As filed with the Securities and Exchange Commission on December 9, 2005
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Registration No. 333-129018
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Amendment No. 1 to FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
Pay88, Inc.
(Exact name of Registrant as specified in its charter)
Nevada 6099 20-3136572
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification
incorporation or organization) Classification Code) No.)
1053 North Barnstead Road
Barnstead, NH 03225
Phone: (603) 776-6044
(Address and telephone number of Registrant's
principal executive offices)
R/A's of America
1504 US Hwy 395 N#8
Garnderville, NV 89410-5273
Tel: 800-848-4900
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies of all Correspondence to:
David Lubin, Esq.
David Lubin & Associates
92 Washington Avenue
Cedarhurst, NY 11516
Tel: (516) 569-9629
Facsimile No.: (516) 569-5053
Approximate date of commencement of proposed sale to the public: From time to
time after the effective date of this registration statement.
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, please check the following box: [X]
If this form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: [ ]
Calculation of Registration Fee
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Title of Class of Proposed Maximum Proposed Maximum
Securities to be Amount to be Aggregate Price Aggregate Offering Amount of
Registered Registered Per Share Price Registration Fee
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Common Stock, $.001 2,000,000 $0.02 (1) $40,000 $4.68
per share (2)
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Total 2,000,000 $40,000 $4.68
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(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) under the Securities Act of 1933. 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 common shares currently outstanding to be sold by the
selling security holders.
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
PRELIMINARY PROSPECTUS SUBJECT TO COMPLETION DATED ______ __, 2005
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
ii
Prospectus
Pay88, Inc.
2,000,000 Common Shares
We are a development stage company focused on becoming involved in the business
of facilitating money transfers between the United States and China. This
prospectus relates to the 2,000,000 common shares of stock currently outstanding
which are held by persons who are stockholders of Pay88, Inc.
We will not receive any of the proceeds from the sale of the shares by the
selling stockholders.
Each of the selling stockholders may be deemed to be an "underwriter," as such
term is defined in the Securities Act of 1933. The selling stockholders may sell
the shares from time to time at the prevailing market price or in negotiated
transactions.
There has been no market for our securities and a public market may not develop,
or, if any market does develop, it may not be sustained. As of December 5, 2005,
we have 10,000,000 common shares issued and outstanding.
Investing in our securities involves significant risks. See "Risk Factors"
beginning on page 2.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The information in this prospectus is not complete and may be changed. This
prospectus is included in the registration statement that was filed by us with
the Securities and Exchange Commission. The selling stockholders may not sell
these securities until the registration statement becomes effective. This
prospectus is not an offer to sell these securities and is not soliciting an
offer to buy these securities in any state where the offer or sale is not
permitted.
The date of this prospectus is ________ , 2005.
iii
Table of Contents
Page
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Prospectus Summary 1
The Offering 1
Selected Financial Information 2
Risk Factors 2
Risk Factors Relating to Our Company 2
Risk Factors Relating to Our Common Shares 5
Capitalization 7
Description of Business 7
Plan of Operations 13
Management 14
Security Ownership of Certain Beneficial Owners and Management 15
Certain Relationships and Related Transactions 16
Selling Security holders 16
Plan of Distribution 19
Dividend Policy 22
Share Capital 22
Legal Matters 23
Experts 23
Interest of Named Experts and Counsel 23
Indemnification for Securities Act Liabilities 23
Where You Can Find More Information 24
Financial Statements 25
Changes in and Disagreements with Accountants 34
Information not Required in Prospectus 34
iv
Prospectus Summary
The following summary highlights selected information contained in this
prospectus. Before making an investment decision, you should read the entire
prospectus carefully, including the "Risk Factors" section, the financial
statements and the notes to the financial statements.
Corporate Background
Pay88, Ltd. was incorporated on March 22, 2005 under the laws of the State of
New Hampshire. The company 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. 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.
We have not generated any revenue to date and are a development stage company.
We currently have no employees other than our two officers who also serve on our
board. 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. To further this objective, we have entered into a five year
agreement with Chongqing Yahu Information, Limited, a Chinese corporation, to
license their proprietary software and technology. This will provide us with an
infrastructure platform to effectuate our business.
Our offices are currently located at 1053 North Barnstead Road, Center
Barnstead, New Hampshire 03225. Our telephone number is (603) 776-6044. We do
not currently have a website.
The Offering
Securities offered 2,000,000 Common shares
Offering price At prevailing market price or in negotiated
transactions
Shares outstanding prior to 10,000,000
offering
Shares outstanding after 10,000,000
offering
Market for the common shares There is no public market for our common shares.
We intend to have a market maker file an
application on our behalf with the NASD to have
our common stock quoted on the OTC Bulletin Board
after this registration statement is declared
effective by the SEC. There is no assurance that a
trading market will develop, or, if developed,
that it will be sustained. Consequently, a
purchaser of our common stock may find it
difficult to resell the securities offered herein
should the purchaser desire to do so when eligible
for public resale.
Use of proceeds We will not receive any proceeds from the sale of
shares by the selling stockholders.
2
Summary Financial Information
Summary Financial Information
For The Period
March 23, 2005
(Inception) To
September 30, 2005
Statement of Operations Data:
Revenues $ -
Net Loss $ (158,998)
Net Loss Per Common Share - Basic and Diluted $ (.02)
Weighted Average Common Shares Outstanding -
Basic and Diluted 8,552,398
September 30, 2005
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Balance Sheet Data:
Working Capital Deficiency $ (30,612)
Total Assets $ 16,629
Stockholders' Deficiency $ (110,997)
Risk Factors
An investment in our common stock involves a high degree of risk. You should
carefully consider the following factors and other information in this
prospectus before deciding to invest in our company. If any of the following
risks actually occur, our business, financial condition, results of operations
and prospects for growth would likely suffer. As a result, you could lose all or
part of your investment.
Risk Factors Relating to Our Company
We are a development stage company and may never be able to effectuate our
business plan.
We were established in March, 2005. Although we have a license agreement which
provides us with the technical ability to effectuate wire transfers between
parties in the United States to China, we may not be able to successfully
effectuate our business. There can be no assurance that we will ever achieve any
revenues or profitability. The revenue and income potential of our proposed
business and operations is unproven as the lack of operating history makes it
difficult to evaluate the future prospects of our business.
We expect losses in the future because we have no revenue.
As we have no current revenue, we are expecting losses over the next 12 months
because we do not yet have any revenues to offset the expenses associated with
the development and the marketing of our wire transfer services. We cannot
guarantee that we will ever be successful in generating revenues in the future.
We recognize that if we are unable to generate revenues, we will not be able to
earn profits or continue operations.
3
There is no history upon which to base any assumption as to the likelihood that
we will prove successful, and we can provide investors with no assurance that we
will generate any operating revenues or ever achieve profitable operations.
We depend solely on software and consulting from Chonqing Yahu Information,
Limited, a Chinese corporation which, if it should become unavailable or if it
contains defects, could result in the failure of our business.
We license the software necessary to operate electronic funds from Chongqing
Yahu Information Limited ("Chongqing Yahu"), a Chinese company which was formed
in 1997 by Mr. Tao Fan. Mr. Fan is a brother of Mr. Guo Fan, a director and
officer of Pay88. Although Chongqing Yahu has over 650 commercial users and over
250,000 individual users, it operates exclusively in China; Chongqing Yahu has
never had operations in the United States. Even though we have a 5 year
agreement, Chongqing Yahu has the right to terminate the license agreement upon
15 days' written notice to us if we breach the agreement or if we file for
bankruptcy. If this license agreement is terminated and we were to be forced to
find a replacement for the software, our business would be harmed. In addition,
since Chongqing Yahu is supposed to provide technical support to us with respect
to the licensed software, it may be difficult for them to correct any defects
because their operations are in China, not in the United States. Accordingly,
our business could be adversely affected. There can be no assurance that
Chongqing Yahu will continue to invest the appropriate levels of resources in
their products and services to maintain and enhance the capabilities of their
software.
Since our officers work or consult for other companies, their activities could
slow down our operations.
Our officers who also serve as our directors are not required to work
exclusively for us and do not devote all of their time to our operations.
Therefore, it is possible that a conflict of interest with regard to their time
may arise based on their employment for other companies. Their other activities
may prevent them from devoting full-time to our operations which could slow our
operations and may reduce our financial results because of the slow down in
operations. It is expected that each of our directors will devote between 5 and
30 hours per week to our operations on an ongoing basis, and will devote whole
days and even multiple days at a stretch when required.
As our two officers, Mr. Guo Fan and Mr. Gordon Preston have no technical
training or experience in creating and operating a wire transfer business, we
will have to hire qualified consultants. If we cannot locate qualified
consultants, we may have to suspend or cease operations which will result in the
loss of your investment.
As neither of our executive officers have any technical training or experience
in creating and operating a wire transfer business, we will have to hire
qualified consultants to perform the various necessary tasks. Our two officers
and directors are the same two persons. Additionally, due to their lack of
experience, our executive officers may make wrong decisions and choices
regarding licensing, marketing and technology and may not take into account
standard managerial approaches which wire transfer companies commonly use.
Consequently our operations, earnings and ultimate financial success could
suffer irreparable harm due to management's lack of experience in this industry.
As a result we may have to suspend or cease operations which will result in the
loss of your investment.
4
If we are unable to obtain additional funding, our business operations will be
harmed. Even if we do obtain additional financing our then existing shareholders
may suffer substantial dilution.
We will require additional funds to obtain all required licenses to operate a
wire transferring business, develop a marketing program and address all
necessary infrastructure and technological concerns. We anticipate that we will
require up to approximately $250,000 to fund our continued operations for the
next twelve months. We hope to raise this capital through a private placement
that is expected to commence after our shares are quoted on the NASD Over the
Counter Bulletin Board. There is no assurance we will ever be successful at
either having our shares quoted or raising sufficient funds. It is possible that
additional capital will be required to effectively support the operations and to
otherwise implement our overall business strategy. The inability to raise the
required capital will restrict our ability to grow and may reduce our ability to
continue to conduct business operations. If we are unable to obtain necessary
financing, we will likely be required to curtail our development plans which
could cause the company to become dormant. Any additional equity financing may
involve substantial dilution to our then existing shareholders.
We may not be able to raise sufficient capital or generate adequate revenue to
meet our obligations and fund our operating expenses.
Failure to raise adequate capital and generate adequate sales revenues to meet
our obligations and develop and sustain our operations could result in our
having to curtail or cease operations. Additionally, even if we do raise
sufficient capital and generate revenues to support our operating expenses,
there can be no assurances that the revenue will be sufficient to enable us to
develop business to a level where it will generate profits and cash flows from
operations. These matters raise substantial doubt about our ability to continue
as a going concern. Our independent auditors currently included an explanatory
paragraph in their report on our financial statements regarding concerns about
our ability to continue as a going concern.
We may not be able to compete with current and potential wire transfer
companies, some of whom have greater resources and experience than we do.
The wire transfer market is intensely competitive, highly fragmented and subject
to rapid change. We do not have the resources to compete with our existing
competitors or with any new competitors. We compete with many wire transfer
companies which have significantly greater personnel, financial, managerial, and
technical resources than we do. This competition from other companies with
greater resources and reputations may result in our failure to maintain or
expand our business as we may never be able to develop clients for our services.
Our principal stockholders, officers and directors own a controlling interest in
our voting stock and investors will not have any voice in our management, which
could result in decisions adverse to our general shareholders.
Our two officers and directors, in the aggregate, beneficially own approximately
or have the right to vote 80% of our outstanding common stock. As a result,
these two stockholders, acting together, will have the ability to control
substantially all matters submitted to our stockholders for approval including:
o election of our board of directors;
o removal of any of our directors;
o amendment of our Articles of Incorporation or bylaws; and
o adoption of measures that could delay or prevent a change in control or
impede a merger, takeover or other business combination involving us.
5
As a result of their ownership and positions, our directors and executive
officers collectively are able to influence all matters requiring shareholder
approval, including the election of directors and approval of significant
corporate transactions. In addition, the future prospect of sales of significant
amounts of shares held by our directors and executive officers, could affect the
market price of our common stock if the marketplace does not orderly adjust to
the increase in shares in the market and the value of your investment in the
company may decrease. Management's stock ownership may discourage a potential
acquirer from making a tender offer or otherwise attempting to obtain control of
us, which in turn could reduce our stock price or prevent our stockholders from
realizing a premium over our stock price.
We are subject to various United States federal, state and foreign laws and
regulations governing money transmissions. Failure to obtain or properly comply
with these regulations may result in the demise of the company.
In the United States, most states license money transfer services providers.
Many states also require money transmitters to comply with federal and/or state
anti-money laundering laws and regulations including the Bank Secrecy Act, as
amended by the USA PATRIOT Act of 2001 (collectively, the "BSA"). In addition,
certain economic and trade sanctions programs that are administered by the
Treasury Department's Office of Foreign Assets Control ("OFAC"), prohibit or
restrict transactions to or from or dealings with specified countries, their
governments, and in certain circumstances, their nationals, and with individuals
and entities that are specially designated nationals of those countries,
narcotics traffickers, and terrorists or terrorist organizations. The BSA, among
other things, requires money transfer companies to develop and implement risk
based anti-money laundering programs, report large cash transactions and
suspicious activity, and to maintain transaction records. We will not be able to
operate without first obtaining the proper licenses and establishing and
maintaining the proper programs necessary to comply with the regulatory
environment in which we hope to operate. Even if we are successful at obtaining
such licenses, if we are not able to maintain them we will not be able to
operate.
While the People's Republic of China regulates the overseas transfer of money
from China and the receipt of foreign money transfers by Chinese banks, these
regulations do not appear to apply to foreign money transmitters that do not
operate in China. In addition, while The People's Bank of China, China's central
bank, has promulgated anti-money laundering regulations that require Chinese
banks to report large and suspicious transactions and is expected to extend such
regulation to the securities and insurance industries. These regulations do not
purport to apply to U.S.-based money transmitters that do not have operations in
China.
We are subject to any new or additional laws enacted by foreign or domestic
governments.
Even if we are successful at obtaining and maintaining all the licenses to
operate a wire transfer business from the United States to China, foreign and
domestic governments may impose new or additional rules on money transfers and
sales of payment instruments, including regulations which (i) prohibit
transactions in, to or from certain countries, governments, nationals and
individuals and entities; (ii) impose additional identification, reporting or
recordkeeping requirements; (iii) limit the entities capable of providing money
transfer services and sales of payment instruments; (iv) limit or restrict the
revenue which may be generated from money transfers, including revenue derived
from foreign exchange; (v) require additional consumer disclosures; or (vi)
limit the number or principal amount of money transfers which may be sent to or
from the jurisdiction. We will not have the resources to obtain any new license
requirements imposed by any regulatory agencies which have jurisdiction over our
business.
6
Risks Relating To Our Common Shares
We may, in the future, issue additional common shares, which would reduce
investors' percent of ownership and may dilute our share value.
Our Articles of Incorporation authorize the issuance of 100,000,000 shares of
common stock and 5,000,000 preferred shares. The future issuance of common stock
may result in substantial dilution in the percentage of our common stock held by
our then existing shareholders. We may value any common stock issued in the
future on an arbitrary basis. The issuance of common stock for future services
or acquisitions or other corporate actions may have the effect of diluting the
value of the shares held by our investors, and might have an adverse effect on
any trading market for our common stock.
Our common shares are subject to the "Penny Stock" Rules of the SEC and the
trading market in our securities is limited, which makes transactions in our
stock cumbersome and may reduce the value of an investment in our stock.
The Securities and Exchange Commission has adopted Rule 15g-9 which establishes
the definition of a "penny stock," for the purposes relevant to us, as any
equity security that has a market price of less than $5.00 per share or with an
exercise price of less than $5.00 per share, subject to certain exceptions. For
any transaction involving a penny stock, unless exempt, the rules require:
o that a broker or dealer approve a person's account for transactions
in penny stocks; and
o 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.
In order to approve a person's account for transactions in penny stocks, the
broker or dealer must:
o obtain financial information and investment experience objectives of
the person; and
o 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.
The broker or dealer must also deliver, prior to any transaction in a penny
stock, a disclosure schedule prescribed by the Commission relating to the penny
stock market, which, in highlight form:
o sets forth the basis on which the broker or dealer made the
suitability determination; and
o that the broker or dealer received a signed, written agreement from
the investor prior to the transaction.
Generally, brokers may be less willing to execute transactions in securities
subject to the "penny stock" rules. This may make it more difficult for
investors to dispose of our Common shares and cause a decline in the market
value of our stock.
Disclosure also has to be made about the risks of investing in penny stocks in
both public offerings and in secondary trading and about the commissions payable
to both the broker-dealer and the registered representative, current quotations
for the securities and the rights and remedies available to an investor in cases
of fraud in penny stock transactions. Finally, monthly statements have to be
sent disclosing recent price information for the penny stock held in the account
and information on the limited market in penny stocks.
7
There is no current trading market for our securities and if a trading market
does not develop, purchasers of our securities may have difficulty selling their
shares.
There is currently no established public trading market for our securities and
an active trading market in our securities may not develop or, if developed, may
not be sustained. We intend to apply for admission to quotation of our
securities on the NASD OTC Bulletin Board after this prospectus is declared
effective by the SEC. If for any reason our common stock is not quoted on the
OTC Bulletin Board or a public trading market does not otherwise develop,
purchasers of the shares may have difficulty selling their common stock should
they desire to do so. No market makers have committed to becoming market makers
for our common stock and none may do so.
State securities laws may limit secondary trading, which may restrict the states
in which and conditions under which you can sell the shares offered by this
prospectus.
Secondary trading in common stock sold in this offering will not be possible in
any state until the common stock is qualified for sale under the applicable
securities laws of the state or there is confirmation that an exemption, such as
listing in certain recognized securities manuals, is available for secondary
trading in the state. If we fail to register or qualify, or to obtain or verify
an exemption for the secondary trading of, the common stock in any particular
state, the common stock could not be offered or sold to, or purchased by, a
resident of that state. In the event that a significant number of states refuse
to permit secondary trading in our common stock, the liquidity for the common
stock could be significantly impacted thus causing you to realize a loss on your
investment.
Because we do not intend to pay any cash dividends on our common stock, our
stockholders will not be able to receive a return on their shares unless they
sell them.
We intend to retain any future earnings to finance the development and expansion
of our business. We do not anticipate paying any cash dividends on our common
stock in the foreseeable future. Unless we pay dividends, our stockholders will
not be able to receive a return on their shares unless they sell them. There is
no assurance that stockholders will be able to sell shares when desired.
We may issue shares of preferred stock in the future that may adversely impact
your rights as holders of our common stock.
Our articles of incorporation authorize us to issue up to 5,000,000 shares of
"blank check" preferred stock. Accordingly, our board of directors will have the
authority to fix and determine the relative rights and preferences of preferred
shares, as well as the authority to issue such shares, without further
stockholder approval. As a result, our board of directors could authorize the
issuance of a series of preferred stock that would grant to holders preferred
rights to our assets upon liquidation, the right to receive dividends before
dividends are declared to holders of our common stock, and the right to the
redemption of such preferred shares, together with a premium, prior to the
redemption of the common stock. To the extent that we do issue such additional
shares of preferred stock, your rights as holders of common stock could be
impaired thereby, including, without limitation, dilution of your ownership
interests in us. In addition, shares of preferred stock could be issued with
terms calculated to delay or prevent a change in control or make removal of
management more difficult, which may not be in your interest as holders of
common stock
8
Capitalization
September 30, 2005
Note Payable - Related Party $ 80,385
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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 (158,998)
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Total Stockholders' Deficiency (110,997)
---------
Total Capitalization (Deficiency) $ (30,612)
=========
Description of Business
Summary
We have not generated any revenue to date and are a development stage company.
We are focused on becoming involved in the business of facilitating money
transfers from the United States to China. 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, a customer will transfer
money using a credit card or a debit from a bank account. 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.
We have not commenced operations other than in connection with this offering and
the execution of the license agreement with Chongqing Yahu described below. Our
officers and directors have no experience in the business in facilitating money
transfers between the United States and China.
Mr. Fan was familiar with the software created by Yahu, since his brother is the
president of Yahu. Shortly after arriving in the United States, Mr. Fan came to
realize the need for a system to facilitate wire transfers from the United State
to China. Being familiar with the services provided in China by Yahu, Mr. Fan
believed that this software application would be ideal for a company in the
United States. Since Mr. Fan did not have sufficient business experience in the
United States, he engaged the services of First Line Consulting to assist in the
development of this business.
On August 3, 2005, we entered into a five year agreement with Chongqing Yahu
Information Limited, a Chinese corporation ("Chongqing Yahu"). 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.
9
Clients will be able to access our services over the internet. A person will be
able to go to our web site and use his credit card to credit his account for the
amount of money that he desires to transfer to a designated recipient in China.
Immediately after his 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 person 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..
We have a consulting agreement with First Line Capital, LLC, a New York based
firm to assist us with various business and financial services including:
assistance in corporate development (competitive environment, financial
performances vs. competition, strategies, operational 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. This agreement covers $120,000 of business consulting services. With
adequate funding we feel that we are well positioned to execute our plan. The
services to be performed by First Line to us have been substantially performed.
We do not have sufficient capital to operate our business and will require
additional funding to sustain operations through the next twelve months. There
is no assurance that we will have revenue in the future or that we will be able
to secure the necessary funding to develop our business.
Our offices are currently located at 1053 North Barnstead Road, Center
Barnstead, New Hampshire 03225. Our telephone number is (603) 776-6044. We do
not have a website at this time.
Money Transfer Market Overview
The money transfer market between America, Canada and China is growing.
According to an article in The New Zealand Herald, Western Union(1) reported
that $11 billion is transferred to China from the United States formally each
year, with an additional $11 billion transferred through less formal channels.
In the 2000 census the population of Chinese nationals living in the United
States numbered more than 2.4 million. Both populations are expected to see
significant and continued growth(1).
1) From The New Zealand Herald June 30th , 2005.
Objectives
We hope to be able to facilitate secure online money transfer services from the
United States to China.
The company has no revenues at this time. As of December 5, 2005 we had
approximately $7,000 in cash. It is our belief that this will suffice until we
are quoted on the NASD Over the Counter Bulletin Board. Once our shares are
quoted, we intend to initiate a capital raise in the amount of $250,000 pursuant
to an exemption from the registration requirements of the Securities Act of
1933. However, there is no assurance we will be successful at raising any monies
at such time. Proceeds from this raise would be utilized for completing the
technical infrastructure needs, development of a marketing plan and professional
fees relating to the procurement of all appropriate regulatory licensing.
10
Software
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
As discussed above, we entered into a five (5) year agreement with Chongqing
Yahu, pursuant to which Chongqing Yahu will provide the system software to us
which satisfies all the above parameters. . We hope that this agreement will
assist us towards establishing us as a quality internet money transfer service
provider.
Marketing
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.
11
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.
Although the company generally intends, once the Registration Statement is
declared effective and its shares are quoted on the NASD Bulletin Board, to make
a private offering of its securities, we have no specific plans, understandings
or agreements with respect to such an offering, and may seek to raise the
required capital by other means. No arrangements have been made with any third
party with respect to such a private offering and we have given no contemplation
with respect to the securities to be offered or any other issue with respect to
any offering. 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.
Licensing
All international wire transfer companies are subject to various United States
federal, state and foreign laws and regulations governing money transmission. In
the United States, most states license money transfer services providers. Our
money transfer and payment services businesses are also subject to regulation by
the United States, including anti-money laundering laws and regulations,
including the Bank Secrecy Act, as amended by the USA PATRIOT Act of 2001
(collectively, the "BSA").
We need to develop a compliance program to monitor and address legal and
regulatory requirements and developments. To assist in managing and monitoring
the money laundering risks, we will develop an anti-money laundering compliance
program comprised of policies, procedures, systems and internal controls which
address potential money laundering risks.
To assist in obtaining all required licenses the company anticipates allocating
Fifty Thousand Dollars ($50,000) towards the procurement of the required
regulatory licenses. We hope to raise the funds for the license procurement in a
private placement offering that is scheduled once this registration is declared
effective and we are quoted on the NASD OTCBB.
Competition
The electronic money transfer industry is highly competitive. The payment
network we plan to introduce will encounter strong competition from many other
banks and money wire transfer companies, including many with greater financial
resources than ours.
As the global money transfer market continues to expand, we expect there to be
significant competition from companies similar to ours, as well as from larger
and more established companies. Our competitors include;
1. Capital Electronic-Store (Capital Electronic-Store Online Payment
Platform) was founded in March 1999. It is the earliest online
payment service platform that implemented online transactions among
multiple banks and multiple regions. Now it supports China's 19
banks and 60 plus cards and 4 international credit cards for online
payment. It owns huge customers groups comprised of individual
consumers as well asnearly 600 business enterprises and
institutions, government agencies and social organizations.
12
2. The IPS of Universal e-Commerce China Ltd (IPS) is an internet
payment system (IPS) developed by Universal Technologies Holdings
Ltd. Its fast and secure trade mode has been widely accepted. The
system has been widely used in many well-known e-commerce web sites.
While they are not presently our direct competitors, they possess
all the necessary software and regulation requirements as well as a
solid customer base to swiftly become active in our environment.
3. SmartPay Jieyin Limited was funded in 2001. It is a company devoted
to mobile payments that can be made from a clients' cell phone. A
cell phone user can use his handset as a payment terminal to pay
service or products via Jieyin's mobile payment system. While we do
not offer "mobile payments", the ability to effectuate a wire
transfer is similar in function.
Government Regulation
Financial transaction reporting and state banking department regulations also
affect our business. As a money transmitter, we must comply with a number of
domestic and international regulatory requirements, including the following:
o state licensing laws;
o federal and state anti-money laundering and the federal government's
Office of Foreign Assets Control ("OFAC") regulations;
o laws of various foreign countries regulating the ability to conduct a
money transfer business and requiring compliance with anti-money
laundering regulations;
o state unclaimed property reporting; and
o state, federal and international privacy laws.
In the United States, 45 states require us to be licensed in order to conduct
business within their jurisdiction. Requirements to be so licensed generally
include minimum net worth, surety bonds, operational procedures and reserves or
"permissible investments" that must be maintained in an amount equivalent to all
outstanding payment obligations issued by us. The state minimum net worth
requirements range from $5,000 to $100,000, depending on the number of offices
or agents within the particular state. The types of securities that are
considered "permissible investments" vary from state to state, but generally
include United States government securities and other highly rated debt
instruments. Most states require us to file reports on a quarterly or more
frequent basis, verifying our compliance with their requirements.
The state of New Hampshire, which is the only state in which we currently
conduct business, does not require us to be so licensed in order to conduct our
business within its jurisdiction. However, the legislature of the state of New
Hampshire is currently considering proposed legislation that would require us to
be so licensed. If such legislation is passed, we will have to ensure that we
are in compliance.
The state of China, which is the only foreign state in which we currently
anticipate doing business, may impose new or additional rules on money
transfers, including regulations which (i) prohibit transactions in, to or from
certain countries, governments, nationals and individuals and entities; (ii)
impose additional identification, reporting or recordkeeping requirements; (iii)
limit the entities capable of providing money transfer services and sales of
payment instruments; (iv) limit or restrict the revenue which may be generated
from money transfers, including revenue derived from foreign exchange; (v)
require additional consumer disclosures; or (vi) limit the number or principal
amount of money transfers which may be sent to or from the jurisdiction.
13
Under the USA Patriot Act, money service businesses, including our agents, are
required to establish anti-money laundering compliance programs that include:
o internal policies and controls;
o the designation of a compliance officer;
o ongoing employee training; and
o an independent review function.
Unclaimed property laws of every state require that we track the relevant
information on each money order or money transfer and, if unclaimed at the end
of the statutory abandonment period, that we remit the proceeds of the unclaimed
property to the appropriate jurisdiction. State abandonment periods for money
orders and money transfers range from three to seven years, while those for
official checks are generally three to five years. Certain foreign jurisdictions
also may have unclaimed property laws.
In the ordinary course of our business, we collect certain types of consumer
data and thus are subject to privacy laws. We are subject to the
Gramm-Leach-Bliley Act of 1999 (the "GLB Act"), which requires that financial
institutions have in place policies regarding the collection and disclosure of
information considered nonpublic personal information. We intend to comply with
the GLB Act by posting a privacy notice on our website, as well as posting a
privacy notice on the forms completed by individuals in order to use services
(for example, on our money transfer "send" form). We also intend to have
confidentiality/information security agreements in place with our third-party
vendors and service providers to the extent required by the GLB Act.
If we fail to comply with any applicable laws and regulations, this failure
could result in restrictions on our ability to provide our products and
services, as well as the imposition of civil fines and criminal penalties. See
"Risk Factors --Risks Relating To Our Company."
Employees
We have no full time employees at this time. All functions including
development, strategy, negotiations and clerical are currently being provided by
our officers on a voluntary basis.
Description of Property
We currently maintain our corporate offices at 1053 North Barnstead Road, Center
Barnstead, NH 03225 in space provided to us by an officer. We currently are
recognizing a lease expense of $200 per month for this space. We believe that
this space will be sufficient until we start generating revenues and need to
hire employees.
Management's Discussion and Analysis or Plan of Operation
Certain statements contained in this prospectus, including statements regarding
the anticipated development and expansion of our business, our intent, belief or
current expectations, primarily with respect to the future operating performance
of Pay88 and the services we expect to offer and other statements contained
herein regarding matters that are not historical facts, are "forward-looking"
statements. Future filings with the Securities and Exchange Commission, future
press releases and future oral or written statements made by us or with our
approval, which are not statements of historical fact, may contain
forward-looking statements, because such statements include risks and
uncertainties, actual results may differ materially from those expressed or
implied by such forward-looking statements.
14
All forward-looking statements speak only as of the date on which they are made.
We undertake no obligation to update such statements to reflect events that
occur or circumstances that exist after the date on which they are made.
Overview
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. With this in mind we have entered into a working
agreement with ChongQing Yahu Information, Limited. This agreement could give us
a competitive edge in this developing sector.
Results of Operations
During the period from March 22, 2005 (inception) through September 30, 2005, we
incurred a net loss of $158,998. Such loss consisted primarily of consulting
fees of $121,000, professional fees of $31,118 and other expenses of $6,545. The
consulting fees were incurred in connection with a business and financial
consulting agreement with First Line Capital, LLC. Services performed included
assisting in corporate development and the preparation of a business plan. In
addition, we incurred interest expense of $335 in connection with a note payable
to Mr. Fan, our Chief Executive Officer.
Revenues
We had no revenues for the period from March 22, 2005 (inception) through
September 30, 2005. We do not anticipate generating any revenues for the next 12
months.
Liquidity and Capital Resources
Our balance sheet as of September 30, 2005 reflects assets of $16,629. Cash and
cash equivalents from inception to date have been sufficient to provide the
operating capital necessary to operate to date.
We do not have sufficient resources to effectuate our business. We 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.
We will have to issue debt or equity or enter into a strategic arrangement with
a third party. There can be no assurance that additional capital will be
available to us. We currently have no agreements, arrangements or understandings
with any person to obtain funds through bank loans, lines of credit or any other
sources.
15
Going Concern Consideration
Our independent auditors included an explanatory paragraph in their report on
the accompanying financial statements regarding concerns about our ability to
continue as a going concern. Our financial statements contain additional note
disclosures describing the circumstances that lead to this disclosure by our
independent auditors.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
Management
Directors and Executive Officers
The following table sets forth certain information regarding the members of our
board of directors and our executive officers as of December 5 2005:
Name Age Positions and Offices Held
--------------------------- -------- ------------------------------------
Guo Fan 27 Chairman, President and CEO
Gordon 62 Director, Secretary
Preston
The business address of our officers and directors is c/o Pay88, Inc., 1053
North Barnstead Road, Center Barnstead, NH 03225.
Our directors hold office until the next annual meeting of our shareholders or
until their successors are duly elected and qualified. Set forth below is a
summary description of the principal occupation and business experience of each
of our directors and executive officers for at least the last five years.
Mr. Guo Fan has been our Chairman, President and CEO since we were established.
Since January 2004, Mr. Fan has been the Internet Operations Senior Consultant
for ChongQing Junfang Science Technology, a private computer software company
located in Chongqing China. In this role, Mr. Fan had developed operating and
financial policies and procedures for the company. From 2000 through 2003 Mr.
Fan was an officer of Hampstead Players Inc., a company involved in traveling
theater productions. From 2003 through March 2005, he was the manager of New
Hampshire Fireworks Inc., a major distributor of Chinese fireworks. Guo has
received his Associate in Science Degree from the New Hampshire Technical
Institute (NHTI) in Aug of 1998.
Mr. Gordon Preston has been a Director and our secretary since we were
established. Mr. Preston is a mechanical engineer with a broad international
work experience. Since 2003, Mr. Preston was Elected Selectman Barnstead, New
Hampshire for a three year term. Mr. Preston is focusing his efforts in this
capacity on helping the community develop and implement an economic recovery
plan. From May 1992 through 2000 he served as Marketing Director of Precious
Metal Industries Ltd. In this position, Mr. Preston was responsible for dealing
with refinery contracts throughout the Soviet Union and Eastern Europe. In 2000
he established Hampstead Stage Co. in New Hampshire, a non-profit company
engaged in traveling theater production.Gordon initially obtained Degree in
Mechanical Engineering (HND) in the United Kingdom at Derby University in 1961.
16
Executive Compensation.
None of our officers or directors have received or earned any compensation or
bonus for services rendered since inception in March, 2005.
We do not maintain key-man life insurance for any of our executive officers or
directors.
We do not have any long-term compensation plans or stock option plans.
Compensation of Directors
During the period from March 22, 2005 to December 5, 2005, no officer or
director received any type of compensation from our Company for serving as such.
No arrangements are presently in place regarding compensation to directors for
their services as directors or for committee participation or special
assignments.
Auditors
Our principal independent accountant is Wolinetz, Lafazan & Company, P.C.
We do not currently have a Code of Ethics applicable to our principal executive,
financial and accounting officers. We do not have a "financial expert" on the
board or an audit committee or nominating committee.
Potential Conflicts of Interest
We are not aware of any current or potential conflicts of interest with any of
our executives or directors.
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information, as of December 5, 2005,
concerning the ownership of the Common Stock by (a) each person who, to the best
of our knowledge, beneficially owned on that date more than 5% of our
outstanding Common Stock, (b) each of our directors and executive officers and
(c) all current directors and executive officers as a group. Unless otherwise
indicated, the address of each person listed is c/o Pay88, Inc., 1053 North
Barnstead Road, Center Barnstead, NH 03225.
Based on 10,000,000 shares of our Common Stock outstanding as of December 5,
2005. Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission (the "SEC") and generally includes voting or
investment power with respect to securities. In accordance with SEC rules,
shares of Common Stock issuable upon the exercise of options or warrants which
are currently exercisable or which become exercisable within 60 days following
the date of the information in this table are deemed to be beneficially owned
by, and outstanding with respect to, the holder of such option or warrant.
Except as indicated by footnote, and subject to community property laws where
applicable, to our knowledge, each person listed is believed to have sole voting
and investment power with respect to all shares of Common Stock owned by such
person.
17
Number of Shares Percent of
of Common Stock Common Stock
Name of Beneficial Owner Beneficially Owned Beneficially Owned
-------------------------------- ----------------------- ------------------------
Guo Fan 7,600,000 76%
Gordon Preston 400,000 4%
All directors and executive 8,000,000 80%
officers as a group (two
persons)
Certain Relationships and Related Transactions
Currently, we utilize space that is provided to us by Mr. Gordon Preston, a
director and our Secretary for a rental fee of $200 per month. As of August 31,
2005, Mr. Fan lent us an aggregate of $80,385, and in consideration therefore,
we issued to Guo Fan a promissory note, in the principal amount of $80,385. Said
amount bears interest at the rate of 5% per annum. Principal and interest are
due and payable on August 31, 2008. In addition, Mr. Fan has advanced us
$36,000. Such loan is non-interest bearing and has no specific repayment terms.
Other than as set forth above, there are no transactions during the last two
years, or proposed transactions, to which we were or are to be a party, in which
any of the following persons had or is to have a direct or indirect material
interest:
o Any director or executive officer of the small business issuer;
o Any majority security holder; and
o Any member of the immediate family (including spouse, parents,
children, siblings, and in-laws) of any of the persons in the above.
Selling Security Holders
The following table sets forth the shares beneficially owned, as of December 5,
2005, by the selling stockholders prior to the offering contemplated by this
prospectus, the number of shares each selling stockholder is offering by this
prospectus and the number of shares which each would own beneficially if all
such offered shares are sold. None of the selling stockholders is a registered
broker-dealer or an affiliate of a registered broker-dealer. Each of the selling
stockholders has acquired his, her or its shares pursuant to a private placement
solely for investment and not with a view to or for resale or distribution of
such securities. Beneficial ownership is determined in accordance with SEC rules
and includes voting or investment power with respect to the securities.
The shares were offered and sold to the selling stockholders in a private
placement made (i) to selling stockholders who are non-U.S. persons (all of the
selling stockholders named in the following table, other than First Line
Capital, LLC, EGC Weekly and Zegal and Ross, LLC in offshore transactions
pursuant to the exemption from the registration under the Securities Act
provided by Regulation S and (ii) to the three U.S. persons (First Line Capital,
EGC Weekly and Zegal and Ross) pursuant to the exemption from the registration
provided by Section 4(2) of the Securities Act. All the Chinese residents listed
below knew Mr. Fan or his family when he lived in China.
None of the selling stockholders are affiliates or controlled by our affiliates
and none of the selling stockholders are now or were at any time in the past an
officer or director of ours or any of any of our predecessors or affiliates.
18
====================================================================================================
Number of Shares Offered
by Selling Security holder and Percent
of Total
Name of Selling Common Shares Issued and Outstanding Held After the
Security holder owned Offering(1)
====================================================================================================
# of % of
Shares Class
====================================================================================================
Mr. Zheng Bin Fan 500 500 *
====================================================================================================
Mrs Li Bao 500 500 *
====================================================================================================
Mr. Ying Bao 500 500 *
====================================================================================================
Mr. Li Han 500 500 *
====================================================================================================
Mr. Kai He 500 500 *
====================================================================================================
Mrs. Wen xue Hu 500 500 *
====================================================================================================
Mr. Yu Hu 500 500 *
====================================================================================================
Mr. Jian kang Huang 500 500 *
====================================================================================================
Mrs Juan Jia 500 500 *
====================================================================================================
Mrs Zhong shu Jiang 500 500 *
====================================================================================================
Mrs. Yi Li 500 500 *
====================================================================================================
Mr Jiao Liu 500 500 *
====================================================================================================
Mrs. Ping Liu 124,000 124,000 *
====================================================================================================
Mrs Qin yu Liu 2,000 2,000 *
====================================================================================================
Mrs Yun LiuIU 500 500 *
====================================================================================================
Mr. Zhi wei Pu 500 500 *
====================================================================================================
Mr Yuan qiang Shi 500 500 *
====================================================================================================
Mr. Ming Song 500 500 *
====================================================================================================
Mrs He yan Wang 500 500 *
====================================================================================================
Mrs. Jie hui Wang 500 500 *
====================================================================================================
Mr. Ming Xiao 500 500 *
====================================================================================================
Mrs Juan Xie 500 500 *
====================================================================================================
Mrs. Ying Xiong 500 500 *
====================================================================================================
Mr. Yuan shu Xiong 500 500 *
====================================================================================================
Mrs. Lin Xu 500 500 *
====================================================================================================
Mr. Hua Yang 500 500 *
====================================================================================================
Mr. Hua bo Zhao 500 500 *
====================================================================================================
Mr. Yi min Zhao 500 500 *
====================================================================================================
Mrs Mi Zhou 500 500 *
====================================================================================================
Mr. Zhang lun Zhou 500 500 *
====================================================================================================
Mr. Xin Yuan 10,000 10,000 *
====================================================================================================
Mr. Tao Min 10,000 10,000 *
====================================================================================================
19
====================================================================================================
Number of Shares Offered
by Selling Security holder and Percent
of Total
Name of Selling Common Shares Issued and Outstanding Held After the
Security holder owned Offering(1)
====================================================================================================
# of % of
Shares Class
====================================================================================================
Mrs Xiao yan Wang 10,000 10,000 *
====================================================================================================
Mrs. Li Liu 10,000 10,000 *
====================================================================================================
Mr. Daniel Matmor 18 1st Ave.,
Toronto, Ontario M4M 1W8
Canada 5,000 5,000 *
====================================================================================================
Mrs. Heidi Von Palleske 18 1st Ave.,
Toronto, Ontario M4M 1W8
Canada 5,000 5,000 *
====================================================================================================
Mr. Craig Max Baron
19 Ashleigh Road
Sketty, Swamsea SA 2 8EE
United Kingdom 5,000 5,000 *
====================================================================================================
Mr. Sheldon Schreter P.O. Box 874
Ra'anana, Israel 43106 5,000 5,000 *
====================================================================================================
First Line Capital, LLC
c/o Mr. Daniel Hirsch
410 Park Avenue, 15th Floor,
New York, NY 10022 450,000 450,000 *
====================================================================================================
EGC Weekly, LLC
c/o Mr. Eliyahu Ben Hamo
2 Windmill Lane
Monsey, New York 10952 450,000 450,000 *
====================================================================================================
Zegal and Ross, LLC
c/o Mr. Mark Zegal
55 Union Road, Suite 203
Spring Valley, NY 10977 450,000 450,000 *
====================================================================================================
Tayside Trading, Limited
c/o Mr. Azriel Pines
Nachal Katlav 6
Tel Aviv, Israel 450,000 450,000 *
====================================================================================================
* Represents less than one percent of the total number of shares of common stock
outstanding as of the date of this filing.
(1) Assumes all of the shares of common stock offered in this prospectus
are sold and no other shares of common stock are sold or issued
during this offering period. Based on 10,000,000 shares of common
stock issued and outstanding as of December 5, 2005.
20
We may require the selling security holders to suspend the sales of the
securities offered by this prospectus upon the occurrence of any event that
makes any statement in this prospectus, or the related registration statement,
untrue in any material respect, or that requires the changing of statements in
these documents in order to make statements in those documents not misleading.
We will file a post-effective amendment to this registration statement to
reflect any material changes to this prospectus.
Expenses of Issuance and Distribution.
We have agreed to pay all expenses incident to the offering and sale to the
public of the shares being registered other than any commissions and discounts
of underwriters, dealers or agents and any transfer taxes, which shall be borne
by the selling security holders. The expenses which we are paying are set forth
in the following table. All of the amounts shown are estimates except the SEC
registration fee.
--------------------------------------------------------------
Nature of Expense Amount
--------------------------------------------------------------
Accounting fees and expenses $25,000*
--------------------------------------------------------------
SEC registration fee $4.68
--------------------------------------------------------------
Legal fees and other expenses $100,000*
---------
--------------------------------------------------------------
Total 125,004.68*
--------------------------------------------------------------
*Estimated Expenses.
Plan of Distribution
The selling security holders may, from time to time, sell all or a portion of
the shares of common stock on any market upon which the common stock may be
listed or quoted (anticipated to be the OTC Bulletin Board in the United
States), in privately negotiated transactions or otherwise. Such sales may be at
fixed prices prevailing at the time of sale, at prices related to the market
prices or at negotiated prices. The shares of common stock being offered for
resale by this prospectus may be sold by the selling security holders by one or
more of the following methods, without limitation:
(a) ordinary brokerage transactions and transactions in which the broker
solicits purchasers;
(b) privately negotiated transactions;
(c) market sales (both long and short to the extent permitted under the
federal securities laws);
(d) at the market to or through market makers or into an existing market
for the shares;
(e) through transactions in options, swaps or other derivatives (whether
exchange listed or otherwise); and
(f) a combination of any of the aforementioned methods of sale.
In the event of the transfer by any of the selling security holders of its
common shares to any pledgee, donee or other transferee, we will amend this
prospectus and the registration statement of which this prospectus forms a part
by the filing of a post-effective amendment in order to have the pledgee, donee
or other transferee in place of the selling stockholder who has transferred his,
her or its shares.
21
In effecting sales, brokers and dealers engaged by the selling security holders
may arrange for other brokers or dealers to participate. Brokers or dealers may
receive commissions or discounts from a selling stockholder or, if any of the
broker-dealers act as an agent for the purchaser of such shares, from a
purchaser in amounts to be negotiated which are not expected to exceed those
customary in the types of transactions involved. Broker-dealers may agree with a
selling stockholder to sell a specified number of the shares of common stock at
a stipulated price per share. Such an agreement may also require the
broker-dealer to purchase as principal any unsold shares of common stock at the
price required to fulfill the broker-dealer commitment to the selling
stockholder if such broker-dealer is unable to sell the shares on behalf of the
selling stockholder. Broker-dealers who acquire shares of common stock as
principal may thereafter resell the shares of common stock from time to time in
transactions which may involve block transactions and sales to and through other
broker-dealers, including transactions of the nature described above. Such sales
by a broker-dealer could be at prices and on terms then prevailing at the time
of sale, at prices related to the then-current market price or in negotiated
transactions. In connection with such resales, the broker-dealer may pay to or
receive from the purchasers of the shares commissions as described above.
The selling security holders and any broker-dealers or agents that participate
with the selling stockholders in the sale of the shares of common stock may be
deemed to be "underwriters" within the meaning of the Securities Act in
connection with these sales. In that event, any commissions received by the
broker-dealers or agents and any profit on the resale of the shares of common
stock purchased by them may be deemed to be underwriting commissions or
discounts under the Securities Act.
From time to time, any of the selling security holders may pledge shares of
common stock pursuant to the margin provisions of customer agreements with
brokers. Upon a default by a selling security holder, their broker may offer and
sell the pledged shares of common stock from time to time. Upon a sale of the
shares of common stock, the selling security holders intend to comply with the
prospectus delivery requirements under the Securities Act by delivering a
prospectus to each purchaser in the transaction. We intend to file any
amendments or other necessary documents in compliance with the Securities Act
which may be required in the event any of the selling stockholders defaults
under any customer agreement with brokers.
To the extent required under the Securities Act, a post effective amendment to
this registration statement will be filed disclosing the name of any
broker-dealers, the number of shares of common stock involved, the price at
which the common stock is to be sold, the commissions paid or discounts or
concessions allowed to such broker-dealers, where applicable, that such
broker-dealers did not conduct any investigation to verify the information set
out or incorporated by reference in this prospectus and other facts material to
the transaction.
We and the selling security holders will be subject to applicable provisions of
the Exchange Act and the rules and regulations under it, including, without
limitation, Rule 10b-5 and, insofar as a selling stockholder is a distribution
participant and we, under certain circumstances, may be a distribution
participant, under Regulation M. All of the foregoing may affect the
marketability of the common stock.
All expenses of the registration statement including, but not limited to, legal,
accounting, printing and mailing fees are and will be borne by us. Any
commissions, discounts or other fees payable to brokers or dealers in connection
with any sale of the shares of common stock will be borne by the selling
security holders, the purchasers participating in such transaction, or both.
Any shares of common stock covered by this prospectus which qualify for sale
pursuant to Rule 144 under the Securities Act, as amended, may be sold under
Rule 144 rather than pursuant to this prospectus.
22
Penny Stock Regulations
You should note that our stock is a penny stock. The Securities and Exchange
Commission has adopted Rule 15g-9 which generally defines "penny stock" to be
any equity security that has a market price (as defined) less than $5.00 per
share or an exercise price of less than $5.00 per share, subject to certain
exceptions. Our securities are covered by the penny stock rules, which impose
additional sales practice requirements on broker-dealers who sell to persons
other than established customers and "accredited investors". The term
"accredited investor" refers generally to institutions with assets in excess of
$5,000,000 or individuals with a net worth in excess of $1,000,000 or annual
income exceeding $200,000 or $300,000 jointly with their spouse. The penny stock
rules require a broker-dealer, prior to a transaction in a penny stock not
otherwise exempt from the rules, to deliver a standardized risk disclosure
document in a form prepared by the SEC which provides information about penny
stocks and the nature and level of risks in the penny stock market. The
broker-dealer also must provide the customer with current bid and offer
quotations for the penny stock, the compensation of the broker-dealer and its
salesperson in the transaction and monthly account statements showing the market
value of each penny stock held in the customer's account. The bid and offer
quotations, and the broker-dealer and salesperson compensation information, must
be given to the customer orally or in writing prior to effecting the transaction
and must be given to the customer in writing before or with the customer's
confirmation. In addition, the penny stock rules require that prior to a
transaction in a penny stock not otherwise exempt from these rules, the
broker-dealer must make a special written determination that the penny stock is
a suitable investment for the purchaser and receive the purchaser's written
agreement to the transaction. These disclosure requirements may have the effect
of reducing the level of trading activity in the secondary market for the stock
that is subject to these penny stock rules. Consequently, these penny stock
rules may affect the ability of broker-dealers to trade our securities. We
believe that the penny stock rules discourage investor interest in and limit the
marketability of our common stock.
Blue Sky Restrictions on Resale
If a selling security holder wants to sell shares of our common stock under this
registration statement in the United States, the selling security holders will
also need to comply with state securities laws, also known as "Blue Sky laws,"
with regard to secondary sales. All states offer a variety of exemption from
registration for secondary sales. Many states, for example, have an exemption
for secondary trading of securities registered under Section 12(g) of the
Securities Exchange Act of 1934 or for securities of issuers that publish
continuous disclosure of financial and non-financial information in a recognized
securities manual, such as Standard & Poor's. The broker for a selling security
holder will be able to advise a selling security holder which states our common
stock is exempt from registration with that state for secondary sales.
Any person who purchases shares of our common stock from a selling security
holder under this registration statement who then wants to sell such shares will
also have to comply with Blue Sky laws regarding secondary sales.
When the registration statement becomes effective, and a selling security holder
indicates in which state(s) he desires to sell his shares, we will be able to
identify whether it will need to register or will rely on an exemption there
from.
Dividend Policy
We have not declared or paid dividends on our Common Stock since our formation,
and we do not anticipate paying dividends in the foreseeable future. Declaration
or payment of dividends, if any, in the future, will be at the discretion of our
Board of Directors and will depend on our then current financial condition,
results of operations, capital requirements and other factors deemed relevant by
the board of directors. There are no contractual restrictions on our ability to
declare or pay dividends.
23
Share Capital
Security Holders
At December 5 2005, there were 10,000,000 common shares outstanding which were
held by 44 stockholders of record.
Transfer Agent
We have appointed OTC Corporate Transfer Service Company, with offices at 52
Maple Run Drive, Jericho, New York 11753, phone number (516) 932-2080, as
transfer agent for our shares of common stock. The transfer agent is responsible
for all record-keeping and administrative functions in connection with the
common shares.
Admission to Quotation on the OTC Bulletin Board
We intend to have our common stock be quoted on the OTC Bulletin Board. If our
securities are not quoted on the OTC Bulletin Board, a security holder may find
it more difficult to dispose of, or to obtain accurate quotations as to the
market value of our securities. The OTC Bulletin Board differs from national and
regional stock exchanges in that it
(1) is not situated in a single location but operates through
communication of bids, offers and confirmations between broker-dealers,
and
(2) securities admitted to quotation are offered by one or more
Broker-dealers rather than the "specialist" common to stock exchanges.
To qualify for quotation on the OTC Bulletin Board, an equity security must have
one registered broker-dealer, known as the market maker, willing to list bid or
sale quotations and to sponsor the company listing. If it meets the
qualifications for trading securities on the OTC Bulletin Board our securities
will trade on the OTC Bulletin Board. We may not now or ever qualify for
quotation on the OTC Bulletin Board.
We currently have no market maker who is willing to list quotations for our
securities.
The following description of our capital stock is a summary and is qualified in
its entirety by the provisions of our Articles of Incorporation which has been
filed as an exhibit to our registration statement of which this prospectus is a
part.
Common Stock
We are authorized to issue 100,000,000 common stock with par value of .001, of
which 10,000,000 shares are issued and outstanding as of December 5, 2005.
Holders of shares of our common stock are entitled to one vote per share on all
matters to be voted upon by the stockholders generally. The holders of shares of
common stock have no preemptive, conversion, subscription or cumulative voting
rights. Each holder of the Company's Common shares is entitled to one vote for
each share held of record on all matters submitted to the vote of stockholders,
including the election of directors.
Preferred Stock
We are authorized to issue 5,000,000 shares of preferred stock. Our board of
directors has the right, without shareholder approval, to issue preferred shares
with rights superior to the rights of the holders of shares of common stock. As
a result, preferred shares could be issued quickly and easily, negatively
affecting the rights of holders of common shares and could be issued with terms
calculated to delay or prevent a change in control or make removal of management
more difficult. Because we may issue up to 5,000,000 shares of preferred stock
in order to raise capital for our operations, your ownership interest may be
diluted which results in your percentage of ownership in us decreasing.
24
Warrants and Options
Currently, there are no warrants, options or other convertible securities
outstanding.
Legal Matters
David Lubin & Associates has opined on the validity of the shares of common
stock being offered hereby.
Experts
The financial statements included in this prospectus and in the registration
statement have been audited by Wolinetz, Lafazan & Company, P.C., an independent
registered public accounting firm, to the extent and for the period set forth in
their report appearing elsewhere herein and in the registration statement, and
are included in reliance upon such report given upon the authority of said firm
as experts in auditing and accounting.
Interest of Named Experts and Counsel
No expert or counsel named in this prospectus as having prepared or certified
any part of this prospectus or having given an opinion upon the validity of the
securities being registered or upon other legal matters in connection with the
registration or offering of the common stock was employed on a contingency basis
or had, or is to receive, in connection with the offering, a substantial
interest, directly or indirectly, in the registrant or any of its parents or
subsidiaries. Nor was any such person connected with the registrant or any of
its parents, subsidiaries as a promoter, managing or principal underwriter,
voting trustee, director, officer or employee.
Indemnification for Securities Act Liabilities
Our By-laws provide to the fullest extent permitted by law, our directors or
officers, former directors and officers, and persons who act at our request as a
director or officer of a body corporate of which we are a shareholder or
creditor shall be indemnified by us. We believe that the indemnification
provisions in our By-laws are necessary to attract and retain qualified persons
as directors and officers.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 (the "Act" or "Securities Act") may be permitted to directors, officers or
persons controlling us pursuant to the foregoing provisions, or otherwise, we
have been advised that in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable.
25
Where You Can Find More Information
We have filed a registration statement on Form SB-2 under the Securities Act
with the SEC for the securities offered hereby. This prospectus, which
constitutes a part of the registration statement, does not contain all of the
information set forth in the registration statement or the exhibits and
schedules which are part of the registration statement. For additional
information about us and our securities, we refer you to the registration
statement and the accompanying exhibits and schedules. Statements contained in
this prospectus regarding the contents of any contract or any other documents to
which we refer are not necessarily complete. In each instance, reference is made
to the copy of the contract or document filed as an exhibit to the registration
statement, and each statement is qualified in all respects by that reference.
Copies of the registration statement and the accompanying exhibits and schedules
may be inspected without charge (and copies may be obtained at prescribed rates)
at the public reference facility of the SEC at Room 1024, 450 Fifth Street, N.W.
Washington, D.C. 20549.
You can request copies of these documents upon payment of a duplicating fee by
writing to the SEC. You may call the SEC at 1-800-SEC-0330 for further
information on the operation of its public reference rooms. Our filings,
including the registration statement, will also be available to you on the
Internet web site maintained by the SEC at http://www.sec.gov
26
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 September 30, 2005 and the related
statements of operations, stockholders' deficiency and cash flows for the period
March 23, 2005 (inception) to September 30, 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 September 30,
2005, and the results of its operations and its cash flows for the period March
23, 2005 (inception) to September 30, 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 September 30, 2005 and as of September 30, 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.
WOLINETZ, LAFAZAN & COMPANY, P.C.
Rockville Centre, New York
December 5, 2005
27
PAY88, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
SEPTEMBER 30, 2005
ASSETS
Current Assets:
Cash $ 16,629
---------
Total Current Assets 16,629
---------
Total Assets $ 16,629
=========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current Liabilities:
Accrued Liabilities $ 11,241
Loans Payable - Related Party 36,000
---------
Total Current Liabilities 47,241
---------
Long-Term Debt:
Note Payable - Related Party 80,385
---------
Total Liabilities 127,626
---------
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 (158,998)
---------
Total Stockholders' Deficiency (110,997)
---------
Total Liabilities and Stockholders' Deficiency $ 16,629
=========
The accompanying notes are an integral part of these financial statements.
28
PAY88, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS
FOR THE PERIOD MARCH 23, 2005 (INCEPTION) TO SEPTEMBER 30, 2005
Net Revenues $ --
-----------
Costs and Expenses:
Consulting Fees 121,000
Professional Fees 31,118
Other General and Administrative Expenses 6,545
-----------
Total Costs and Expenses 158,663
-----------
Loss from Operations before Other Income (Expense) (158,663)
-----------
Other Income (Expense)
Interest Expense - Related Party (335)
-----------
Total Other Income (Expense) (335)
-----------
Net Loss $ (158,998)
===========
Basic and Diluted Loss Per Share $ (.02)
===========
Weighted Average Basic and Diluted Shares Outstanding 8,552,398
===========
The accompanying notes are an integral part of these financial statements
29
PAY88, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' DEFICIENCY
FOR THE PERIOD MARCH 23, 2005 (INCEPTION) TO SEPTEMBER 30, 2005
Deficit
Accumulated
Additional During the
Common Stock Paid-In Developement
Shares Amount Capital Stage Total
---------- ---------- ---------- ---------- ----------
Balance, March 23, 2005 -- $ -- $ -- $ -- $ --
Common Stock Issued to 8,000,000 8,000 1 -- 8,001
Founders
Common Stock Issued to
Private Investors, July
through August, 2005 2,000,000 2,000 38,000 -- 40,000
at $.02 Per Share
Net Loss for the Period -- -- -- (158,998) (158,998)
---------- ---------- ---------- ---------- ----------
Balance, September 30, 2005 10,000,000 $ 10,000 $ 38,001 $ (158,998) $ (110,997)
========== ========== ========== ========== ==========
The accompanying notes are an integral part of these financial statements.
30
PAY88, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
FOR THE PERIOD MARCH 23, 2005 (INCEPTION) TO SEPTEMBER 30, 2005
Cash Flows from Operating Activities:
Net Loss $(158,998)
Adjustments to Reconcile Net Loss to Net Cash (Used)
by Operating Activities:
Changes in Assets and Liabilities:
Increase in Accrued Liabilities 11,241
---------
Net Cash (Used) by Operating Activities 147,757)
---------
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 16,629
Cash - Beginning of Period --
---------
Cash - End of Period $ 16,629
=========
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 part of these financial statements.
31
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 September 30, 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.
32
PAY88, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
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
September 30, 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 September 30, 2005, the Company had no
options outstanding.
33
PAY88, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
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 $158,998 for the period March 23, 2005
(inception) to September 30, 2005. In addition, the Company had a working
capital deficiency of $30,612 at September 30, 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.
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.
34
PAY88, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
During the period March 23, 2005 (inception) to September 30, 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 September 30, 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 September 30, 2005, the
Company's CEO and significant stockholder advanced $116,385 to the Company.
These advances were non-interest bearing and had no specific repayment terms. 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 September
30, 2005 was $335. The interest was unpaid at September 30, 2005 and is included
in accrued liabilities.
The remaining balance of $36,000 represents non-interest bearing advances
from the Company's CEO with no specific repayment terms.
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.
35
PAY88, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
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 $1,200 during the
period ended September 30, 2005. The rent was unpaid at September 30, 2005 and
is included in accrued liabilities.
NOTE 8 - Consulting Agreement
The Company has entered into a business and financial consulting agreement
with First Line Capital, LLC. Such agreement calls for payment of consulting
fees of $120,000 which have been charged to operations in the current period.
36
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Wolinetz, Lafazan & Company, P.C. are our auditors. There have not been any
changes in or disagreements with accountants on accounting and financial
disclosure or any other matter.
INFORMATION NOT REQUIRED IN PROSPECTUS
Indemnification Of Directors, Officers, Employees And Agents
Our officers and directors are indemnified as provided by the Nevada Revised
Statutes and our bylaws.
Under the Nevada Revised Statutes, director immunity from liability to a company
or its shareholders for monetary liabilities applies automatically unless it is
specifically limited by a company's Articles of Incorporation. Our Articles of
Incorporation do not specifically limit our directors' immunity. Excepted from
that immunity are: (a) a willful failure to deal fairly with the company or its
stockholders in connection with a matter in which the director has a material
conflict of interest; (b) a violation of criminal law, unless the director had
reasonable cause to believe that his or her conduct was lawful or no reasonable
cause to believe that his or her conduct was unlawful; (c) a transaction from
which the director derived an improper personal profit; and (d) willful
misconduct.
Our bylaws provide that we will indemnify our directors and officers to the
fullest extent not prohibited by Nevada law; provided, however, that we may
modify the extent of such indemnification by individual contracts with our
directors and officers; and, provided, further, that we shall not be required to
indemnify any director or officer in connection with any proceeding, or part
thereof, initiated by such person unless such indemnification: (a) is expressly
required to be made by law, (b) the proceeding was authorized by our board of
directors, (c) is provided by us, in our sole discretion, pursuant to the powers
vested in us under Nevada law or (d) is required to be made pursuant to the
bylaws.
Our bylaws also provide that we may indemnify a director or former director of
subsidiary corporation and we may indemnify our officers, employees or agents,
or the officers, employees or agents of a subsidiary corporation and the heirs
and personal representatives of any such person, against all expenses incurred
by the person relating to a judgment, criminal charge, administrative action or
other proceeding to which he or she is a party by reason of being or having been
one of our directors, officers or employees.
Our directors cause us to purchase and maintain insurance for the benefit of a
person who is or was serving as our director, officer, employee or agent, or as
a director, officer, employee or agent or our subsidiaries, and his or her heirs
or personal representatives against a liability incurred by him as a director,
officer, employee or agent.
37
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to our directors, officers and control persons pursuant to the
foregoing provisions or otherwise, we have been advised that, in the opinion of
the Securities and Exchange Commission, such indemnification is against public
policy, and is, therefore, unenforceable.
Other Expenses Of Issuance And Distribution
The following table sets forth the expenses in connection with the issuance and
distribution of the securities being registered hereby. All such expenses will
be borne by the registrant; none shall be borne by any selling stockholders.
Securities and Exchange
Commission registration fee $4.68
Legal fees and miscellaneous expenses (1) $100,000
Accounting fees and expenses (1) $25,000
Total (1) $125,004.68
(1) Estimated.
Recent Sales Of Unregistered Securities
In August, 2005 we issued 2,000,000 shares of common stock to 42 investors in a
private placement. The aggregate consideration paid for such shares was $40,000.
The private placement was made in pursuant to the exemption from the
registration requirements of the Securities Act provided by Regulation S and/or
Section 4(2) of the Securities Act. The issuance of these shares was made to
accredited investors without any general solicitation or advertisement and a
restriction on resale.
Exhibits And Financial Statement Schedules
(a) Exhibits:
The following exhibits are filed as part of this registration statement:
Exhibit Description
3.1 Articles of Incorporation of Registrant.*
3.2 By-Laws of Registrant.*
4.1 Specimen Common Stock certificate.*
5.1 Opinion of David Lubin & Associates regarding the legality of the
securities being registered.**
10.1 Licensing and Service Agreement, dated August 3, 2005, between
Chongqing Yahu Information, Limited and Pay88, Inc.*
10.2 Plan and Agreement of Merger, dated July 2005, by and between the
Registrant and Pay88, Ltd.*
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10.3 Promissory Note, dated August 31, 2005, in the principal amount of
$80,385, made by the Registrant in favor of Guo Fan.* 10.4
Agreement, dated March 29, 2005, by and between First Line Capital
LLC and Pay 88, Ltd.*
23.1 Consent of Wolinetz, Lafazan & Company, P.C.**
23.2 Consent of David Lubin & Associates (included in Exhibit 5.1).**
24.1 Power of Attorney (Contained on the signature page of this
Registration Statement)
* Previously filed as an exhibit to the Company's Registration Statement on Form
SB-2 filed with the Securities and Exchange Commission on October 14, 2005. **
Filed herewith
Undertakings
(A) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by Section 10(a)(3) of the Securities
Act of 1933;
(ii) Reflect in the prospectus any facts or events which, individually or
together, represent a fundamental change in the information set forth in the
registration statement; and
(iii)Include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the Securities Act
of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering.
(B) Undertaking Required by Regulation S-B, Item 512(e).
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers or controlling persons pursuant to
the foregoing provisions, or otherwise, the Registrant has been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
39
against public policy as expressed in the Securities Act of 1933 and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel that the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act of 1933 and will be
governed by the final adjudication of such issue.
(C) Undertaking Required by Regulation S-B, Item 512(f)
The undersigned Registrant hereby undertakes that, for purposes of determining
any liability under the Securities Act of 1933, each filing of the Registrant's
annual report pursuant to Section 13(a) or 15(d) of the Exchange Act of 1934
that is incorporated by reference in the registration statement shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at the time shall be deemed to be the
initial bona fide offering thereof.
Signatures
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing this Form SB-2 and has authorized this
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in Barnstead, New Hampshire, on December 9, 2005.
Pay88, Inc.
By: /s/ Guo Fan
------------------------------------------------
Guo Fan
President and Chief Executive Officer
(principal executive and financial officer)
By: /s/ Gordon Preston
------------------------------------------------
Gordon Preston
Secretary
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POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Guo Fan and Gordon Preston, each or
either of them, his true and lawful attorneys-in-fact, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities to sign any and all amendments (including post-effective
amendments) to this registration statement and to sign a registration statement
pursuant to Section 462(b) of the Securities Act of 1933, and to file the same
with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact, full
power and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact or his substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Guo Fan President, Chief Executive Officer and Director December 9, 2005
--------------------------------------
Guo Fan
/s/ Gordon Preston Secretary December 9, 2005
----------------------------------
Gordon Preston
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