Nevada
|
5099
|
20-3136572
|
||
(State
or other jurisdiction of
incorporation or organization) |
|
(Primary
Standard Industrial
Classification Code) |
|
(IRS
Employer
Identification No.) |
Guo
Fan
President
and Chief Executive Officer
1053
North Barnstead Road
Barnstead,
NH 03225
Phone:
(603) 776-6044
|
Guo
Fan
President
and Chief Executive Officer
1053
North Barnstead Road
Barnstead,
NH 03225
Phone:
(603) 776-6044
|
|||
(Address
and telephone number of registrants principal executive offices and
principal place of business)
|
(Name,
address and telephone number of agent for
service)
|
Title of Class of Securities to be Registered
|
Amount to be
Registered (1)
|
Proposed
Maximum
Aggregate
Price Per
Share
|
Proposed
Maximum
Aggregate
Offering
Price
|
Amount of
Registration Fee
|
|||||||||
Common
Stock, $0.001 per share (2)
|
2,021,250
|
$
|
1.00
(3
|
)
|
$
|
2,021,250
|
$
|
62.05
|
|||||
Common
Stock, $0.001 per share (4)
|
2,021,250
|
$
|
1.00
(5
|
)
|
$
|
2,021,250
|
$
|
62.05
|
|||||
Common
Stock, $0.001 per share(6)
|
3,887,000
|
$
|
1.34(7
|
)
|
5,208,580
|
159.90
|
|||||||
Total
|
7,929,500
|
$
|
9251,080
|
$
|
284.00
|
(8)
|
(1)
|
In
the event of a stock split, stock dividend or similar transaction
involving our common stock, the number of shares registered
shall
automatically be increased to cover the additional shares of
common stock
issuable pursuant to Rule 416 under the Securities Act of 1933,
as
amended.
|
(2)
|
Represents
our good faith estimate of the number of shares that are issuable
to the
selling security holders following the conversion of interest
and/or
principal of secured convertible promissory notes held by the
selling
security holders or our payment of the interest and/or principal
of the
secured convertible promissory notes held by the selling security
holders
with shares of our common
stock.
|
(3)
|
Pursuant
to Rule 457(g), calculated based upon the conversion price
of secured
convertible promissory notes held by the selling security
holders.
|
(4)
|
Represents
our good faith estimate of the number of shares that are issuable
to the
selling security holders following the conversion of interest
and/or
principal of secured convertible promissory notes to be issued
to the
selling security holders on the second closing scheduled to
occur no later
than the fifth day after this Registration Statement is declared
effective
by the Securities and Exchange
Commission.
|
(5)
|
Pursuant
to Rule 457(g), calculated based upon the conversion price
of secured
convertible promissory notes to be issued to the selling security
holders
at the second closing scheduled to occur no later than the
fifth day after
this Registration Statement is declared effective by the Securities
and
Exchange Commission.
|
(6)
|
Represents
shares of common stock currently outstanding to be sold by
selling
security holders.
|
(7)
|
Fee
calculated in accordance with Rule 457(c) of the Securities
Act.
Estimated for the sole purpose of calculating the registration
fee. We
have based the fee calculation on the average of the last reported
bid and
ask price for our common stock on the OTC Bulletin Board on
October 15,
2007.
|
(8)
|
Previously
paid.
|
· |
Up
to 2,021,250 shares
of our common stock that may be issued pursuant to secured convertible
promissory notes that were issued by us in connection with a private
placement that closed in September 2007;
|
· |
Up
to 2,021,250 shares
of our common stock that may be issued pursuant to secured convertible
promissory notes that will be issued by us at the second closing
of the
September 2007 private placement;
and
|
· |
3,887,000
shares of our common stock.
|
Prospectus
Summary
|
2
|
|
Risk
Factors
|
5
|
|
Use
of Proceeds
|
13
|
|
Selling
Security Holders
|
13
|
|
Plan
of Distribution
|
14
|
|
Legal
Proceedings
|
17
|
|
Directors,
Executive Officers, Promoters and Control Persons
|
17
|
|
Security
Ownership of Certain Beneficial Owners and Management
|
18
|
|
Description
of Securities
|
19
|
|
Interest
of Named Experts and Counsel
|
23
|
|
Disclosure
of Commission Position of Indemnification for Securities Act
Liabilities
|
23
|
|
Organization
Within Last Five Years
|
23
|
|
Description
of Business
|
23
|
|
Management’s
Discussion and Analysis or Plan of Operation
|
26
|
|
Description
of Property
|
30
|
|
Certain
Relationships and Related Transactions
|
31
|
|
Market
for Common Equity and Related Stockholder Matters
|
31
|
|
Executive
Compensation
|
33
|
|
Where
You Can Find Additional Information
|
34
|
|
Financial
Statements
|
F-1
|
Shares
of common stock being registered
|
7,929,500
|
|
Total
shares of common stock outstanding as of the date of this
prospectus
|
30,766,666
|
|
Total
proceeds raised by us from the disposition of the common stock by
the
selling security holders or their transferees
|
We
will receive no proceeds from the disposition of already outstanding
shares of common stock by the selling security holders or their
transferees or the disposition of the shares of common stock issuable
pursuant to the secured convertible promissory
notes.
|
Pay88, Inc.
For the Period April
24, 2006 (Inception) to
December 31, 2006
|
Pay88,
Inc.
for the quarter ended June 30, 2007 |
||||||
Statement of Operations Data:
|
(unaudited)
|
||||||
Net
Sales
|
1,199,927
|
1,242,455
|
|||||
Total
Operating Expense
|
321,436
|
155,174
|
|||||
Loss
from Operations
|
(294,773
|
)
|
(125,119
|
)
|
|||
Net
Loss
|
(297,764
|
)
|
(137,709
|
)
|
|||
Loss
per Share - Basic
|
($0.03
|
)
|
(0.01
|
)
|
|||
Loss
per Share - Diluted
|
($0.01
|
)
|
(0.01
|
)
|
December
31,
2006 |
June
30,
2007 |
||||||
Balance Sheet Data:
|
(unaudited)
|
||||||
Working
Capital
|
(140,018
|
)
|
(409,755
|
)
|
|||
Total
Assets
|
728,119
|
1,232,041
|
|||||
Current
Liabilities
|
381,137
|
1,148,744
|
|||||
Total
Stockholders’ Equity
|
266,597
|
2,912
|
· |
increase
awareness of our brand and the development of customer
loyalty;
|
·
|
respond
to competitive market conditions;
|
·
|
respond
to changes in regulatory environment of our business in
China;
|
·
|
manage
risks associated with intellectual property
rights;
|
·
|
maintain
effective control of our costs and
expenses;
|
·
|
raise
sufficient capital to sustain and expand our
business;
|
·
|
attract,
retain and motivate qualified personnel;
and
|
·
|
upgrade
our technology to support additional research and development of
new
prepaid card products.
|
·
|
limit
our ability to pay dividends or require us to seek consent for the
payment
of dividends;
|
·
|
increase
our vulnerability to general adverse economic and industry
conditions;
|
·
|
require
us to dedicate a portion of our cash flow from operations to payments
on
our debt,
thereby
reducing the availability of our cash flow to fund capital expenditures,
working
capital
and other general corporate purposes; and
|
·
|
limit
our flexibility in planning for, or reacting to, changes in our business
and our industry.
|
|
·
|
structure
|
·
|
capital
re-investment
|
|
|
·
|
government
involvement
|
·
|
allocation
of resources
|
|
|
·
|
level
of development
|
·
|
control
of foreign exchange
|
|
|
·
|
growth
rate
|
·
|
rate
of inflation
|
·
|
actual
or anticipated fluctuations in our quarterly operations
results;
|
·
|
changes
in financial estimates by securities research
analysts;
|
·
|
changes
in the economic performance or market valuations of other Internet
companies offering prepaid telephone cards and/or online video
games;
|
·
|
announcements
by us or our competitors of new products, acquisitions, strategic
partnerships, joint ventures or capital
commitments;
|
·
|
addition
or departure of key personnel;
|
·
|
fluctuations
of exchange rates between the Renminbi and the U.S.
dollar;
|
·
|
intellectual
property litigation; and
|
·
|
general
economic or political conditions in China.
|
· |
that
a broker or dealer approve a person's account for transactions
in penny
stocks; and
|
· |
the
broker or dealer receive from the investor a written agreement
to the
transaction, setting forth the identity and quantity of the penny
stock to
be purchased.
|
· |
obtain
financial information and investment experience objectives of the
person;
and
|
· |
make
a reasonable determination that the transactions in penny stocks
are
suitable for that person and the person has sufficient knowledge
and
experience in financial matters to be capable of evaluating the
risks of
transactions in penny stocks.
|
· |
sets
forth the basis on which the broker or dealer made the suitability
determination; and
|
· |
that
the broker or dealer received a signed, written agreement from the
investor prior to the transaction.
|
Selling Security Holder
|
|
Common Stock
Beneficially
Owned
Before Offering
|
|
Shares of Common
Stock Being
Offered in the
Offering
|
|
Common Stock
Beneficially
Owned After
Offering
|
|
Percent
After
Offering
|
|
Alpha
Capital Anstalt
Pradafant
7
9490
Furstentums
Vaduz,
Lichtenstein
|
|
3,003,000
|
(1)(2)
|
1,751,750
|
(3)
|
1,251,250
|
|
3.91
|
%
|
|
|
|
|
|
|
|
|
|
|
Whalehaven
Capital Fund Limited
c/o
FWS Capital Ltd.
3rd
Floor, 14 Par-Laville Road
Hamilton,
Bermuda HM08
|
|
3,003,000
|
(1)(3)
|
1,751,750
|
(3)
|
1,251,250
|
|
3.91
|
%
|
|
|
|
|
|
|
|
|
|
|
Osher
Capital Partners LLC
5
Sansberry Lane
Spring
Valley, NY 10977
|
|
924,000
|
(1)(4)
|
539,000
|
(3)
|
385,000
|
|
1.23
|
%
|
|
|
|
|
|
|
|
|
|
|
Eliezer
Oppenheimer
12/3
Zoltist
Jerusalem,
Israel
|
|
1,333,334
|
(5)(6)
|
1,333,334
|
|
—0—
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
Natan
Birnack
28
Mizrahi St.
Jerusalem,
Israel
|
|
1,220,333
|
(6)
|
1,220,333
|
|
—0—
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
Yehezkel
Klohr
13
Sadigura St.
Jerusalem,
Israel
|
|
1,333,333
|
(6)
|
1,333,333
|
|
—0—
|
|
*
|
|
(1) |
Includes
shares of common stock that are issuable to the selling security
holders
following the conversion of interest and/or principal of secured
convertible promissory notes held by the selling security holders,
and
that were purchased in the private placement that closed in September
2007, and the secured convertible promissory notes to be issued to
the
selling security holders on the second closing of the private placement,
scheduled to occur on the 5 business day after the registration statement
containing this prospectus is declared effective by the Securities
and
Exchange Commission, or our payment of the interest and/or principal
of
the secured convertible promissory notes held by the selling security
holder with shares of our common stock and shares of common stock
issuable
upon the exercise of warrants issued in the private placement that
closed
in September 2007.
|
(2) |
The
shares beneficially owned by Alpha Capital Anstalt (“Alpha Capital”)
before the offering include (a) 500,500 shares of common stock issuable
to
Alpha Capital pursuant to the conversion of interest and/or principal
of
secured convertible promissory notes held by Alpha Capital or our
payment
of the interest and/or principal of the secured convertible promissory
notes held by Alpha Capital; (b) warrants exercisable to purchase
1,001,000 shares of common stock; Also included are shares of common
stock
issuable to Alpha Capital pursuant to notes and warrants that will
be
issued to Alpha Capital at a second closing for the September 2007
private
placement. This second closing is required to occur within five business
days after the registration statement containing this prospectus
is
declared effective by the SEC. At this second closing, Alpha Capital
will
purchase (a) secured convertible promissory notes convertible into
500,500
shares of common stock and (b) warrants exercisable to purchase 1,001,000
shares of common stock. Konrad Ackerman is a director of Alpha Capital
and
has the voting and investment power of the shares of our Common stock
owned by Alpha Capital.
|
(3) |
The
shares being offered by the selling security holder is equal
to 175% of
the shares issued and issuable upon conversion of the secured
convertible
promissory notes held by the selling security
holder.
|
(4) |
The
shares beneficially owned by Whalehaven Capital Fund Limited
(“Whalehaven”) before the offering includes (a) 500,500 shares of common
stock issuable to Whalehave pursuant to the conversion of interest
and/or
principal of secured convertible promissory notes held by Whalehaven
or
our payment of the interest and/or principal of the secured convertible
promissory notes held by Whalehaven; (b) warrants exercisable to
purchase
1,001,000 shares of common stock; Also included are shares of common
stock
issuable to Whalehaven pursuant to notes and warrants that will be
issued
to Whalehaven at a second closing for the September 2007 private
placement. This second closing is required to occur within five business
days after the registration statement containing this prospectus
is
declared effective by the SEC. At this second closing, Whalehaven
will
purchase (a) secured convertible promissory notes convertible into
500,500
shares of common stock and (b) warrants exercisable to purchase 1,001,000
shares of common stock. Brian Mazella is the President of Whalehaven
and
has the voting and investment power of the shares of our Common stock
owned by Whalehaven.
|
(5) |
The
shares beneficially owned by Osher Capital Partners LLC (the “Osher”)
before the offering includes (a) 154,000 shares of common stock issuable
to Osher pursuant to the conversion of interest and/or principal
of
secured convertible promissory notes held by Osher or our payment
of the
interest and/or principal of the secured convertible promissory notes
held
by Osher; (b) warrants exercisable to purchase 308,000 shares of
common
stock; Also included are shares of common stock issuable to Osher
pursuant
to notes and warrants that will be issued to Osher at a second closing
for
the September 2007 private placement. This second closing is required
to
occur within five business days after the registration statement
containing this prospectus is declared effective by the SEC. At this
second closing, Osher will purchase (a) secured convertible promissory
notes convertible into 154,000 shares of common stock and (b) warrants
exercisable to purchase 308,000 shares of common stock. Yisroel Kluger
is
the President of Osher and has the voting and investment power of
the
shares of our Common stock owned by Osher.
|
(6) |
Mr.
Oppenheimer is subject to a lock-up agreement with pursuant to
which he
agreed not to sell any shares of our common stock prior to 365
calendar
days after the registration statement which contains this prospectus
has
been declared effective, or until the secured convertible promissory
notes
are no longer
outstanding.
|
(7) |
The
selling security holder received the shares from TVH Limited,
a
consultant, who received an aggregate of 6,666,666 shares from
us in
consideration for services
provided.
|
·
|
ordinary
brokerage transactions and transactions in which the broker-dealer
solicits purchasers;
|
·
|
block
trades in which the broker-dealer will attempt to sell the shares
as
agent, but may position and resell a portion of the block as principal
to
facilitate the transaction;
|
·
|
purchases
by a broker-dealer as principal and resale by the broker-dealer for
its
account;
|
·
|
an
exchange distribution in accordance with the rules of the applicable
exchange;
|
·
|
privately
negotiated transactions;
|
·
|
short
sales;
|
·
|
through
the writing or settlement of options or other hedging transactions,
whether through an options exchange or
otherwise;
|
·
|
broker-dealers
may agree with the selling security holders to sell a specified number
of
such shares at a stipulated price per
share;
|
·
|
a
combination of any such methods of sale;
and
|
·
|
any
other method permitted pursuant to applicable
law.
|
Name
|
|
Age
|
|
Positions
and Offices Held
|
Guo
Fan
|
|
29
|
|
Chairman,
President, CEO, CFO and Director
|
Tao
Fan
|
|
35
|
|
Chief
Operating Officer, and Director
|
Gordon
Preston
|
|
64
|
|
Director,
Secretary
|
Shiqing
Fu
|
43
|
Director
|
Name of Beneficial Owner
|
Number of Shares
and Nature
of Beneficial
Ownership
|
Percent of Common
Stock
Outstanding
|
|||
Guo
Fan
c/o
Pay88, Inc.
1053
North Barnstead Road
Barnstead,
NH 03225
|
7,600,000
|
24.7
|
%
|
||
Tao
Fan
c/o
Chongqing Qinbao Technology Ltd.
No.
78 1st
Yanghe Village
Jiangbei
District, Chongqing
China
|
1,393,000
|
4.5
|
%
|
||
Gordon
Preston
c/o
Pay88, Inc.
1053
North Barnstead Road
Barnstead,
NH 03225
|
0
|
*
|
|||
Shiqing
Fu
c/o
Chongqing Qinbao Technology Ltd.
No.
78 1st
Yanghe Village
Jiangbei
District, Chongqing
China
|
270,000
|
*
|
|||
All
directors and executive officers as a group (four persons)
|
8,293,000
|
29.2
|
%
|
Year
|
|
Quarter
Ended
|
|
High
|
|
Low
|
2006
|
December
31
|
$3.35
|
$3.25
|
|||
|
September
30
|
$3.25
|
$3.25
|
|||
|
June
30
|
N/A
|
N/A
|
|||
|
March
31 (from March 8)
|
N/A
|
N/A
|
|||
2007
|
|
|||||
September
30
|
$1.65
|
$1.65
|
||||
June
30
|
$2.65
|
$2.50
|
||||
March
31
|
No
data
|
No
data
|
ASSETS
|
||||
Current
Assets:
|
||||
Cash
and Cash Equivalents
|
$
|
19,574
|
||
Accounts
Receivable, Net of Allowances of $2,268
|
88,450
|
|||
Inventories
|
288,630
|
|||
Deposits
on Inventories
|
331,555
|
|||
Prepaid
Expenses
|
10,780
|
|||
Total
Current Assets
|
738,989
|
|||
Property
and Equipment, Net
|
493,052
|
|||
Total
Assets
|
$
|
1,232,041
|
||
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
||||
Current
Liabilities:
|
||||
Accounts
Payable
|
$
|
133,252
|
||
Deferred
Income
|
2,347
|
|||
Loans
Payable - Related Party
|
865,057
|
|||
Loans
Payable - Other
|
148,088
|
|||
Total
Current Liabilities
|
1,148,744
|
|||
Long-Term
Debt:
|
||||
Note
Payable - Related Party
|
80,385
|
|||
|
||||
Total
Liabilities
|
1,229,129
|
|||
Commitments
and Contingencies:
|
||||
Stockholders’
Equity:
|
||||
Preferred
Stock, $.001 par value; 5,000,000 shares authorized, 5,000,000
shares
issued and outstanding; liquidation preference, $.01 per
share
|
5,000
|
|||
Common
Stock, $.001 par value; 100,000,000 shares authorized, 10,100,000
shares
issued and outstanding
|
10,100
|
|||
Additional
Paid-In Capital
|
535,627
|
|||
Accumulated
Deficit
|
(
570,301
|
)
|
||
Accumulated
Other Comprehensive Income (Loss)
|
22,486
|
|||
Total
Stockholders’ Equity
|
2,912
|
|||
Total
Liabilities and Stockholders’ Equity
|
$
|
1,232,041
|
For
the Period
|
||||||||||
For
the Six
|
For
the Three
|
April
24, 2006
|
||||||||
Months
Ended
|
Months
Ended
|
(Inception)
To
|
||||||||
June
30, 2007
|
June
30, 2007
|
June
30, 2006
|
||||||||
Sales-Net
|
$
|
2,345,236
|
$
|
1,242,455
|
$
|
—
|
||||
Cost
of Sales
|
2,299,774
|
1,212,400
|
—
|
|||||||
Gross
Profit
|
45,462
|
30,055
|
—
|
|||||||
Operating
Expenses:
|
||||||||||
Selling
Expenses
|
12,609
|
8,797
|
—
|
|||||||
Salaries
and Related Costs
|
116,628
|
70,701
|
10,397
|
|||||||
Website
Development Costs
|
27,196
|
13,598
|
—
|
|||||||
Professional
Fees
|
43,586
|
15,228
|
40,101
|
|||||||
Other
General and Administrative Expense
|
100,975
|
46,850
|
1,049
|
|||||||
Total
Operating Expenses
|
300,994
|
155,174
|
51,547
|
|||||||
Loss
from Operations
|
(
255,532
|
)
|
(
125,119
|
)
|
(
51,547
|
)
|
||||
Other
Income (Expense):
|
||||||||||
Interest
Expense - Related Party
|
(
15,843
|
)
|
(
12,250
|
)
|
—
|
|||||
Interest
Income
|
259
|
181
|
251
|
|||||||
Total
Other Income (Expense)
|
(
15,584
|
)
|
(
12,069
|
)
|
251
|
|||||
Loss
before Provision for Income Tax
|
(
271,116
|
)
|
(
137,188
|
)
|
(
51,296
|
)
|
||||
Provision
for Income Tax
|
1,421
|
521
|
—
|
|||||||
Net
Loss
|
$
|
(
272,537
|
)
|
$
|
(
137,709
|
)
|
$
|
(
51,296
|
)
|
|
Basic
Loss Per Common Share
|
$
|
(
0.03
|
)
|
$
|
(
0.01
|
)
|
$
|
(
0.01
|
)
|
|
Weighted
Average Basic Common
|
||||||||||
Shares
Outstanding
|
10,100,000
|
10,100,000
|
10,100,000
|
|||||||
Fully
Diluted Loss Per Share
|
$
|
(
0.01
|
)
|
$
|
(
0.01
|
)
|
$
|
(
0.00
|
)
|
|
Weighted
Average Fully Diluted
|
||||||||||
Shares
Outstanding
|
24,100,000
|
24,100,000
|
24,100,000
|
For
the Period
|
|||||||
For
the Six
|
April
24, 2006
|
||||||
Months
Ended
|
(Inception)
To
|
||||||
June
30, 2007
|
June
30, 2006
|
||||||
Cash
Flows from Operating Activities:
|
|||||||
Net
Loss
|
$
|
(
272,537
|
)
|
$
|
(
51,296
|
)
|
|
Adjustments
to Reconcile Net Loss to
|
|||||||
Net
Cash (Used) by Operating Activities
|
|||||||
Allowance
for Bad Debts
|
1,054
|
—
|
|||||
Depreciation
and Amortization
|
23,108
|
147
|
|||||
Changes
in Assets and Liabilities:
|
|||||||
(Increase)
in Accounts Receivable
|
(
37,030
|
)
|
—
|
||||
(Increase)
in Inventories
|
(
162,825
|
)
|
—
|
||||
(Increase)
in Deposits on Inventories
|
(
331,555
|
)
|
—
|
||||
Decrease
in Prepaid Expenses
|
34,976
|
—
|
|||||
Increase
in Accounts Payable
|
39,936
|
46,565
|
|||||
Increase
in Deferred Income
|
2,347
|
—
|
|||||
Net
Cash (Used) by Operating Activities
|
(
702,526
|
)
|
(
4,584
|
)
|
|||
Cash
Flows from Investing Activities:
|
|||||||
Capital
Expenditures
|
(
19,030
|
)
|
(
362,967
|
)
|
|||
Net
Cash (Used) by Investing Activities
|
(
19,030
|
)
|
(
362,967
|
)
|
|||
Cash
Flows from Financing Activities:
|
|||||||
Net
Proceeds from Loans Payable - Related Party
|
577,236
|
—
|
|||||
Net
Proceeds from Loans Payable - Other
|
148,088
|
—
|
|||||
Proceeds
of Registered Capital Contribution
|
—
|
362,790
|
|||||
Proceeds
of Additional Paid-In Capital Contribution
|
—
|
358,705
|
|||||
Net
Cash Provided by Financing Activities
|
725,324
|
721,495
|
|||||
Effect
of Exchange Rate Changes on Cash
|
(
1,278
|
)
|
(
167
|
)
|
|||
Net
Increase in Cash and Cash Equivalents
|
2,490
|
353,777
|
|||||
Cash
and Cash Equivalents - Beginning of Period
|
17,084
|
—
|
|||||
Cash
and Cash Equivalents - End of Period
|
$
|
19,574
|
$
|
353,777
|
|||
Supplemental
Disclosures of Cash Flow Information:
|
|||||||
Interest
Paid
|
$
|
—
|
$
|
—
|
|||
Income
Taxes Paid
|
$
|
451
|
$
|
—
|
|
Estimated
Useful Lives
|
||||||
Office
Units and Improvements
|
$
|
403,363
|
31
Years
|
||||
Furniture
and Fixtures
|
7,944
|
5
Years
|
|||||
Office
Equipment
|
87,388
|
3
Years
|
|||||
Software
|
27,128
|
3
Years
|
|||||
Automobile
|
6,502
|
5
Years
|
|||||
532,325
|
|||||||
Less:
Accumulated Depreciation
|
39,273
|
||||||
$
|
493,052
|
Loans
payable to the Company’s Chief Executive Officer,bearing interest at 5%
per annum and payable on demand
|
$
|
448,893
|
||
Loans
payable to the Company’s Chief Operating Officer,bearing interest at 2%
per annum and payable on demand
|
416,164
|
|||
|
$
865,057
|
Loan
payable, bearing interest at 2.5% per month, due on December 31,
2007.
|
$
|
131,400
|
||
Loan
payable on demand, non-interest bearing
|
16,688
|
|||
$
|
148,088
|
During
the Year Ending December
31,
|
||||
2007
|
$
|
—
|
||
2008
|
80,385
|
|||
$
|
80,385
|
PAY88,
INC. AND SUBSIDIARY
|
||||
CONSOLIDATED
BALANCE SHEET
|
||||
DECEMBER
31, 2006
|
||||
ASSETS
|
||||
Current
Assets:
|
||||
Cash
and Cash Equivalents
|
$
|
17,084
|
||
Accounts
Receivable, Net of Allowances of $1,214
|
52,474
|
|||
Inventories
|
125,805
|
|||
Prepaid
Expenses
|
45,756
|
|||
Total
Current Assets
|
241,119
|
|||
Property
and Equipment, Net
|
487,000
|
|||
Total
Assets
|
$
|
728,119
|
||
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
||||
Current
Liabilities:
|
||||
Accounts
Payable
|
$
|
93,316
|
||
Loans
Payable - Related Parties
|
287,821
|
|||
Total
Current Liabilities
|
381,137
|
|||
Long-Term
Debt:
|
||||
Note
Payable - Related Party
|
80,385
|
|||
Total
Liabilities
|
461,522
|
|||
Stockholders’
Equity:
|
||||
Preferred
Stock, $.001 par value; 5,000,000 shares authorized,
|
||||
5,000,000
shares issued and outstanding; liquidation preference,
|
||||
$.01
per share
|
5,000
|
|||
Common
Stock, $.001 par value; 100,000,000 shares authorized,
|
||||
10,100,000
shares issued and outstanding
|
10,100
|
|||
Additional
Paid-In Capital
|
535,596
|
|||
Accumulated
Deficit
|
(297,764
|
)
|
||
Accumulated
Other Comprehensive Income
|
13,665
|
|||
Total
Stockholders’ Equity
|
266,597
|
|||
Total
Liabilities and Stockholders’ Equity
|
$
|
728,119
|
Sales
- Net
|
$
|
1,199,927
|
||
Cost
of Sales
|
1,173,264
|
|||
Gross
Profit
|
26,663 | |||
Operating
Expenses:
|
||||
Selling
Expenses
|
25,733 | |||
Salaries
and Related Costs
|
54,145 | |||
Website
Development Costs
|
18,049 | |||
Professional
Fees
|
150,420 | |||
General
and Administrative Expenses
|
73,089 | |||
Total
Operating Expenses
|
321,436 | |||
Loss
from Operations
|
(294,773
|
)
|
||
Other
Income (Expense)
|
||||
Interest
Expense - Related Parties
|
(3,657
|
)
|
||
Interest
Income
|
666 | |||
Total
Other Income (Expense)
|
(2,991
|
)
|
||
Net
Loss
|
$
|
(297,764)
|
||
Basic
Loss Per Common Share
|
$
|
(0.03
|
)
|
|
Weighted
Average Common Shares Outstanding - Basic
|
10,090,040
|
|||
Diluted
Loss Per Common Share
|
$
|
(0.01
|
)
|
|
Weighted
Average Common Shares Outstanding - Diluted
|
24,090,040
|
PAY88,
INC. AND
SUBSIDIARY
|
|||||||||||||||||||||||||
CONSOLIDATED
STATEMENT OF STOCKHOLDERS’
EQUITY
|
|||||||||||||||||||||||||
FOR
THE PERIOD APRIL 24, 2006 (INCEPTION) TO DECEMBER 31,
2006
|
|||||||||||||||||||||||||
Accumulated | |||||||||||||||||||||||||
Additional
|
Other | ||||||||||||||||||||||||
Preferred
Stock
|
Common
Stock
|
Paid-In
|
Accumulated
|
Comprehensive |
|
||||||||||||||||||||
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
Capital
|
|
Deficit
|
|
Income
|
|
Total
|
|||||||||
Balance
- April 24, 2006
|
-
|
$
|
-
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
|||||||||||
Proceeds
from Initial Investment
|
|||||||||||||||||||||||||
in
Qianbao
|
-
|
-
|
-
|
-
|
362,790
|
-
|
-
|
362,790
|
|||||||||||||||||
Proceeds
from Additional Investment
|
|||||||||||||||||||||||||
in
Qianbao
|
-
|
-
|
-
|
-
|
358,705
|
-
|
-
|
358,705
|
|||||||||||||||||
Effect
of Recapitalization
|
-
|
-
|
10,000,000
|
10,000
|
(183,299
|
)
|
-
|
-
|
(173,299
|
)
|
|||||||||||||||
Issuance
of Preferred Stock in
|
|||||||||||||||||||||||||
Connection
with Recapitalization
|
5,000,000
|
5,000
|
-
|
-
|
(
5,000
|
)
|
-
|
-
|
-
|
||||||||||||||||
Issuance
of 100,000 Shares of
|
|||||||||||||||||||||||||
Common
Stock for Services
|
-
|
-
|
100,000
|
100
|
2,400
|
-
|
-
|
2,500
|
|||||||||||||||||
Comprehensive
Income (Loss):
|
|||||||||||||||||||||||||
Net
(Loss) for the Period
|
-
|
-
|
-
|
-
|
-
|
(297,764
|
)
|
-
|
(297,764
|
)
|
|||||||||||||||
Foreign
Currency Translation
|
|||||||||||||||||||||||||
Adjustment
|
-
|
-
|
-
|
-
|
-
|
-
|
13,665
|
13,665
|
|||||||||||||||||
Total
Comprehensive Loss
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(284,099
|
)
|
||||||||||||||||
Balance
- December 31, 2006
|
5,000,000
|
$
|
5,000
|
10,100,000
|
$
|
10,100
|
$
|
535,596
|
$
|
(297,764
|
)
|
$
|
13,665
|
$
|
266,597
|
PAY88,
INC. AND SUBSIDIARY
|
||||
CONSOLIDATED
STATEMENT OF CASH FLOWS
|
||||
FOR
THE PERIOD APRIL 24, 2006 (INCEPTION) TO DECEMBER 31,
2006
|
||||
Cash
Flows from Operating Activities:
|
||||
Net
Loss
|
$
|
(297,764
|
)
|
|
Adjustments
to Reconcile Net Loss to
|
||||
Net
Cash (Used) by Operating Activities:
|
||||
Allowance
for Bad Debts
|
1,214
|
|||
Depreciation
|
16,165
|
|||
Common
Stock Issued for Services
|
2,500
|
|||
Changes
in Assets and Liabilities:
|
||||
(Increase)
in Accounts Receivable
|
(53,688
|
)
|
||
(Increase)
in Inventories
|
(125,805
|
)
|
||
(Increase)
in Prepaid Expenses
|
(45,756
|
)
|
||
Increase
in Accounts Payable
|
75,233
|
|||
Net
Cash (Used) by Operating Activities
|
(427,901
|
)
|
||
Cash
Flows from Investing Activities:
|
||||
Capital
Expenditures
|
(503,165
|
)
|
||
Effect
of Recapitalization
|
1,209
|
|||
Net
Cash (Used) by Investing Activities
|
(501,956
|
)
|
||
Cash
Flows from Financing Activities:
|
||||
Proceeds
from Issuance of Registered Capital Stock
|
721,495
|
|||
Proceeds
from Loans Payable - Related Parties
|
211,781
|
|||
Net
Cash Provided by Financing Activities
|
933,276
|
|||
Effect
of Exchange Rate Changes on Cash
|
13,665
|
|||
Net
Increase in Cash and Cash Equivalents
|
17,084
|
|||
Cash
and Cash Equivalents - Beginning of Period
|
-
|
|||
Cash
and Cash Equivalents - End of Period
|
$
|
17,084
|
||
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
|
NOTE 1 - |
Description
of Business and Basis of
Presentation
|
NOTE 1 - |
Basis
of Presentation (Continued)
|
· |
Received
approximately $212,000 in advances from two of its officers and
significant stockholders;
|
· |
Received
approximately $721,000 from the initial and subsequent investments
in
connection with the founding of
Qianbao.
|
NOTE 2 - |
Summary
of Significant Accounting Policies
|
NOTE 2 - |
Summary
of Significant Accounting Policies
(Continued)
|
NOTE 2 - |
Summary
of Significant Accounting Policies
(Continued)
|
NOTE 3 - |
Property
and Equipment
|
Estimated
Useful
|
|||||||
Lives
|
|||||||
Office
Units and Improvements
|
$
|
393,233
|
31Years
|
||||
Furniture
and Fixtures
|
7,745
|
5
Years
|
|||||
Office
Equipment
|
78,856
|
3
Years
|
|||||
Software
|
16,992
|
3
Years
|
|||||
Automobile
|
6,339
|
5
Years
|
|||||
503,165
|
|||||||
Less:
Accumulated Depreciation
|
16,165
|
||||||
$
|
487,000
|
NOTE 4 - |
Loans
Payable - Related Parties
|
Loans
payable to related parties consist of the following:
|
||||
Loans payable to the Company’s Chief Executive Officer, | ||||
bearing
interest at 5% per annum and payable on demand
|
$
|
130,006
|
||
Loans
payable to the Company’s Chief Operating Officer,
|
||||
bearing
interest at 2% per annum and payable on demand
|
157,815
|
|||
$
|
287,821
|
NOTE 5 - |
Note
Payable - Related Party
|
Maturities
of this long-term debt are as follows:
|
||||
During
the Year Ending
|
||||
December
31,
|
||||
2007
|
$
|
-
|
||
2008
|
80,385
|
|||
$
|
80,385
|
NOTE 6 - |
Commitments
and Contingencies
|
NOTE 7 - |
Stockholders’
Equity
|
NOTE 8 - |
Related
Party Transactions
|
NOTE 9 - |
Concentration
of Credit Risk
|
NOTE 10 - |
Income
Taxes
|
NOTE 10 - |
Income
Taxes
|
NOTE 11 - |
Subsequent
Events
|
Securities
and Exchange
|
||||
Commission
registration fee
|
$
|
421.57
|
||
Legal
fees and miscellaneous expenses (1)
|
$
|
40,000
|
||
$
|
15,000
|
|||
Total
(1)
|
$
|
55,421.57
|
Exhibit
No.
|
Description
|
|
3.1
|
Articles
of Incorporation of Pay88 (incorporated by reference to Exhibit 3.1
to
Pay88's Registration Statement on Form SB-2 filed with the Securities
and
Exchange Commission on October 14, 2005).
|
|
|
|
|
3.2
|
Bylaws
of Pay88 (incorporated by reference to Exhibit 3.2 to Pay88's Registration
Statement on Form SB-2 filed with the Securities and Exchange Commission
on October 14, 2005).
|
|
|
|
|
4.1
|
Specimen
Common Stock (incorporated by reference to Exhibit 4.1 to Pay88's
Registration Statement on Form SB-2 filed with the Securities and
Exchange
Commission on October 14, 2005).
|
|
|
|
|
4.2
|
Certificate
of Designation for Series A Convertible Preferred Stock, filed with
the
Nevada Secretary of State on September 5, 2006 (incorporated by reference
to Exhibit 4.1 to Pay88's Current Report on Form 8-K filed with the
Securities and Exchange Commission on September 6,
2006).
|
|
|
|
|
4.3
|
Form
of Convertible Note (incorporated by reference to Exhibit 4.1 to
Pay88’s
Current Report on Form 8-K filed with the Securities and Exchange
Commission on September 18, 2007).
|
|
4.4
|
Form
of Class A and Class B Warrant (incorporated
by reference to Exhibit 4.2 to Pay88’s Current Report on Form 8-K filed
with the Securities and Exchange Commission on SeptSeptember 18,
2007).
|
5.1
|
Opinion
of David Lubin & Associates, PLLC (incorporated by reference to
Exhibit 5.1 to Pay88's Registration Statement on Form SB-2 filed
with the
Securities and Exchange Commission on October 16,
2007).
|
10.1
|
Licensing
and Service Agreement, dated August 3, 2005, between Chongqing Yahu
Information, Limited and Pay88 (incorporated by reference to Exhibit
10.1
to Pay88's Registration Statement on Form SB-2 filed with the Securities
and Exchange Commission on October 14, 2005).
|
|
|
|
|
10.2
|
Plan
and Agreement of Merger, dated July 2005, by and between Pay88, Inc.
and
Pay88, Ltd. (incorporated by reference to Exhibit 10.2 to Pay88's
Registration Statement on Form SB-2 filed with the Securities and
Exchange
Commission on October 14, 2005).
|
|
|
|
|
10.3
|
Promissory
Note, dated August 31, 2005, in the principal amount of $80,385,
made by
Pay88, Inc. in favor of Guo Fan (incorporated by reference to Exhibit
10.3
to Pay88's Registration Statement on Form SB-2 filed with the Securities
and Exchange Commission on October 14, 2005).
|
|
|
|
|
10.4
|
Agreement,
dated March 29, 2005, by and between First Line Capital LLC and Pay
88,
Ltd. (incorporated by reference to Exhibit 10.4 to Pay88's Registration
Statement on Form SB-2 filed with the Securities and Exchange Commission
on October 14, 2005).
|
Exhibit
No.
|
Description
|
|
10.5
|
Share
Purchase Agreement, dated September 5, 2006, Pay88, Inc., Chongqing
Qianbao Technology Ltd., Ying Bao, and Chongqing Yahu Information
Development Co., Ltd. (incorporated by reference to Exhibit 10.1
to
Pay88's Current Report on Form 8-K filed with the Securities and
Exchange
Commission on September 6, 2006).
|
|
|
|
|
10.6
|
Sales
Contract 3-1, dated July 3, 2006, between Chongqing Yinxin Realty
Development Ltd. and Chongqing Qianbao Technology Ltd., for the
purchase
of offices located at No. 78 1st Yanghe Village, Jiangbei District,
Chongqing, China (incorporated by reference to Exhibit 10.2 to
Pay88's
Current Report on Form 8-K filed with the Securities and Exchange
Commission on September 6, 2006).
|
|
|
|
|
10.7
|
Sales
Contract 3-2, dated July 3, 2006, between Chongqing Yinxin Realty
Development Ltd. and Chongqing Qianbao Technology Ltd., for the
purchase
of offices located at No. 78 1st Yanghe Village, Jiangbei District,
Chongqing, China (incorporated by reference to Exhibit 10.3 to
Pay88's
Current Report on Form 8-K filed with the Securities and Exchange
Commission on September 6, 2006).
|
|
|
|
|
10.8
|
Sales
Contract 3-2, dated July 3, 2006, between Chongqing Yinxin Realty
Development Ltd. and Chongqing Qianbao Technology Ltd., for the
purchase
of offices located at No. 78 1st Yanghe Village, Jiangbei District,
Chongqing, China (incorporated by reference to Exhibit 10,4 to
Pay88's
Current Report on Form 8-K filed with the Securities and Exchange
Commission on September 6, 2006).
|
10.9
|
Sales
Area Distribution Agreement of Rainbow Islands Digital Game Cards,
between
Pay88 and Chongqing
Telecom Value-Added Service Center
(incorporated by reference to Exhibit 10.9 to Pay88's Registration
Statement on Form SB-2 filed with the Securities and Exchange
Commission
on October 16, 2007).
|
10.10
|
Employment
Agreement dated February 1, 2007, between Pay88 and Tao Fan (incorporated
by reference to Exhibit 10.2 to Pay88's Current Report on Form
8-K filed
with the Securities and Exchange Commission on February 7,
2007).
|
|
|
|
|
10.11
|
Employment
Agreement dated February 1, 2007, between Pay88
and Tao Fan (incorporated by reference to Exhibit 10.1 to Pay88’s Current
Report on Form 8-K filed with the Securities and Exchange Commission
on
February 7, 2007).
|
|
10.12
|
Security
Agreement dated September 12, 2007, between the Purchasers named on
the signature page thereto (incorporated
by reference to Exhibit 10.2 to Pay88’s Current Report on Form 8-K filed
with the Securities and Exchange Commission on September 18,
2007).
|
|
10.13
|
Security
Agreement dated September 12, 2007 by and between the Purchasers
named on the signature page thereto, Barbara R. Mittman,
as Collateral Agent for the Purchasers, and Pay88,Inc. and
Chongqing Qianbao Technology Ltd., as Debtors (incorporated
by reference to Exhibit 10.3 to Pay88’s Current Report on Form 8-K filed
with the Securities and Exchange Commission on September 18,
2007).
|
Exhibit
No.
|
Description
|
|
10.14
|
Form
of Guaranty (incorporated
by reference to Exhibit 10.4 to Pay88’s Current Report on Form 8-K filed
with the Securities and Exchange Commission on September 18,
2007).
|
|
10.15
|
Form
of Guaranty (incorporated
by reference to Exhibit 10.5 to Pay88’s Current Report on Form 8-K filed
with the Securities and Exchange Commission on September 18,
2007).
|
|
10.16
|
Form
of Lock Up Agreement (incorporated
by reference to Exhibit 10.5 to Pay88’s Current Report on Form 8-K filed
with the Securities and Exchange Commission on September 18,
2007).
|
|
23.1
|
Consent
of Wolinetz, Lafazan & Company, P.C.*
|
|
23.2
|
Consent
of David Lubin & Associates, PLLC (included in Exhbit
5.1)
|
|
24.1
|
Power
of Attorney (Contained on the signature page of this Registration
Statement)
|
PAY88,
INC.
|
||
|
|
|
By: | /s/ Guo Fan | |
Name: Guo Fan Title:
President,
Chief Executive Officer,
Chief
Financial Officer, and
Director
(Principal
Executive, Financial,
and
Accounting Officer)
|
Signature
|
Title
|
Date
|
||
/s/
Guo Fan
|
President,
Chief Executive Officer, and Director
|
October
25, 2007
|
||
Guo
Fan
|
(Principal
Executive, Financial and Accounting Officer)
|
|||
/s/
Tao Fan
|
Chief
Operating Officer
|
October
25, 2007
|
||
Tao Fan |
||||
/s/
Gordon Preston
|
Director
|
October
25, 2007
|
||
Gordon Preston |
||||
/s/
Shiqing Fu
|
Director
|
October
25, 2007
|
||
Shiqing Fu |