third parties.  None of our application technologies are proprietary to us.  As we continue to introduce new services that require new technology, we anticipate that we may need to license additional third-party technology.  These existing and additional technology licenses may not be available to us on commercially reasonable terms, if at all.  In addition, it is possible that in the course of using new technology, we may inadvertently breach the technology rights of third parties and face liability.  Our inability to obtain these technology licenses or avoid breaching third party technology rights could delay or compromise our introduction of new services and could materially and adversely affect our businesses and financial condition.





We cannot be certain that our website content and online services and tools do not or will not infringe upon patents, valid copyrights or other intellectual property rights held by third parties.  We may become subject to legal proceedings and claims from time to time relating to the intellectual property of others in the ordinary course of our business.  If we are found to have violated the intellectual property rights of others, we may be banned from using such intellectual property, and we may incur licensing fees or be forced to develop alternatives.  In addition, we may incur substantial expenses in defending against these third party infringement claims, regardless of their merit.  Successful infringement or licensing claims against us may result in substantial monetary liabilities, which may materially and adversely affect our businesses.





We enter into confidentiality agreements with our employees and consultants, and control access to and distribution of our documentation and other licensed information.  In spite of these precautions, it may be possible for such persons to breach such precautions or controls or a third-party to copy or otherwise obtain and use our licensed services or technology without authorization, or to develop and apply similar technology independently.  In addition, effective copyright, trademark and trade secret protection may be unavailable or limited, and the global nature of the Internet and the media makes it practically impossible to control the ultimate destination of our products.  Policing the unauthorized use of our licensed technology is difficult as are the steps necessary to prevent the misappropriation or infringement of our licensed technology.  In addition, litigation may be necessary to enforce our intellectual property rights, to protect our trade secrets or to determine the validity and scope of the proprietary rights of others, which could result in substantial cost to us, divert our resources and have a material adverse effect on our businesses, results of operations and financial condition.





Our long-term liquidity and capital resources are uncertain.  Failure to maintain profitability and positive cash flow may lead to failure of the businesses.





We anticipate the need to secure additional financing in order to maintain our existing operations and to implement our planned expansions in North America and Asia.  The Company has recurring losses from operations since inception and has accumulated a deficit of $2,425,124 as at December 31, 2010.  The Company’s ability to continue as a going concern is dependent upon its ability to obtain additional financing to maintain and to expand its business operations.  Management has been able to finance its business operations through equity and debt financing.  Management will continue to seek additional capital to finance its business operations and expansions through equity and debt financing.  However, there can be no assurance that such financing will materialize on a timely basis or obtained on favorable terms.  These conditions raise substantial doubt that the Company will be able to continue as a going concern.


10


Our strategy of expansion through acquisitions has been and will continue to be costly and may not be effective, and we may realize losses on our investments.  It may also affect our ability to receive favorable financing terms.





We have acquired, and intend to continue to acquire, companies and assets that we believe will enhance our revenue growth, operations and profitability.  Our acquisitions may result in the use of significant amounts of cash, dilutive issuances of our common shares and amortization expenses related to goodwill and other intangible assets, each of which could materially and adversely affect our businesses.  These acquisitions involve significant risks, including:





·
the difficulties of integrating, assimilating and managing the operations, technologies, intellectual property, products and personnel of the acquired business;


·
the diversion of management attention from other business concerns;


·
the reduced availability of favorable financing for future acquisitions;


·
the additional expense associated with acquired contingent liabilities;


·
our inability to manage adequately the currency, interest rate and equity price fluctuations relating to our acquisitions and investments;


·
the loss of key employees in acquired businesses;


·
the risk of being sued by terminated employees and contractors; and


·
our lack of familiarity with local market and other conditions and business practices





If we acquire another business, we would need to integrate, manage and protect our interests in our acquired businesses successfully, and failure to do so could have a material adverse effect on our businesses, results of operations and financial condition.





If economic and other conditions deteriorate, or if market or other values fluctuate, we may need to provide for decreases in value or increased unrealized losses.  Our results of operations, financial condition, prospects and share price could be adversely and materially affected, particularly if we are unable to hedge or adequately hedge our exposure to reduced valuations.





In addition, there is no guarantee that acquisitions would actually enhance our revenues, operations and profitability.  If those benefits do not materialize as expected, our financial condition may worsen and we may have lower cash balance, lower profitability, higher debt level and lower credit rating.  These will likely affect our ability to receive favorable terms on equity or debt financing.  As a result, we may need to accept a less than favorable financing such as issuing common shares at below book value or market value or issuing debt at a higher interest rate, should we require additional capital for our operations.





Our Portal business may be adversely affected if we fail to attract or retain sufficient number of Premium Subscribers or if we fail to develop or introduce new features and research tools.





Currently, we offer Premium Subscribers a number of service packages with premium and personalized features and functionalities.  If we fail to attract or retain sufficient number of Premium Subscribers to our premium service packages, or if our readers continue to use our free services rather than subscribing to our Premium Services, our revenues may decline.  In addition, if we fail to offer new features or tools on a regular basis, or if such features and tools are not favorably received, our Premium Subscribers may choose to discontinue their subscription.  Alternately, if we fail to offer service packages that provide value, potential subscribers may turn to our competitors that put more resources into innovation of their products rather than using our services.  In developing new features and tools, it is probable that we will experience challenges that may delay or prevent launching these new services. Furthermore, the said new services may contain errors that are discovered only after launch.  Our Portal business may be affected adversely in the aforementioned scenarios.


11


In addition, a number of companies and websites offer stock quotes, economic and company-specific news, historical stock performance statistics, online chatting regarding individual securities and other features for free over the Internet.  If users determine that the information available for free over the Internet is sufficient for their investing needs, they would be unlikely to pay for subscription to our services, thus reducing our revenues and net income and forcing us to develop a new business model.  Furthermore, the amount and quality of information available for free over the Internet may expand in the future, reducing the attractiveness of our services and forcing us to spend additional money to develop more sophisticated services in order to compete.  There can be no assurance that we would be successful in developing a new business model or more advanced services in response to either of the above challenges.  Failure to do so would lead to significant declines in our number of subscribers, revenues and net income.





Failure to establish and maintain strategic relationships with other companies, including partnerships with content providers in Greater China, may negatively affect our subscriber and reader base, hence, our businesses.





We depend on establishing and maintaining content syndication and headline indexing relationships with high-traffic websites for a portion of our current subscriber and reader base.  There is intense competition for relationships with these firms and placement on these sites, and we may have to pay substantial fees to establish additional content syndication and headline indexing relationships or maintain existing relationships in the future.  We may be unable to enter into or successfully renew relationships with these firms or sites on commercially reasonable terms.  Many companies that we may approach for a strategic relationship or which already have strategic relationships with us also receive financial news and information from other sources.  As a result, these companies may be reluctant to enter into or maintain strategic relationships with us.





We also depend on establishing and maintaining the content of the financial markets, economy and company trends in Greater China as a key aspect of our businesses.  These content include blogs, expert analysis, news articles and commentaries.  Failure to maintain the quality of such content or to develop the content through partnerships may negatively affect our client and readership base.





If we do not establish additional and maintain existing strategic relationships on commercially reasonable terms, or if any of our strategic relationships do not result in an increase in the number of subscribers or readers of our websites, our businesses may be negatively affected.





Certain of our revenues from our Portal and IR/PR businesses are billed on a fixed-price basis which may be subject to cost over-runs and we may incur a loss as a result.




Certain of our Portal and IR/PR businesses include individual and short-term projects are billed on a fixed-price basis as distinguished from a method of billing on a time and materials basis.  Our failure to obtain new business in any given quarter or estimate accurately the resources and time required for an engagement, to manage client expectations effectively regarding the scope of services to be delivered for the estimated fees or to complete fixed-price engagements within budget, on time and to clients’ satisfaction could expose us to risks associated with cost over-runs, which could have a material adverse effect on our businesses.





Failure to attract individual investor participants to our conferences or failure of implementing the changes planned for the Conference business may decrease attendance of presenting companies, corporate delegates, and in general, paying participants for the conferences.





Our Conference business represents a significant portion of our revenue.  Presenting companies and exhibitors pay to attend our conferences typically for the purpose of meeting individual investor participants.  Failing to attract individual investor participants to our conferences may result in a decline of presenting companies and exhibitors, thereby affecting our overall revenue.  In the future, we may increase the price we charge the presenting companies and exhibitors or we may begin charging the individual investor participants, this may have a negative effect on the attendance, thereby also affecting our overall revenue.





In addition, our Conference business had undergone changes to address the current financial environment.  Specifically, the repositioning of our conferences away from the traditional focus on the capital markets and towards a more general partnering business format for selected industries in cross-border businesses between North America and Greater China.  The success of the conferences is, by no means, secure.  Problems may arise from inexperienced company personnel as well as other factors which may have a negative effect on the revenue of our Conference business.


12


Failure to maintain strategic relationship with partner companies in organizing financial seminars in PRC may adversely affect our business.





In expanding our financial seminars in PRC, we may depend on establishing and maintaining partnerships with local companies in PRC, such as agents, internet platform partners, consulting companies, project event organizers etc., in various disciplines such as marketing our company and/or events, seminar organization and coordination.  We may be unable to enter into or successfully renew relationships with these companies or partners on commercially reasonable terms.





Many companies that we may approach for a strategic relationship or who already have strategic relationships with us will have financial commitments and responsibilities involved with our company.  Failure to establish or maintain relationships with said companies would significantly affect our businesses.





Our businesses are dependent on the level of trading activity in PRC’s securities markets.  Volatility in PRC’s securities markets may dampen investors’ interest in such markets and adversely affect our revenue and profitability.





Our businesses are dependent on user demand for market intelligence on various securities markets, including PRC’s securities markets.  The demand for investment in PRC’s securities markets has fluctuated with the level of trading activity there.  In the last several years, PRC’s securities markets have experienced significant fluctuation.  If the PRC’s securities markets weaken, and if investors’ interest in PRC’s securities markets declines, our businesses could be significantly and adversely affected.





RISKS RELATING TO OUR INDUSTRY





Intense competition could reduce our market share and harm our financial performance.





A number of financial news and information sources compete for consumers’ and advertisers’ attention and spending. We compete for advertisers, staff and outside contributors, clients and users and many types of companies, including:





·
English Content:


o
online services or websites focused on business, finance and investing news, such as CBS.MarketWatch.com, CNBC on MSN Money, CNNfn.com, The Wall Street Journal Online, TheStreet.com, Globeinvestor.com, TheNewYorkTimes.com, DowJones.com, SmartMoney.com, and The Motley Fool;


o
publishers and distributors of traditional media, including print, radio and television, such as The Wall Street Journal, Fortune, Bloomberg Business Radio, and CNBC;


o
web “portal” companies, such as Yahoo!, MSN.com, and America Online;


o
online brokerage firms, many of which provide financial and investment news and information, such as Charles Schwab, E*TRADE, and TD Waterhouse; and


o
providers of terminal-based financial news and data, such as Bloomberg Business News, Reuters News Service, and Dow Jones Markets.





·
Chinese Content:


o
online services or websites focused on business, finance and investing, such as Chinesefn.com, HKNasdaq.com, Chinese.wsj.com, www.cnyes.com, and www.jrj.com;


o
publishers and distributors of traditional media, including print, radio and television, such as Apple Daily, MingPao Daily, SingTao Daily, ChinaByte, and Xinhua News Agency;


o
web “portal” companies, such as Yahoo! China, Yahoo! Hong Kong, baidu.com, China.com, Taiwan.com, Sina.com, Sohu.com, HongKong.com, Tom.com, 36.com, Netease.com, Yam, and Hinet; and


o
online brokerage firms, many of which provide financial and investment news and information, such as whsb.com, Cash Online, and Pt123.com.


13


Our ability to compete depends on many factors, including the originality, timeliness, insightfulness and trustworthiness of our content and that of our competitors, the ease of use of services developed either by us or our competitors and the effectiveness of our sales and marketing efforts.





Many of our existing competitors, as well as a number of potential new competitors, have longer operating histories, greater name recognition, larger customer bases and significantly greater financial, technical and marketing resources than we do.  This may allow them to devote greater resources than we can to the development and promotion of their services.  These competitors may also engage in more extensive research and development, undertake more far-reaching marketing campaigns, adopt more aggressive pricing policies (including offering more of their financial news and commentary for free) and make more attractive offers to existing and potential employees, outside contributors, strategic partners and advertisers.  Our competitors may develop content that is equal or superior to our content or that achieves greater market acceptance than our content.  It is also possible that new competitors may emerge and rapidly acquire significant market share.  We may not be able to compete successfully for advertisers, staff or outside contributors, clients and users which could materially adversely affect our businesses, results of operations and financial condition.  Increased competition could result in price reductions, reduced margins or loss of market share, any of which could materially and adversely affect our businesses, results of operations and financial condition.





We also compete with other websites, television, radio and print media for a share of advertisers’ total advertising budgets.  If advertisers perceive the Internet or our websites to be a limited or an ineffective advertising medium, they may be reluctant to devote a portion of their advertising budget to Internet advertising or to advertising on our websites.





Furthermore, we are experiencing increased competition with a growing number of companies in the United States and Canada with respect to our IR/PR and Conference businesses.  We compete for our client companies’ limited marketing budgets on our various product and service offerings in our IR/PR business.  There is also a growing trend for companies to put on trade shows and conferences related to investing in China, which competes with our businesses. If we are not able to effectively compete with these companies for the limited marketing budgets of participants, our business may be adversely affected and our financial performance may be harmed.





Existing and future laws and regulations may increase our costs of doing business and legal compliance expenditures.





Existing domestic and international laws or regulations and private industry guidelines specifically regulate communications or commerce on the web.  Furthermore, laws and regulations that address issues such as user privacy, pricing, online content regulations, taxation of electronic commerce transactions and the characteristics and quality of online products and services are under consideration by federal, state, local and foreign governments and agencies and by private industry groups.  Several telecommunications companies have petitioned the Federal Communications Commission to regulate Internet service providers and online services providers in a manner similar to the regulation of long distance telephone carriers and to impose access fees on such companies.  The governments of other states or foreign countries might attempt to regulate our transmissions or levy sales or other taxes relating to our activities.  These regulations, if imposed, could increase the cost of transmitting data over the web.





In addition, the growth and development of the market for Internet commerce may prompt calls for more stringent consumer protection laws, both in the United States and abroad, that may impose additional burdens on companies conducting business over the Internet.  Our business, results of operations and financial condition could be materially and adversely affected by the adoption or modification of laws or regulations relating to the Internet.





The interpretation and application of existing securities laws to web-based financial news providers, including laws governing investment advisors, investment companies and broker/dealers, by the Securities and Exchange Commission and state securities regulators, is a developing area.  If, as this area matures, our activity is interpreted as subjecting it to regulation, we could be subject to liability, and our business, results of operations and financial condition could be materially and adversely affected.


14


We are also subject to various federal and state regulations concerning the collection and use of information regarding individuals. These laws include the Children’s Online Privacy Protection Act, and state laws which limit or preclude the use of voter registration and drivers’ license information, as well as other laws that govern the collection and use of consumer credit and financial information, including the Gramm-Leach-Bliley Act.  Although our compliance with applicable federal and state laws, regulations and industry guidelines has not had a material adverse effect on our business, governments, trade associations and industry self-regulatory groups may enact more burdensome laws, regulations and guidelines, including antitrust and consumer privacy laws, for us and our customers.  The U.S. federal and various state governments have been investigating certain Internet companies regarding their use of personal information and have recently proposed limitations on the collection and use of information regarding Internet users.  The European Union has enacted its own privacy regulations that may result in limits on the collection and use of certain information from users in Europe.  We could incur additional expenses if any new regulations regarding the use of personal information are introduced or if these agencies chose to investigate our privacy practices.  Also, as a consequence of governmental legislation or regulation or enforcement efforts or evolving standards of fair information collection practices, we may be required to make changes to our products or services in ways that could diminish the effectiveness of the product or service or our attractiveness to potential customers, which could materially and adversely affect our business, financial condition or results of operations.  Any new laws or regulations relating to the web, or certain application or interpretation of existing laws, could decrease the growth in the use of the web, decrease the demand for our websites or otherwise materially and adversely affect our business.





Laws and regulations directly applicable to Internet communications, commerce and advertising are becoming more prevalent, and new laws and regulations are under consideration by the U.S. Congress and state legislatures.  Any legislation enacted or restrictions arising from current or future government investigations or policy could dampen the growth in use of the Internet generally and decrease the acceptance of the Internet as a communication, commercial and advertising medium.  The laws governing the Internet remain largely unsettled, even in areas where there has been some legislative action.  Moreover, it may take years to determine the extent to which existing laws relating to issues such as intellectual property ownership and infringement, libel, obscenity and personal privacy apply to the Internet and Internet advertising.





Doing business outside of the United States may subject us to additional risks.




A substantial portion of our business is conducted outside of the United States and as a result, our 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, our 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.  We could also be subject to taxation in a number of jurisdictions, and the final determination of our tax liabilities might involve the interpretation of the statutes and requirements of various domestic and foreign taxing authorities.





Computer equipment problems and failures could adversely affect our business.





Problems or failures in our Internet-related equipment, including our file servers, computers and software could result in interruptions or slow response times on our websites, which could reduce the attractiveness of our websites to advertisers and users.  Equipment problems and failures could result from a number of causes, including but not limited to an increase in the number of users of our websites, computer viruses, outside programmers penetrating and disrupting our software systems, human errors, fires, floods, power and telecommunications failures, and internal breakdowns.  In addition, any disruption in Internet access provided by third parties could have an adverse effect on our ability to provide the services that it proposes to offer to our members which in turn may have an adverse effect on the number of members we are able to attract to our websites.


15


Our computer network is vulnerable to hacking, viruses and other disruptions.





Inappropriate use of our Internet services or errors or omissions in processing instructions or data available in our computer system or databases could jeopardize the security of confidential information stored in our computer system, which may cause us to lose key clients, expose us to liability for our clients’ losses and prevent us from securing future business, any of which could have a material adverse effect on our prospects, business, financial condition, results of operations and share price.





Inappropriate use of the Internet includes attempting to gain unauthorized access to information or systems – commonly known as cracking or hacking.  Our current policies, procedures and configurations for managing our systems, including our computer servers, may not be adequate to protect our facilities and the integrity of our user and customer information.  Although we intend to implement security measures to protect our facilities and the integrity of our user and customer information, such measures could be ineffective or circumvented.  Alleviating problems caused by computer viruses or other inappropriate uses or security breaches may require interruptions, delays or cessation in our services, in addition to the outages that occur in our systems from time to time for various reasons, including power interruptions, errors in instructions, equipment inadequacy, capacity and other technical problems.  We do not carry errors and omissions or other insurance covering losses or liabilities caused by computer viruses or security breaches.  Compromises or breaches in the security or integrity of our facilities or customer or user information, or inappropriate use of our Internet services, could subject us to litigation and could adversely affect our customer base, business, prospects, share price, results of operation and financial condition.





The ability to block Internet advertising could prevent the expansion of online advertising in Asia.




The development of Web software that blocks Internet advertisements before they appear on a user’s screen may hinder the growth of online advertising.  The expansion of ad blocking on the Internet may decrease our revenues because when an ad is blocked, it will not be downloaded from our ad server, which means these advertisements will not be tracked as a delivered advertisement.  In addition, advertisers may choose not to advertise on the Internet or on our advertising network because of the use of Internet advertisement blocking software.  The use of software that blocks Internet advertisements may materially and adversely affect our business.




Concerns about the security of electronic commerce transactions and confidentiality of information on the Internet may reduce the use of our network and impede our growth.





A significant barrier to electronic commerce and communications over the Internet in general has been a public concern over security and privacy, especially the transmission of confidential information.  If these concerns are not adequately addressed, they may inhibit the growth of the Internet and other online services generally, especially as a means of conducting commercial transactions.  If a well-publicized Internet breach of security were to occur, general Internet usage could decline, which could reduce traffic to our destination sites and impede our growth.





We may rely on electronic commerce as a significant part of our future revenue, but the Internet has not yet been proven as an effective commerce medium in the Greater China region.




Our revenue growth also depends on the increasing acceptance and use of electronic commerce in the region comprised of the PRC, Hong Kong and Taiwan (referred in this Report as “Greater China”).  The Internet may not become a viable commercial marketplace in Asia for various reasons, many of which are beyond our control, including inexperience with the Internet as a sales and distribution channel; inadequate development of the necessary infrastructure to facilitate electronic commerce; concerns about security, reliability, cost, ease of deployment, administration and quality of service associated with conducting business over the Internet; and inexperience with credit card usage or with other means of electronic payment in the PRC.  If the Internet does not become more widely accepted as a medium for electronic commerce, our ability to generate increased revenue will be negatively affected.


16


Our future operating results from online advertising and electronic business solutions services will depend substantially upon the increased use of the Internet for information, publication, distribution and commerce and the emergence of the Internet as an effective advertising medium in Greater China and Asia.  Many of our customers may have limited experience with the Internet as an advertising medium or sales and distribution channel, and will not have devoted a significant portion of their advertising expenditures or other available funds to Web-based advertising or website development and may not find the Internet to be effective for promoting their products and services relative to traditional print and broadcast media.





Critical issues concerning the commercial use of the Internet in Greater China and elsewhere in Asia, including:





·
security;


·
reliability;


·
cost;


·
ease of deployment;


·
administration; and


·
quality of service





may affect the adoption of the Internet to solve business needs.  For example, the cost of access, penetration rate or availability of access to technology, hardware and software may prevent potential users in Asia from using the Internet.  Also, the use of credit cards in sales transactions is not common in parts of Asia.  Until the use of credit cards, or another viable alternative means of electronic payment, becomes more prevalent, the development of electronic commerce through our portal network will be seriously impeded. In addition, even if suitable payment methods are widely adopted in Asia, consumers will have to be confident that adequate security measures are taken to protect electronic sale transactions conducted over the Internet and prevent fraud.





Our entry into the Chinese Internet market depends on the establishment of an adequate telecommunications infrastructure in the PRC by the Chinese government





Unlike Hong Kong and Taiwan, where the telecommunications infrastructure is comparable to U.S. standards where private companies compete as ISPs, the telecommunications infrastructure in PRC is not as well developed.  In addition, access to the Internet in PRC is accomplished primarily by means of the government’s backbone of separate national interconnecting networks that connect with the international gateway to the Internet.  This gateway is owned and operated by the Chinese government, and is the only means of connection to the international Internet network.  Although private sector ISPs exist in PRC, almost all access to the Internet is accomplished through ChinaNet, PRC’s primary commercial network, which is owned and operated by the Chinese government.  We will rely on this backbone enterprise and telecom companies to provide data communications capacity primarily through local telecommunications lines.  As a result, we will continue to depend on the Chinese government to establish and maintain a reliable Internet infrastructure to reach a broader Internet user base in PRC.  We will have no means of accessing alternative networks and services in PRC, on a timely basis or at all, in the event of any disruption or failure.  The Internet infrastructure in PRC may not support the demands associated with continued growth. If the necessary infrastructure standards or protocols or complementary products, services or facilities are not developed by the Chinese government, our business could be materially and adversely affected.





Political and economic conditions in Greater China are unpredictable and may disrupt our operations if these conditions become unfavorable to our business.





We expect to derive a substantial percentage of our revenues from the Greater China market.  Changes in political or economic conditions in the region are difficult to predict and could adversely affect our operations or cause the Greater China market to become less attractive to advertisers, which could reduce our revenues.  We intend to maintain a strong local identity and presence in each of the regions in the Greater China market, although we may not be able to maintain effectively this local identity if political conditions were to change.





In addition, economic reforms in the region could affect our business in ways that are difficult to predict. Since the late 1970s, the Chinese government has been reforming the Chinese economic system to emphasize enterprise autonomy and the utilization of market mechanisms. Although we believe that these reform measures have had a positive effect on the economic development in PRC, they may not be effective or benefit our business.


17


There are economic risks associated with doing business in Greater China.





PRC.The Chinese government has been reforming its economic system since the late 1970s. The economy of PRC has historically been a planned economy, subject to governmental plans and quotas and has, in certain aspects, been transitioning to a more market-oriented economy. Although we believe the economic reform and the macroeconomic measures adopted by the Chinese government have had a positive effect on the economic reform and the macroeconomic measures adopted by the Chinese government have had a positive effect on the economic development of PRC, we cannot predict the future direction of these economic reforms or the effects these measures may have on our business, financial position or results of operations. In addition, the Chinese economy differs from the economies of most countries belonging to the Organization for Economic Cooperation and Development, or OECD.





These differences include:





PRC

OECDEconomic structure:

Planned economy, but in a slow process of transition to a market economy

Market economyLevel of government involvement in the economy:

Very high

Low to moderateLevel of economic development:

Developing country

Developed countriesMethods of allocation resources:

Government controlled, but in the slow process of transition to a market economy

Market driven





As a result of these differences, our business may not develop in the same way or at the same rate as might be expected if the Chinese economy were similar to those of the OECD member countries. Changes in the PRC’s political, economic and social conditions, adjustments in policies of the Chinese government or changes in the Chinese’s laws and regulations may adversely affect our results of operations and financial condition. The Chinese economy has experienced significant growth in the past decade, but this growth has been uneven across geographic and economic sectors and has recently been slowing. Such growth may not continue and any slow-down may have a negative effect on our business. The international financial markets in which the securities of the Chinese government, agencies and private entities are traded have experienced significant price fluctuations upon speculation that the Chinese government may devalue the Renminbi which could increase our costs relative to our Chinese revenues.





Hong Kong.As part of our expansion plan, a small part of our business will be generated from Hong Kong. Hong Kong is a Special Administrative Region of the PRC (“SAR”) with its own government and legislature. Hong Kong enjoys a high degree of autonomy from PRC under the principle of one country, two systems, however, such autonomy may not continue. The Hong Kong dollar has remained relatively constant due to the U.S. dollar peg and currency board system that has been in effect in Hong Kong since 1983. However, in early 1999, the Hong Kong dollar was subject to currency speculation and the SAR government substantially supported the market for the Hong Kong dollar, both directly and indirectly through the large-scale purchase of securities listed on the Hong Kong Stock Exchange. The historical currency peg of the Hong Kong dollar to the U.S. dollar may not be maintained, and accordingly may adversely affect our business.





Taiwan.A small part of our future revenues may be derived from the Taiwan market. Taiwan has a unique international political status. The Chinese government asserts sovereignty over Taiwan and does not recognize the legitimacy of the Taiwan government. Although significant economic and cultural relations have been established in recent years between Taiwan and PRC, PRC has refused to renounce the possibility that it may at some point use force to gain control over Taiwan. Relations between Taiwan and PRC have been strained since mid-1999 as a result of then-President Lee Teng-Hui’s assertion that relations between the two sides should be conducted on a special state-to-state basis. During the Macau handover ceremony in 1999, President Jiang Zemin reiterated PRC position towards Taiwan, stating that he was confident that Taiwan would soon be reunified with PRC in order to complete PRC’s plans for national reunification. The election of pro-independence candidate Chen Shui-Bian as the new President of Taiwan in early 2000, and Taiwan’s recent request to purchase strategic arms and defense technology from the United States have created additional uncertainty to the already tenuous relationship between PRC and Taiwan. Strained relations between Taiwan and PRC could adversely affect our business, results of operations or financial condition. Between late 1997 and early 1999, the NT dollar, the currency of Taiwan, experienced considerable volatility and depreciation as a result of the economic downturn in Asia. Continued volatility and depreciation of the NT dollar could adversely affect our business, results of operations and financial condition. Taiwan has recently experienced a recession primarily due to a reduction in exports due to weakened demand for imported goods in many Asian countries and a continued recession in Taiwan may materially affect our business.


18


The PRC’s regulation of content distributed on the Internet may adversely affect our businesses.





PRC has enacted regulations governing Internet access and the distribution of news and other information. The Ministry of Information Industry (the “MII”) has published implementing regulations that subject online information providers to potential liability for content included on their portals and the actions of subscribers and others using their systems, including liability for violation of Chinese laws prohibiting the distribution of content deemed to be socially destabilizing. Because many Chinese laws, regulations and legal requirements with regard to the Internet are relatively new and untested, their interpretation and enforcement of what is deemed to be socially destabilizing by Chinese authorities may involve significant uncertainty. Under the PRC’s regulations on telecommunications and Internet information services, Internet information service providers are prohibited from producing, duplicating, releasing or distributing any information which falls within one or more of nine stipulated categories of “undesirable content”. These categories cover any information which:





·
contravenes the basic principles enshrined in the PRC Constitution;


·
endangers the security or unity of the State;


·
undermines the State’s religious policies;


·
undermines public order or social stability; or


·
contains obscene, pornographic, violent or other illegal content or information otherwise prohibited by law.





Internet information service providers found to be disseminating information that falls under any of these categories must cease immediately, keep a record of the relevant information, and report to the appropriate government authority.





In addition, the Chinese legal system is a civil law system based on written statutes. Unlike common law systems, it is a system in which decided legal cases have little precedential value. As a result, it is difficult to determine the type of content that may result in liability. We cannot predict the effect of further developments in the Chinese legal system, particularly with regard to the Internet and the dissemination of news content, including the creation of new laws, changes to existing laws or the interpretation or enforcement thereof, or the pre-emption of local regulations by national laws.





Periodically, the Ministry of Public Security has stopped the distribution of information over the Internet which it believes to be socially destabilizing. The Ministry of Public Security has the authority to cause any local ISP to block any website maintained outside of PRC at our sole discretion. Websites that are blocked in PRC include many major news-related websites such as www.cnn.com, www.latimes.com, www.nytimes.com and www.appledaily.com.hk.The Chinese government has also expressed its intention to closely control possible new areas of business presented by the Internet, such as Internet telephony.





Violations or perceived violations of Chinese laws arising from information displayed, retrieved from or linked to our portals could result in significant penalties, including a temporary or complete cessation of our business in PRC. Chinese government agencies have recently announced restrictions on the transmission of state secrets through the Internet. State secrets have been broadly interpreted by Chinese governmental authorities in the past. We may be liable under these new pronouncements for content and materials posted or transmitted by users on our message boards, virtual communities, chat rooms or e-mails. If the Chinese government were to take any action to limit or eliminate the distribution of information through our portal network or to limit or regulate any current or future applications available to users on our portal network, this action could have a material adverse effect on our business, financial condition and results of operations.


19


We may be adversely affected by Chinese government regulation of Internet companies.





The Chinese government heavily regulates the Internet sector including the legality of foreign investment in the Chinese Internet sector, the existence and enforcement of content restrictions on the Internet and the licensing and permit requirements for companies in the Internet industry. Because these laws, regulations and legal requirements with regard to the Internet are relatively new, their interpretation and enforcement may involve significant uncertainty. In addition, the Chinese legal system is a civil law system in which decided legal cases have limited binding force as legal precedents. As a result, in many cases it is difficult to determine what actions or omissions may result in liability.





Issues, risks and uncertainties relating to the PRC government regulation of the Chinese Internet sector include the following:





·
The problems that foreign telecom service providers have faced in accessing China's market should improve as foreign companies will be permitted to establish joint venture operations in domestic or international data services without quantitative restrictions in Beijing, Guangzhou, and Shanghai—though the foreign investment share may not exceed 25 percent. Foreign companies will be able to invest up to 49 percent. Although, PRC was officially admitted to the World Trade Organization (the “WTO”), it is still not clear how this agreement may be changed in future.


·
The numerous and often vague restrictions on acceptable content in the PRC subject us to potential civil and criminal liability, temporary blockage of our website or complete cessation of our website. For example, the State Secrecy Bureau, which is directly responsible for the protection of state secrets of all Chinese government and Chinese Communist Party organizations, is authorized to block any website it deems to be leaking state secrets or failing to meet the relevant regulations relating to the protection of state secrets in the distribution of online information.





The interpretation and application of existing Chinese laws and regulations, the stated positions of the MII and possible new laws or regulations have created substantial uncertainties regarding the legality of existing and future foreign investments in, and the businesses and activities of, Chinese Internet businesses, including our business.





If we do not comply with Chinese regulations relating to our scope of permitted business, Chinese regulators could cause us to discontinue our operations in the PRC.





The Chinese government regulates access to the Internet by imposing strict licensing requirements and requiring ISPs in PRC to use the international inbound and outbound Internet backbones. The Chinese government may require that we obtain a license for Internet access in the future based on new legislation or otherwise. We may not be able to obtain all necessary licenses required in the future, and any future changes in Chinese government policies may impose additional regulatory requirements on us or our service providers, intensify competition in PRC information industry or otherwise have a material adverse effect on our business, financial condition and results of operations.





We are uncertain as to whether the Chinese government will reclassify our business as a media or a retail company, due, among other things, to our acceptance of Internet advertising and electronic commerce related services fees as sources of revenue. Any reclassification could subject us to penalties or fines or significant restrictions on our business. We are also uncertain whether the Chinese government will reclassify our business as a telecommunications business, potentially resulting in significant restrictions on our business.





If we do not comply with Chinese government regulations relating to foreign investment prohibitions, the Chinese government could cause us to discontinue our operations in China.





Chinese government policy prohibits foreign investment in the telecommunications services industry, which it has defined to include Internet-related businesses. We may not be in compliance with current Chinese government policies and the Chinese government may not view our intended business in the PRC as in compliance with these policies or any policies that may be made in the future. If we are not viewed as complying with these policies or any regulations that may be created relating to foreign ownership of Internet- related businesses, the Chinese government could block us from starting our development plan in PRC or take other actions that could harm our business.


20


Even if we are in compliance with Chinese governmental regulations relating to licensing and foreign investment prohibitions, the Chinese government may prevent us from distributing, and we may be subject to liability for, content that it believes is inappropriate.





The PRC has enacted regulations governing Internet access and the distribution of news and other information. In the past, the Chinese government has stopped the distribution of information over the Internet that it believes to violate Chinese law, including content that it believes is obscene, incites violence, endangers national security, is contrary to the national interest or is defamatory. In addition, we may not publish certain news items, such as news relating to national security, without permission from the Chinese government. Furthermore, the Ministry of Public Security has the authority to cause any local Internet service provider to block any website maintained outside PRC at our sole discretion. Even if we comply with Chinese governmental regulations relating to licensing and foreign investment prohibitions, if the Chinese government were to take any action to limit or prohibit the distribution of information through our network or to limit or regulate any current or future content or services available to users on our network, our business would be harmed.





We are also subject to potential liability for content on our websites that is deemed inappropriate and for any unlawful actions of our subscribers and other users of our systems under regulations promulgated by the MII. Furthermore, are required to delete content that clearly violates the laws of PRC and report content that we suspect may violate Chinese law. It is difficult to determine the type of content that may result in liability for us, and if we are wrong, we may be prevented from operating our websites.





If we do not comply with Chinese government regulations related to organizing public business and investment seminars and conferences, the Chinese government could cause us to discontinue our seminar services in China.





We typically work with local event organizers in China to help us establish seminars and conferences who we depend on to obtain proper permits in China for these events. However, if the Chinese government found that we are not compliant with their requirements to hold seminars and conferences in China, they may prohibit us from holding future events which would result in a significant restriction to our business and negatively impact our revenues.





Currency fluctuations and restrictions on currency exchange may adversely affect our business, including limiting our ability to convert Chinese Renminbi into foreign currencies and, if Renminbi were to decline in value, reducing our projected revenues in U.S. dollars.





We intend to generate revenues and incur expenses and liabilities in Chinese Renminbi, Taiwan dollars, Hong Kong dollars, Canadian dollars and U.S. dollars. As a result, we are subject to the effects of exchange rate fluctuations with respect to any of these currencies. For example, the value of the Renminbi depends to a large extent on PRC’s domestic and international economic and political developments, as well as supply and demand in the local market. Since July of 1995, the official exchange rate for the conversion of Renminbi to U.S. dollars has been free floating and the Renminbi has appreciated slightly against the U.S. dollar. So the Renminbi may not continue to remain stable against the U.S. dollar or any other foreign currency. Our results of operations and financial condition may be affected by changes in the value of Renminbi and other currencies in which our earnings and obligations are denominated. We have not entered into agreements or purchased instruments to hedge our exchange rate risks, although we may do so in the future.





Although Chinese governmental policies were introduced in 1996 to allow the convertibility of Renminbi into foreign currency for current account items, conversion of Renminbi into foreign exchange for capital items, such as foreign direct investment, loans or security, requires the approval of the State Administration of Foreign Exchange, or SAFE, which is under the authority of the People’s Bank of China. These approvals, however, do not guarantee the availability of foreign currency. We may not be able to obtain all required conversion approvals for our operations, and Chinese regulatory authorities may impose greater restrictions on the convertibility of the Renminbi in the future. Because a significant amount of our future revenues may be in the form of Renminbi, our inability to obtain the requisite approvals or any future restrictions on currency exchanges will limit our ability to utilize revenue generated in Renminbi to fund our business activities outside the PRC.


21


Terrorist activities and resulting military and other actions could adversely affect our business.





The terrorist acts in New York, Washington, D.C. and Pennsylvania on September 11, 2001 have created an uncertain economic environment and we are unable to predict the impact these events, or the responses thereto, will have on our business. The continued threat of terrorism within the United States and abroad and military action and heightened security measures in response to such threat may cause significant economic disruptions throughout the world. Our business, results of operations and financial condition could be materially and adversely affected to the extent such disruptions result in our inability to effectively market and sell our services and software.





RISKS RELATED TO OUR COMMON SHARES AND SHAREHOLDER RIGHTS





We do not intend to pay cash dividends, so any return on investment to an investor must come from appreciation.





To date, we have not paid  dividends on our Common Shares and do not intend to do so in the foreseeable future, as we expect any excess funds will be reinvested in implementing our business plan.  As a result, any return on investment in our Common Shares must come from increases in the fair market value and trading price of our common stock.





Our Common Shares became traded on the OTC Bulletin Board in October 2006 and it is considered a “penny stock” and a shareholder’s ability to buy and sell shares in the secondary market may be limited.





On September 25, 2006, we obtained the trading symbol of “CWNOF.OB” and began trading on the OTC Bulletin Board in October 2006.  The liquidity of our Common Shares will continue to be limited, not only in the number of shares that are bought and sold, but also through delays in the timing of transactions, and the lack of coverage by security analysts and the news media of our company.  In addition, any shares quoted on the OTC Bulletin Board will be subject to certain rules and regulations relating to “penny stock.”  A “penny stock” is generally defined as any equity security that has a price less than $5.00 per share and that is not quoted on the NASDAQ Stock Market or a national securities exchange.  Being a penny stock generally would mean that any broker who wanted to trade in our shares (other than with established customers and certain institutional investors) must comply with certain “sales practice requirements,” including delivery to the prospective purchaser of the penny stock a risk disclosure document describing the penny stock market and the risks associated therewith.  In addition, broker-dealers must take certain steps prior to selling a “penny stock,” which steps include:





·
obtaining financial and investment information from the investor;


·
obtaining a written suitability questionnaire and purchase agreement signed by the investor; and


·
providing the investor a written identification of the shares being offered and the quantity of the shares.





If these penny stock rules are not followed by the broker-dealer, the investor has no obligation to purchase the shares.  The application of these comprehensive rules could make it more difficult for broker-dealers to sell our Common Shares, and as a practical matter, these requirements may mean that brokers would be less likely to make recommendations on our shares to its general customers.





Shares eligible for future sale may have a substantial depressing effect on the stock price.





As of December 31, 2010, we have an aggregate of 10,950,000 shares of common stock outstanding, which includes 3,420,000 Common Shares that were freely transferable without restriction under the Securities Act (excluding any shares purchased in the offering by any person who is or thereby becomes an “affiliate” of us).  There were a total of 7,530,000 Common Shares which were “restricted securities”, as defined in Rule 144 under the Securities Act.


22


We are unable to predict the effect that sales of the shares offered hereby, or sales under Rule 144 may have on the then prevailing market price of the shares, but such sales may have a substantial depressing effect on such market price.





All of our officers, directors and 5% or more stockholders have agreed not to, directly or indirectly, issue, agree or offer publicly to sell, grant an option for the purchase or sale of, assign, transfer, pledge, hypothecate, distribute or otherwise encumber or dispose of, any shares of the common stock or other equity securities of ours or other securities convertible unto or exercisable for such shares of the common stock or other equity securities except pursuant to an effective registration statement under the Act, or pursuant to an exemption from registration under the Act, the availability of which is to be established to the satisfaction of the Company.





The absence of a prior public market for the shares may lead to high volatility in the stock price.





Prior to our approval for trading there has been no public market for our common stock and there can be no assurance that an active public trading market for our common stock will develop or be sustained. The absence of an active trading market would adversely affect the liquidity of the shares and existing shareholders might have difficulty in selling their shares. In addition, the stock market is subject to price and volume fluctuations affecting the market price for public companies generally, which fluctuations maybe unrelated to the operating results or other circumstances of a particular company. Such fluctuations may adversely affect the liquidity of the shares, as well as the price that holders may achieve for the securities upon any future sale.





Our shareholders may face difficulties in protecting their interests because we are incorporated under Cayman Islands law.





Our corporate affairs are governed by our memorandum and articles of association, by theCompany Law (1998 Revision) and the common law of the Cayman Islands.  The rights of shareholders to take action against our directors, actions by minority shareholders and the fiduciary responsibilities of our directors under Cayman Islands law are to a large extent governed by the common law of the Cayman Islands.





Under the common law of the Cayman Islands, the fiduciary relationship of a director is to the Company and a director, therefore, does not usually owe a fiduciary duty to individual shareholders.  As a result, it may be difficult for a shareholder to take action against the directors for breach of fiduciary duty.





The common law in the Cayman Islands is derived in part from comparatively limited judicial precedent in the Cayman Islands and from English common law, the decisions of whose courts are of persuasive authority but are not binding on a court in the Cayman Islands.  Cayman Islands law in this area may conflict with jurisdictions in the United States and/or other jurisdictions.  As a result, our public shareholders may face more difficulties in protecting their interests in the face of actions against the management, directors or our controlling shareholders than would shareholders of a corporation incorporated in a jurisdiction in the United States.





There is uncertainty as to our shareholders’ ability to enforce civil liabilities in the Cayman Islands, Canada and the Greater China.





We are a Cayman Islands company and have no assets located in the United States.  A substantial portion of our current operations is conducted in Canada and the Greater China.  In addition, all of our directors and officers are nationals and/or residents of countries other than the United States.  All or a substantial portion of the assets of these persons are located outside the United States.  As a result, it may be difficult to effect service of process within the United States upon these persons.  In addition, there is uncertainty as to whether the courts of the Cayman Islands, Canada, Hong Kong, Taiwan and, PRC and other jurisdictions would recognize or enforce judgments of United States courts obtained against us or such persons predicated upon the civil liability provisions of the securities laws of the United States or any state thereof, or be competent to hear original actions brought in the Cayman Islands, Canada, Hong Kong, Taiwan, PRC or other jurisdictions against us or such persons predicated upon the securities laws of the United States or any of our state.


23





ITEM 4.INFORMATION ON THE COMPANY








A.History and Development of the Company





CWN was incorporated on January 12, 2000 under theCompany Law (1998 revision) of the Cayman Islands.  We are principally based in the Cayman Islands and our operations are primarily conducted in the North America and Asia.  The address of our registered office is that of our agent, Appleby, being: Clifton House, 75 Fort Street, P.O. Box 190, Grand Cayman, Cayman Islands KY1-1104, telephone is (345) 949-4900.  Our principal executive office is located at Suite 368 – 1199 West Pender Street, Vancouver, British Columbia, Canada V6E 2R1, telephone is (604) 488-8878.





On January 15, 2000, we completed the acquisition of NAI, a company incorporated under the Company Act (British Columbia), from Ms. Tim Yee Lau, a related party to our President and Chief Executive Officer, Mr. Joe Tai, for a purchase price of 112,500 of our Common Shares valued at $5,625.  NAI has an office located at Suite 368 – 1199 West Pender Street, Vancouver, British Columbia, Canada V6E 2R1.  NAI is the Company’s main operation base delivering its business products and services.  As of December 31, 2010, there were twelve employees in Vancouver, Canada.





In October 2000, we purchased 100,000 common shares of Technology City Holdings Limited (“TCHL”), a company incorporated and based in Hong Kong, representing 4.167% of the then issued and outstanding common shares of TCHL, for $100,000.  TCHL is a multi-media and Internet-based financial information provider focusing on listed securities in Hong Kong.  The purpose of the investment was to establish a business relationship with TCHL to provide us with market and content information for our businesses.





On November 2, 2000, we completed a private placement and issued 2,000,000 of our Common Shares at a price of $0.40 per share for total gross proceeds of $800,000, which were used for general working capital purposes.





On May 31, 2004, we issued a 5% Unsecured Convertible Debenture for a term of three years for total gross proceeds of $150,000.





On October 29, 2004, we issued 200,000 of our Common Shares to acquire all of the assets of TCHL, which included HK$540,000 in cash and equipment, from Marrick Investments Limited (“Marrick”).  Marrick nominated its sister company, Datacom Venture Limited (“Datacom”), to be the record owner of the shares.  Datacom is one of the majority shareholders of the Company.  See “Item 7 – Major Shareholders and Related Party Transactions”.





In November 2004, we commenced operations in Hong Kong, China through our subsidiary, CWNHK, at an office located at Room 1101, St. George’s Building, 2 Ice House Street, Central, Hong Kong.  CWNHK provides a regional operation base for the Company’s penetration and expansion plans in the Asian markets.





In 2005, we terminated our lease of the Business Center Space in Toronto, which was used by our employees in Vancouver when they travelled to Toronto.  Subsequent to the termination of the lease, we rented a P.O. Box at the Toronto Board of Trade at P.O. Box 60, 1 First Canadian Place, Toronto, Ontario, Canada M5X 1C1 where mails were being forwarded to our Vancouver office.  In 2008, we cancelled our subscription to the P.O. Box.





On September 25, 2006, we obtained the trading symbol of “CWNOF.OB” and our Common Shares have been approved for trading on the OTC Bulletin Board since October 2006.





On January 18, 2007, the 5% Unsecured Convertible Debenture we issued on May 31, 2004 was converted into 250,000 Common Shares of the Company, at a fair value of $0.60 per share.





On March 1, 2007, we issued a 6% Unsecured Convertible Note for a term of three years for total gross proceeds of $250,000.





On October 26, 2007, we completed a non-brokered private placement and issued 2,250,000 of our Common Shares at a price of $1.08 per share for total net proceeds of $2,070,000 for the purpose of expanding our businesses into China.


24


On February 1, 2008, CWNHK and Shanghai Compass Venture Capital Investment Company Limited (“Shanghai Compass”) signed an Agreement to Establish CWN China Co., Ltd., a Chinese-Foreign Joint Venture Limited Liability Company.  In April 2008, the two parties incorporated CWN China.  CWNHK has a 70% controlling interest in CWN China.  CWN China has an office located at #1003, Eton Place Tower B, 555 Pudong Ave., Shanghai, PRC 200120.  CWN China provides the Company with the capabilities and resources to penetrate and expand particularly in the Greater China markets.  As of December 31, 2010, there were eleven employees in Shanghai, China, with duties ranging from translations, web design and technical support, to sales, business development and marketing.  CWN China also heads the Company’s efforts in hosting various events in the Greater China.





In August 2009, the Company incorporated CWN Capital Inc. (“CWN Capital”) under the BVI Business Companies Act, with a registered address at Morgan & Morgan Building, Pasea Estate, Road Town, Tortola, British Virgin Islands, focusing on capital markets businesses.  CWN Capital provides a vehicle for expanding the scope of our businesses into the capital markets.  On October 1, 2010, CWN Capital completed a non-brokered private placement and issued 25,000 of its common shares at a subscription price of $0.01 per share to Silver Lake Investment Partners, Ltd., resulted in CWN diluted down to a 50% ownership in CWN Capital.  On December 18, 2010, CWN Capital completed another non-brokered private placement and issued 55,000 of its common shares at a subscription price of $1.00 per share to Goldpac Investments Partners Ltd., resulted in CWN a diluted down to 23.8% ownership in CWN Capital. As a result the Company deconsolidated CWN Capital on December 18, 2010 and recorded its interest in CWN Capital as an equity interest.





On September 8, 2009, CWN China funded and incorporated Weihai as a local entity for the purpose of carrying out certain business operations in the Greater China.  Weihai has the same address as CWN China.  Through CWN China, the Company has a 70% controlling interest in Weihai.





On February 24, 2010, the 6% Unsecured Convertible Note we issued on March 1, 2007 was converted into 250,000 Common Shares of the Company, at a contract price of $1.00 per share.





Subsequent to the year end, on February 1, 2011, the Company issued incentive stocks options with the right to purchase up to 1,090,000 Common Shares to its directors, officers, and employees.  All of these options have an exercise price of $0.60 per share and a vesting period of 1 to 5 years, and a term of 5 years expiring on February 1, 2016.





Subsequent to the year end, in March 2011, the Company completed substantially all of the regulatory procedures and processes with Shanghai Compass, the other shareholder of CWN China and invested further 5,000,000 Renminbi to CWN China which result of the Company’s financial interest increased from 70% to 85%.





During Fiscal 2010, the Company made purchases of property and equipment in the amounts of $1,786 primarily relating to the purchase of equipment for general and administrative purposes.  There are currently no major capital projects or divestitures in progress.





B.Business Overview





During fiscal 2010, the Company has restructured its business model and focused its resources on the development as a financial content and information provider targeting potential investors in the Greater China; in addition to building its network with various content and information distribution channels in the region.  Through the various products and services we offer, we have accumulated substantial and valuable corporate information and financial data in our database, including companies publicly listed in North America, market news, investors’ tools and commentaries etc.  We translate such information and data into Chinese and collaborate with local Greater China distribution channels to distribute and disseminate the contents and information.  In March 2010, the Company has signed a Distributorship Agreement with MegaHub Limited, a fast growing player in financial data distribution in the Greater China providing the Company with exposure to various financial institutions and over 100 million active investors in the region.  The Company is also actively engaging other joint venture opportunities as part of its efforts in this new endeavor.


25


The Company has three other principal businesses: (1) the financial web portal (“Portal”) business, conducted under the ChineseWorldNet.com brand via the “www.chineseworldnet.com” website; (2) the investor relations and public relations (“IR/PR”) business, conducted under the NAI500 brand via a number of media channels including the “www.nai500.com” and “en.nai500.com” websites, as well as certain other promotional services; and (3) the North America and Greater China cross-border business partnering conferences (“Conference”) business, conducted via the brand of Global Chinese Financial Forum and its ”www.gcff.ca” website.  Our IR/PR business was the result of the acquisition of NAI for a purchase price of 112,500 of our Common Shares valued at $5,625.  Our Conference business was segregated from our IR/PR business as it expanded in popularity and size.





FINANCIAL WEB PORTAL (“PORTAL”) BUSINESS





Overview





Our www.chineseworldnet.com website is a web-based portal that provides up-to-date financial content and information and financial management tools in the Chinese language targeting the Chinese investor community in North America.  Our Portal business provides financial news and covers corporate information of more than 98% of the listed stocks on major North American exchange markets, including New York Stock Exchange (“NYSE”), American Stock Exchange (“AMEX”), NASDAQ Stock Market (“NASDAQ”), OTC Bulletin Board (“OTCBB”), Toronto Stock Exchange (“TSX’), and Toronto Venture Exchange (“TSX-V”).  Our Portal business also provides certain coverage of the financial markets in China, Hong Kong and Taiwan, which we intend to expand further in the near future through a combination of internal efforts as well as partnerships.  All information and services we provided through our www.chineseworldnet.com website are free of charge, except certain premium and personalized information and services such as premium articles and market commentary accessible only by “Premium Subscribers” who are required to register as a subscriber and pay a subscription fee.





Current Product / Service Offering





Currently, our Portal business provides an abundant of resources and investor’s tools on a variety of items including: Stocks, Forex, Options, Futures, ETF (exchange-traded funds), Financial Services and Financial Products.  The following contents and features are provided free of charge on our www.chineseworldnet.com website to all readers, other than the Premium Services described below for which we charge a subscription fee.





1. Company Profile





This section features a variety of interactive investment tools that enable users to conduct their own financial research of companies, including delayed stock quotes, summary company profiles, analysts’ buy/sell ratings, company news, insider trading information, intraday and historical stock charts, and financial statements summary.





2. Headlines and Market News





Throughout the day, we provide headlines and news stories in brief covering various corporate announcements.  We also provide continuous update of market news from 5 a.m. to 5 p.m. Pacific Time on each business day covering the latest movements of the major indices, the most active stocks, news from foreign markets, earnings news, mergers and acquisitions news, and other major market events.





3. Commentary





This section features commentary prepared by our in-house editorial team and external contributors who comment on topics such as money management, technical analysis, currency issues, industry analysis, macroeconomics, fundamental analysis, financial planning, mutual funds, initial public offerings, technology, and international investing.




4.  Premium Services





In addition to the provision of financial news and corporate information of public companies in North America and the Greater China region, our www.chineseworldnet.com website also offers to our Premium Subscribers, through partnerships and affiliations, personalized services such as online investment tools and applications such as portfolio tracking.  The following “Premium Services” are provided to Premium Subscribers, who currently pay a monthly subscription fee of $9.95 or an annual subscription fee of $59.95.


26


a. Personalized Financial Services “MyCWN”:





“MyCWN” is a platform on our www.chineseworldnet.com website that allows Premium Subscribers to create a personalized portal to customize and manage their own personal stock portfolios. They can also easily access and view news and information of companies in their particular portfolios.





b. CWN Research Reports





Premium Subscribers get access to weekly in-depth research reports prepared by our in-house editorial team on individual stocks, overall market trends, industry, and other topics of interest.





Future Product / Service Offering





Readers are not required to register as subscribers at this time although we may in the future require registration before allowing access to our contents and services.





We are planning to upgrade our www.chineseworldnet.com website providing a new layout that focuses on user friendliness.  We are also planning to strengthen our platform by covering additional content and investors’ tools in each of our featured financial products.  We are not planning for any additional features for our Premium Services in 2011 but we may do so in the future, such as additional investment tools and premium research reports, on our web portal.





Revenue Model of the Portal Business





1. Premium Subscription Fees





All information and services the Company provided through its www.chineseworldnet.com website are free of charge, except certain premium and personalized information and services such as premium articles and market commentary accessible only by Premium Subscribers who are required to register as a subscriber and pay a subscription fee.  Currently, Premium Subscribers pay a monthly subscription fee of $9.95 or an annual subscription fee of $59.95.





2. Banner Advertising





The Company derives revenue from selling banner advertising space on thewww.chineseworldnet.com website.  The fee for a six-month banner ad ranges from $750 to $1,200.  In addition, the Company also charges a monthly fee of up to $1,500 based on the estimated number of impressions on the website.The amount of fees charged depends on the size and the location of the banner ad on the website.  There is no price adjustment to the monthly fees if the actual clicks differ from the estimated clicks.





3. Online Marketing and Intermediary Service





It is the Company’s intention that its subscribers be able to access information on various financial products and service providers such as online brokerage, mutual funds, insurance and bonds by logging onto its partnering companies’ independent Internet-based trading platforms through its web portal.  However, the Company is not involved in executing any types of transactions for the account of others.  All trading transactions are performed directly between the subscribers and partnering companies.  In order to do so, the subscribers have to independently register with our partner companies.





Our Portal business derives no revenue from our subscribers through this service offering. We do not receive transaction-based compensation either from our subscribers or partner companies.  Instead, we charge our partner companies a flat marketing fee based on the number of subscribers opening new accounts through our efforts.


27


INVESTOR RELATIONS AND PUBLIC RELATIONS (“IR/PR”) BUSINESS





Overview





Our IR/PR business was the result of the acquisition of NAI.  NAI operates our IR/PR business focusing on providing IR/PR services for fast growing public companies trading on the North American exchange markets to reach the Chinese investor community in North America through various media such as its www.nai500.com website, publications, and various web and online marketing services.  In May 2009, NAI rebranded its business model and launched “NAI 500” which provides the 500 fastest growing companies from 10 different sectors generated from NAI’s market intelligence and street-smart expertise accumulated through its 10 plus years of operations and experience.  NAI also added a road show business component in 2009, providing face-to-face meeting opportunities for public companies and institutional and retail investors.





Current Product / Service Offering





1. www.nai500.com and NAI 500





NAI operates the www.nai500.com website (formerly www.na-investor.com) which provides IR/PR services to fee-paying North American public company clients who are listed or quoted on the small or micro public markets in North America, such as the TSX, TSX-V, NASDAQ and OTCBB.  The website offers stock quotes, company reviews, newsletters and guide to investing of these client companies in the Chinese language to readers in the Chinese investor community in North America.  Currently, there are over 64,000 registered members on the www.nai500.com website which attracts over 1,800,000 readers each month.





In May 2009, NAI launched an English version of the www.nai500.com website, the en.nai500.com website, in order to meet the needs of a broader reader base including those who prefer the English language.





Also in May 2009, NAI rebranded its business model and launched “NAI 500” which provides the 500 fastest growing companies from 10 different sectors including: Mining and Resources; Oil and Gas; Clean Tech; Life Science; Industrial Products; Software and IT Services; Technology; Consumer Products and Services; China-theme Stocks; and Special Industries.  This is generated from NAI’s market intelligence and street-smart expertise accumulated through its 10 plus years of operations and experience, and is being updated monthly.





In October 2010, NAI launched the “NAI 500 iPhone App”, which is a mobile phone application designed for iPhone users to access our NAI 500 contents and information from their iPhone including delayed stock quotes and updates, daily top stories, press releases etc., available in both Chinese and English, downloadable from the Internet for free.





Unlike www.chineseworldnet.com, www.nai500.com is not a financial portal for registered members or readers but an Internet-based medium for the dissemination of information from fee-paying client companies to increase exposure in the Chinese investor community.  NAI charges its client companies an annual fee of $3,500 to $4,000 for these services.  There is no fee being charged to individual registered members or readers of the www.nai500.com website.





2. Road Show Business





NAI has recently started the Road Show Business where it creates and provides face-to-face meeting opportunities for its North American public company clients and their representatives to meet with potential institutional and high net worth individual investors in Greater China.  NAI arranges everything from top to bottom and brings its client companies together in Greater China and sets up an environment (e.g. private meetings, presentations, luncheons, dinners etc.) for them to meet with potential investors, and charged the participating companies for fees and expenses accordingly, ranges from $20,000 to $25,000.  We operate this through collaboration with various investment groups in China in addition to partnership with a top local brokerage firm that has a client base and network of over 3 million potential investors.  We expect to continue to expand our Road Show Business in 2011 by continuing the same format, in addition to inviting Chinese listed companies over to North America to meet with potential investors locally.


28


3. Design, Printing and Translation Services





NAI provides various IR/PR services to its client companies such as the design and printing of promotional materials and financial reports.  NAI also provides translation service to its client companies translating promotional materials and financial reports from English into Chinese.  NAI charges $100 to $150 per page for its translation service.




4. Chinese Webpage Design, Hosting and Maintenance





NAI offers assistance to client companies to translate their English websites into Chinese.  These Chinese web pages are linked to the featured company section on our www.nai500.com website.  There are various demands of our clients’ needs and customized services that we provide to our client companies.  NAI charges a one-time set-up fee plus a 12-month maintenance fee for our services ranging from $2,000 to $5,000 based on the scope of services as agreed with each client.





5. Online Marketing Service





This service aims to increase the publicity and website traffic of our client companies’ websites.  Our range of online marketing service includes the creation of search criteria for Internet-based search engines to enable quick access to client companies’ websites, e-mail blasts to NAI members and other services such as online promotional events to help increasing Internet traffic to client companies’ websites.  In particular, our “Mining Search Engine” was launched in November 2006 focusing on the promotion of client companies from the mining sector. This service aims to provide and promote the mining companies’ information and news to potential investors and at the same time increasing such companies’ publicity in the community.  NAI currently charges its e-mail blast service at $800 to $1,500 per blast which reaches over 64,000 of our registered members.





6. Publication Service





We started to publish specialty investment publications in 2002. Our first investment handbook was focused on the mining sector, selling for CDN$13.80 Canadian dollars each.  In 2005, we published the Mining Investment Guide, Vol. 3 and the Chinese Theme Stocks Investment Guide, Vol. 1, both selling for CDN$13.80 Canadian dollars each.  In 2006, we published the Mining Investment Guide, Vol. 4, selling at an increased price of CDN$29.50 Canadian dollars each due to content increase.  In 2007, we published the Mining Investment Guide, Vol. 5 and the Chinese Theme Stocks Investment Guide, Vol. 2 – A New Chapter of Success, both selling for $29.95 each.  In 2008, we published the Resource Investment Guide, Vol. 6, a renamed iteration of the Mining Investment Guide, selling for $29.95 each.  In 2009, we published the Resource Investment Guide, Vol. 7 and the China Theme Stocks Investment Guide 2009/2010, both selling for $29.95 each.  In 2010, we published the Resource Investment Guide 2010/2011, Vol. 8, selling for $29.95 each.  We charge client companies ranged at $500 to $2,000 each to be profiled in our publications.  Our publications are sold through our offices, online and in selected bookstores.





Future Product / Service Offering





Currently, our IR/PR services are focused on introducing and promoting North American client companies to the Chinese investor community in North America and recently also in Greater China.  NAI plans to adopt the same model and expand it to other market segments, such as promoting client companies from Asia to the Chinese investor community of North America.  As we have already established a solid client base in the mining and resources sector, we plan to further diversify into other sectors such as clean technology, information technology, life science, and industrials in 2011.  The launch of NAI 500 in 2009 and the NAI 500 iPhone App in 2010 were successful milestones.  We are planning for further development by adding new functionalities to our website including portfolio tracker and online video posting.  We are also planning to offer specialized and in-depth IR/PR services to clients who require more day-to-day assistance on their Investor Relations’ needs, such as filling an Account Manager position who has full understanding about our Company’s businesses and to answer our Chinese investors’ inquiries.  We also plan to continue our focus in expanding our Road Show Business in 2011.


29


Revenue Model of the IR/PR Business





The IR/PR business is marketed via the brand name of NAI 500.  Sources of revenue for the IR/PR business are from each of the current product / service offering mentioned above.





CONFERENCE (“CONFERENCE”) BUSINESS





Overview





Our conference business was originally an integrated aspect of products and services provided by NAI under our IR/PR business model.  Because of the success of our conference series in 2006, our conference business has grown to become an individual component of our business model.





During 2000 to 2002, NAI organized and marketed two to four Chinese investment seminars each year in Vancouver, Toronto, and/or San Francisco, where participating private and public companies paid NAI a sponsorship fee to present their companies to individual Chinese investors who attended the seminars free of charge.   While NAI continued the focus of its conference business in the North American cities, in 2003, it started to organize its conferences in larger scale in the name of Chinese Financial Forum.  In 2004, the name was changed once again to Global Chinese Financial Forum (“GCFF”) to reflect the international nature of the event.  In the same year, we filed for trademark protection for the name Global Chinese Financial Forum in Canada and launched the investment seminar and conference website www.gcff.ca.  In 2006, GCFF was segregated from the IR/PR business and became a separate business model on its own.  In 2007, GCFF successfully launched its first China-focus conference in Shanghai, China and provided a networking environment for local private and public companies and services providers in China.  Since 2008, GCFF has increased its focus and efforts on providing cross-border partnership opportunities in the capital markets in North America and Greater China.  GCFF aims to be the largest series of bilingual (Chinese/English) financial and business related functions connecting participants and client companies including individual potential investors, public and private companies, service providers, and various industry associations.  Revenue generated through GCFF is recorded under the revenue model of NAI 500.





Current Product / Service Offering





The format of GCFF is conducted through exhibition booths and presentation sessions, held in various cities in North America and China. While client companies can pay a fee to rent an exhibition booth area to showcase and promote their companies, they can also conduct corporate presentations in the industry related topics determined beforehand.  Since 2008, GCFF has established itself to serve for two distinctive purposes: (1) the retail investment services to bring together the Chinese-speaking retail investors and the players in the financial markets at its Retail Events, and (2) the cross-border (North America and Greater China) capital market and strategic investment services at its Institutional Events.  With respect to its Institutional Events, GCFF offers its client companies the Privately Arranged Meetings service, which provides them and the participants the opportunities to meet together through the arrangement of GCFF based on criteria set upon by all parties prior to the events.    The Privately Arranged Meetings service has become a major pillar of the GCFF business, which took major spotlights in our previous conferences.





General sponsorship opportunities are available for all conferences for a fee. There are several categories of sponsorship for interested parties to participate and sponsor our conferences. These categories include Platinum, Gold, Silver, Corporate and Media, in addition to the Global Corporate Sponsorship program.  Conference specific sponsorship opportunities are also available for a fee with a focus on specific functions and themes of the events.





Future Product / Service Offering





We plan to continue improving the format of the GCFF conferences, to have a major focus on institutional clients, in addition to further establish our brand name in both North America and Asia.  GCFF will continue its conferences efforts in various cities in North America and China servicing clientele from both North America and China, in addition to focusing on providing cross-border partnership opportunities between North American and Greater Chinese companies.  Conferences will be held in Vancouver, Toronto, Shenzhen and Shanghai in 2011.  GCFF will continue to offer Institutional Events and its Privately Arranged Meetings service focused on capital market and strategic investment services among public companies, capital market institutions, services providers and institutional investors in 2011, focusing on the natural resources, energy and life sciences industries.  GCFF will also expand its Retail Events with plans for increased services and marketing campaigns for its conferences.


30


Revenue Model of the Conference Business





We charge $2,500 for a standard exhibition booth at GCFF retail level events.  With respect to the GCFF industrial, cross-border related events, corporate delegate package is charged $2,500 to $3000 and individual delegate package is charged $299.  The Company also earns revenue from sponsorship. Conference specific sponsorship fees range from $5,000 to $25,000.  More sponsorship packages will be implemented for industrial, cross-border related events in the future.  Currently, complimentary admission is offered for individual investors pre-registering for the conferences.  Drop-in attendees are required to pay an admission fee ranging from $15 to 25 depending on the conferences.  We might be turning our conferences into a fully paid model for all individual investors when the conferences have grown and reached a certain size and scale.





REVENUE BREAKDOWN





The breakdown of the revenue sources for the years ended December 31, 2010, 2009 and 2008 is as follows. A majority of our revenues is generated from our wholly-owned subsidiary NAI based in Vancouver in Canada, and partly is generated from CWN China based in Shanghai in China.





Year ended December 31,Revenue Breakdown

2010


2009


2008GCFF Conference Business

$
312,781


$
414,098


$
602,538Road Show Business


232,977



122,860



—Various IR/PR Service


207,725



115,938



100,147Chinese Webpage Design, Hosting and Maintenance


130,032



80,396



130,107Online Marketing Service


85,811



75,937



39,427Banner Advertising


42,322



18,788



28,570Publication Service


21,099



16,794



60,822CWN Membership and Online Service


4,866



7,377



9,473Translation Service (Company Review, Company Newsletter)


12,633



4,406



20,878Other Revenues


683,083



49,861



19,360Total

$
1,733,329


$
906,455


$
1,011,322





CORPORATE STRATEGY AND STRATEGIC BUSINESS PLAN





During fiscal 2010, the Company has restructured its business model and focused its resources on the development as a financial content and information provider targeting potential investors in the Greater China in addition to building its network with various content and information distribution channels in the region.  Through the various products and services we offer, we have accumulated substantial and valuable corporate information and financial data in our database, including companies publicly listed in North America, market news, investors’ tools and commentaries etc.  We translate such information and data into Chinese and collaborate with local Greater China distribution channels to distribute and disseminate the contents and information.  In March 2010, the Company has signed a Distributorship Agreement with MegaHub Limited, a fast growing player in financial data distribution in the Greater China providing the Company with exposure to various financial institutions and over 100 million active investors in the region.  The Company is also actively engaging other joint venture opportunities as part of its efforts in this new endeavor.


31


In addition, our goal is to become a global leader in communication and information gateways between investors and products and services providers worldwide.  We offer an Internet-based financial community by providing a diverse range of financial news and corporate information on public companies targeting the Chinese investors in North America and Asia.  Through our infrastructure and client and user base, we form partnerships and collaborations with various providers of financial products and services and market them to Chinese investors in North America and Asia. We believe we have already built a strong foundation of our Portal and IR/PR businesses in North America.  However, our IR/PR business may have limited potential in the Hong Kong and the Greater China markets as these markets are different from the North American markets and are more competitive.  Our Conference business, which we named Global Chinese Financial Forum or GCFF, has evolved into a stand-alone business since 2006 and conferences are being hosted in major cities in North America and Greater China. We provide a networking environment to companies and products and services providers and we connect them together by the various services we offer.  As we have already established our presence in the North American market, our next milestone is to penetrate deeper into the Greater China market and then gradually expand into other cities in Asia.  Together, our three principal businesses enable us to further expand our businesses and services to reach the users in Asia with a focus on the Greater China region.  We believe that one of the biggest competitive advantages of operating an Internet-based business is that we are able to leverage our existing infrastructure to reach a broad range of target customers without a significant capital requirement.  Based on this principle, we intend to maintain the operation of our businesses in our Vancouver office in Canada.  However, we may consider other means of expansion such as partnering with local companies or services providers, or establishing a direct presence in certain markets.





As part of our expansion into Asia, we have established partnerships with a few local Chinese companies. One of which is our joint venture with Shanghai Compass Venture Capital Investment Company Limited, which has resulted in the incorporation of CWN China in Shanghai, China.  CWN China serves for three main purposes: (1) It helps building the necessary channels to capture the financial information business locally.  (2) It offers assistance in the organization and coordination of regional marketing activities.  For instance, the Toronto Conference 2010 in October 2010 relied on the networks we gained through the joint venture by means of bringing in governmental agencies, public and private companies, industrial associations and other business professionals and experts in order to create the Greater China portion of the cross-border partnering services for its industrial level event.  In addition, the Shanghai Conference 2010 in December 2010 was largely through the coordination effort of the joint venture.  (3) It seeks other business opportunities including the development of investor relations/public relations business, the creation of a basis for potential acquisition opportunities, and for further the digital financial media business in the Greater China region.





INTERNET CONTENT PARTNERS





Through NAI, we currently have agreements in place with the following Internet content partners:





Company Name

Services ProvidedDaily FX

Daily FX provides foreign exchange data, news, and articles on our website.FMFOREX

FMFOREX provides foreign exchange data, news, and articles on our website.InterFax

InterFax is a news agency in China that provides business news and stories to various different publications and media worldwide.  We publish its contents to a section of our www.chineseworldnet.com website in return for RMB$8,000 per year.IRAsia

IRAsia provides financial news and articles of the stock market in Hong Kong.PR Newswire

PR Newswire provides news releases of companies in North America, China, Hong Kong, and Taiwan which we disseminate on our www.chineseworldnet.com website.Quote123.com

Quote123.com provides news and market commentaries in North America on our website.Tanrich Financial Group

Tanrich Financial Group provides us information on the future market and stock market in Hong Kong in exchange for our news and market commentaries on the North American stock markets.





Our agreements with PR Newswire, Tanrich Financial Group and FMFOREX are all service-to-service connections which do not incur any direct fees on us.  We provide a channel to PR Newswire for dissemination of press releases in return for PR Newswire’s content and trademark to be provided on our website.  Tanrich Financial Group provides us with the Hong Kong market sector news for our marketing purposes and in return we provide a link to access the Tanrich Financial Group website on our website.  FMFOREX provides foreign exchange data and news in exchange for complimentary ad space on our website.


32


TECHNOLOGY INFRASTRUCTURE





None of our application technologies are proprietary to us, other than the recently launched NAI 500 iPhone App.  The technologies used by us are sourced from different commercially available software programs. CWN’s application technologies, including its communication applications and content management applications, are under a collaborative authoring environment allowing different users such as our various in-house programmers to work together on creating and managing the contents of our websites.  All users have their own accounts and can belong to any number of sites.





We own two servers to serve our websites in North America, with one acting as a backup.If one of the servers malfunctions, all traffic will be re-directed to the other server.  The two servers synchronize with each other every 30 seconds.  We have also added a new server for handling the increased traffic from visitors in Asia.





INTELLECTUAL PROPERTY, GOVERNMENT APPROVALS AND REGULATIONS





Our application technologies are not protected by any patents or copyrights nor do we intend to seek any such protection. Without patent or copyright protection, we may not be able to prevent duplication or use of our technology by competitors.





There are currently no material effects of government regulations on our businesses.





OUR PRIMARY MARKETS





Chinese Internet Users





According to data published by Internet World Stats in June 2010, the number of Internet users in the Asia-Pacific region has continued to increase at an unprecedented rate and has reached nearly 114 million.  This already surpassed that of the whole of North America.  The following table represents the estimates provided by Internet World Stats in relation to the uses of Internet in China, Hong Kong and Taiwan in 2010:





Population


Internet Users


Penetration


Growth


Users in AsiaChina


1,330,141,295



420,000,000



31.6
%


1,766.7
%


50.9
%Hong Kong


7,089,705



4,878,713



68.8
%


113.7
%


0.6
%Taiwan


23,024,956



16,130,000



70.1
%


157.7
%


2.0
%





According to a report published by Statistics Canada on March 9, 2010, there are 396,000 of Chinese ethnicity in Vancouver, representing 18% of the city’s population.  It is expected to reach 809,000 or 23% of the city’s population in two decades.  We believe this may indicate a similar growing trend of Chinese immigrants in the major cities in North America.





Internet Advertising Market





Internet advertising revenues in the United States totaled $26 billion for the full year of 2010, up 15% from 2009, according to the Interactive Advertising Bureau (IAB).  The report showed that as of April 2011, there have been five consecutive quarters of growth in the industry.





According to the Interactive Advertising Bureau of Canada (IAB)’s 2009 Actual + 2010 Estimated Canadian Online Advertising Revenue Survey, Canadian online advertising revenues topped $1.82 billion Canadian dollars in 2009, up 14% from the budgeted expectations for 2009 of $1.75 billion Canadian dollars reported in 2008.  It was estimated to reach $2.1 billion Canadian dollars in 2010.





Based on these data, we believe that our services and offerings are well positioned in a market that is continuing to grow.


33


IR/PR Market





The IR/PR market in Greater China is not well-established yet.  However, this represents a potential for us to grow due to our existing infrastructure.  With an increasing number of listed companies in China and the already well-established financial systems and markets in Hong Kong and Taiwan, we believe the potential of the IR/PR business in the Greater China region is favorable.





Conference Market





Because our Conference business targets those Chinese investors, financial institutions and companies seeking to invest in North America and to establish business connections with North American servicing firms, we believe our market will grow substantially with the sustained trend of Chinese outward direct investments (“ODI”).  According to the Ministry of Commerce of the People’s Republic of China, Chinese net ODI from the period of 2006 to 2010 was $216.6 billion, exceeding government targets by 3.6 times.  Non-financial ODI was $47.56 billion in the first 11 months of 2010.





COMPETITION





The markets for businesses are extremely competitive and rapidly changing.  The number of competitors competing for our potential clients and users’ attention and spending has increased significantly since we commenced operations and we expect that competition will continue to intensify.  As we continue to broaden our range of product offerings, we expect increasing competition from established players as well as less well-known players in the coming years.  Many of these competitors have longer operating histories, better brand recognition, larger customer bases and databases, and significantly greater financial, technical and marketing resources.  In addition, certain companies, especially early-stage venture-backed start-ups may be willing to compete for market share at the expense of generating revenues.  Any of our present or future competitors may provide products and services that provide significant better performance, price, creativity or other advantages over those offered by us.  Our 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.  Our ability to compete successfully depends on many factors, including the quality of our content, the breadth, depth and ease of use of services, sales and marketing efforts, and performance of technology etc.





In terms of our Portal business, we currently compete, directly and indirectly, for paying subscribers and users with companies in the business of providing financial data and information services, including publishers and distributors of traditional media, Internet portals providing information on business, finance and investing, dedicated financial information websites, personal stock research software vendors, and stock brokerage companies and especially those with online trading capabilities.  We face competition from those that are data providers in addition to operating their own financial portals, such as SINA Corporation (NASDAQ: SINA), Quote123 (www.quote123.com), and Chineseinvestors.com Inc. (www.chinesefn.com).  Our Portal business also faces competition from pure data providers, such as QuoteMedia, Inc. (OTCBB: QMCI) and Interactive Data Corporation (NYSE: IDC).





The IR/PR market is well established and very competitive.  Our IR/PR business faces competition from across the continent, including Chinese Investment Club Inc. (www.nafinance.com) which targets Chinese investors, Agora Enterprises International Inc. (www.agoracom.com) which targets the mainstream market, the Equicom Group (www.equicomgroup.com) which is an IR services group based in Canada, and CCG Investor Relations Strategic Communications (www.ccgir.com) which is an IR services group based in the US.





Our Conference business faces competition from DealFlow Media, Inc. (www.dealflowmedia.com) and Zero2IPO Group (www.zero2ipo.com.cn) which focus on institutions, MoneyShow.com, LLC (www.moneyshow.com) which focuses on the financial sector, and Cambridge House International Inc. (www.cambridgehouse.ca) and Aspermont UK (minesandmoney.com) which focus on the mining sector.





Our new financial content and information business faces competition from Imeigu.com Corporation (www.imeigu.com).


34


C.Organizational Structure





ChineseWorldNet.Com Inc. (“CWN”) was incorporated under theCompany Law (1998 revision) of the Cayman Islands on January 12, 2000.  Our registered office is located at Appleby, Clifton House, 75 Fort Street, P.O. Box 190, Grand Cayman, Cayman Islands KY1-1104.  Our principal executive office is located at Suite 368 – 1199 West Pender Street, Vancouver, British Columbia, Canada V6E 2R1.





NAI Interactive Ltd. (“NAI”) was incorporated under the Company Act (British Columbia) on November 13, 1998.  We completed the acquisition of NAI on January 15, 2000 from Ms. Tim Yee Lau, the spouse of our President and Chief Executive Officer, Mr. Joe Tai, for a purchase price of 112,500 of our Common Shares valued at $5,625. NAI is 100% owned by CWN.  NAI has an office located at Suite 368 – 1199 West Pender Street, Vancouver, British Columbia, Canada V6E 2R1.





ChineseWorldNet.com (Hong Kong) Ltd. (“CWNHK”) was incorporated under the laws of Hong Kong on December 22, 1999.  CWNHK is 99% owned by CWN and 1% owned by Mr. Liu Chi Cheong, a director and a major shareholder of CWN.  Since June 2004, CWNHK’s office has been located at Room 1101, St. George’s Building, 2 Ice House Street, Central, Hong Kong.  CWNHK provides us witha local operation base for CWN’s penetration and expansion plans in the Asian market.





ChineseWorldNet.com (Shanghai) Ltd. (“CWN China”) was incorporated under the law of People’s Republic of China in April 2008.  CWN China is 70% owned by CWNHK and 30% owned by our joint venture partner Shanghai Compass Venture Capital Investment Company Limited (“Shanghai Compass”).  Subsequent to the year end, the Company completed substantially all of the regulatory procedures and processes and invested further 5,000,000 Renminbi to CWN China which result of the Company’s financial interest increased from 70% to 85%. CWN China has an office located at #1003, Eton Place Tower B, 555 Pudong Ave., Shanghai, PRC 200120.  CWN China provides the Company with the capabilities and resources to penetrate and expand particularly in the Greater China markets.   On September 8, 2009, CWN China funded and incorporated Weihai Consulting Investment Ltd. (“Weihai”) under the law of People’s Republic of China for the purpose of carrying out certain business operations in Greater China.  Weihai has the same address as CWN China.





The Company also has a wholly-owned subsidiary CWN Capital Inc. (“CWN Capital”), a company incorporated under the laws of British Virgin Islands in August 2009.  On December 18, 2010, the Company’s ownership interests were diluted to 23.8% upon CWN Capital issued 80,000 common shares to two companies controlled by two directors of the Company.





As of December 31, 2010, there were twelve employees in NAI and eleven employees in CWN China.





D.Property, Plants and Equipment





We do not own any real property.  We have a lease agreement for the Vancouver office with an address at Suite 368 – 1199 West Pender Street, Vancouver, British Columbia, Canada V6E 2R1, for a term of 5 years expiring on July 31, 2011.  We have a lease agreement for the Shanghai office with an address at #1003, Eton Place Tower B, 555 Pudong Ave., Shanghai, PRC 200120, for a term of 1 year expiring on May 31, 2011.  We also have a lease agreement for an automobile for a term of 4 years expiring on September 30, 2013.





As of December 31, 2010, we had leasehold improvements of $nil (2009 – $10,227 and 2008 – $17,764), computer equipment and computer software of $14,260 (2009 – $17,030 and 2008 – $18,533), office furniture of $10,217 (2009 – $12,617 and 2008 – $10,229), and vehicle of $26,044 (2009 – $33,138 and 2008 – $nil).


35


ITEM 4A.UNRESOLVED STAFF COMMENTS








Not applicable.





ITEM 5.OPERATING AND FINANCIAL REVIEW AND PROSPECTS








This discussion and analysis is of our operating results and our financial position for the fiscal years ended December 31, 2010, 2009 and 2008 should be read in conjunction with the consolidated financial statements and the related notes thereto provided at “Item 17 – Financial Statements”.





A. Results of Operations





The Company currently generates revenue from its Portal, IR/PR and Conference businesses.  The Company’s annual and quarterly operating results are primarily affected by the level of its sales and costs of operations over these three businesses.  Economic factors such as the general global economic and political environment, foreign exchange fluctuations, as well as market prices of similar products and services may also play an important role to affect the Company’s operating performance and the volatility of its share price.  To management’s knowledge, there are no known economic, political, and inflation that have materially affected, directly or indirectly the Company’s operations.





YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008





For the year ended December 31, 2010 (“Fiscal 2010”), we recorded a net gain of $296,604 with a net income of $188,746 attributable to common stockholders ($0.03 per Common Share), compared to a net loss of $402,209 of which $329,232 was attributable to common stockholders (($0.03) per Common Share) for the year ended December 31, 2009 (“Fiscal 2009”).  The increase of net gain of $698,813 was primarily due to record the revenue from CWN Capital, the increase of sales revenue, the recognition of deferred income tax recovery, as well as gain in foreign exchange transactions.  In Fiscal 2010, we recorded revenue of $1,733,329 compared to $906,455 in Fiscal 2009.  The increase of revenue of $826,874 was primarily due to the company recognized the revenue from consolidation of CWN Capital from inception up to December 18, 2010.





For the year ended December 31, 2008 (“Fiscal 2008”), we recorded a net loss of $1,004,835 of which $950,123 was attributable to common stockholders (($0.09) per Common Share) and revenue of $1,011,322.  The decrease of net loss of $602,626 in Fiscal 2009 compared to Fiscal 2008 was primarily due to management’s effort in reducing operating expenditures as well as gain in foreign exchange transactions.  The decrease of revenue of $104,867 in Fiscal 2009 compared to Fiscal 2008 was primarily due to the effects of the global financial crisis and the weakened economy that was started in late 2008.





YEAR ENDED DECEMBER 31, 2010 COMPARED TO YEAR ENDED DECEMBER 31, 2009





Revenues





The gradual recovery of the global financial crisis and the weakened economy that was started in late 2008 has caused increased confidence and funding of client companies as well as individual investors, and was the primary factor of the increase of overall revenue.  The Company generates revenue from its Portal, IR/PR and Conference businesses.  Our revenue sources come from these products and services we offer – GCFF Conference Business, Road Show Business, Various IR/PR Service, Chinese Webpage Design, Hosting and Maintenance, and Online Marketing Service.  Other revenue sources include Banner Advertising, Publication Service, CWN Membership and Online Service, Translation Service, and others.





Revenue Growth Trend





The global financial crisis and the weakened economy had had a negative impact on our businesses in Fiscal 2009 as shown in our declined revenues, client base and conference attendance and sales.  But as the market continued to improve at an optimistic pace over in Fiscal 2010, all aspects of our businesses showed positive growth in sales revenue, other than GCFF Conference Business and CWN Membership and Online Service.  Going forward, with our focus in development as a financial content and information provider targeting potential investors in the Greater China in addition to building a network with various content and information distribution channels in the region, we see untapped opportunities in one of the fastest growing markets in the world and we expect our revenue to continue to grow as we attract and retain new and existing clients and users.


36


GCFF Conference Business





Revenue generated from GCFF Conference Business was $312,781 in Fiscal 2010, compared to $414,098 in Fiscal 2009.  The decrease of $101,317 was due to the decrease of presenting companies and exhibitors’ sponsorship in our conferences during Fiscal 2010 as compared to Fiscal 2009.  We anticipate revenue from GCFF Conference Business will improve in 2011 as the market continues to improve.





Road Show Business





Road Show Business was a new service offering we started in Fiscal 2009, where we create and provide opportunities for public companies and their representatives to meet with potential institutional and retail investors, and we charge participating companies for fees and expenses accordingly.  Revenue generated from Road Show Business was $232,977 in Fiscal 2010, compared to $122,860 in Fiscal 2009.  The significant increase of $110,117 was due to the increase of companies that participated for the events held in 2010.  We expect to continue our focus in and expand on this new service offering in 2011 as we see positive feedback and results.





Various IR/PR Service





Revenue from Various IR/PR Service was $207,725 in Fiscal 2010, compared to $115,938 in Fiscal 2009.  The increase of $91,787 was primarily due to the recovery of the financial market causing an increase of confidence and funding from our client companies as compared to Fiscal 2009.





Chinese Webpage Design, Hosting and Maintenance





Revenue from Chinese Webpage Design, Hosting and Maintenance was $130,032 in Fiscal 2010, compared to 80,396 in Fiscal 2009.  The increase of $49,636 was primarily due to the recovery of the financial market causing more client companies interested in our Chinese micro-site development and hosting services as compared to Fiscal 2009.





Online Marketing Service





Revenue from Online Marketing Service was $85,811 in Fiscal 2010, compared to $75,937 in Fiscal 2009.  The increase of $9,874 was primarily due to our added resources on promoting our Online Marketing Service as compared to a year ago.





Banner Advertising





Revenue we generated from Banner Advertising increased $23,534 from $18,788 in Fiscal 2009 to $42,322 in Fiscal 2010.  This was primarily due to the increase in client companies’ frequency of placing advertisements on our websites because of the improved financial market situation as compared to a year ago.





Publication Service





Revenue we generated from Publication Service increased $4,305 from $16,794 in Fiscal 2009 to $21,099 in Fiscal 2010.  This was primarily due to the increase in sponsorship of our client companies because of the weakened general financial market situation as compared to a year ago.





CWN Membership and Online Service





Revenue we generated from CWN Membership and Online Service decreased $2,511 from $7,377 in Fiscal 2009 to $4,866 in Fiscal 2010.  This was primarily due to the decrease in the number of Premium Subscribers of our websites as compared to a year ago.


37


Translation Service





Translation Service was $12,633 in fiscal 2010, compared to $4,406 in fiscal 2009.  The increase of $8,227 was due to more translation projects as compared to a year ago.





Other Revenues





Other Revenues was $683,083 in fiscal 2010, compared to $49,861 in fiscal 2009.  The large increase of $633,222 was mainly due to revenue recognition  from consolidation of CWN Capital with the Company in 2010.





Expenses





For fiscal 2010, we recorded operating expenses of $1,602,286 compared to operating expenses of $1,464,743 for fiscal 2009.  The increase of operating expenses of $137,543 was primarily due to increase the consulting fees in 2010.  In Fiscal 2010, advertising and promotion, stock-based compensation, depreciation, provision for bad and doubtful debts, and directors’ remuneration increased significantly, while seminar operating expense, and printing expense decreased significantly, as compared to fiscal 2009.  Accretion on convertible debenture and interest expense on long term debt also decreased substantially as the convertible debentures were matured and converted into our Common Shares early on in Fiscal 2010.  As the market continues to improve and as we focus on expanding and diversifying our core revenue generating products and services in 2011, we expect our operating expenditures, particularly in relation to salaries and benefits and seminar and conference related expenses, will increase accordingly to accommodate our growth strategies.





Advertising and Promotion





Advertising and promotion expenses were $217,519 in fiscal 2010, compared to $131,604 in Fiscal 2009.  The increase of $85,915 was primarily due to more resources allocated in advertising and promotion during Fiscal 2010 for GCFF and Road Show events as compared to fiscal 2009.





Audit and Legal





Audit and legal expenses were $67,322 in fiscal 2010, compared to $60,731 in fiscal 2009.  The increase of $6,591 was primarily due to increased legal expenses as compared to fiscal 2009.





Consulting Fees





Consulting fees expenses were $215,918 in Fiscal 2010, compared to $104,841 in fiscal 2009.  The increase of $111,077 was primarily due to consultants’ services recorded under CWN Capital during fiscal 2010.





Depreciation





Depreciation expenses were $26,620 in Fiscal 2010, compared to $16,453 in fiscal 2009.  The increase of $10,167 was due to certain new property purchased during Fiscal 2009.





Directors’ Remuneration





Directors’ remuneration expenses were $12,000 in Fiscal 2010, compared to $8,000 in fiscal 2009.  The increase of $4,000 was due to the increase in directors’ fees paid to each director during Fiscal 2010.





Accretion on convertible debenture





Accretion on convertible debenture expenses were a credit of $8,772 in fiscal 2010, compared to $21,845 in fiscal 2009.  The decrease of $30,617 was primarily due to the effective interest rate calculation, in addition to the maturity of the convertible debentures early in the year in February 2010.


38


Interest Expense on Long Term Debt





Interest expense on long term debt was $2,500 in Fiscal 2010, compared to $15,000 in Fiscal 2009.  The decrease of $12,500 was due to the maturity of the convertible debentures early in the year in February 2010. Interest expense was recorded in the first 2 months in 2010.





Office and Miscellaneous





Office and miscellaneous expenses were $60,568 in Fiscal 2010, compared to $65,386 in Fiscal 2009.  The decrease of $4,818 was primarily due to management’s effort in controlling operating expenditures.





Printing





Printing expenses were $11,533 in Fiscal 2010, compared to $34,481 in Fiscal 2009.  The decrease of $22,948 was primarily due to fewer resources allocated in printing during Fiscal 2010 as compared to Fiscal 2009.





Provision for bad and doubtful debts





Provision for bad and doubtful debts expenses were $16,242 in Fiscal 2010, compared to $12,031 in Fiscal 2009.  The increase of $4,211 was due to the management’s best estimation on accounts.





Rent and Operating





Rent and operating expenses were $130,311 in Fiscal 2010, compared to $131,958 in Fiscal 2009.  The decrease of $1,647 was primarily due to an adjustment of property taxes and reduction of rent in our Shanghai office.





Salaries and Benefits





Salaries and benefits expenses were $514,508 in Fiscal 2010, compared to were $553,819 in Fiscal 2009.  The decrease of $39,311 was primarily due to the termination of a senior management position offset by increased salary of  two senior management positions during Fiscal 2010 and salary increment for some employees during 2010.





Seminar Operating Expense





Seminar operating expenses were $11,178 in Fiscal 2010, compared to $71,074 in Fiscal 2009.  The significant decrease of $59,896 was primarily due to reallocation of most expenses to the account of advertising and promotion in 2010.





Stock-based Compensation





Stock-based compensation expenses increased $90,141 from $61,339 in Fiscal 2009 to $151,480 in Fiscal 2010, as new incentive stock options were granted in June 2010 and corresponding stock-based compensation were recognized.





Telephone





Telephone expenses were $28,404 in Fiscal 2010, compared to $28,268 in Fiscal 2009.  Telephone expenses remained relatively at the same level over the 2 years.





Travel and Entertainment





Travel and entertainment expenses were $144,955 in Fiscal 2010, compared to $147,913 in Fiscal 2009.  Travel and entertainment expenses remained relatively at the same level over the 2 years.




39




Other Income (Loss)





We recorded other income of $58,126 in Fiscal 2010 and $156,079 in Fiscal 2009.  The decrease of other income of $97,953 was primarily due to loss of $128,356 on ownership dilution of CWN Capital in 2010.  Our other income or loss line items primarily consist of interest and sundry income from our liquid investments that are deposited with banks and other financial institutions, and foreign exchange gain or loss derived from currency exchange transactions.  We generally deposit our excess cash in interest bearing or mutual fund accounts and term deposits.  For Fiscal 2010, we recorded interest and sundry income of $30,274, compared to interest and sundry income of $30,337 in Fiscal 2009.  We recorded foreign exchange gain of $100,996 in Fiscal 2010 and gain of $125,742 in Fiscal 2009.  The continuing gain on foreign exchange was a result of further depreciation of the US dollar, in comparison with the Canadian dollar.





YEAR ENDED DECEMBER 31, 2009 COMPARED TO YEAR ENDED DECEMBER 31, 2008





Revenues





The global financial crisis and the weakened economy leading to lack of confidence and funding of client companies as well as individual investors, and fewer conferences we organized and hosted in Fiscal 2009 were the primary factors of the decrease in our overall revenue.  The Company currently generates revenue from its Portal, IR/PR and Conference businesses.  Our core revenue sources come from these products and services we offer – GCFF Conference Business, Road Show Business, Various IR/PR Service, Chinese Webpage Design, Hosting and Maintenance, and Online Marketing Service.  Other revenue sources include Banner Advertising, Publication Service, CWN Membership and Online Service, Translation Service, and others.





Revenue Growth Trend





The global financial crisis in 2008 has had a negative impact on our businesses as shown in our declining revenues, client base and conference attendance and sales since the latter half of 2008.  Despite signs of economic improvement in the general financial market, we continued to face difficulties in our businesses in 2009.  But as the market continues to improve at an optimistic pace and the general public’s adaptation to the current financial environment, in addition to our focus on expanding and diversifying our core revenue generating products and services, we expect our revenue to grow as we attract and retain new and existing clients and users.





GCFF Conference Business





Revenue we generated from GCFF Conference Business was $414,098 in Fiscal 2009, compared to $602,538 in Fiscal 2008.  The decrease of $188,440 was due to fewer conferences we organized and hosted during Fiscal 2009 as compared to Fiscal 2008, as well as the decrease of presenting companies and exhibitors’ sponsorship in our conferences.





Road Show Business





Road Show Business was a brand new service offering we started in Fiscal 2009, where we create and provide opportunities for public companies and their representatives to meet with potential institutional and retail investors, and we charge participating companies for fees and expenses accordingly. Revenue we generated from Road Show Business was $122,860 in Fiscal 2009.





Various IR/PR Service





Revenue from Various IR/PR Service was $115,938 in Fiscal 2009, compared to $100,147 in Fiscal 2008.  The increase of $15,791 was primarily due to the minor increase of funding and confidence of our client companies as compared to Fiscal 2008.


40





Chinese Webpage Design, Hosting and Maintenance





Revenue from Chinese Webpage Design, Hosting and Maintenance was $80,396 in Fiscal 2009, compared to $130,107 in Fiscal 2008.  The decreased of $49,711 was primarily due to fewer client companies interested in our Chinese micro-site development and hosting services as compared to Fiscal 2008.





Online Marketing Service





Revenue from Online Marketing Service was $75,937 in Fiscal 2009, compared to $39,427 in Fiscal 2008.  The increase of $36,510 was primarily due to our added resources on promoting our Online Marketing Service as compared to a year ago.





Banner Advertising





Revenue we generated from Banner Advertising decreased $9,782 from $28,570 in Fiscal 2008 to $18,788 in Fiscal 2009.  This was primarily due to the decrease in client companies’ frequency of placing advertisements on our websites because of the general financial market situation as compared to a year ago.





Publication Service





Revenue we generated from Publication Service decreased $44,028 from $60,822 in Fiscal 2008 to $16,794 in Fiscal 2009.  This was primarily due to the decrease in sponsorship of our client companies because of the weakened general financial market situation as compared to a year ago.





CWN Membership and Online Service





Revenue we generated from CWN Membership and Online Service decreased $2,096 from $9,473 in Fiscal 2008 to $7,377 in Fiscal 2009.  This was primarily due to the decrease in the number of Premium Subscribers of our websites as compared to a year ago.





Translation Service





Translation Service was $4,406 in Fiscal 2009, compared to $20,878 in Fiscal 2008.  The decrease of $16,472 was due to our switch away of our focus in providing Translation Service and fewer translation projects as compared to a year ago.





Other Revenues





Other Revenues was $49,861 in Fiscal 2009, compared to $19,360 in Fiscal 2008.  The increase of $30,501 was due to certain added corporate finance services we provided to our client companies as compared to a year ago.





Expenses





For Fiscal 2009, we recorded operating expenses of $1,464,743, compared to operating expenses of $1,791,091 for Fiscal 2008.  The decrease of operating expenses of $326,348 was primarily due to management’s effort in reducing operating expenditures in the face of weakened economy leading to weakened sales and fewer conferences we organized and hosted in Fiscal 2009.  In Fiscal 2009, stock-based compensation and seminar operating expense dropped significantly, while accretion on convertible debenture, audit and legal, and travel and entertainment also dropped substantially, as compared to Fiscal 2008.





Advertising and Promotion





Advertising and promotion expenses were $131,604 in Fiscal 2009, compared to $144,906 in Fiscal 2008.  The decrease of $13,302 was primarily due to fewer resources allocated in advertising and promotion as we hosted and organized fewer conferences during Fiscal 2009 as compared to Fiscal 2008.


41





Audit and Legal





Audit and legal expenses were $60,731 in Fiscal 2009, compared to $75,289 in Fiscal 2008.  The decrease of $14,558 was primarily due to less legal expenses as compared to Fiscal 2008.





Consulting Fees





Consulting fees expenses were $104,841 in Fiscal 2009, compared to $95,900 in Fiscal 2008.  The increase of $8,941 was primarily due to the increase in consulting fees paid to Goldpac Investments Ltd., where one of our senior management was Managing Director.





Depreciation





Depreciation expenses were $16,453 in Fiscal 2009, compared to $14,229 in Fiscal 2008.  The increase of $2,224 was primarily due to certain new property purchased during Fiscal 2009.





Accretion on convertible debenture





Accretion on convertible debenture expenses were $21,845 in Fiscal 2009, compared to $31,265 in Fiscal 2008.  The decrease of $9,420 was primarily due to the effective interest rate calculation.





Provision for bad and doubtful debts





Provision for bad and doubtful debts expenses were $12,031 in Fiscal 2009, compared to $13,410 in Fiscal 2008.  The decrease of $1,379 was due to the management’s best estimation on accounts.





Rent and Operating





Rent and operating expenses were $131,958 in Fiscal 2009, compared to $114,428 in Fiscal 2008.  The increase of $17,530 was primarily due to an adjustment of property taxes and increased rent as we leased a new office space in Shanghai, China since the second half of 2008.





Salaries and Benefits





Salaries and benefits expenses were $553,819 in Fiscal 2009, compared to $599,354 in Fiscal 2008.  The decrease of $45,535 was primarily due to the termination of a certain junior positions offset by the increased staff in our office in Shanghai, China.





Seminar Operating Expense





Seminar operating expenses were $71,074 in Fiscal 2009, compared to $152,843 in Fiscal 2008.  The decrease of $81,769 was primarily due to the smaller scale of conferences we organized and hosted in China in Fiscal 2009 as compared to Fiscal 2008.





Stock-based Compensation





Stock-based compensation expenses decreased $161,406 from $222,745 in Fiscal 2008 to $61,339 in Fiscal 2009, as most stock-based compensation for the previous stock option grants have already been recognized in prior periods.





Telephone





Telephone expenses increased $6,699 from $21,569 in Fiscal 2008 to $28,268 in Fiscal 2009, primarily due to increased levels of cross-border business development related activities.


42





Travel and Entertainment





Travel and entertainment expenses decreased $35,456 from $183,369 in Fiscal 2008 to $147,913 in Fiscal 2009, primarily due to increased levels of cross-border business development related activities offset by management’s preference of using telecommunication over travelling as a way to reduce operating expenditures.





Other Income (Loss)





We recorded other income of $156,079 in Fiscal 2009 and other loss of $170,454 in Fiscal 2008.  The increase of other income of $326,533 was primarily due to a much higher foreign exchange gain compared to a year ago.  Our other income or loss line items primarily consist of interest and sundry income from our liquid investments that are deposited with banks and other financial institutions, and foreign exchange gain or loss derived from currency exchange transactions.  We generally deposit our excess cash in interest bearing or mutual fund accounts and term deposits.  For Fiscal 2009, we recorded interest and sundry income of $30,337, compared to interest and sundry income of $60,584 in Fiscal 2008.  The decrease of $30,247 was a result of less deposit made during the year.  We recorded foreign exchange gain of $125,742 in Fiscal 2009 and foreign exchange loss of $231,038 in Fiscal 2008.  The increase of $356,780 was a result of depreciation of the US dollar, in comparison with the Canadian dollar.





For year ending December 31,2010


2009RevenueGCFF Conference Business

$
312,781


$
414,098Road Show Business


232,977



122,860Various IR/PR Service


207,725



115,938Chinese Webpage Design, Hosting and Maintenance


130,032



80,396Online Marketing Service


85,811



75,937Banner Advertising


42,322



18,788Publication Service


21,099



16,794CWN Membership and Online Service


4,866



7,377Translation Service (Company Review, Company Newsletter)


12,633



4,406Other Revenues


683,083



49,861Total revenue

$
1,733,329


$
906,455ExpensesAdvertising and promotion

$
217,519


$
131,604Audit and legal


67,322



60,731Consulting fees


215,918



104,841Depreciation


26,620



16,453Directors’ remuneration


12,000



8,000Accretion on convertible debenture


(8,772
)


21,845Interest expense on long term debt


2,500



15,000Office and miscellaneous


60,568



65,386Printing


11,533



34,481Provision for bad and doubtful debts


16,242



12,031Rent and operating


130,311



131,958Salaries and benefits


514,508



553,819Seminar operating expense


11,178



71,074Stock based compensation


151,480



61,339Telephone


28,404



28,268Travel and entertainment


144,955



147,913Total expenses

$
1,602,286


$
1,464,743Income (loss) before other items


131,043



(558,288
)Other income (loss)


58,126



156,079Income (loss) before income taxes

$
189,169


$
(402,209
)Deferred income tax recovery (expense)


107,435



—Net income (loss) for the year

$
296,604


$
(402,209
)Net income (loss) attributable to non controlling interest


107,858



(72,977
)Net income (loss) attributable to common stockholders

$
188,746


$
(329,232
)


43




CURRENCY


We maintain our accounting records in US dollars.  The functional currency of NAI is in Canadian dollar, of CWNHK and CWN Capital is in Hong Kong dollar, and of CWN China and Weihai is in Chinese Renminbi, and the current rate method of translation was used.  We translate our assets and liabilities at the exchange rate prevailing as of the balance sheet date.  Revenues and expenses are translated at the average exchange rate for the year.  Foreign exchange gains and losses are deferred and shown separately in the shareholders’ equity (deficiency).





Foreign currency fluctuations may have an impact on our financial condition.  However, we do not engage in any foreign currency hedge transactions.




INFLATION





We do not believe that inflation will have a material adverse effect on our financial condition.  Traditionally, Canada has not been a country that experienced a substantial increase in inflation.  As of December 31, 2010, the monthly average rate of inflation in Canada was 2.4%.




B. Liquidity and Capital Resources





As of December 31, 2010, we had cash and cash equivalents of $1,438,831 (December 31, 2009 – $1,659,083). We had a working capital of $1,571,460 at December 31, 2010, compared to $1,276,050 at December 31, 2009.  We are currently seeking additional capital to finance our business operations and expansions, even though we believe our cash and cash equivalents, and cash flow are sufficient to satisfy our current requirements to operate and further expand our businesses and other future development in Asia for the next twelve months.  Our principal sources of funding consist of advances from related parties in fiscal 2003 and fiscal 2005, and advances from non-related parties in fiscal 2004.  In November 2000, the Company completed a non-brokered private placement offering of Common Shares and received gross proceeds of $800,000.  In May 2004, the Company issued a convertible debt in the amount of $150,000 at an interest rate of 5%.  In March 2007, the Company issued a convertible debt in the amount of $250,000 at an interest rate of 6%.  In October 2007, the Company completed a non-brokered private placement offering of Common Shares and received net proceeds of $2,070,000.  Our primary cash requirements relate to our operating expenditures.  Our operating expenditures have been, and are expected to continue to be, funded through our operations and capital financing resources.





C. Research and Development, Patents and Licenses





We have not engaged in research and development activities for the last three fiscal years, and have no patents and licenses.




D. Trend Information





The global financial crisis affecting the world capital markets, particularly with public companies and investors, may have a positive material impact on our business operations including – the general financial market turnaround, which will increase demand for financial information services and spending on investor relations and public relations; increasing interest of Asian companies looking to enter North American financial markets; and the increased attention to corporate governance and disclosure.  We believe these trends may lead to an increase in demand for our services, which could lead to increase in sales of our services.  However, the investor relations and public relations area in Asia is still in its development stage, which may affect our investor relations and public relations services in Asia.  Continued growth in China and interest in the Chinese markets is key to our future profitability and to increasing revenues.  There are no known trends with relation to the production of our services.


44





E. Off-Balance Sheet Arrangements





We do not have any off-balance sheet arrangements.





F. Tabular Disclosure of Contractual Obligations





Payments due by period ($)Contractual Obligations

Total


Less than

1 year


1-3 years


3-5 years


More than

5 yearsLong-Term Debt Obligations


—



—



—



—



—Capital (Finance) Lease Obligations


—



—



—



—



—Operating Lease Obligations


80,817



67,350



13,467



—



—Purchase Obligations


—



—



—



—



—Other Long-Term Liabilities


—



—



—



—



—Total


80,817



67,350



13,467



—



—





ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES








A. Directors and Senior Management





The following table sets forth all directors and executive officers of CWN as of December 31, 2010.  Each director’s term of office expires at the next annual general meeting of shareholders.




Name

Age

Office Held Since

Offices and Positions Held in CWNJoe K.F. Tai

47

January 12, 2000

Director, President and Chief Executive OfficerChi Cheong Liu(1)

51

January 12, 2000

Director and TreasurerChi Kong Liu(1)

50

January 12, 2000

DirectorAndy S.W. Lam

61

March 8, 2004

DirectorKelvin Szeto(2)

50

June 1, 2006

Chief Financial Officer and Chief Operating OfficerGilbert Chan(3)

35

April 1, 2008

Acting Secretary and Senior Vice President, Marketing and Investor RelationsFornia Lau(4)

29

May 25, 2009

Ex-Vice President, Business Development





(1)
Chi Cheong Liu and Chi Kong Liu are related parties.


(2)
Kelvin Szeto was appointed as acting Chief Operating Officer and acting Chief Financial Officer of the Company on April 1, 2005.  He was appointed permanently to the positions on June 1, 2006.


(3)
Vivien Leung was appointed as Secretary on February 1, 2007 and resigned effective April 1, 2008.  Gilbert Chan was appointed as acting Secretary effective April 1, 2008 until a replacement is found.  Gilbert Chan was also appointed as Senior Vice President, Marketing and Investor Relations effective April 1, 2008.


(4)
Fornia Lau resigned from her position as Vice President, Business Development effective October 31, 2010.





The following table sets forth all directors and executive officers of our subsidiary NAI as of December 31, 2010.  Each director’s term of office expires at the next annual general meeting of shareholders.





Name

Age

Office Held Since

Offices and Positions Held in NAIKelvin Szeto(1)

50

November 2001

Director, President and SecretaryGilbert Chan(2)

35

June 2000

Vice President, Marketing and Project Development





(1)
Kelvin Szeto resigned from his position as President effective December 31, 2010.


(2)
Gilbert Chan was appointed as President effective January 1, 2011.





The business background and principal occupations of each of CWN and NAI’s director and executive officer for the preceding five years are as follows:


45





Joe K.F. Tai


Mr. Tai has been appointed a director, President and Chief Executive Officer of CWN since January 12, 2000.  Mr. Tai is Managing Director of Goldpac Investments Ltd., a venture capital company.  He is a director of Medifocus Inc. and China Goldcorp Ltd., both of which are TSX Venture Exchange listed companies.  Mr. Tai was the founder of NAI Interactive Ltd., now a wholly-owned subsidiary of the Company.  Mr. Tai was involved in the startup of an international computer manufacturing company with offices in Vancouver and Calgary and manufacturing facilities in Hong Kong and China with annual sales exceeding CA$30 million.  Through his 15 plus years of experience in international business, Mr. Tai has established a very solid and extensive network in North America and Asia, where such network is considered one of the crucial competitive advantages of the Company.  Through his efforts, he has raised over $100 million dollars in the public markets for various companies and projects in the last 8 years.





Chi Cheong Liu


Mr. Liu has been a director and treasurer of CWN since January 2000.  Mr. Liu is President of Chigo Engineering Company, a security engineering firm, for the last 17 years.  Mr. Liu is a venture capitalist specializing in biotechnology and technology investments.





Chi Kong Liu


Mr. Liu has been a director of CWN since January 2000.  Mr. Liu is President and owner of S & B Trading Company Limited, a diamond and jewelry wholesaler.  Mr. Liu is a venture capitalist specializing in biotechnology and technology investments.





Andy S.W. Lam


Mr. Lam has been a director of CWN since March 2004.  Mr. Lam is also a director of CWNHK.  Mr. Lam is a Justice of the Peace appointed by the Hong Kong Government.  He is a successful businessman with over 19 years of experience in strategic investment and planning.  Mr. Lam has sat on the board of a number of publicly listed companies on the Hong Kong Stock Exchange and served on several government committees and tribunals in Hong Kong.  Mr. Lam is a CPA and holds a MBA degree from Oklahoma City University.





Kelvin Szeto


Mr. Szeto has served as Chief Operating Officer and Chief Financial Officer of CWN since June 2006.  Prior to his appointment, Mr. Szeto was acting Chief Operating Officer and acting Chief Financial Officer of CWN since April 2005.  Mr. Szeto is a director, President and Secretary of NAI since November 2001.  Prior to his appointment as President of NAI, Mr. Szeto was a director, Secretary and Vice President, Operation since January 2000.  Mr. Szeto was involved in the startup of an international computer manufacturing company with offices in Vancouver and Calgary and manufacturing facilities in Hong Kong and China with annual sales exceeding CA$30 million.





Gilbert Chan


Mr. Chan was appointed as Acting Secretary and Senior Vice President, Marketing and Investor Relations of CWN in April 2008.  Mr. Chan has also served as Vice President, Marketing and Project Development of NAI since June 2000.  Mr. Chan’s expertise is in the field of mining, resources and China-related industries and he has established a broad network and relationships within the financial and investment community.  Mr. Chan holds a Bachelor Degree in Applied Sciences majoring in Metals & Materials Engineering from the University of British Columbia.


46


B. Compensation





The following table provides information regarding direct and indirect remuneration paid to the directors and executive officers of CWN and its subsidiaries during Fiscal 2010.





Annual Compensation in Fiscal 2010Name and Respective Office and Position Held

Salary

($)


Bonus

($)


Other Annual

Compensation

($)Joe K.F. Tai(1)

Director, President and Chief Executive Officer

Nil


Nil



75,000Chi Cheong Liu(2)

Director and Treasurer

Nil


Nil



3,000Chi Kong Liu(3)

Director

Nil


Nil



27,000Andy S.W. Lam(4)

Director

Nil


Nil



3,000Kelvin Szeto

Chief Operating Officer and Chief Financial Officer

(Director, President and Secretary of NAI)


45,340


Nil


NilGilbert Chan

Secretary and Senior Vice President, Sales and Marketing

(Vice President, Marketing and Project Development of NAI)


43,786


Nil


NilFornia Lau(5)

Ex-Vice President, Business Development


35,825


Nil


NilTotal


124,951


Nil



108,000





(1)
Mr. Tai is a shareholder and does not receive salary.  The Company paid Mr. Tai director fee of $3,000 per year in 2010, and $2,000 per year in 2009 and 2008.  The Company had consulting agreements with Goldpac Investments Ltd. and paid consulting fees of $72,000 per year in 2010 and 2009, and $60,000 per year in 2008.  Mr. Tai is Managing Director of Goldpac Investments Ltd.


(2)
Mr. Liu is a shareholder and does not receive salary.  The Company paid Mr. Liu director fee of $3,000 per year in 2010, and $2,000 per year in 2009 and 2008.


(3)
Mr. Liu is a shareholder and does not receive salary.  The Company paid Mr. Liu director fee of $3,000 per year in 2010, and $2,000 per year in 2009 and 2008.  The Company had consulting agreements with Silver Lake Investment Partners, Ltd. and paid consulting fees of $24,000 per year in 2010, 2009 and 2008.  Mr. Liu has a controlling interest in Silver Lake Investment Partners, Ltd.


(4)
Mr. Lam is a director and does not receive salary.  The Company paid Mr. Lam director fee of $3,000 per year in 2010, and $2,000 per year in 2009 and 2008.


(5)
Fornia Lau resigned from her position as Vice President, Business Development effective October 31, 2010.


PENSION PLANS




We do not provide pension, retirement or similar benefits for directors, senior management or employees.




C. Board Practices




Directors hold office for a term of one year or until the next annual general meeting of shareholders at which directors are elected.  All of the current directors have served the Company since January 12, 2000, other than Mr. Andy S.W. Lam, who was appointed to the board on March 8, 2004 following the resignation of Mr. Ken Cai in January 2004.  Our officers are appointed by the board and serve at the board’s discretion.




We have not entered into service contracts with any of our directors.  However, we have entered into and renewed consulting agreements with Goldpac Investments Ltd and Silver Lake Investment Partners, Ltd., which are managed or controlled by directors of our Company.  Our consulting agreement with Goldpac Investments Ltd expires on December 31, 2011 and our consulting agreement with Silver Lake Investment Partners, Ltd. expires on December 31, 2011.




D. Employees




As of December 31, 2010, there were twelve employees in NAI and eleven employees in CWN China.




Employee Breakdown

NAI (Vancouver)


CWN China (Shanghai)Management


0



0Business Development


3



1Editorial


1



5Finance and Accounting


2



2IT


2



2Sales/Marketing


4



1Total


12



11


47





E. Share Ownership of Directors and Senior Management





The Company’s authorized capital consists of 100,000,000,000 Common Shares, at a par value of $0.001 per share.  On February 24, 2010, the Company issued an aggregate of 250,000 Common Shares upon the conversion of a 6% Unsecured Convertible Note.  There was no other issuance of Common Shares, exercise in stock options, or change in the percentage of shares beneficially owned during Fiscal 2010.  As a result, 10,950,000 Common Shares were issued and outstanding as at December 31, 2010.





The following table sets forth certain information regarding the ownership of our Common Shares by each of the directors and members of senior management in office as at December 31, 2010.  The percentage owned is based on 10,950,000 shares outstanding as at December 31, 2010.





Name and Respective Office and Position Held

Share Ownership


% Share OwnershipJoe K.F. Tai(1)

Director, President and Chief Executive Officer


250,000



2.28
%Chi Cheong Liu(2)

Director and Treasurer


1,730,000



15.80
%Chi Kong Liu

Director


580,000



5.30
%Andy S.W. Lam

Director


—



—Kelvin Szeto

Chief Operating Officer and Chief Financial Officer

(Director, President and Secretary of NAI)


150,000



1.37
%Gilbert Chan

Secretary and Senior Vice President, Sales and Marketing

(Vice President, Marketing and Project Development of NAI)


50,000



0.46
%Fornia Lau(3)

Ex-Vice President, Business Development


—



—Total


2,760,000



25.21
%





(1)
As at December 31, 2010, Ms. Tim Yee Lau, a related party to Mr. Tai, owned 112,500 Common Shares of the Company. Goldpac Investments Ltd., for which Mr. Tai is Managing Director, owned 200,000 Common Shares of the Company.  Total direct and indirect share ownership was 562,500 Common Shares or 5.14% of the total Common Shares of the Company.


(2)
As at December 31, 2010, Goldpac Investment Partners Ltd., for which Mr. Liu is Principal, owned 1,166,667 Common Shares of the Company.  Total direct and indirect share ownership was 2,896,667 Common Shares or 26.45% of the total Common Shares of the Company.


(3)
Fornia Lau resigned from her position as Vice President, Business Development effective October 31, 2010.





STOCK OPTIONS





The Board of Directors of the Company (the “Board”) adopted the 2007 Stock Option Plan (the “2007 Plan”) on October 11, 2007, under which the Company issued incentive stocks options with the right to purchase up to 550,000 Common Shares to our directors, officers, and employees.  All of these options granted on October 11, 2007 have an exercise price of $1.08 per share and a vesting period of 1 to 5 years, and a term of 5 years expiring on October 11, 2012.  We had not grant options to individual consultants or advisors.





The Board further adopted the 2010 Stock Option Plan (the “2010 Plan”) on June 10, 2010, under which the Company issued incentive stocks options with the right to purchase up to 1,090,000 Common Shares to our directors, officers, and employees.  All of these options granted on June 10, 2010 have an exercise price of $0.60 per share and a vesting period of 1 to 5 years, and a term of 5 years expiring on June 10, 2015.  We had not grant options to individual consultants or advisors.


48





Optionee

Position

Number of Options

Granted Under 2007 Plan


Number of Options

Granted Under 2010 PlanJoe K.F. Tai

Director


25,000



100,000Chi Cheong Liu

Director


25,000



100,000Chi Kong Liu

Director


25,000



100,000Andy Lam

Director


25,000



100,000Joe K.F. Tai

Officer


180,000



200,000Kelvin Szeto

Officer


100,000



180,000Gilbert Chan

Officer


50,000



140,000Kwok Keung Pang

Employee


10,000



50,000Kai Bei Yang

Employee

15,000 (Forfeited)



—Mary Weixin Zhang

Employee


10,000



—Fornia Lau

Officer

20,000 (Forfeited)



—Frank Feng Feng

Employee

20,000 (Forfeited)



—Vivien Ka Ki Leung

Employee

10,000 (Forfeited)



—Karl Por So

Employee

10,000 (Forfeited)



—Jin Xu

Employee

10,000 (Forfeited)



—Lixin Yang

Employee

15,000 (Forfeited)



—Elly Chung

Employee


—



30,000Kai Ju Hsieh

Employee


—



20,000Philip Tai

Employee


—



30,000Yao Yao

Employee


—



20,000Daodang Zhang

Employee


—



20,000Total




550,000



1,090,000





As at December 31, 2010, we had 1,540,000 options issued and outstanding, of which 270,000 optionswere fully vested.





A copy of our 2010 Plan is filed as exhibits to this annual report.





ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS








A. Major Shareholders





The Company’s authorized capital consists of 100,000,000,000 Common Shares, at a par value of $0.001 per share.  On February 24, 2010, the Company issued an aggregate of 250,000 Common Shares upon the conversion of a 6% Unsecured Convertible Note.  There was no other issuance of Common Shares, exercise in stock options, or change in the percentage of shares beneficially owned during Fiscal 2010.  As a result, 10,950,000 Common Shares were issued and outstanding as at December 31, 2010.





As at December 31, 2010, there were four registered shareholders in the U.S. with holdings of 1,920,833 Common Shares representing 17.54% of the total issued and outstanding Common Shares.





To the knowledge of the directors and senior officers of the Company, the following table sets forth the persons or companies who beneficially own, directly or indirectly, or exercise control or direction over shares carrying 5% or more of the voting rights attached to the total outstanding Common Shares of the Company as at December 31, 2010.  The percentage owned is based on 10,950,000 shares outstanding as at December 31, 2010.




Name of Shareholder

Number of

Common Shares


Percentage of Shares

Beneficially OwnedChi Cheong Liu(1)


2,896,667



26.45
%CEDE&Co


2,067,000



18.88
%Vcanland China Holdings Ltd.


1,500,000



13.70
%Datacom Venture Limited(2)


600,000



5.48
%Chi Kong Liu


580,000



5.30
%Monica Law


570,000



5.21
%Joe K.F. Tai(3)


562,500



5.14
%Total


8,776,167



80.15
%


49





(1)
As at December 31, 2010, Mr. Liu owned 1,730,000 Common Shares.  Goldpac Investment Partners Ltd., for which Mr. Liu is Principal, owned 1,166,667 Common Shares of the Company.


(2)
On October 29, 2004, we issued 200,000 of our Common Shares to acquire all of the assets of TCHL, which included HK$540,000 in cash and equipment, from Marrick.  Marrick nominated its sister company, Datacom, to be the record owner of the shares.


(3)
As at December 31, 2010, Mr. Tai owned 250,000 Common Shares.  Ms. Tim Yee Lau, a related party to Mr. Tai, owned 112,500 Common Shares.  Goldpac Investments Ltd., for which Mr. Tai is Managing Director, owned 200,000 Common Shares.





Unless otherwise indicated by footnote, we believe that the beneficial owners of the Common Shares listed above, based on information furnished by such owners, have sole investment and voting power with respect to such Common Shares, subject to community property laws where applicable.  Beneficial ownership is determined in accordance with the rules of the United States Securities and Exchange Commission and generally includes voting or investment power with respect to securities.  As far as it is known to the Company, except as disclosed herein, we are not directly or indirectly owned or controlled by another corporation, by any foreign government or any other person or entity.  The shareholders, who own five percent or more of our Common Shares, do not have voting rights which are different than our other shareholders who own our Common Shares.





B. Related Party Transactions





During Fiscal 2010, we had a consulting agreement with Goldpac Investments Ltd. and we paid Goldpac Investments Ltd. consulting fees of $72,000 ($6,000 per month).  Mr. Joe Tai, a director, President and Chief Executive Officer of the Company, is Managing Director of Goldpac Investments Ltd.





During Fiscal 2010, we had a consulting agreement with Silver Lake Investment Partners, Ltd. and we paid Silver Lake Investment Partners, Ltd. consulting fees of $24,000 ($2,000 per month).





In 2010, the Company paid $124,951 [2009 - $110,383 and 2008 - $80,360] salary to current and former senior officers of the Company.





As at December 31, 2010, the Company has non-interest bearing advances from a stockholder and director of $2,128 [2009 - $128]. In 2010, the Company recorded imputed interest of $Nil [2009 - $Nil and 2008 - $Nil] at an interest rate of 4% per annum on these advances.





Included in accounts payable, $12,252 [2009 - $23,160] was payable to directors and senior officers of the Company.





Included in accounts receivable, $4,601 [2009 - $Nil] was receivable from senior officers of the Company.





As at December 31, 2010, the Company provided an advance of $2,572 [2009 - $2,579] to a director as a prepaid expenses.





In 2010, the Company provided service for a total of $57,636 [2009 - $144,956 and 2008 - $Nil] to a company whose director and shareholder is also a director and shareholder of the company, of which $100,446 [2009 - $40,523] was outstanding as at December 31, 2010.





In 2010, the Company incurred $12,000 [2009 - $8,000 and 2008 - $Nil] in director fees, of which $2,000 [2009 - $Nil] was outstanding as at December 31, 2010.




In 2010, the Company provided service for a total of $ 139,091 [2009 - $Nil and 2008 - $Nil] to CWN Capital, of which $139,091 [2009 - $Nil] was outstanding as at December 31, 2010.


50





C. Interests of Experts and Counsel





This Report on Form 20-F is being filed as an annual report under the Exchange Act and, as such, there is no requirement to provide any information under this item.





ITEM 8. FINANCIAL INFORMATION








A. Financial Statements





This Report on Form 20-F includes our audited consolidated financial statements for the years ended December 31, 2010, 2009 and 2008, including our consolidated balance sheets as of December 31, 2010 and 2009, and the consolidated statements of shareholders’ equity, operations and cash flows for the years ended December 31, 2010, 2009 and 2008, and the related notes to those statements and the auditors’ reports thereon.  Reference is made to these documents commencing at Page F-1 of this Report.





B. Significant Changes





There have been no significant changes in our businesses in the period from December 31, 2010 until the date of this document.





ITEM 9. THE OFFER AND LISTING








A. Offer and Listing Details





Shares of our common stock are currently quoted on the OTC Bulletin Board under the symbol “CWNOF.OB”.  For the periods indicated, the following table sets forth the high and low bid prices of our common shares, as reported by the OTC Bulletin Board.  These prices represent inter-dealer quotations without retail markup, markdown, or commission and may not necessarily represent actual transactions.  As at March 31, 2011, the closing bid price per share of our common stock was $0.55.





Periods

High


LowFiscal 20111Q-2011

$
0.55


$
0.55Fiscal 20104Q-2010

$
0.75


$
0.503Q-2010

$
0.50


$
0.502Q-2010

$
0.50


$
0.251Q-2010

$
0.25


$
0.25Fiscal 20094Q-2009

$
0.25


$
0.253Q-2009

$
0.25


$
0.152Q-2009

$
0.25


$
0.251Q-2009

$
0.25


$
0.13Most Recent 6 months from October 2010 through March 2011March 2011

$
0.55


$
0.55February 2011

$
0.55


$
0.55January 2011

$
0.55


$
0.55December 2010

$
0.75


$
0.50November 2010

$
0.50


$
0.50October 2010

$
0.50


$
0.50


51





B. Plan of Distribution




This Report on Form 20-F is being filed as an annual report under the Exchange Act and, as such, there is no requirement to provide any information under this item.


C. Markets




Our common shares are quoted on the OTC Bulletin Board of the National Association of Securities Dealers, Inc. under the symbol “CWNOF.OB”.


D. Selling Shareholders




This Report on Form 20-F is being filed as an annual report under the Exchange Act and, as such, there is no requirement to provide any information under this item.




E. Dilution




This Report on Form 20-F is being filed as an annual report under the Exchange Act and, as such, there is no requirement to provide any information under this item.


F. Expenses of the Issue


This Report on Form 20-F is being filed as an annual report under the Exchange Act and, as such, there is no requirement to provide any information under this item.





ITEM 10. ADDITIONAL INFORMATION








A. Share Capital





This Report on Form 20-F is being filed as an annual report under the Exchange Act and, as such, there is no requirement to provide any information under this item.





B. Memorandum and Articles of Association





There have been no changes to the Memorandum, Articles of Association, or Cayman Islands Law with respect to rights and powers of directors and shareholders since our 20-F Registration Statement (SEC file no. 000-33051) filed on July 3, 2002.  Such discussion is hereby incorporated by reference into this Report.





C. Material Contracts




The material contracts entered into by the Company, other than those contracts entered into during the ordinary course of business, are as follows:


52


In April 2004, we entered into an Exchange Agreement with Marrick Investments Limited to acquire all of the assets of Technology City Holdings Ltd., which included HK$540,000 in cash and equipment.  Pursuant to the agreement, we issued 200,000 of our common shares to Datacom Venture Limited, a nominee of Marrick Investments Limited, on October 29, 2004.





On June 6, 2006, we entered into an office lease agreement for our current premises located at Suite 368 – 1199 West Pender Street, Vancouver, British Columbia, Canada V6E 2R1.  The term of the lease is for 5 years expiring on July 31, 2011.  The monthly lease payment is CA$6,871.63.





On February 1, 2008, our subsidiary ChineseWorldNet.com (Hong Kong) Ltd. entered into an Agreement to Establish CWN China Co., Ltd., a Chinese-Foreign Joint Venture Limited Liability Company with Shanghai Compass Venture Capital Investment Company Limited to establish ChineseWorldNet.com (Shanghai) Ltd.





On April 20, 2010, we renewed an office lease agreement for our current premises located at #1003, Eton Place Tower B, 555 Pudong Ave., Shanghai, PRC 200120.  The term of the lease is for 1 year expiring on June 8, 2011.  The monthly lease payment is RMB$22,467.88 plus applicable taxes and maintenance fees.





D. Exchange Controls





CAYMAN ISLANDS





We are organized under the laws of the Cayman Islands. We do not believe there are any decrees or regulations under the laws of the Cayman Islands applicable to us restricting the import or export of capital or affecting the remittance of dividends or other payments to non-resident holders of our common stock.  There are no restrictions under CWN’s Articles of Incorporation or Memorandum of Association or under Cayman Islands law as dividends thereon.  There is uncertainty as to whether the Courts of Cayman Island would (i) enforce judgments of United States Courts obtained against us or our directors and officers predicated upon the civil liability provisions of the federal securities laws of the United States or (ii) entertain original actions brought in Cayman Island Courts against us or such persons predicated upon the federal securities laws of the United States.  There is no treaty in effect between the United States and Cayman Island providing for such enforcement.





CANADA





There are no governmental laws, decrees or regulations in Canada relating to restrictions on the export or import of capital, or affecting the remittance of interest, dividends or other payments to non-residents. Dividends paid to US residents, however, are subject to a 15% withholding tax or a 5% withholding tax for dividends if the shareholder is a corporation owning at least 10% of the outstanding voting shares of the Company pursuant to Article X of the reciprocal tax treaty between Canada and the US.





Except as provided in the Investment Canada Act (the "ICA"), which has provisions that restrict the holding of voting shares by non-Canadians, there are no limitations specific to the rights of non-Canadians to hold or vote the common shares under the laws of Canada, or in the charter documents of the Company or its subsidiaries.





The ICA requires a person who is not a Canadian resident (a "non-Canadian") making an investment, which would result establish a new Canadian business or which would result in the acquisition of control of a Canadian business (i.e. the gross value of the assets of which exceed a certain monetary threshold), to identify, notify, or file an application for review with the Investment Review Division of Industry Canada ("IRD"). The notification procedure involves a brief statement of information about the investment on a prescribed form to be filed by the investor within 30 days following implementation of the investment. Specific investments are subject to review under the ICA. It is intention of the IRD that investments requiring only notification will proceed without government intervention.





The following investments by non-Canadians are subject to review under the ICA:





1.
An investment is reviewable if there is an acquisition of a Canadian business and the asset value of the Canadian business being acquired equals or exceeds the following thresholds:


53




(a)
For non-WTO investors, the threshold is $5 million for a direct acquisition and $50 million for an indirect acquisition; the $5 million threshold will apply however for an indirect acquisition if the asset value of the Canadian business being acquired exceeds 50% of the asset value of the global transaction;





(b)
Except as specified in paragraph (c) below, a threshold is calculated annually for reviewable direct acquisitions by or from WTO investors. The threshold for 2005 is $250 million. Pursuant to Canada's international commitments, indirect acquisitions by or from WTO investors are not reviewable;





(c)
The limits set out in paragraph (a) above apply to all investors for acquisitions of a Canadian business that:





(i)
engages in the production of uranium and owns an interest in a producing uranium property in Canada;


(ii)
provides any financial service;


(iii)
provides any transportation services; or


(iv)
is a cultural business.




2.
Notwithstanding the above, any investment which is usually only notifiable, including the establishment of a new Canadian business, and which falls within a specific business activity, including the publication and distribution of books, magazines, newspapers, film or video recordings, audio or video music recordings, or music in print or machine-readable form may be reviewed if an Order-in-Council directing a review is made and a notice is sent to the Investor within 21 days following the receipt of a certified complete notification.





With reference to 1(a) above, generally speaking, an acquisition is direct if it involves the acquisition of control of the Canadian business or of its direct or indirect Canadian parent and an acquisition is indirect if it involves the acquisition of control of a non-Canadian direct or indirect parent of an entity carrying on the Canadian business. No change of voting control will be deemed to have occurred if an investor acquires less than one-third of the voting control of a Canadian corporation.





With reference to 1(a) above, a WTO investor, as defined in the ICA, includes an individual who is a national of a member country of the WTO or who has the right of permanent residence in relation that WTO member, a government or government agency of a WTO investor-controlled corporation, a limited partnership, trust or joint venture that is neither WTO-investor controlled or Canadian controlled of which two-thirds of its board of directors, general partners or trustees, as the case may be, are any combination of Canadians and WTO investors.





The ICA exempts certain transactions from notification and review, including, among others:





1.
An acquisition of voting shares if the acquisition were made in the ordinary course of that persons' business as a trader or dealer in securities;





2.
An acquisition of control of the Company in connection with the realization of a security interest granted for a loan or other financial assistance and not for any purpose related to the provisions of the ICA;





3.
The acquisition of voting interests by any person in the ordinary course of a business carried on by that person that consists of providing, in Canada, venture capital on terms and conditions not inconsistent with such terms and conditions as may be fixed by the Minister; and





4.
Acquisition of control of the Company by reason of an amalgamation, merger, consolidation or corporate reorganization, following which the ultimate direct or indirect control in fact of the Company, through the ownership of voting interests, remains unchanged.





The Management estimates approximately eighty percent of our operations are in Canadian dollars.


54





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.  As of 2007, the currency trades within a narrow band specified by the Chinese central government.  The PRC’s central banking authority, publishes the Renmini exchange rate against the U.S. dollar every day 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 the PRC.





Before 2009, Renminbi had little to no exposure in the international markets due to strict government controls by the central Chinese government that prohibited almost all forms of Renminbi holdings or transactions.  Transactions between Chinese companies and a foreign entity would have to be denominated in US dollars.  With Chinese company unable to hold US dollars and foreign companies unable to hold Chinese Renminbi, all transactions would go through the People's Bank of China.  In June 2009, the Chinese officials announced a pilot scheme where business and trade transactions were allowed between limited businesses in Guangdong and Shanghai municipalities and only counterparties in Hong Kong, Macau, and select ASEAN nations.  Proving a success, the program was further extended to 20 Chinese provinces and counterparties internationally in July 2010.  In steps intended to establish the Renminbi as an international reserve currency, China has agreements with Russia, Vietnam, and Thailand allowing trade with those countries to be settled directly in Renminbi instead of requiring conversion to US dollars.





Foreign exchange is administered by the State Administration of Foreign Exchange (“SAFE”), and its local branch offices, all of which are subject to the supervision of the People’s Bank of China.  SAFE has established regulations relating to outward remittance by foreign investors of their share of net profit or dividends and final repatriation of their investments, in foreign currency.  Subject to payment of applicable taxes, foreign investors may remit out of PRC, in foreign exchange, profit or dividends derived from a source within PRC.  Swap centers 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 centers 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 our or his investments in PRC) out of PRC is subject to the approval of the SAFE.





E. Taxation





CAYMAN ISLAND INCOME TAX CONSEQUENCES





CWN is organized under the laws of Cayman Islands.  At present, there is no Cayman Islands profit tax, withholding tax, capital gains tax, capital transfer tax, estate duty or inheritance tax payable by our United States shareholders, except shareholders ordinarily resident in the Cayman Islands.  There is currently no reciprocal tax treaty between Cayman Islands and the United States regarding withholding taxes.




F. Dividends and Paying Agents





This Report on Form 20-F is being filed as an annual report under the Exchange Act and, as such, there is no requirement to provide any information under this item.





G. Statement by Experts





This Report on Form 20-F is being filed as an annual report under the Exchange Act and, as such, there is no requirement to provide any information under this item.




55





H. Documents on Display





Any documents referred to in this Report on Form 20-F may be inspected at our principal office located at Suite 368 – 1199 West Pender Street, Vancouver, British Columbia, Canada V6E 2R1 during normal business hours.





The Company's filings with the Securities and Exchange Commission, and the exhibits thereto, are available for inspection and copying at the public reference facilities maintained by the Securities and Exchange Commission in 100 F. St., NE, Washington, D.C., 20549.  Copies of these filings may be obtained from these offices after the payment of prescribed fees.  Please call the Securities and Exchange Commission at 1-800-SEC-0330 for further information on the public reference rooms. These filings are also available on the Securities and Exchange Commission's website at www.sec.gov.





I. Subsidiary Information





The Company has 4 subsidiaries, including NAI Interactive Ltd., a company incorporated under the laws of British Columbia (“NAI”), ChineseWorldNet.com (Hong Kong) Ltd., a company incorporated under the laws of Hong Kong (“CWNHK”), 70% owned interest in ChineseWorldNet.com (Shanghai) Ltd., a company incorporated under the laws of PRC (“CWN China”), and 70% owned interest in Weihai Consulting Investment Ltd., a company incorporated under of PRC (“Weihai”).





ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK








The Company is a small business issuer as defined in Section 230, 405 and Section 240, 23b-2 of the Exchange Act and, as such, there is no requirement to provide any information under this item.





ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES





This Report on Form 20-F is being filed as an annual report under the Exchange Act and, as such, there is no requirement to provide any information under this item.





PART II





ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES





There has not been a material default in the payment of principal, interest, a sinking or purchase fund installment, or any other material default not cured within 30 days, relating to any indebtedness of us or any of our significant subsidiaries.  No payment of dividends is in arrears.





ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS





There has been no modification of the instruments defining the rights of holders of any class of the Company’s registered securities.  There has been no modification or qualification of the rights evidenced by any class of the Company’s registered securities by issuing or modifying any other class of securities.  There are no assets securing any class of the Company’s registered securities.  There has been no change in the last financial year to the trustee of the Company’s registered securities.


56





ITEM 15. CONTROLS AND PROCEDURES





DISCLOSURE CONTROLS AND PROCEDURES





Disclosure controls and procedures are designed to provide reasonable assurance that all relevant information is gathered and reported to senior management, including the Chief Executive Officer (“CEO”) and the Chief Financial Officer (“CFO”) on a timely basis so that appropriate decisions can be made regarding public disclosure.





Our CEO and our CFO have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934) as of the end of the period covered by this report, and have concluded that our disclosure controls and procedures were not effective as of December 31, 2010 to ensure that (i) information required to be disclosed in reports that are filed or submitted under Canadian securities legislation and the Exchange Act is recorded, processed, summarized and reported within the time periods specified in those rules and forms; or (ii) material information relating to the Company is accumulated and communicated to the Company’s management, including the CEO and CFO, or persons performing similar functions.





MANAGEMENT’S REPORT ON INTERNAL CONTROLS OVER FINANCIAL REPORTING





Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) under the Exchange Act.  Our management evaluated the effectiveness of our internal control over financial reporting as of December 31, 2010 based on criteria for effective internal control over financial reporting described in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.  Based on its evaluation, our management concluded that we did not maintain effective internal control over financial reporting as of December 31, 2010, as per the five components of the Framework: Control Environment, Risk Assessment, Control Activities, Information and Communication and Monitoring.





During its assessment of internal control over financial reporting, management identified the following deficiencies.  Based on the context in which the deficiencies occur, management and the auditor agreed that these deficiencies individually represent significant deficiencies:





1.
Inadequate segregation of duties over certain information system access controls.  Although there were no major error or incident noted during the evaluation, the control deficiency carries significant risk of management overrides and unauthorized and approved transactions.





2.
There was no human resources department in the Company; the monthly salary calculations were conducted by the accounting department instead of human resources.  The lack of segregation of duties would not ensure the calculation of salary’s accuracy, and possibilities for staff receiving payment for work not attended.  There was also the potential risk of management override.





3.
Purchase requisitions and purchase orders were not prepared, only oral indication was given by management.  Purchases could be initiated and executed for other uses or purchased goods or services could be misappropriated for other uses.  There was also the potential risk of fraud for these purchases.





4.
Several instances of sales agreements were not properly numbered, some agreements were missing and cancelled agreements were destroyed.  Without written sales orders, it was difficult to ensure the completeness of sales, which might result in the risk of errors of record in the financial statement.





Based only on these facts, management has determined that the combination of these significant deficiencies represents a material weakness.  Individually, these deficiencies were evaluated as representing a more than remote likelihood that a misstatement that was more than inconsequential, but less than material, could occur. However, each of these significant deficiencies affects the same set of accounts. Taken together, these significant deficiencies represent a more than remote likelihood that a material misstatement could occur and not be prevented or detected.  Therefore, in combination, these significant deficiencies represent a material weakness.





This Report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting.  Our management’s report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit us to provide only the management’s report in this Report.


57





CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING





There were no changes to our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended) during the year ended December 31, 2010 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.





ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT





The Company’s board of directors also serves as its audit committee.  The board has designated Mr. Andy S.W. Lam as its audit committee financial expert.  Mr. Lam is an independent audit committee member, as defined by the rules of the Securities Exchange Commission.





ITEM 16B. CODE OF ETHICS





On October 29, 2004, the Company adopted a Code of Ethics (the “Code of Ethics”).  A copy of our Code of Ethics was filed as an exhibit to the Report on Form 20-F filed with the Securities Exchange Commission on December 4, 2004.  Our Code of Ethics will be made available in print, free of charge, to any person requesting a copy in writing from our secretary at our North American headquarters in Vancouver, British Columbia, Canada.





ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES





The following table sets forth the aggregate fees billed by our auditors, Chang Lee LLP, in 2010 and 2009.  Our board of directors has considered these fees and professional services rendered compatible with maintaining the independence of that firm.





For year ending December 31,2010


2009Audit Fees(1)

$
38,000


$
41,000Audit-Related Fees(2)


—



—Tax Fees(3)


—



—All Other Fees


—



—Total

$
38,000


$
41,000





(1)
Audit Fees consist of fees for the audit of our annual financial statements, review of our interim financial statements and review in connection with our statutory and regulatory filings.


(2)
Audit-Related Fees consist of fees related to assurance and related services that are reasonably related to the performance of the audit or review of our financial statements and are not reported under “Audit Fees”.


(3)
Tax Fees consist of fees related to tax compliance, tax advice and tax planning.





ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES







There are no applicable disclosures required by Exchange Act Rule 10a-3(d) regarding an exemption from the listings standards for audit committees.





ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS





Neither the Company, nor any affiliated purchaser of the Company, has purchased any of the Company’s securities during Fiscal 2010.


58





ITEM 16F. CHANGES IN REGISTRANT’S CERTIFYING ACCOUNTANT





The Company did not change its principal accountant for the three most recent fiscal years and, as such, there is no requirement to provide any information under this item.





ITEM 16G. CORPORATE GOVERNANCE





The Company is not listed on a national securities exchange and, as such, there is no requirement to provide any information under this item.




PART III





ITEM 17. FINANCIAL STATEMENTS





The following Consolidated Financial Statements and the related Notes thereto are filed as part of this Report, commencing at Page 63 to 81 of this Report:





Report of Independent Registered Public Accounting Firm
63Consolidated Balance Sheets as at December 31, 2010 and 2009
64Consolidated Statements of Stockholders’ Equity (Deficiency) for the years ended December 31, 2010, 2009 and 2008
65Consolidated Statements of Operations for the years ended December 31, 2010, 2009 and 2008
66Consolidated Statements of Cash Flows for the years ended December 31, 2010, 2009 and 2008
67Notes to Consolidated Financial Statements
68 to 80




59





ITEM 18. FINANCIAL STATEMENTS





We have elected to provide financial statements pursuant to “Item 17 – Financial Statements”.





ITEM 19. EXHIBITS





Exhibit No.

Document DescriptionEX-1
(1)
Articles of Association, Memorandum of Association and Certificate of Incorporation of CWNEX-2.1
(2)
Form of Convertible Debenture dated May 31, 2004EX-4.1
(4)
Stock Option Plan Agreement dated October 1, 2007EX-4.2
**
Stock Option Plan Agreement dated June 10, 2010EX-4.3
(5)
Agreement to Establish [CWN China Co., Ltd.], a Chinese – Foreign Joint Venture Ltd. Liability CompanyEX-4.4
**
Consulting Agreement between Chineseworldnet.Com Inc. and Goldpac Investments Ltd. dated January 1, 2010EX-4.5
**
Consulting Agreement between Chineseworldnet.Com Inc. and Silver Lake Investment Partners, Ltd. dated January 1, 2010EX-8
**
List of SubsidiariesEX-11
(3)
Code of EthicsEX-31.1
**
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002EX-31.2
**
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002EX-32.1
**
Certification Of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002EX-32.2
**
Certification Of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002





**
Filed herewith


(1)
Incorporated by reference to Exhibits of Registrant’s Registration Statement on Form 20-F (file no. 000-33051) filed on July 3, 2002.


(2)
Incorporated by reference to Exhibits of Registrant’s Annual Report on Form 20-F (file no. 000-33051) filed on December 3, 2004.


(3)
Incorporated by reference to Exhibits of Registrant’s Annual Report on Form 20-F (file no. 000-33051) filed on June 30, 2005.


(4)
Incorporated by reference to Exhibits of Registrant’s Annual Report on Form 20-F (file no. 000-33051) filed on June 30, 2008.




60




(5)
Incorporated by reference to Exhibits of Registrant’s Annual Report on Form 20-F (file no. 000-33051) filed on June 30, 2009.




SIGNATURES





The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F, and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.





Dated: April 29, 2011





ChineseWorldNet.com Inc.,a Cayman Islands Corporation/s/ Joe Kin Foon TaiJOE KIN FOON TAIDirector, President and Chief Executive Officer




61





Consolidated Financial Statements





Chineseworldnet.com Inc. & Subsidiaries


(Expressed in U.S. Dollars)


December 31, 2010 and 2009


62





Chang Lee LLP


Chartered Accountants
 606-815 Hornby Street


Vancouver, B.C., V6Z 2E6


Tel: 604-687-3776


Fax:  604-688-3373





REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM





To the Board of Directors and Stockholders of




CHINESEWORLDNET.COM INC. & SUBSIDIAIRES




We have audited the accompany consolidated balance sheets of Chineseworldnet.com Inc. & Subsidiaries (“the Company”) as at December 31, 2010 and 2009 and the related consolidated statements of stockholders’ equity (deficiency), operations and comprehensive income (loss) and cash flows for the years ended December 31, 2010, 2009 and 2008. 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 audit in accordance with the standards of the Public Company Accounting Oversight Board (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.  We were not engaged to perform an audit of the Company’s internal control over financial reporting.  Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstance, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.  Accordingly, we express no such opinion.  An audit also includes examining, on a test basis, evidence supporting the amounts and disclosure in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audit provides a reasonable basis for our opinion.




In our opinion, these consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as at December 31, 2010 and 2009 and the results of its operations and its cash flows for the years ended December 31, 2010, 2009 and 2008 in conformity with generally accepted accounting principles in the United States of America.




The accompanying consolidated financial statements referred to above have been prepared assuming that the Company will continue as a going concern.  As discussed in Note 1 to the consolidated financial statements, the Company has incurred recurring losses from inception and requires additional financing for its intended business operations.  These factors raise substantial doubt about its ability to continue as a going concern.  Management’s plans in regard to these matters are also described in Note 1.  The financial statements do not include any adjustments that might result from the outcome of this uncertainty.





Vancouver, CanadaMay 2, 2011
Chartered Accountants




63


Chineseworldnet.Com Inc. & Subsidiaries





CONSOLIDATED BALANCE SHEETS





As at December 31
(Expressed in U.S. Dollars)





2010


2009$


$ASSETSCurrent assetsCash and cash equivalents


1,438,831



1,659,083Available-for-sale securities[note 3]


4



4Accounts receivable [note 4]


270,863



165,253Receivable from a related party [note 10]


145,638



—Prepaid expenses and deposits


28,333



35,669Deferred income tax assets [note 8]


72,464



—Total current assets


1,956,133



1,860,009Equipment[note 5]


50,521



73,012Long term investments [note 6]


126,115



—Deferred income tax assets [note 8]


38,450



—Total assets


2,171,219



1,933,021LIABILITIES AND STOCKHOLDERS’ EQUITYCurrent liabilitiesAccounts payable and accrued liabilities


276,821



246,970Due to related parties, non-interest bearing [note 10c]


2,128



128Deferred revenue


105,724



78,089Convertible debentures [note 7]


—



258,772Total current liabilities


384,673



583,959Stockholders’ equity[note 9]Common stockAuthorized100,000,000,000 common shares with a par value of $0.001 per shareIssued and outstanding 10,950,000 (2009 – 10,700,000) common shares


10,950



10,700Additional paid-in capital


4,179,538



3,778,308Accumulated other comprehensive income


(3,786
)


81,481Deficit


(2,425,124
)


(2,613,870
)Non-controlling interests


24,968



92,443Total stockholders’ equity


1,786,546



1,349,062Total liabilities and stockholders’ equity


2,171,219



1,933,021Commitments[note 12]Subsequent events [note 13]


See accompanying notes


64


Chineseworldnet.Com Inc. & Subsidiaries




CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIENCY)





Year ended December 31
(Expressed in U.S. Dollars)




Common stock


Additional

paid-in





Accumulated

other

comprehensive


Total equity

(deficiency)

attributable

to common


Non

controllingShares


Amount


capital


(Deficit)


income


stockholders


interest


Total#


$


$


$


$


$


$


$Balance, December 31, 2008


10,700,000



10,700



3,716,969



(2,284,638
)


40,280



1,483,311



162,894



1,646,205Stock based compensation


—



—



61,339



—



—



61,339







61,339Non controlling interest contribution


—



—



—



—



—



—



215,448



215,448Components of comprehensive income (loss):Foreign currency translation adjustment


—



—



—



—



41,201



41,201



2,526



43,727Net income (loss) for the year


—



—



—



(329,232
)


—



(329,232
)


(72,977
)


(402,209
)Balance, December 31, 2009


10,700,000



10,700



3,778,308



(2,613,870
)


81,481



1,256,619



92,443



1,349,062Stock based compensation


—



—



151,480



—



—



151,480



—



151,480Conversion common shares from convertible debentures


250,000



250



249,750



—



—



250,000



—



250,000Components of comprehensive income (loss):Foreign currency translation adjustment


—



—



—



—



(85,267
)


(85,267
)


156



(85,111
)Net income (loss) for the year


—



—



—



188,746



—



188,746



107,858



296,604Elimination of minority interest upon deconsolidation of CWN Capital


























(175,489
)


(175,489
)Balance, December 31, 2010


10,950,000



10,950



4,179,538



(2,425,124
)


(3,786
)


1,761,578



24,968



1,786,546


See accompanying notes


65


Chineseworldnet.Com Inc. & Subsidiaries




CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)





Year ended December 31
(Expressed in U.S. Dollars)





2010


2009


2008$


$


$Revenue


1,733,329



906,455



1,011,322ExpensesAdvertising and promotion


217,519



131,604



144,906Audit and legal


67,322



60,731



75,289Consulting fees


215,918



104,841



95,900Depreciation


26,620



16,453



14,229Directors’ remuneration


12,000



8,000



8,000Accretion on convertible debenture


(8,772
)


21,845



31,265Interest expense on long-term debt


2,500



15,000



15,000Office and miscellaneous


60,568



65,386



65,096Printing


11,533



34,481



33,688Provision  for bad and doubtful debts


16,242



12,031



13,410Rent and operating


130,311



131,958



114,428Salaries and benefits


514,508



553,819



599,354Seminar operating expense


11,178



71,074



152,843Stock based compensation


151,480



61,339



222,745Telephone


28,404



28,268



21,569Travel and entertainment


144,955



147,913



183,3691,602,286



1,464,743



1,791,091Other income (loss)Interest and sundry income


30,274



30,337



60,584Gain on short term investment


41,315Foreign exchange gain (loss) and other losses


100,996



125,742



(231,038
)Equity pick up


13,897



—



—Loss on dilution of CWN Capital


(128,356
)


—



—Other income (loss), net


58,126



156,079



(170,454
)Income (loss) before income taxes


189,169



(402,209
)


(950,223
)Deferred income tax recovery (expense)


107,435



—



(54,612
)Net income (loss) for the year


296,604



(402,209
)


(1,004,835
)Other comprehensive incomeCurrency translation adjustments


(85,111
)


43,727



12,153Comprehensive income (loss)


211,493



(358,482
)


(992,682
)Net income (loss) attributable to:Common stockholders


188,746



(329,232
)


(950,123
)Non-controlling interests


107,858



(72,977
)


(54,712
)296,604



(402,209
)


(1,004,835
)Net comprehensive income (loss) attributable to:Common stockholders


103,479



(288,031
)


(940,128
)Non-controlling interests


108,014



(70,451
)


(52,554
)211,493



(358,482
)


(992,682
)Earning (loss) per share – basic


0.03



(0.03
)


(0.09
)Earning (loss) per share – diluted


0.03



(0.03
)


(0.09
)Weighted average number of common shares outstanding- basic


10,873,288



10,700,000



10,700,000- diluted


10,873,288



10,700,000



10,700,000





See accompanying notes


66


Chineseworldnet.Com Inc. & Subsidiaries





CONSOLIDATED STATEMENTS OF CASH FLOWS





Year ended December 31
(Expressed in U.S. Dollars)





2010


2009


2008$


$


$OPERATING ACTIVITIESNet income (loss) for the year


296,604



(402,209
)


(1,004,835
)Adjustment to reconcile net loss to net cash used in operating activities:Provision for bad and doubtful debts


16,242



12,031



13,410Depreciation


26,620



16,453



14,229Accretion on convertible debenture


(8,772
)


21,845



31,265Interest (imputed) – related parties


—



—



—Deferred income tax recovery


(107,435
)


—



54,612Stock based compensation


151,480



61,339



222,745Finder’s fee revenue


(109,696
)


—



—Equity interest pick up


(13,897
)


—



—Gain on short term investment


(41,315
)Loss on dilution of CWN Capital


128,356



—



—Changes in non-cash working capital items:Accounts receivable


(126,047
)


(130,116
)


(20,068
)Prepaid expenses and deposits


8,391



14,445



(27,717
)Accounts payable and accrued liabilities


34,823



62,672



47,601Income taxes


254



—



—Deferred revenue


57,724



6,140



(116,264
)Due to related parties


(8,365
)


—



(27,318
)Net cash provided by (used in) operating activities


304,967



(337,400
)


(812,340
)FINANCING ACTIVITIESNon controlling interest


—



—



215,446Net cash provided by financing activities

—



—



215,446INVESTING ACTIVITIESCash eliminated upon dilution of a subsidiary


(436,805
)


—



—Purchase of equipment


(1,786
)


(39,974
)


(42,451
)Short term investments


—



1,291,726



(1,291,726
)Net cash provided by (used in) investing activities


(438,591
)


1,251,752



(1,334,177
)Effect of exchange rate changes on cash and cash equivalents


(86,628
)


60,499



(23,311
)Increase (decrease) in cash and cash equivalents


(220,252
)


974,851



(1,954,382
)Cash and cash equivalents, beginning of year


1,659,083



684,232



2,638,614Cash and cash equivalents, end of year


1,438,831



1,659,083



684,232Supplemental disclosure of cash flow informationCash paid for interest, net of interest capitalized


2,500



15,000



15,000Cash paid for income taxes


—



—



—





See accompanying notes


67


Chineseworldnet.Com Inc. & Subsidiaries




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”), a company incorporated under the laws of British Columbia, Canada. The Company also has a dormant wholly-owned subsidiary ChineseWorldNet.com HK Limited (“CWN HK”) incorporated under the laws of Hong Kong.  During the fiscal year 2008, the Company invested and owned 70% interest in ChineseWorldNet.com (Shanghai) Ltd. (“CWN China”), a company incorporated under the laws of People’s Republic of China in April 2008.  CWN China has a wholly-owned subsidiary, Weihai Consulting Investment Ltd (“Weihai”), a company incorporated under the laws of People’s Republic of China in September 2009.  The Company also has a wholly-owned subsidiary CWN Capital Inc. (“CWN Capital”), a company incorporated under the laws of British Virgin Islands in August 2009.  On December 18, 2010, the Company’s ownership interests were diluted to 23.8% upon CWN Capital Inc. issued 80,000 common shares to two companies controlled by two directors of the Company.  As the dilution has resulted in the Company ceased to own a controlling interest, the Company deconsolidated CWN Capital on December 18, 2010 and recorded its interest in CWN Capital as an equity investment.





The Company’s business is to provide online internet services through its Chinese world-wide website. The online internet services comprise banner advertisements, web page hosting and maintenance, online promotion for customers, translation services, investment seminars, investment handbooks, website contest events, and subscription fees. These services are considered as one segment based upon the Company’s organizational structure, the way in which these operations are managed and evaluated by management, the availability of separate financial results and materiality considerations.





These consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. The Company has recurring losses since its inception and requires additional funds to maintain and expand its intended business operations.  Management’s plans in this regard are to raise debt or equity financing as required which the Company has been able to finance the operations through a series of equity and debt financings and additional fund is still required to fund the Company’s anticipated business expansion.





These conditions raise substantial doubt about the Company’s ability to continue as a going concern.  These consolidated financial statements do not include any adjustments that might result from this uncertainty.





2. SIGNIFICANT ACCOUNTING POLICIES





Basis of consolidation





These consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and include the accounts of the Company and its wholly owned subsidiaries and subsidiaries which the Company owns 70% interests and its investment in CWN Capital Inc. All material inter-company accounts and transactions have been eliminated upon consolidation.


68


Chineseworldnet.Com Inc. & Subsidiaries





2. SIGNIFICANT ACCOUNTING POLICIES (cont’d.)





Use of estimates





The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Significant areas requiring the use of management estimates relate to the determination of the net recoverable value of assets, fair value of financial instruments, allowance for doubtful accounts, asset impairment, deferred income tax assets and liabilities and stock based compensation. Management makes its best estimate of the ultimate outcome of these items based on historical trends and other information available when the financial statements are prepared. Actual amounts may ultimately differ from those estimates.





Equipment





Equipment is recorded at cost, net of accumulated amortization.





Depreciation on equipment is provided on a declining-balance basis over its expected useful lives at the following annual rates:





Furniture and fixtures


20
%Computer equipment


30
%Leasehold improvement

over the term of the leaseVehicle


25
%





Cash equivalents





Cash equivalents usually consist of highly liquid investments which are readily convertible into cash with maturity of three months or less when purchased. As at December 31, 2010, the Company held $638,292  [2009 - $459,667] in cash equivalents.





Foreign currency translations





The Company, NAI, CWN HK, CWN China and Weihai maintain their accounting records in their functional currencies of U.S. dollars, Canadian dollars, HK dollars, Chinese Renminbi and Chinese Renminbi, respectively. However, the Company reports in U.S. dollars. Foreign currency transactions in the foreign subsidiaries are translated into their functional currency using the exchange rate in effect at that date for assets, liabilities, revenues and expenses. At the period end, monetary assets and liabilities denominated in the foreign currency are re-evaluated into the functional currency by using the exchange rate in effect for the period end. The resulting foreign exchange gains and losses are included in operations.





Assets and liabilities of the foreign subsidiaries are translated into the reporting U.S. dollars at exchange rates in effect at the balance sheet date. Revenues and expenses are translated at the average exchange rates. Gain and losses from such translations are included in stockholders’ equity, as a component of other comprehensive income.





Advertising expenses





The Company expensed advertising costs as incurred. Advertising expenses for the years ended December 31, 2010, 2009 and 2008 were $217,519, $131,604 and $144,906 respectively.


69


Chineseworldnet.Com Inc. & Subsidiaries





2. SIGNIFICANT ACCOUNTING POLICIES (cont’d.)





Income taxes





The Company accounts for income taxes under the provisions of Accounting Standards Codification (“ASC”) 740 (formerly 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. Valuation allowances are established when necessary to reduce deferred income tax assets to the amount expected to be realized.





On January 1, 2007 the Company adopted FAS Interpretation No. 48, “Accounting for Uncertainty in Income Taxes— an interpretation of FASB Statement No. 109 ("FIN 48")”, codified into ASC 740. FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise's financial statements in accordance with SFAS No. 109, Accounting for Income Taxes. FIN 48 describes a recognition threshold and measurement attribute for the recognition and measurement of tax positions taken or expected to be taken in a tax return and also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.





Comprehensive income





The Company accounts for comprehensive income under the provisions of ASC 220 (formerly SFAS 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. The Company’s comprehensive income (loss) consists of net earnings (loss) for the year, foreign currency translation adjustments and unrealized gain (loss) on available-for-sale securities.





Financial instruments and concentration of risks





Fair value of financial instruments is made at a specific point in time, based on relevant information about financial markets and specific financial instruments. As these estimates are subjective in nature, involving uncertainties and matters of significant judgment, they cannot be determined with precision. Changes in assumptions can significantly affect estimated fair values.





The carrying value of cash and cash equivalents, available for sale securities, accounts receivable, receivable from related parties, accounts payable and accrued liabilities and due to related parties approximates the 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 risk arising from these financial instruments.





The Company has cash and cash equivalents with various financial institutions, which may exceed insured limits throughout the year. The Company is exposed to credit loss for amounts in excess of insured limits in the event of non-performance by the institution. However, the Company does not anticipate non-performance.  As at December 31, 2010, the Company had $Nil (2009 - $Nil) in a bank beyond insured limits.





Concentration of credit risk with respect to trade receivables is limited due to the Company’s large number of diverse customers. The Company does not require collateral or other security to support financial instruments subject to credit risk.





The Company operates and incurs significant expenditures outside of the United States of America and is exposed to foreign currency risks due to the currency exchange fluctuation between the subsidiaries’ functional currency and the Company’s reporting currency.


70





Chineseworldnet.Com Inc. & Subsidiaries




2. SIGNIFICANT ACCOUNTING POLICIES (cont’d.)





Available-for-sale securities





Marketable securities are classified as available-for-sale securities and are recorded at market value. Unrealized holding gains and losses on available-for-sale securities are excluded from income and charged toAccumulated other comprehensive income as a separate component of stockholders’ equity until realized.





Non-monetary transactions





The Company entered into agreements for the supply of content for the Company’s websites in exchange for advertising, consisting primarily of links to the supplier’s websites.  The Company accounted for these transactions in accordance with ASC 845 (formerly Accounting Principles Board No. 29)Nonmonetary Transactions and with ASC 605-20 (formerly Emerging Issues Task Force No. 99-17) Revenue Recognition.  No cash was exchanged between the parties in any of these transactions.  These transactions have been recorded at a zero value, being the carrying amount of the content supplied.





Revenue recognition





Revenue consists of two main sources:





1.
Fees from banner advertisement, webpage hosting and maintenance, on-line promotion and translation services, advertising and promotion fees for customers in the Company’s Chinese Investment Guides, sponsorship fees from investment seminars, road show and forums, all of which sales prices are fixed and determinable at the time the contracts are signed and there are no provisions for refunds contained in the contracts. These revenues are recognized when all significant contractual obligations have been satisfied and collection of the resulting receivable is reasonably assured.





2.
Fees from membership subscriptions. These revenues are recognized over the term of the subscription.





Fees received in advance and require continuing performance obligation are deferred and recognized as revenue systematically over the period of services provided to customers.





Long-lived assets impairment





Long-term assets of the Company are reviewed for impairment whenever events or changes in circumstances indicate that their carrying value has become impaired, in accordance with the guidance established in ASC 360 (formerly SFAS144), Property, Plant and Equipment. An impairment loss would be recognized when the carrying amount of an asset exceeds the estimated undiscounted future cash flows expected to result from the use of the asset and its eventual disposition. The amount of the impairment loss to be recorded is calculated by the excess of the asset’s carrying value over its fair value. Fair value is generally determined using a discounted cash flow analysis.





Stock-based compensation





The Company has adopted the fair value method of accounting for stock-based compensation as recommended by ASC 718 (formerly SFAS 123R) Compensation –Stock Compensation. The Company has granted stock options to directors and certain employees for services provided to the Company under this method. The Company recognizes compensation expense for stock options awarded based on the fair value of the options at the grant date using the Black-Scholes option pricing model. The fair value of the options is amortized over the vesting period.




71


Chineseworldnet.Com Inc. & Subsidiaries





2. SIGNIFICANT ACCOUNTING POLICIES (cont’d.)





Fair value of financial instruments





The Company has adopted the provisions of ASC Topic 820, Fair Value Measurements, which defines fair value, establishes a framework for measuring fair value in GAAP, and expands disclosures about fair value measurements. ASC 820 does not require any new fair value measurements, but provides guidance on how to measure fair value by providing a fair value hierarchy used to classify the source of the information. The fair value hierarchy distinguishes between assumptions based on market data (observable inputs) and an entity’s own assumptions (unobservable inputs). The hierarchy consists of three levels:





·
Level one – Quoted market prices in active markets for identical assets or liabilities;


·
Level two – Inputs other than level one inputs that are either directly or indirectly observable; and


·
Level three – Unobservable inputs developed using estimates and assumptions, which are developed by the reporting entity and reflect those assumptions that a market participant would use.




For the period ended December 31, 2010, the fair value of cash and cash equivalents and available-for-sale securities is recognized in the balance sheet as level one per the fair value hierarchy.





Earning (Loss) per share





Earning (loss) per share is computed using the weighted average number of common shares outstanding during the period. The Company has adopted ASC 260 (formerly SFAS128),Earnings Per Share. Diluted earning (loss) per share is equal to basic loss per share because there is no potential dilutive security.





Accounts receivable





Accounts receivable are recorded at face value, less an allowance for doubtful accounts. The allowance for doubtful accounts is an estimate calculated based on an analysis of current business and economic risks, customer credit-worthiness, specific identifiable risks such as bankruptcies, terminations or discontinued customers, or other factors that may indicate a potential loss. The allowance is reviewed on a regular basis, at least annually, to ensure that it adequately provides for all reasonably expected losses in the receivable balances. An account may be determined to be uncollectible if all collection efforts have been exhausted, the customer has filed for bankruptcy and all recourse against the account is exhausted, or disputes are unresolved and negotiations to settle are exhausted. This uncollectible amount is written off against the allowance.  For the fiscal year 2010, the Company incurred an expense for bad debt and provision for allowance for doubtful accounts receivable in the amount of $16,242 (2009 - $12,031; 2008 – $13,410).





Newly adopted accounting pronouncements and new accounting pronouncements




In October 2009, the Financial Accounting Standards Board (the “FASB”) issued guidance related to revenue arrangements with multiple deliverables. Under the new guidance, when vendor specific objective evidence or third party evidence for deliverables in an arrangement cannot be determined, a best estimate of the selling price is required to separate deliverables and allocate arrangement consideration using the relative selling price method. Such guidance is to be applied on a prospective basis for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010, with early adoption permitted. The adoption of this guidance did not have any effect on our consolidated financial statements.


72


Chineseworldnet.Com Inc. & Subsidiaries





2. SIGNIFICANT ACCOUNTING POLICIES (cont’d.)





In January 2010, the FASB issued new standards in the ASC 820, Fair Value Measurements and Disclosures, which requires reporting entities to make new disclosures about recurring or nonrecurring fair-value measurements including significant transfers into and out of Level 1 and Level 2 fair-value measurements and information on purchases, sales, issuances, and settlements on a gross basis in the reconciliation of Level 3 fair-value measurements. ASU 2010-6 is effective for annual reporting periods beginning after December 15, 2009, except for Level 3 reconciliation disclosures which are effective for annual periods beginning after December 15, 2010. We do not anticipate that this update will have a material impact on our consolidated financial statements.  The Company adopted this guidance in the fiscal year 2010.  The adoption of this guidance did not have a material impact on the Company’s financial statements.





In February 2010, the FASB issued Accounting Standards Update (“ASU”) 2010-09 Subsequent Event (Topic 855) Amendments to Certain Recognition and Disclosure Requirements. ASU 2010-09 removes the requirement for an SEC filer to disclose a date through which subsequent events have been evaluated in both issued and revised financial statements. Revised financial statements include financial statements revised as a result of either correction of an error or retrospective application of GAAP. All of the amendments in ASU 2010-09 are effective upon issuance of the final ASU, except for the use of issued date for conduit debt obligors. The Company adopted this guidance in the fiscal year 2010.  The adoption of this guidance did not have a material impact on the Company’s financial statements.





In December 2010, the FASB amended its guidance related to Step 1 of the goodwill impairment test for reporting units with zero or negative carrying amounts. For those reporting units, an entity is required to perform Step 2 of the goodwill impairment test if it is more-likely-than-not that a goodwill impairment exists. In determining whether it is more-likely-than-not that a goodwill impairment exists, consideration should be made as to whether there are any adverse qualitative factors indicating that an impairment may exist. The adoption of the new accounting guidance is not expected to have a material impact on our consolidated financial statements.





In December 2010, the FASB amended its guidance related to business combinations entered into by an entity that is material on an individual or aggregate basis. These amendments clarify existing guidance that if an entity presents comparative financial statements that include a material business combination, the entity should disclose revenue and earnings of the combined entity as though the business combination that occurred during the current year had occurred as of the beginning of the comparable prior annual reporting period. The amendments also expand the supplemental pro forma disclosures to include a description of the nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business combination included in the reported pro forma revenue and earnings. The requirements of the amended guidance are effective for us December 31, 2011 and early adoption is permitted. This disclosure-only guidance will not have a material impact on our results of operations, financial position or cash flows.





Management does not believe that any other recently issued, but not yet effective, accounting standards could have a material effect on the accompanying financial statements. As new accounting pronouncements are issued, the Company will adopt those that are applicable under the circumstances.


73


Chineseworldnet.Com Inc. & Subsidiaries





3. AVAILABLE-FOR-SALE SECURITIES





Available-for-sale securities consist of marketable securities and are summarized as follows:





Gross


Gross


Accumulatedunrealized


unrealized


unrealized


MarketCost

$


gains

$


losses

$


losses

$


value

$December 31, 2008


1,009



—



(1,006
)


(1,006
)


3Change during the year


—



—



1



1



1December 31, 2010 and 2009


1,009



—



(1,005
)


(1,005
)


4





4. ACCOUNTS RECEIVABLE





December 31,

2010


December 31,

2009Accounts receivable


287,105



217,406Allowance for doubtful accounts


(16,242
)


(52,153
)Total


270,863



165,253





5. EQUIPMENT





Accumulated


Net bookCost

$


amortization

$


value

$2010Furniture and fixtures


35,830



25,613



10,217Computer equipment


98,309



84,049



14,260Leasehold improvement


25,674



25,674



-Vehicle


35,066



9,022



26,044194,879



144,358



50,5212009Furniture and fixtures


34,154



21,537



12,617Computer equipment


91,849



74,819



17,030Leasehold improvement


24,753



14,526



10,227Vehicle


33,807



669



33,138184,563



111,551



73,012





6. LONG TERM INVESTMENTS





During the fiscal year 2010, the Company’s investment in CWN Capital was diluted to 23.8% upon CWN Capital  issued 80,000 of its common stocks to two companies controlled by two directors of the Company.


74





Chineseworldnet.Com Inc. & Subsidiaries





6. LONG TERM INVESTMENTS (cont’d)





The dilution occurred on October 1, 2010 and December 18, 2010 which CWN Capital issued 25,000 and 55,000 common stocks at a price of $0.01 and $1.00 per share of its common stock to a company controlled by a director of the Company and another company controlled by another director of the Company, respectively.  The above issuance of CWN Capital common stocks diluted the Company’s ownership interest in CWN Capital down to 50% and 23.8%, respectively. Upon the issuance of 55,000 common stocks of CWN Capital on December 18, 2010, the Company has become a non-controlling shareholder, which the Company (the former parent) deconsolidated CWN Capital from its consolidated financial statements in accordance with ASC 810-10-65 (formerly SFAS 160 Non-controlling Interests in Consolidated Financial Statements – an amendment of ARB No. 51), and subsequently the Company accounts for its investment in the CWN Capital under the equity method.





Pursuant to ASC 810-10-65 (formerly SFAS 160 Non-controlling Interests in Consolidated Financial Statements – an amendment of ARB No. 51), upon the deconsolidation of CWN Capital, the Company’s retained non-controlling equity investment in the CWN Capital (former subsidiary) was initially measured at fair value which is estimated at $112,218 which the Company recognized a dilution loss of $128,356.





For the fiscal year 2010 consolidated financial statements, the Company included the account of CWN Capital for the period from January 1, 2010 to December 17, 2010 and recorded an equity income of $13,897 for the period from December 18, 2010 to December 31, 2010, which resulted in a net investment of $126,115.





7. CONVERTIBLE DEBENTURES





On March 1, 2007, convertible debentures were issued to an investor as a working capital of $250,000 with advances secured by an unregistered three-year convertible debenture, which are due on February 28, 2010. Simple interest accrues at 6% per annum on the amount of principal outstanding. The debentures are convertible into common shares of the Company upon the Company completing its registration statement with the relevant securities commission. The principal amount of this note may be converted at a conversion price to US$1.00 per share, in whole or in part, by the Holder at any time until the note is repaid in full by the Company. In connection with the issuance of the convertible debenture, the investor also received 75,000 warrants which are exercisable at any time between March 1, 2007 and February 28, 2010 at a price of $1.30 per share.  Each warrant converts into one common stock of the Company.





In accordance with ASC 470-20 (formerly EITF No. 00-27), Debt with Conversion and Other Options, the Company recorded $29,046, $29,047 and $191,907 to the share purchase warrants, beneficial conversion feature and convertible debt, respectively.





On February 24, 2010, the Company issued 250,000 common shares at the price of US$1.00 to the holder of a convertible note for the conversion of the convertible note.





8. INCOME TAXES





The parent company is not subject to income taxes.





Income tax expense varies from the amount that would be computed from applying the combined federal and provincial income tax rate to loss before taxes as follows:


75





Chineseworldnet.Com Inc. & Subsidiaries





8. INCOME TAXES (cont’d)





2010

$


2009

$


2008

$Net loss for the year


189,168



(402,209
)


(950,223
)Statutory Cayman Islands corporate tax rate


0
%


0
%


0
%Anticipated tax recovery


—



—



—Change in tax rates resulting from:Impact of foreign exchange movement


—



(2,437
)


(896
)Foreign tax rate differential


1,678



(80,125
)


(118,032
)Effect of tax change


15,032



—



—Others


1,715



4,451



4,495Loss carry forward utilized


(63,623
)


—



—Change in valuation allowance


(62,237
)


78,111



169,045Income tax expense (recovery)


(107,435
)


—



54,612





The significant components of the Company’s deferred tax assets are as follows:





2010

$


2009

$


2008

$Non-capital loss carryforwards


272,084



298,000



291,000Equipment and furniture


918



6,700



2,000Others


(2,376
)


(4,600
)


5,000270,626



300,100



298,000Valuation allowance


(159,712
)


(300,100
)


(298,000
)Net deferred income tax assets


110,914



—



—





The Company has non-capital losses available for Canadian income tax purposes which may be carried forward to reduce taxable income in future years. If not utilized, the non-capital losses in the amount of $430,000 expire as follows:





$2026


124,0002029


235,0002030


71,000430,000





The Company also has non-capital losses available for Chinese income tax purposes which may be carried forward to reduce taxable income in future years. If not utilized, the non-capital losses in the amount of $645,000 expire as follows:





$2012


184,0002013


249,0002014


212,000645,000


76




Chineseworldnet.Com Inc. & Subsidiaries





9. STOCKHOLDERS’ EQUITY





Common Stocks





On April 22, 2010, the Company issued 250,000 common stocks for the settlement of convertible debentures of $250,000.





Stock Options





On October 11, 2007, the Company granted key officers and directors 550,000 stock options, which expire on October 11, 2012 with each stock option entitling its holder to purchase one common share at $1.08.





On June 10, 2010, the Company granted key officers and directors 1,090,000 stock options, which expire on June 10, 2015 with each stock option entitling its holder to purchase one common share at $0.60, which are vested 20% on the first anniversary of the grant date and remaining 80% shall become vested in four equal yearly installments on each of the four anniversary dates of the grant date subsequent to the first anniversary of the grant date.





As at December 31, 2010, the Company has 1,540,000 stock options outstanding:





Number of Options


Weighted

Average Exercise

PriceBalance, December 31, 2009 and 2008


495,000


$
1.08Forfeited


(45,000
)


1.08Granted


1,090,000



0.60Balance, December 31, 2010


1,540,000


$
0.74





Exercise price


Outstanding as at December 31,2010


Exercisable as at December 31, 2010Number of

Options

Weighted

Average

Exercise

Price


Weighted

Average

Remaining

Contractual

Life (years)


Number of

Options


Weighted

Average

Exercise

Price$
1.08


450,000

$
1.08



1.78



270,000


$
1.080.60


1,090,000


0.60



4.44



-



-1,540,000

$
0.74



3.67



270,000


$
1.08





Exercise price


Outstanding as at December 31, 2009


Exercisable as at December 31,2009Number of

Options

Weighted

Average

Exercise

Price


Weighted

Average

Remaining

Contractual

Life (years)


Number of

Options


Weighted

Average

Exercise

Price$
1.08


495,000

$
1.08



2.78



198,000


$
1.08





The weighted average fair value of stock options granted during the year was $0.30 and the Company recorded stock based compensation expense of $151,480 (2009- $61,339 and 2008-$222,745) for options granted in the current and previous years. The fair value of each option granted is estimated on the date of the grant using the Black-Scholes option pricing model with weighted average assumptions for grants as follows:


77




Chineseworldnet.Com Inc. & Subsidiaries





9. STOCKHOLDERS EQUITY (cont’d.)





2010Risk-free interest rate


2.65
%Expected life of options

5 yearsAnnualized volatility


76.71
%Dividend rate


0
%





Share Purchase Warrants





A summary of share purchase warrants is as follows:





Exercise Price


NumberBalance, December 31, 2009 and 2008


1.30



75,000Expired


1.30



(75,000
)Balance, December 31, 2010

$
-



-





On February 28, 2010, all warrants expired unexercised.





10. RELATED PARTY TRANSACTIONS





[a]
In 2010, the Company incurred $96,000 [2009 - $96,000 and 2008 - $84,000] in consulting fees to two companies related to a director of the Company, of which there were no outstanding balance as at December 31, 2010.




[b]
In 2010, the Company paid $124,951 [2009 - $110,383 and 2008 - $80,360] salary to current and former senior officers of the Company.




[c]
As at December 31, 2010, the Company has non-interest bearing advances from a stockholder and director of $2,128 [2009 - $128]. In 2010, the Company recorded imputed interest of $Nil [2009 - $Nil and 2008 - $Nil] at an interest rate of 4% per annum on these advances.




[d]
Included in accounts payable, $12,252 [2009 - $23,160] was payable to directors and senior officers of the Company.




[e]
Included in accounts receivable, $4,601 [2009 - $Nil] was receivable from senior officers of the Company.




[f]
As at December 31, 2010, the Company provided an advance of $2,572 [2009 - $2,579] to a director as a prepaid expenses.




[g]
In 2010, the Company provided service for a total of $ 57,636 [2009 - $144,956 and 2008 - $Nil] to a company whose director and shareholder is also a director and shareholder of the company, of which $100,446 [2009 - $40,523] was outstanding as at December 31, 2010.




78


Chineseworldnet.Com Inc. & Subsidiaries





[h]
In 2010, the Company incurred $12,000 [2009 - $8,000 and 2008 - $Nil] in director fees, of which $2,000 [2009 - $Nil] was outstanding as at December 31, 2010.





[i]
In 2010, the Company provided service for a total of $ 139,091 [2009 - $Nil and 2008 - $Nil] to CWN Capital, of which $139,091 [2009 - $Nil] was outstanding as at December 31, 2010.





All related party transactions were entered into in the normal course of business and are recorded at the exchange amount established and agreed to between the related parties.





11.  GEOGRAPHIC INFORMATION





The Company’s head office is located in Vancouver, British Columbia, Canada. The operations of the Company are primarily in two geographic areas: Canada and China. A summary of geographical information for the Company’s assets and net loss for the years is as follows:





Year ended December 31, 2010

Canada


China


TotalRevenue from external customers

$
1,684,766


$
48,563


$
1,733,329Net income (loss)


686,113



(389,509
)


296,604Total assets

$
1,988,406


$
182,813


$
2,171,219





Year ended December 31, 2009

Canada


China


TotalRevenue from external customers

$
728,098


$
178,357


$
906,455Net income (loss)


(154,710
)


(247,499
)


(402,209
)Total assets

$
1,581,601


$
351,420


$
1,933,021





12. COMMITMENTS





The Company has entered into operating leases for automobile and office space. Minimum future rental payments under these leases are as follows:





$2011


78,1512012


8,0922013


6,068Total


92,311





13.  SUBSEQUENT EVENTS





[a]
Subsequent to the year end, the Company entered a new consulting agreement with Silver Lake Investment Partners, Limited controlled by a director of the Company.  The Company will be charging $2,000 per month for the consulting fee from January 1 to December 31, 2011. Also, the Company entered a new consulting agreement with Goldpac Investments Ltd., a company controlled by a director of the Company.  The Company will be charging $20,000 per quarter for the consulting fee from January 1, 2011 to December 31, 2011.




79


Chineseworldnet.Com Inc. & Subsidiaries





[b]
Subsequent to the year end, in March 2011, the Company completed substantially all of the regulatory procedures and processes with Shanghai Compass, the other shareholder of CWN China and invested further 5,000,000 Renminbi to CWN China which result of the Company’s financial interest increased from 70% to 85%.


[c]
Subsequent to the year end, on February 1, 2011, the Company issued incentive stocks options with the right to purchase up to 1,090,000 Common Shares to its directors, officers, and employees.  All of these options granted on February 1, 2011 have an exercise price of $0.60 per share and a vesting period of 1 to 5 years, and a term of 5 years expiring on February 1, 2016.





14.  COMPARATIVE FIGURES





Certain of comparative figures have been reclassified to conform with the presentation adopted in the current period.


80