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 March 31, 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 May 8, 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|
1
TABLE OF CONTENTS
Page
PART I 3
Item 1. Financial Statements 3
Item 2. Management's Discussion and Analysis or Plan of Operation 13
Item 3 Controls and Procedures 17
PART II 18
Item 1. Legal Proceedings 18
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 18
Item 3. Defaults Upon Senior Securities 18
Item 4. Submission of Matters to a Vote of Security Holders 18
Item 5. Other Information 18
Item 6. Exhibits 19
2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Stockholders
Pay88, Inc. (A Nevada Corporation)
We have audited the accompanying balance sheet of Pay88, Inc. (a Development
Stage Company) ("the Company") as of December 31, 2005 and the related
statements of operations, stockholders' deficiency and cash flows for the period
March 23, 2005 (inception) to December 31, 2005. 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 audit.
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 the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of its 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 circumstances, 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. Also, an audit includes
examining, on a test basis, evidence supporting the amounts and disclosures 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, the financial statements referred to above present fairly, in
all material respects, the financial position of Pay88, Inc. at December 31,
2005, and the results of its operations and its cash flows for the period March
23, 2005 (inception) to December 31, 2005 in conformity with accounting
principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note 2 to the financial
statements, the Company has incurred an operating loss for the period March 23,
2005 (inception) to December 31, 2005 and as of December 31, 2005, has a working
capital deficit that raise substantial doubt about its ability to continue as a
going concern. Management's plans regarding those matters are also described in
Note 2. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
/s/ Wolinetz, Lafazan & Company, P.C.
------------------------------------
WOLINETZ, LAFAZAN & COMPANY, P.C.
Rockville Centre, New York
February 1, 2006
3
PAY88, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
DECEMBER 31, 2005
ASSETS
Current Assets:
Cash $ 7,048
---------
Total Current Assets 7,048
---------
Total Assets $ 7,048
=========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current Liabilities:
Accrued Liabilities $ 12,723
Loans Payable - Related Party 36,000
---------
Total Current Liabilities 48,723
---------
Long-Term Debt:
Note Payable - Related Party 80,385
---------
Total Liabilities 129,108
---------
Commitments and Contingencies
Stockholders' Deficiency:
Preferred Stock, $.001 par value; 5,000,000 shares authorized,
none issued and outstanding --
Common Stock, $.001 par value; 100,000,000 shares authorized,
10,000,000 shares issued and outstanding 10,000
Additional Paid-In Capital 38,001
Deficit Accumulated During the Development Stage (170,061)
---------
Total Stockholders' Deficiency 122,060)
---------
Total Liabilities and Stockholders' Deficiency $ 7,048
=========
The accompanying notes are an integral part of these financial statements.
4
PAY88, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS
FOR THE PERIOD MARCH 23, 2005 (INCEPTION) TO DECEMBER 31, 2005
Net Revenues $ --
-----------
Costs and Expenses:
Consulting Fees 121,000
Professional Fees 39,242
Other General and Administrative Expenses 7,879
-----------
Total Costs and Expenses 168,121
-----------
Loss from Operations before Other Income (Expense) (168,121)
-----------
Other Income (Expense)
Interest Expense - Related Party (1,940)
-----------
Total Other Income (Expense) (1,940)
-----------
Net Loss $ (170,061)
===========
Basic and Diluted Loss Per Share $ (.02)
===========
Weighted Average Basic and Diluted Shares Outstanding 9,022,996
===========
The accompanying notes are an integral part of these financial statements.
5
PAY88, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' DEFICIENCY
FOR THE PERIOD MARCH 23, 2005 (INCEPTION) TO DECEMBER 31, 2005
Deficit
Additional Accumulated
Common Stock Paid-In During the
Shares Amount Capital Development Stage Total
---------- ---------- ---------- ----------------- ----------
Balance, March 23, 2005 -- $ -- $ -- $ -- $ --
Common Stock Issued to Founders 8,000,000 8,000 1 -- 8,001
Common Stock Issued to Private Investors,
July through August, 2005 at $.02 Per Share 2,000,000 2,000 38,000 -- 40,000
Net Loss for the Period -- -- -- (170,061) (170,061)
---------- ---------- ---------- ----------------- ----------
Balance, December 31, 2005 10,000,000 $ 10,000 $ 38,001 $ (170,061) $ (122,060
========== ========== ========== ================= ==========
The accompanying notes are an integral part of these financial statements.
6
PAY88, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
FOR THE PERIOD MARCH 23, 2005 (INCEPTION) TO DECEMBER 31, 2005
Cash Flows from Operating Activities:
Net Loss $(170,061)
Adjustments to Reconcile Net Loss to Net Cash (Used)
by Operating Activities:
Changes in Assets and Liabilities:
Increase in Accrued Liabilities 12,723
---------
Net Cash (Used) by Operating Activities (157,338)
---------
Cash Flows from Investing Activities: --
---------
Cash Flows from Financing Activities:
Proceeds from Shareholder Advances 116,385
Proceeds from Sale of Common Stock 48,001
---------
Net Cash Provided by Financing Activities 164,386
---------
Increase in Cash 7,048
Cash - Beginning of Period --
---------
Cash - End of Period $ 7,048
=========
Supplemental Disclosures of Cash Flow Information:
Interest Paid $ --
=========
Income Taxes Paid $ --
=========
Supplemental Disclosure of Non-Cash Financing Activities:
Reclassification of Shareholder Advances to Note Payable
- Related Party $ 80,385
=========
The accompanying notes are an integral par of these financial statements.
7
PAY88, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - Summary of Significant Accounting Policies
Organization
The Company was originally incorporated on March 22, 2005 under the
laws of the State of New Hampshire as Pay88, Ltd. On July 7, 2005, Pay88, Inc.,
a Nevada corporation, was formed. Subsequently, the New Hampshire corporation
was merged with and into the Nevada corporation. For accounting purposes this is
a capital transaction and the equivalent to the issuance of common stock by the
Nevada corporation for the net monetary assets of the New Hampshire corporation,
accompanied by a recapitalization. The Company has selected December 31 as its
fiscal year.
The Company has not yet generated revenues from planned principal
operations and is considered a development stage company as defined in Statement
of Financial Accounting Standards ("SFAS") No. 7. The Company plans on becoming
involved in the business of facilitating money transfers between the United
States and China and its goal is to offer persons in the United States near
instantaneous, efficient and secure online money transfer services to China.
There is no assurance, however, that the Company will achieve its objectives or
goals.
Cash and Cash Equivalents
The Company considers all highly-liquid investments purchased with a
maturity of three months or less to be cash equivalents.
Revenue Recognition
The Company utilizes the accrual method of accounting.
Advertising Costs
Advertising costs will be charged to operations when incurred. The
Company did not incur any advertising costs during the period ended December 31,
2005.
Income Taxes
The Company accounts for income taxes using the asset and liability
method described in SFAS No. 109, "Accounting For Income Taxes", the objective
of which is to establish deferred tax assets and liabilities for the temporary
differences between the financial reporting and the tax bases of the Company's
assets and liabilities at enacted tax rates expected to be in effect when such
amounts are realized or settled. A valuation allowance related to deferred tax
assets is recorded when it is more likely than not that some portion or all of
the deferred tax assets will not be realized.
8
PAY88, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - Summary of Significant Accounting Policies (Continued)
Loss Per Share
The computation of loss per share is based on the weighted average
number of common shares outstanding during the period presented. Diluted loss
per common share is the same as basic loss per common share as there are no
potentially dilutive securities outstanding (options and warrants).
Accounting 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 amounts of
assets and liabilities, the disclosures of contingent assets and liabilities at
the date of the financial statements, and the reported amount of revenues and
expenses during the reported period. Actual results could differ from those
estimated.
Fair Value of Financial Instruments
The carrying value of cash, accrued liabilities and loans payable
approximates fair value because of the immediate or short-term maturity of these
financial instruments.
Research and Development
Research and development costs will be charged to expense as
incurred. The Company did not incur any research and development costs during
the period ended December 31, 2005.
Recently Enacted Accounting Standards
In December 2004, the Financial Accounting Standards Board ("FASB")
issued SFAS 123R "Share Based Payment," a revision of SFAS 123, "Accounting for
Stock Based Compensation." This standard requires the Company to measure the
cost of employee services received in exchange for equity awards based on grant
date fair value of the awards. The Company is required to adopt SFAS 123R
effective January 1, 2006. The standard provides for a prospective application.
Under this method, the Company will begin recognizing compensation cost for
equity based compensation for all new or modified grants after the date of
adoption. In addition, the Company will recognize the unvested portion of the
grant date fair value of awards issued prior to the adoption based on the fair
values previously calculated for disclosure purposes. At December 31, 2005, the
Company had no options outstanding.
9
PAY88, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - Summary of Significant Accounting Policies (Continued)
In December 2004, the FASB issued SFAS No. 153, "Exchanges of
Nonmonetary Assets." SFAS 153 amends Accounting Principles Board ("APB") Opinion
No. 29, "Accounting for Nonmonetary Transactions," to require exchanges of
nonmonetary assets to accounted for at fair value, rather than carryover basis.
Nonmonetary exchanges that lack commercial substance are exempt from this
requirement. SFAS 153 is effective for nonmonetary exchanges entered into in
fiscal years beginning after June 15, 2005. The Company does not routinely enter
into exchanges that could be considered nonmonetary, accordingly the Company
does not expect adoption of SFAS 153 to have a material impact on the Company's
financial statements.
In June 2005, the FASB issued SFAS 154, "Accounting Changes and Error
Corrections, a replacement of APB Opinion No. 20, Accounting Changes, and SFAS
3, "Reporting Accounting Changes in Interim Financial Statements". SFAS 154
changes the requirements for the accounting for and reporting of a change in
accounting principle. Previously, most voluntary changes in accounting
principles were required recognition via a cumulative effect adjustment within
net income of the period of the change. SFAS 154 requires retrospective
application to prior periods' financial statements, unless it is impracticable
to determine either the period-specific effect or the cumulative effect of the
change. SFAS 154 is effective for accounting changes made in fiscal years
beginning after December 15, 2005; however, SFAS 154 does not change the
transaction provisions of any existing accounting pronouncements. The Company
believes the adoption of SFAS 154 will not have a material impact on its
financial statements.
NOTE 2 - Going Concern
The Company incurred net losses of $170,061 for the period March 23,
2005 (inception) to December 31, 2005. In addition, the Company had a working
capital deficiency of $41,675 at December 31, 2005. These factors raise
substantial doubt about the Company's ability to continue as a going concern.
There can be no assurance that sufficient funds required during the
next year or thereafter will be generated 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 resulting from the inability
to generate cash flow from operations or to raise capital from external sources
would force the Company to substantially 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.
10
PAY88, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
NOTE 2 - Going Concern (Continued)
The accompanying financial statements do not include any adjustments
related to the recoverability or classification of asset-carrying amounts or the
amounts and classification of liabilities that may result should the Company be
unable to continue as a going concern.
During the period March 23, 2005 (inception) to December 31, 2005,
the Company relied heavily for its financing needs on its majority
shareholder/CEO, Mr. Guo Fan. In addition, the Company successfully obtained
external financing through the private sale of its common stock.
During the period ended December 31, 2005, the Company:
o Received approximately $116,000 in advances from its majority
shareholder/CEO. Of these advances, $80,385 were memorialized
as a note payable.
o Raised an aggregate total amount of $40,000 through a Private
Placement of the Company's common stock in July and August
2005.
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. The Company currently plans to raise approximately $250,000 through a
private placement of its securities. There can be no assurances that the Company
will be able to raise the additional funds it requires.
NOTE 3 - Note and Loans Payable - Related Party
During the period March 23, 2005 (inception) to December 31, 2005,
the Company's CEO and significant stockholder advanced $116,385 to the Company.
These advances were non-interest bearing and payable on demand. On August 31,
2005 the Company issued a promissory note to the CEO in the amount of $80,385.
The note bears interest at 5% per annum and is payable on August 31, 2008.
Interest expense on this note for the period August 31, 2005 to December 31,
2005 was $1,340. The interest was unpaid at December 31, 2005 and is included in
accrued liabilities.
The remaining balance of $36,000 represents advances from the
Company's CEO bearing interest at 5% per annum and payable on demand. Interest
expense on this advance was $600 and is included in accrued liabilities at
December 31, 2005.
11
PAY88, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
NOTE 4 - Common Stock
In March and July 2005 the Company issued 8,000,000 shares of common
stock for $8,001 to the Founders of the Company.
In July and August 2005 the Company sold 2,000,000 shares of common
stock for $40,000 to private investors.
NOTE 5 - Preferred Stock
The Company's Board of Directors may, without further action by the
Company's stockholders, from time to time, direct the issuance of any authorized
but unissued or unreserved shares of Preferred Stock in series and at the time
of issuance, determine the rights, preferences and limitations of each series.
The holders of Preferred Stock may be entitled to receive a preference payment
in the event of any liquidation, dissolution or winding-up of the Company before
any payment is made to the holders of the Common Stock. Furthermore, the Board
of Directors could issue Preferred Stock with voting and other rights that could
adversely affect the voting power of the holders of the Common Stock.
NOTE 6 - 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 7 - 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 to $1,800 during
the period ended December 31, 2005. The rent was unpaid at December 31, 2005 and
is included in accrued liabilities.
12
PAY88, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
NOTE 8 - Consulting Agreement
On March 29, 2005, the Company entered into a business and financial
consulting agreement with First Line Capital, LLC. (the "Consultant"). Such
agreement calls for payment of consulting fees of $120,000.
Under the terms of the consulting agreement, the Consultant is to
assist the Company with various business and financial services including:
assistance in corporate development (competitive environment, financial
performances vs. competition, strategies, operations viability, etc.),
preparation of a business plan and preparation of all necessary documentation in
connection with the listing of the Company on the Over the Counter Bulletin
Board. The agreement ends on the earlier of (i) termination by either party upon
30 days' prior written notice or (ii) the securities of the Company being traded
or listed on a securities exchange or otherwise.
The Consultant was paid on aggregate of $121,000 through December 31,
2005. Substantially all services in connection with the agreement have been
performed and the agreement has no specific or finite duration and has no
provision for refund or recouping of fees paid. In addition, the agreement has
no "time-line" or "benchmark" provision. Therefore, the entire amount paid has
been expensed in the period reported.
NOTE 9 - Income Taxes
At December 31, 2005, the Company had available federal net operating
loss carryforwards to reduce future taxable income, if any, of approximately
$170,000. The net operating loss carryforwards expire December 31, 2025.
At December 31, 2005, the Company has a deferred tax asset of
approximately $67,000, representing the benefit of its net operating loss
carryforward. The Company has not recorded a tax benefit because realization of
the benefit is uncertain and therefore a valuation allowance has been fully
provided against the deferred tax asset. The difference between the federal
statutory rate of 34% and the Company's effective tax rate of 0% is due to the
initial increase in the valuation allowance of $67,000 in 2005.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS.
As used in this Form 10-QSB, references to the "Company," the "Registrant,"
"we," "our" or "us" refer to Pay88, Inc. unless the context otherwise indicates.
13
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.
We are a development stage company focused on becoming involved in the business
of facilitating money transfers from the United States to China. We have not
commenced operations other than in connection with the execution of the license
agreement with Chongqing Yahu described below.
Money transfers are transfers of funds between consumers from one location to
another. Our goal is to offer persons in the United States near instantaneous,
efficient and secure online money transfer services to 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 go to 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.
14
Any on-line financial service provider requires quality software to be
financially and commercially successful. Optimally, the software should be easy
to use for the consumer, have the ability to interact with relative ease with
other businesses and financial institutions, and must be secure enough to
accommodate the strict internet security regulations of both the United States
and China. In our initial stages we had to make the decision to develop an
internal software system or attempt to partner with an entity that had already
developed the software technology. Due to the time frame that would be required
to develop the software and the corresponding costs that would be associated
with such an undertaking, we made the decision to seek out and utilize a third
party that would accommodate our needs. Specifically, we wanted the system to
address the following requirements:
o Experience in the China marketplace
o Real time transactions
o Ease of use
o Reliable and detailed account information
o System expandability
o Internet based
o 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)
o Transactions and transaction data be encrypted with the state-of-the-art
network security technology
o Free registration o Low cost of transaction
o On-going technical assistance and support
On August 3, 2005, we entered into a five year agreement with Chongqing Yahu
Information Limited, a Chinese corporation ("Chongqing Yahu") which satisfies
all the above parameters. Pursuant to such agreement, Chongqing Yahu will
provide the system software to us. We hope that this agreement will assist us
towards establishing us as a quality internet money transfer service provider.
Chongqing Yahu was formed in 1997 by Mr. Tao Fan. Mr. Fan is a brother of Mr.
Guo Fan, a director and officer of Pay88. Chongqing Yahu is a member of CECA
(China Electronic Commerce Association) a nationwide organization in the
electronic commerce field in China. Chongqing Yahu has over 650 commercial users
and over 250,000 individual users. The agreement provides for two services to be
provided to us by Chongqing 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 Chongqing 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 us to provide wire transfers from the United States to
China.
15
Plan of Operation
We do not expect to generate any revenues over the next twelve months. We are
focused on becoming involved in the business of facilitating money transfers
between the United States and China. Our goal is to offer persons in the United
States near instantaneous, efficient and secure online money transfer services
to China. As an internet money transfer company, our objective is to develop and
market a cost efficient and fast method for the transfer of funds from one
country to another. As discussed above, we have entered into a working agreement
with ChongQing Yahu Information, Limited. This agreement could give us a
competitive edge in this developing sector.
We would like to initially focus our services to people within the United States
seeking to wire transfer money to China. Therefore, we hope to build and execute
a marketing campaign that targets areas within the United States that has a
large population of Chinese expatriates. Once we have sufficient funds, we
intend to employ various methods of marketing which may include internet
advertising, telemarketing and commercial advertisements.
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.
We do not have sufficient resources to effectuate our business. We continue to
expect to incur a minimum of $250,000 in expenses during the next twelve months
of operations. 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.
We hope to do so through a private offering after this registration statement is
declared effective and our shares are quoted on the Over the Counter Bulletin
Board.
16
There can be no assurance that additional capital will be available to us.
Although the Company generally intends, once its shares are quoted on the Over
the Counter Bulletin Board, 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
For the three months ended March 31, 2006, the Company had no revenues. The
Company's operating expenses for the three months ended March 31, 2006 were
$16,053. Such operating expenses consisted of $11,283 in professional fees and
$4,770 in general and administrative fees.
Liquidity and Capital
Our balance sheet as of March 31, 2006 reflects assets of $3,026 consisting
solely of cash.
We have been dependent on our CEO for financing during the quarter ended March
31, 2006. Mr. Fan has advanced $14,214 in the form of demand loans to the
Company during the quarter ended March 31, 2006.
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.
17
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.
None.
18
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 March 31, 2006.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS
Exhibit No. Description Where Found
----------- ----------- -----------
31.1 Rule 13a-14(a)/15d14(a) Attached Hereto
Certifications of Principal Executive
and Financial Officer
32.1 Section 1350 Certifications Attached Hereto
19
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: May 9, 2006
PAY88, INC.
By: /s/ Guo Fan
-----------------------------
Name: Guo Fan
Title: President, Chief Executive
Officer, and Director (Principal
Executive Officer and Principal
Financial Officer)
20