ITEM 3. KEY INFORMATION

A.

Selected Financial Data

The following table sets forth selected consolidated financial information which has been derived from our consolidated financial statements prepared in accordance with US GAAP for our most recently completed fiscal periods since our incorporation in January 2000, consisting of the years ended December 31, 2002 and 2001 and the eleven months ended December 31, 2000.  The financial data should be read in conjunction with our consolidated financial statements and notes thereto and “Results of Operations” under “Item 5 – Operating and Financial Review and Prospectus”.

B.

Capitalization And Indebtedness

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

C.

Reasons for the Offer and Use of Proceeds

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

- 3 -

D.

Risk Factors

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

Risk Factors Relating to Our Company and Our Business

Our limited operating history makes it difficult for investors to judge our prospects.

We have a limited operating history upon which an evaluation of our current business and prospects can be based.  Potential investors should consider any purchase of our common shares in light of the risks, expenses and problems frequently encountered by all companies in the early stages of development.

We have received limited revenues from our operations and expect that most of our revenues in the foreseeable future will be dependant upon the implementation of our business plan.  In creating the suite of services that we propose to offer through our financial portals, we will need to rely upon partnerships or collaborations with other companies such as on-line trading facilities and there can be no guarantees that we will be able to enter into such collaborations or partnerships to provide these services.  We may never achieve profitability.

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

We have enhanced our design and our technological infrastructure to further improve our websites and to accommodate increased traffic, and intend to continue such development activities. However, unforeseen development difficulties could prevent us from implementing such improvements or cause the costs to implement such improvements, including design, technology and related costs, to be higher than anticipated.

In the past, we have experienced spikes in traffic on our web sites when there have been important financial news events.  Accordingly, our web sites must accommodate a high volume of traffic, often at unexpected times. Although we have upgraded and continue to improve our systems, our web sites have in the past, and may in the future, experience publishing problems, slower response times than usual or other problems for a variety of reasons. These occurrences could cause our readers to perceive our web sites as not functioning properly and, therefore, cause them to use other methods to obtain their financial news and information. In such a case, our business, results of operations and financial condition could be materially adversely affected.

A failure to establish and maintain strategic relationships with other companies could decrease our subscriber and reader base, which may harm our business

We depend on establishing and maintaining content syndication and headline indexing relationships with high-traffic web sites for a portion of our current subscriber and reader base. There is intense competition for relationships with these firms and placement on these sites, and we may have to pay significant fees to establish additional content syndication and headline indexing relationships or maintain existing relationships in the future. We may be unable to enter into or successfully renew relationships with these firms or sites on commercially reasonable terms.  These relationships may not attract significant numbers of subscribers or readers.

Many companies that we may approach for a strategic relationship or who already have strategic relationships with us also provide financial news and information from other sources.  As a result, these companies may be reluctant to enter into or maintain strategic relationships with us.  Our business, results of operations and financial condition could be materially adversely affected if we do not establish additional, and maintain existing, strategic relationships on commercially reasonable terms or if any of our strategic relationships do not result in an increase in the number of subscribers or readers of our web sites.

- 4 -

Difficulties associated with our brand development may harm our ability to attract subscribers and readers.

We believe that maintaining and growing awareness about our www.chineseworldnet.com and www.na-investor.com websites and their associate brands is an important aspect of our efforts to continue to attract users. Our planned products and services may not have widely recognized brands, and we will need to increase awareness of these brands among potential users.  Despite our continued efforts to build brand awareness, they may not be cost effective or successful in the future in reaching potential users, and some potential users may not be receptive to our advertising campaign or other efforts.  Accordingly, our efforts may not be successful in raising awareness of our websites and their associate brands or in persuading potential users to subscribe to our products or visit our sites.

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

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

• inadequate network infrastructure;

• security and privacy concerns;

• inconsistent quality of service; and

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

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

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

Because our services can be used to download and distribute information to others, there is a risk that claims may be made against us for defamation, negligence, copyright or trademark infringement or other claims based on the nature and content of that material, such as violation of censorship laws in the People’s Republic of China (“PRC”).  In addition, we do not carry any liability insurance to indemnify us for all liability that may be imposed. Any imposition of liability could have a material adverse effect on our business, results of operations and financial condition.

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

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

- 5 -

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

A substantial amount of our revenues are billed on a fixed-price basis which may be subject to cost over-runs and we may incur a loss as a result.

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

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

Our two principal website addresses or Uniform Resource Locators (URLs), www.chineseworldnet.com and www.na-investor.com , are currently licensed from Register.com on a yearly basis.  As per the Service Agreement with Register.com, there is no guarantee that we can renew the licensing agreement with regard to the two principal Web site addresses or URLs.  If we lose the right to use the www.chineseworldnet.com and www.na-investor.com domain names, they could become the property of our competitors or other parties, either of which would have a material adverse effect on our business, prospects, financial condition, results of operation and share price.

Our future performance is dependent on our ability to retain key personnel.

Our performance is substantially dependent on the performance of our senior management and key technical personnel.  In particular, our success depends on the continued effort of our senior management team, especially the President and Chief Executive Officer, Joe Tai; and for our subsidiary NAI, President, Secretary and Director, Kelvin Szeto; the Vice President – Editing, Edward Liu; the Vice President – Website Development, Michael Hui; and the Vice President – Marketing & Project Development, Gilbert Chan.  In addition, we intend to grant stock options to many of our employees in lieu of additional salary.  Due to potential fluctuation of our future share price, our employees may have options at strike prices far above the then current share price. As a result, many of our employees may not consider their options to be valuable compensation, and we may need to provide additional compensation, in the form of additional salary, bonuses or equity, in an effort to retain our existing employees. Our inability to retain our employees, particularly our senior officers, and key sales, technical, marketing and other service personnel in our key revenue producing businesses could have a material adverse effect on our prospects, business, operations, financial conditions and share price.

Our long-term liquidity and capital resources are uncertain.

We believe revenues from current operations combined with our cash resources are adequate to fund our current marketing program in North America.  However, we expect to need to secure additional financing to implement our planned expansion into Asia.  We have not entered into any agreements with respect to this additional financing but expect to raise such funds through debt or the offering of stock to accredited investors.  In the event that there is an opportunity for an acquisition and additional funds are needed, we may not be successful in raising a sufficient amount of additional capital or in internally generating a sufficient amount of capital to fund this purpose. See Item 4 “Information on the Company”

- 6 -

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

We currently own and license technology from third parties. As we continue to introduce new services that require new technology, we anticipate that we may need to license additional third-party technology. These existing and additional technology licenses may not be available to us on commercially reasonable terms, if at all. In addition, it is possible that in the course of using new technology, we may inadvertently breach the technology rights of third parties and face liability for our breach. Our inability to obtain these technology licenses or avoid breaching third party technology rights could delay or compromise our introduction of new services and could materially and adversely affect our business and financial condition.

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

Our strategy of expansion through acquisitions has been and will continue to be costly and may not be effective, and we may realize losses on our investments.

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

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

• the diversion of management attention from other business concerns;

• the reduced availability of favourable financing for future acquisitions;

• the additional expense associated with acquired contingent liabilities;

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

• the loss of key employees in acquired businesses;

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

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

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

If economic and other conditions further deteriorate, or if market or other values continue to fluctuate, we may need to provide for further decreases in value or increased unrealized losses. Our results of operations, financial

- 7 -

condition, prospects and share price could be adversely and materially affected, particularly if we are unable to hedge or adequately hedge our exposure to reduced valuations.

Our strategy of expansion through acquisitions may affect our ability to receive favourable financing

Our future acquisitions may result in the use of significant amounts of cash, dilutive issuances of our common shares and amortization expenses related to goodwill and other intangible assets, each of which could materially and adversely affect our financial condition.  In addition, there is no guarantee that those acquisitions will actually enhance our revenue, operations and profitability. If those benefits do not materialize as expected, our financial conditions may worsen to include lower cash balance, lower profitability, higher debt level and lower credit rating.  These will likely to affect our ability to receive favourable debt or equity financing. As a result, we may need to accept a less than favourable financing such as issuing debt at a higher interest rate or issuing common shares at below book value or market value, should we require additional capital for our operations.

Risks Relating to Our Industry

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

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

• English Content:

online services or web sites focused on business, finance and investing, such as CBS.MarketWatch.com, CNBC on MSN Money, CNNfn.com, The Wall Street Journal Interactive Edition, TheStreet.com, Globeinvestor.com, The New York Times on the Web, DowJones.com, SmartMoney.com, and The Motley Fool;

-

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

-

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

-

web “portal” companies, such as Yahoo! and America Online;

-

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

• Chinese Content:

-

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

-

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

-

online brokerage firms, many of which provide financial and investment news and information, such as ez128.com, Cash Online, Pt123.com;

-

online services or web sites focused on business, finance and investing, such as Chinesefn.com, HKNasdaq.com, www.meigu.com, Chinese.wsj.com, www.cnyes.com.

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

- 8 -

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

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

Computer equipment problems and failures could adversely affect our business.

Problems or failures in our Internet-related equipment, including our file servers, computers and software could result in interruptions or slower response times on our websites, which could reduce the attractiveness of our websites to advertisers and users.  Equipment problems and failures could result from a number of causes, including an increase in the number of users of our websites, computer viruses, outside programmers penetrating and disrupting our software systems, human error, fires, floods, power and telecommunications failures, and internal breakdowns.  In addition, any disruption in Internet access provided by third parties could have an adverse effect on our ability to provide the services that it proposes to offer to our members which in turn may have an adverse effect on the number of members we are able to attract to our websites.

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

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

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

- 9 -

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

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

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

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

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

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

- 10 -

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

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

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

A substantial portion of our business is conducted outside of the United States and as a result our operations could be subject to various risks such as the possibility of the loss of revenue, property or equipment due to expropriation, nationalization, war, insurrection, terrorism or civil disturbance, the instability of foreign economies, currency fluctuations and devaluations, adverse tax policies and governmental activities that may limit or disrupt markets, restrict payments or the movement of funds or result in the deprivation of contract rights. Additionally, our ability to compete could be adversely affected by foreign governmental regulations that encourage or mandate the hiring of local contractors, or by regulations that require foreign contractors to employ citizens of, or purchase supplies from vendors in a particular jurisdiction. We could also be subject to taxation in a number of jurisdictions, and the final determination of our tax liabilities might involve the interpretation of the statutes and requirements of various domestic and foreign taxing authorities.  

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

Our revenue growth also depends on the increasing acceptance and use of electronic commerce in the Greater China region. The Internet may not become a viable commercial marketplace in Asia for various reasons, many of which are beyond our control, including: inexperience with the Internet as a sales and distribution channel; inadequate development of the necessary infrastructure to facilitate electronic commerce; concerns about security, reliability, cost, ease of deployment, administration and quality of service associated with conducting business over the Internet; and inexperience with credit card usage or with other means of electronic payment in PRC.

If the Internet does not become more widely accepted as a medium for electronic commerce, our ability to generate increased revenue will be negatively affected.

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

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

The greater China and Asian Internet industry is a developing market and is not a proven effective commercial medium

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

- 11 -

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

-

security;

-

reliability;

-

cost;

-

ease of deployment;

-

administration; and

-

quality of service

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

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

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

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

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

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

- 12 -

There are economic risks associated with doing business in the countries in which we primarily operate.

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

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

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

Taiwan.  A small part of our future revenues may be derived from the Taiwan market. Taiwan has a unique international political status. The Chinese government asserts sovereignty over Taiwan and does not recognize the legitimacy of the Taiwan government. Although significant economic and cultural relations have been established in recent years between Taiwan and PRC, PRC has refused to renounce the possibility that it may at some point use force to gain control over Taiwan. Relations between Taiwan and PRC have been strained since mid-1999 as a result of then-President Lee Teng-Hui’s assertion that relations between the two sides should be conducted on a special state-to-state basis. During the Macau handover ceremony in 1999, President Jiang Zemin reiterated PRC position towards Taiwan, stating that he was confident that Taiwan would soon be reunified with PRC in order to complete PRC’s plans for national reunification. The election of pro-independence candidate Chen Shui-bian as the new

- 13 -

President of Taiwan in early 2000, and Taiwan’s recent request to purchase strategic arms and defense technology from the United States have created additional uncertainty to the already tenuous relationship between PRC and Taiwan. Strained relations between Taiwan and PRC could adversely affect our business, results of operations or financial condition. Between late 1997 and early 1999, the NT dollar, the currency of Taiwan, experienced considerable volatility and depreciation as a result of the economic downturn in Asia. Continued volatility and depreciation of the NT dollar could adversely affect our business, results of operations and financial condition. Taiwan has recently experienced a recession primarily due to a reduction in exports due to weakened demand for imported goods in many Asian countries and a continued recession in Taiwan may materially affect our business.

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

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

• contravenes the basic principles enshrined in PRC Constitution;

• endangers the security or unity of the State;

• undermines the State’s religious policies;

• undermines public order or social stability; or

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

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

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

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

Violations or perceived violations of Chinese laws arising from information displayed, retrieved from or linked to our portals could result in significant penalties, including a temporary or complete cessation of our business in PRC. Chinese government agencies have recently announced restrictions on the transmission of state secrets through the Internet. State secrets have been broadly interpreted by Chinese governmental authorities in the past. We may be liable under these new pronouncements for content and materials posted or transmitted by users on

- 14 -

our message boards, virtual communities, chat rooms or e-mails. If the Chinese government were to take any action to limit or eliminate the distribution of information through our portal network or to limit or regulate any current or future applications available to users on our portal network, this action could have a material adverse effect on our business, financial condition and results of operations.

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

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

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

• Under the agreement reached in November 1999 between PRC and the United States, foreign ownership in Chinese value-added telecommunication services, including internet services, will be allowed for up to 30% in the first year after PRC’s entry into the World Trade Organization, or WTO, and up to 49% in the second year and up to 50% thereafter.  Although, PRC was officially admitted to WTO in November 2001, it is still not clear how this agreement will be implemented.

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

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

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

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

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

- 15 -

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

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

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

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

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

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

We intend to generate revenues and incur expenses and liabilities in Chinese renminbi, Taiwan dollars, Hong Kong dollars, Canadian dollars and U.S. dollars. As a result, we are subject to the effects of exchange rate fluctuations with respect to any of these currencies. For example, the value of the renminbi depends to a large extent on PRC’s domestic and international economic and political developments, as well as supply and demand in the local market. Since 1994, the official exchange rate for the conversion of renminbi to U.S. dollars has generally been stable and the renminbi has appreciated slightly against the U.S. dollar. However, given recent economic instability and currency fluctuations, the renminbi may not continue to remain stable against the U.S. dollar or any other foreign currency. Our results of operations and financial condition may be affected by changes in the value of renminbi and other currencies in which our earnings and obligations are denominated. We have not entered into agreements or purchased instruments to hedge our exchange rate risks, although we may do so in the future.

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

- 16 -

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

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

Risks Related to Our Common Shares and Shareholder Rights

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

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

Currently, our Common Shares are not publicly traded on any market or exchange, and as a result a shareholder would have difficulty in selling any shares.  If our Common Shares become traded on the OTC Bulletin Board, it would be considered a “penny stock” and a shareholder’s ability to sell shares in the secondary trading market may be limited.

Our common shares are currently not quoted or listed for trading on any securities market or exchange, whether in the U.S. or elsewhere.  As a result, existing shareholders would have difficulty in selling their shares in a secondary trading market.  This lack of liquidity may also make it more difficult for us to raise capital in the future through the sale of equity securities.

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

• obtaining financial and investment information from the investor;

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

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

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

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

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

- 17 -

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

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

There is uncertainty as to our shareholders’ ability to enforce civil liabilities in the Cayman Islands, Hong Kong, Taiwan and PRC.

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