U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarter ended September 30, 2006
[_] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from _____ to _____
Commission File Number: 333-125581
PAY88, INC.
(Exact name of small business issuer as specified in its charter)
Nevada 20-3136572
------ ----------
(State of incorporation) (IRS Employer ID Number)
1053 North Barnstead Road, Barnstead, NH 03225
(Address of principal executive offices)
(603) 776-6044
(Issuer's telephone number)
----------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. YES [ X ] NO [ ]
Number of shares of common stock outstanding as of November 14, 2006: 10,000,000
shares of common stock.
Transitional Small Business Format Yes [ ] No [ X ]
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). YES [ ] NO [ X ]
TABLE OF CONTENTS
Page
PART I
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis or Plan of Operation
Item 3 Controls and Procedures
PART II
Item 1. Legal Proceedings
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
PAY88, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 2006
(Unaudited)
ASSETS
Current Assets:
Cash and Cash Equivalents $ 23,212
Accounts Receivable 40,878
Inventories 261,524
---------
Total Current Assets 325,614
Property and Equipment, Net 437,686
Other Assets:
Trademark, Net 447
---------
Total Assets $ 763,747
=========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable $ 144,145
Accrued Liabilities 50,259
Loans Payable - Related Party 103,197
Note Payable - Related Party 80,385
---------
Total Current Liabilities 377,986
---------
Stockholders' Equity:
Preferred Stock, $.001 par value; 5,000,000 shares authorized,
5,000,000 shares issued and outstanding 5,000
Common Stock, $.001 par value; 100,000,000 shares authorized,
10,000,000 shares issued and outstanding 10,000
Additional Paid-In Capital 533,770
Accumulated Deficit (161,965)
Accumulated Other Comprehensive Income (Loss) (1,044)
---------
Total Stockholders' Equity 385,761
---------
Total Liabilities and Stockholders' Deficiency $ 763,747
=========
The accompanying notes are an integral part of these financial statements.
PAY88, INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
For the Period
For the Three April 24, 2006
Months Ended (Inception) To
September 30, 2006 September 30, 2006
------------------ ------------------
Sales - Net $ 329,006 $ 329,006
Cost of Good Sold 321,584 321,584
------------ ------------
Gross Profit 7,422 7,422
------------ ------------
Operating Expenses:
Advertising 23,273 23,273
Salaries and Related Costs 26,058 36,455
Professional Fees 41,035 81,136
Other General and Administrative Expense 27,491 28,541
------------ ------------
Total Operating Expenses 117,857 169,405
------------ ------------
Loss from Operations (110,435) (161,983)
------------ ------------
Other Income (Expense)
Interest Expense - Related Party (581) (581)
Interest Income 348 599
------------ ------------
Total Other Income (Expense) (233) 18
------------ ------------
Net Loss $ (110,668) $ (161,965)
============ ============
Basic and Diluted Loss Per Common Share $ (0.01) $ (0.02)
============ ============
Weighted Average Basic Common Shares Outstanding 10,000,000 10,000,000
============ ============
The accompanying notes are an integral part of these financial statements.
PAY88, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIOD APRIL 24, 2006 (INCEPTION) TO SEPTEMBER 30, 2006
(Unaudited)
Cash Flows from Operating Activities:
Net Loss $(161,965)
Adjustments to Reconcile Net Loss to
Net Cash (Used) by Operating Activities:
Changes in Assets and Liabilities:
Depreciation and Amortization 5,640
(Increase) in Accounts Receivable (40,878)
(Increase) in Inventories (261,524)
Increase in Accounts Payable 144,145
Increase in Accrued Liabilities 24,676
---------
Net Cash (Used) by Operating Activities (289,906)
---------
Cash Flows from Investing Activities:
Capital Expenditures (443,318)
Trademark Registration (455)
---------
Net Cash (Used) by Investing Activities (443,773)
---------
Cash Flows from Financing Activities:
Proceeds from Issuance of Common Stock 729,569
Proceeds from Loans Payable - Related Party 27,157
Cash of Business Acquired 1,209
---------
Net Cash Provided by Financing Activities 757,935
---------
Effect of Exchange Rate Changes on Cash (1,044)
---------
Net Change in Cash and Cash Equivalents 23,212
Cash and Cash Equivalents - Beginning of Period --
---------
Cash and Cash Equivalents - End of Period $ 23,212
=========
Supplemental Disclosures of Cash Flow Information:
Interest Paid $ --
=========
Income Taxes Paid $ --
=========
Supplemental Disclosure of Non-Cash Financing Activities:
Preferred Stock Issued in Connection with Recapitalization $ 5,000
=========
The accompanying notes are an integral par of these financial statements.
PAY88, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - Basis of Presentation
Organization
On September 5, 2006, Pay88, Inc. ("Pay88") entered into a Share Purchase
Agreement (the "Share Purchase Agreement") with Chongqing Qianbao Technology
Ltd., a limited Liability company organized under the laws of the People's
Republic of China ("Qianbao"), Ying Bao ("Bao"), and Chongqing Yahu Information
Development Co., Ltd., a limited liability company organized under the laws of
the People's Republic of China ("Yahu"; and together with Bao, the "Qianbao
Shareholders"). Pursuant to the Share Purchase Agreement, Pay88 agreed to
acquire Qianbao at a closing held simultaneously therewith by purchasing from
the Qianbao Shareholders all of their respective shares of Qianbao's registered
capital stock, which represent 100% of the issued and outstanding registered
capital stock of Qianbao. In consideration therefore, Pay88 agreed to issue to
the Qianbao Shareholders an aggregate of 5,000,000 shares of Pay88 Series A
Convertible Preferred Stock, to be allocated between the Qianbao Shareholders as
follows: 4,950,000 shares to Yahu and 50,000 shares to Bao. Mr. Tao Fan, a
brother of Mr. Guo Fan, a director and officer of Pay88, is the Chief Executive
Officer of Yahu and owns 5% of its issued shares of capital stock.
The Series A Preferred Stock is convertible into 14,000,000 shares of
Pay88 common stock. The holders of shares of Series A Preferred Stock are
entitled to the number of votes equal to the number of shares of common stock
into which such shares of Series A Preferred Stock could be converted. With the
issuance of the 5,000,000 shares of Pay88 Series A Preferred Stock, Qianbao's
stockholders have voting control of Pay88 (approximately 58%) and therefore the
acquisition was accounted for as a reverse acquisition. The combination of the
two companies is recorded as a recapitalization of Qianbao pursuant to which
Qianbao is treated as the continuing entity.
Qianbao was incorporated on April 24, 2006 in Chongqing, China. Qianbao is
building a web distribution platform to provide effective services for
connecting diversified service providers and consumer product suppliers to
retailers and consumers in the Chinese market. Qianbao is also engaged in the
business of wholesale and retail of electronic products, such as game cards and
phone cards.
Pay88, Inc. and Chongqing Qianbao Technology Ltd. are hereafter
collectively referred to as "the Company".
Condensed Financial Statements
In the opinion of the Company's management, the accompanying unaudited
condensed consolidated financial statements contain all adjustments (consisting
of only normal recurring adjustments) necessary to present fairly the
information set forth therein. These financial statements are condensed and
therefore do not include all of the information and footnotes required by
accounting principles generally accepted in the United States of America for
complete financial statements.
Results of operations for interim periods are not necessarily indicative
of the results of operations for a full year.
Consolidation
The accompanying unaudited condensed consolidated financial statements
included the accounts of Pay88 (Parent) and its wholly owned subsidiary
("Qianbao"). All significant intercompany transactions have been eliminated in
consolidation.
PAY88, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - Basis of Presentation (Continued)
Going Concern
The Company incurred a net loss of $161,964 for the period April 24, 2006
(inception) to September 30, 2006. In addition, the Company had a working
capital deficiency of $52,372 at September 30, 2006. These factors raise
substantial doubt about the Company's ability to continue as a going concern.
There can be no assurance that sufficient funds will be generated during
the next year or thereafter from operations or that funds will be available from
external sources such as debt or equity financings or other potential sources.
The lack of additional capital could force the Company to curtail or cease
operations and would, therefore, have a material adverse effect on its business.
Furthermore, there can be no assurance that any such required funds, if
available, will be available on attractive terms or that they will not have a
significant dilutive effect on the Company's existing stockholders.
The Company is attempting to address its lack of liquidity by raising
additional funds, either in the form of debt or equity or some combination
thereof. There can be no assurances that the Company will be able to raise the
additional funds it requires.
The accompanying condensed consolidated financial statements do not
include any adjustments related to the recoverability or classification of
asset-carrying amounts or the amounts and classifications of liabilities that
may result should the Company be unable to continue as a going concern.
NOTE 2 - Summary of Significant Accounting Policies
Trade Receivables and Allowance for Bad Debts
Trade accounts receivable are reported at the amounts management expects
to collect from outstanding balances. The Company will provide an allowance for
doubtful accounts based on the ages of accounts receivable. Currently, all
accounts receivable are outstanding under 30 days. Therefore, no allowance for
doubtful accounts is provided in the reporting period.
Inventories
Inventories consist primarily of purchased game and phone cards and are
valued at the lower of cost or market (first-in, first-out method).
Property and Equipment
Office space, fixtures and equipment are stated at cost. The costs of
additions and betterments are capitalized and expenditures for repairs and
maintenance are expensed in the period incurred. When items of property and
equipment are sold or retired, the related costs and accumulated depreciation
are removed from the accounts and any gain or loss is included in income.
Depreciation of office space is calculated utilizing the straight-line
method over a thirty-one year period. Depreciation of fixtures is calculated
utilizing the straight-line method over a seven year period. Depreciation of
computers, servers, office equipment and transportation equipment are calculated
utilizing the straight-line method over a five year period.
PAY88, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - Summary of Significant Accounting Policies (Continued)
Intangible Assets
Trademark is being amortized on a straight-line basis over the registered
life of ten years.
Revenue Recognition
The Company's revenue is derived from the resale of game cards in the
reporting period. The revenue is recognized at the point of shipment.
Advertising Costs
Advertising costs are generally expensed as incurred and are included in
operating expenses. Any deferred advertising costs are classified as prepaid
expenses and will be expensed in the first year used. Adverting costs for the
period ended September 30, 2006 amounted to $23,273.
Income Taxes
No provision has been made for corporation income taxes due to the current
loss. In addition, no future tax benefit has been calculated. According to the
tax regulation of China, the amount of loss that will carry over to the next tax
period should be assessed and approved by the tax regulation agency. The maximum
carry over period is five years in China.
Foreign Currency Translation
The financial statements of the Company are translated pursuant to
Statement of Financial Accounting Standards (SFAS) No. 52 - "Foreign Currency
Translation." Qianbao is located and operated in China. The Chinese Yuan is the
functional currency. The current rate method has been used to translate
financial statements into US dollars. Foreign exchange rates from Federal
Reserve Statistical Release were used. At September 30, 2006, the exchange rate
was 1CN(Y) = 0.1265US$. During July, August and September, the quarterly average
exchange rate was 1CN(Y) = 0.1255US$.
NOTE 3 - Office Units
The purchase of three units of office space was closed on July 3, 2006.
Total cost of office space amounted $388,321 (3,069,732 Chinese Yuan), which
included initial cost, initial build out expenses, title, registration and
taxes, and one time payment to the building repair fund.
In People's Republic of China, land is owed by the State. The land lease
of office spaces will expire in May 2037.
NOTE 4 - Note and Loans Payable - Related Party
Loans payable to the Company's CEO represents advances bearing interest at
5% per annum that are payable on demand. Interest expense for the period
September 6, 2006 to September 30, 2006 was $308. Note payable to the Company's
CEO bears interest at 5% per annum and is payable on August 31, 2008. Interest
expense for the period September 6, 2006 to September 30, 2006 was $273.
PAY88, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5 - Commitments and Contingencies
On August 3, 2005, the Company entered into a five year agreement with
Chongqing Yahu Information Limited ("Yahu"). Yahu is a Chinese corporation
formed by Mr. Tao Fan, a brother of Mr. Guo Fan, a significant stockholder,
director and officer of the Company. The Agreement provides for two services to
be provided to the Company by Yahu. The first service is the provision of all
proprietary software needed to effectuate fund transfers between the U.S. and
China. The second service to be provided is technical assistance in the areas of
installation and future product support. This support includes assistance with
all technical aspects of the software as well as problem resolution and general
inquiries. Both of these services are to be provided to the Company by Yahu for
a licensing fee that is based upon 20% of the gross fund transfer revenues. The
fee is payable on a quarterly basis. The use of the software will enable the
Company to provide wire transfers from the U.S. to China.
NOTE 6 - Related Party Transactions
Rent
The Company rents office space owned by an officer of the Company for $200
per month on a month to month basis. Rent expense amounted was $200 for the
period September 6, 2006 to September 30, 2006.
Accrued Liabilities
Included in accrued liabilities at September 30, 2006 is accrued interest
to the Company's CEO in the amount of $7,210 and accrued rent to the Company's
Secretary in the amount of $3,600.
The Company purchased computer equipment and fixtures in the amount of
$41,074 (324,698 Chinese Yuan) from Chongqing Yahu Information Development Co.
Ltd. The purchase price of the equipment was assessed and decided by an
independent third party.
NOTE 7 - Concentration of Credit Risk
The Company maintains a cash balance in Minsheng Bank, China Merchant Bank
and Industrial and Commercial Bank of China. Currently, no deposit insurance
system has been set up in China. Therefore, the Company will bear a risk if any
of these banks becomes insolvent. As of September 30, 2006, the Company's
uninsured cash balance was $22,978 (181,647) Chinese Yuan.
The financial position and operations of Qianbao are recorded in Chinese
Yuan. Therefore, exchange rate fluctuations could affect the future business
operations of the Company.
Item 2. Management's Discussion and Analysis or Plan of Operations.
As used in this Form 10-QSB, references to "Pay88", the "Company," "we," "our"
or "us" refer to Pay88, Inc. unless the context otherwise indicates.
Forward-Looking Statements
The following discussion should be read in conjunction with our financial
statements, which are included elsewhere in this Form 10-QSB. We and our
representatives may, from time to time, make written or verbal forward-looking
statements, including statements contained in our filings with the United States
Securities and Exchange Commission and in our reports to shareholders.
Generally, the inclusion of the words "believe", "expect", "intend", "estimate",
"anticipate", "will", and similar expressions or the converse thereof, identify
statements that constitute "forward-looking statements".
These forward-looking statements are subject to uncertainties and other factors
that could cause actual results to differ materially from such statements as a
result of a number of risks and uncertainties including: (a) those risks and
uncertainties related to general economic conditions, (b) whether we are able to
manage our planned growth efficiently and operate profitable operations, (c)
whether we are able to generate sufficient revenues or obtain financing to
sustain and grow our operations, (d) whether we are able to successfully fulfill
our primary requirements for cash.
Overview
We were incorporated on March 22, 2005 under the name "Pay88, Ltd." in the State
of New Hampshire. We subsequently decided to reincorporate in the State of
Nevada by merging with and into Pay88, Inc., a Nevada corporation formed for
such purpose on July 7, 2005. Such merger was effectuated on August 9, 2005.
Through our wholly-owned subsidiary, "Chongqing Qianbao Technology Ltd.", a
Chinese limited liability company ("Qianbao"), we operate a distribution
platform on Qianbao's website, www.iamseller.com, on which various suppliers of
consumer products offer their products for sale to consumers or retailers
visiting such website. We generate revenues by earning commissions on such
sales, which generally range from two to five percent of revenues generated by
sales made on our website. We also intend to engage in the provision of online
money transfer services between the United States and China.
1. Our Consumer Products Business
On September 5, 2006, we acquired Chongqing Qianbao Technology Ltd., a limited
liability company organized under the laws of the People's Republic of China
("Qianbao"), by purchasing all of its issued and outstanding shares of
registered capital stock from its two shareholders, Ying Bao, a Chinese
resident, and Chongqing Yahu Information Development Co., Ltd., a Chinese
limited liability company ("Yahu"). In consideration therefor, we issued to
Qianbao's shareholders an aggregate of 5,000,000 shares of our Series A
Convertible Preferred Stock, which was allocated between them as follows:
4,950,000 shares to Yahu and 50,000 shares to Bao. Mr. Tao Fan, a brother of Mr.
Guo Fan, a director and officer of Pay88, is the Chief Executive Officer of Yahu
and owns 5% of its issued shares of capital stock.
With the issuance of the 5,000,000 shares of our Series A Preferred Stock,
Qianbao's shareholders have voting control of our Company (approximately 58% and
therefore the acquisition was accounted for us a reverse acquisition. The
combination of our Company and Qianbao is recorded as a recapitalization of
Qianbao pursuant to which Qianbao is treated as the continuing entity.
Qianbao was incorporated on April 24, 2006, under the name "Chongqing Qianbao
Technology Ltd." under the laws of the People's Republic of China. Qianbao
maintains an internet website, http://www.iamseller.com, on which it operates a
distribution platform through which various suppliers of consumer products are
able to offer their products for sale to consumers or retailers visiting such
websites. At present, the main products offered for sale on such website include
the following: prepaid game cards, which allow the holder thereof to play online
games for the designated allotted time; prepaid calling cards; and prepaid study
cards, which allow the holder thereof to use online software that assists in the
learning of various subjects including Chinese, English and cooking. Qianbao
expects to generate revenue by earning commissions on the sales of such products
and other products made from its website. The commission is a percentage of the
revenues generated from such sales; the specific amount of such percentage is
negotiated between Qianbao and each supplier of products sold on Qianbao's
website and generally ranges from two to five percent.
The following companies supply products to be sold on Qianbao's website:
Shandong Tianfu Online Platform (supplier of game cards); Sifang Online
Distribution Platform (supplier of game cards); Chongqing Digital World
(supplier of phone cards); Chongqing E Net Chongqing Sifang (supplier of phone
cards); Chongqing Taoxing (supplier of study cards); and Chongqing Dezheng
Technology Development. We have not entered into any agreements with any of such
suppliers.
Qianbao currently has forty-eight employees, all of whom are employed on a full
time basis. Twenty employees are involved in technical operations of the
company, twenty are involved in sales and marketing, and the remainder is
involved in human resources and finances.
2. Our Online Money Transfer Business
Since our inception, we have been planning to become involved in the business of
facilitating online money transfers from the United States to China. Our goal is
to offer persons in the United States near instantaneous, efficient and secure
online money transfer services to persons in China. In a typical money transfer,
we anticipate that a customer located in the United States will conduct money
transfer transactions on the internet via our website, which we intend to
develop. Utilizing our website, which has yet to be developed, a customer will
transfer money using a credit card or a debit from a bank account. The customer
will be able to visit our web site and use his or her credit card to credit his
or her account for the amount of money that the customer desires to transfer to
a designated recipient in China. Immediately after such transaction over the
internet, the recipient's account in China will be credited with the funds. Then
the recipient can go to its bank in China and withdraw the money. When the
customer initiates the transfer, the software will inform him as to the amount
of fees we are to be paid as a result of the transaction. The fee paid to us
from the sending customer will be based on the amount to be transferred and the
location at which the funds are to be received. We expect our money transfer
revenues to be derived primarily from consumer transaction fees and revenues
from currency exchange on international money transfers.
On August 3, 2005, we entered into a five (5) year agreement with Chongqing Yahu
Information Development Co., Ltd., a Chinese limited liability company ("Yahu"),
pursuant to which Yahu will provide to us the software we need to process money
transfers. Mr. Tao Fan, a brother of Mr. Guo Fan, a director and officer of
Pay88, is the Chief Executive Officer of Yahu and owns 5% of its issued shares
of capital stock. The agreement provides for two services to be provided to us
by Yahu. The first service is the provision of all proprietary software needed
to effectuate fund transfers between the United States and China. The second
service to be provided is technical assistance in the areas of installation and
future product support. This support includes assistance with all technical
aspects of the software as well as problem resolution and general inquiries.
Both of these services are to be provided to us by Yahu for a licensing fee that
is based upon 20% of the gross fund transfer revenues. The fee is payable on a
quarterly basis.
We hope that this agreement will assist us towards establishing us as a quality
internet money transfer service provider. We believe that such software is easy
to use for the consumer, has the ability to interact with relative ease with
other businesses and financial institutions, and is secure enough to accommodate
the strict internet security regulations of both the United States and China. We
also believe that the software addresses the following requirements: experience
in the China marketplace; real time transactions; ease of use; reliable and
detailed account information; system expandability; internet based; where no
bank/credit card is available, payment can be made when client deposits money
with a financial institution which holds the money for the client (knows as an
electronic purse) ; transactions and transaction data be encrypted with the
state-of-the-art network security technology; free registration; low cost of
transaction; and on-going technical assistance and support.
We recognize that our current management and Board of Directors do not have
sufficient marketing experience to create and execute an effective marketing
plan. Accordingly, it is our intention to seek out a consulting firm(s) that
specializes in this arena. Currently, we are focusing our efforts on developing
a request for proposal for prospective marketing firms. Generally we are seeking
firms with experience in the Chinese American population.
Plan of Operation
During the three month period ended September 30, 2006, we commenced the
operation of our distribution platform on Qianbao's website, www.iamseller.com,
on which various suppliers of consumer products offer their products for sale to
consumers or retailers visiting such website. As a result of the commencement of
our business operations, we began generating revenues by earning commissions on
such sales, which generally range from two to five percent of revenues generated
by sales made on our website. Over the next twelve months, we will continue such
business operations.
As of September 30, 2006, we had $23,212 in cash. We believe that such funds,
together with our revenues, will be sufficient to pay our operating expenses and
effectuate our plans with respect to Qianbao's business operations over the next
twelve months.
We may seek additional capital for the purpose of financing our plans with
respect to our proposed money transfer business. We expect to incur a minimum of
$250,000 in expenses in order to effectuate our plans regarding our money
transfer business. We estimate that this will be comprised mostly of
professional fees including; $50,000 towards the procurement of the required
regulatory licenses, $75,000 towards the planning of a comprehensive marketing
campaign and $25,000 towards addressing technological infrastructure concerns.
Additionally, $100,000 will be needed for general overhead expenses such as for
salaries, corporate legal and accounting fees, office overhead and general
working capital. Accordingly, we will have to raise the funds to pay for these
expenses.
There can be no assurance that additional capital will be available to us.
Although we generally intend to raise additional funds, we have no specific
plans, understandings or agreements with respect to such an offering, and we
have given no contemplation with respect to the securities to be offered or any
other issue with respect to any offering. We may seek to raise the required
capital by other means. We will have to issue debt or equity or enter into a
strategic arrangement with a third party. We currently have no agreements,
arrangements or understandings with any person to obtain funds through bank
loans, lines of credit or any other sources. Since we have no such arrangements
or plans currently in effect, our inability to raise funds for a marketing
program will have a severe negative impact on our ability to remain a viable
company because even though we have the technical platform to provide wire
transfer services, no one will know we can provide these services.
Results of Operation
We earned no revenues prior to the three month period ended September 30, 2006.
For the three month period ended September 30, 2006 net sales were $329,006 and
the cost of goods sold was $321,584, generating $7,422 in gross profit. General
and administrative expenses for the three month period ended September 30, 2006
were $117,857, consisting if $23,273 in advertising expenses, $26,058 in
salaries and related costs, $41,035 in professional fees, and $27,491 in other
general and administrative expenses. General and administrative expenses for the
period April 24, 2006 (inception) through September 30, 2006 were $169,405.
Liquidity and Capital Resources
We incurred a net loss of $161,964 for the period April 24, 2006 (inception) to
September 30, 2006. In addition, the Company had a working capital deficiency of
$52,372 at September 30, 2006. As of September 30, 2006, we had $23,212 in cash.
Going Concern Consideration
The condensed financial statements contained in this Report have been prepared
on a `going concern' basis, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. For the reasons
discussed in this Report, there is a significant risk that we will be unable to
continue as a going concern, in which case, you would suffer a total loss on
your investment in our company.
Off-Balance Sheet Arrangements
None.
Item 3. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Our disclosure controls and procedures are designed to ensure that information
required to be disclosed in reports that we file or submit under the Securities
Exchange Act of 1934 is recorded, processed, summarized and reported within the
time periods specified in the rules and forms of the United States Securities
and Exchange Commission. Our Chief Executive Officer and Chief Financial Officer
have reviewed the effectiveness of our "disclosure controls and procedures" (as
defined in the Securities Exchange Act of 1934 Rules 13a-14(c) and 15d-14(c))
within the end of the period covered by this Quarterly Report on Form 10-QSB and
have concluded that the disclosure controls and procedures are effective to
ensure that material information relating to the Company is recorded, processed,
summarized, and reported in a timely manner. There were no significant changes
in our internal controls or in other factors that could significantly affect
these controls subsequent to the last day they were evaluated by our Chief
Executive Officer and Chief Financial Officer.
Changes in Internal Controls over Financial Reporting
There have been no changes in the Company's internal control over financial
reporting during the last quarterly period covered by this report that have
materially affected, or are reasonably likely to materially affect, the
Company's internal control over financial reporting.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
There are no pending legal proceedings to which the Company is a party or in
which any director, officer or affiliate of the Company, any owner of record or
beneficially of more than 5% of any class of voting securities of the Company,
or security holder is a party adverse to the Company or has a material interest
adverse to the Company. The Company's property is not the subject of any pending
legal proceedings.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
As discussed above in Items 1.01 and 2.01, on September 5, 2006, Pay88 issued an
aggregate of 5,000,000 shares of Pay88's Series A Convertible Preferred Stock to
the stockholders of Qianbao, allocated as follows: 4,950,000 shares to Chongqing
Yahu Information Development Co., Ltd.; and 50,000 shares to Ying Bao. The
foregoing shares were issued pursuant to the Share Purchase Agreement, dated
September 5, 2006, among Pay88, Qianbao, and the stockholders of Qianbao. In
consideration for such securities, the stockholders of Qianbao conveyed to Pay88
all of their shares of the registered capital of Qianbao. Such securities were
issued under Section 4(2) of the Securities Act of 1933, as amended and
Regulation D promulgated by the Securities and Exchange Commission thereunder.
Purchases of equity securities by the issuer and affiliated purchasers
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
There was no matter submitted to a vote of security holders during the fiscal
quarter ended September 30, 2006.
Item 5. Other Information.
None.
Item 6. Exhibits
Exhibit No. Description Where Found
--------------------------------------------------------------------------------
31.1 Rule 13a-14(a)/15d14(a) Certifications Attached Hereto
--------------------------------------------------------------------------------
32.1 Section 1350 Certifications Attached Hereto
--------------------------------------------------------------------------------
SIGNATURES
In accordance with to requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Dated: November 14, 2006
PAY88, INC.
By: /s/ Guo Fan
Name: Guo Fan
Title: President, Chief Executive
Officer, and Director (Principal
Executive, Financial, and Accounting
Officer)