CATHAYONLINE INC, S-1, 2000-11-27

CATHAYONLINE INC
S-1, 2000-11-27
BUSINESS SERVICES, NEC

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------

CathayOnline Inc.
------------------------
(Exact name of registrant as specified in its charter)

Nevada 7374 88-0346952
------------ ---------- ----------------
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or Classification Code Number) Identification No.)
organization)

CathayOnline Inc.
----------------------------------
437 Madison Avenue, 33rd Floor
New York, New York 10022
(212) 888-6822
----------------------------------
(Address, including zip code, and
telephone number, including area code,
of registrant's principal executive offices)

Brian W. Ransom
Chief Executive Officer
CathayOnline Inc.
437 Madison Avenue, 33rd Floor
New York, New York 10022
(212) 888-6822
----------------------------------
(Name, address, including zip code, and telephone number,
including area code, of agent for service)

Copies to:

<PAGE>

Approximate date of commencement of proposed sale to the public: As soon as
practicable 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, 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, please 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,
check the following box. | |

<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE

Title of each Proposed maximum Proposed maximum Amount of
class of securities Amount to offering price aggregate offering registration
to be registered be registered per share price fee
_________________ _____________ ________________ __________________ ______________
<S> <C> <C> <C> <C>
Up to
Common Stock, $.001 24,608,736 $0.19 (2) $4,675,660 (1) $1,234.40
par value

Up to
Total 24,608,736 $ 0.19 $4,675,660 $1,234.40
__________________ ____________ ________________ __________________ _______________
</TABLE>

(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(o) of the Securities Act of 1933.

(2) The shares to be registered may be offered for sale and sold from time to
time during the period the registration statement remains effective, by
or for the accounts of the selling stockholders. These shares include
12,467,225 shares issuable upon the exercise of warrants issued to
warrant holders. The proposed maximum offering price per share has been
estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) of the Securities Act of 1933. The proposed
maximum aggregate offering price for these shares is based upon the
proposed maximum offering price per share.

The Registrant hereby files 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.

Subject to Completion, Dated November , 2000
<PAGE>

24,608,736 Shares

CathayOnline Inc.
Common Stock

The shares of common stock being offered, 24,608,736 (including common
stock issuable upon exercise of warrants by selling stockholders) are being
offered by the selling stockholders identified on pages 45 through 49 and are
being registered for resale. The shares of common stock which may be resold by
the selling stockholders constitute 80.5% of our issued and outstanding common
stock as of September 30, 2000. We will not receive any proceeds from the sale
of the shares by the selling stockholders. However, we will receive the proceeds
upon the exercise for cash of the stock purchase warrants held by the selling
stockholders.

The selling stockholders may offer shares of our common stock on the Nasdaq
Over The Counter Bulletin Board, in negotiated transactions or otherwise, or by
a combination of these methods. The selling stockholders may sell the shares
through broker-dealers who may receive compensation from the selling
shareholders in the form of discounts or commissions.

Our common stock is listed on The Nasdaq Over The Counter Bulletin Board
under the symbol "CAOL.OB". The average of the high and low prices of the common
shares as reported on the Nasdaq OTC Bulletin Board on September 29, 2000 was
$0.1953 per common share which is used as the offering price pursuant to this
prospectus.

An investment in CathayOnline common stock involves certain risks.
See the section entitled "Risk Factors" beginning on page 3.

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved the common stock 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. 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.

Prospectus dated November , 2000

<PAGE>
TABLE OF CONTENTS

Page
-----
PART I
INFORMATION REQUIRED IN PROSPECTUS

Prospectus Summary ........................................................... 1

Risk Factors ..................................................................3

Special Notes Regarding Forward-Looking Statements ...........................12
Use of Proceeds ..............................................................12
Dividend Policy ..............................................................12
Price Range of Common Stock and Determination of Offering Price ..............13
Selected Consolidated Financial Data .........................................14
Management's Discussion and Analysis of Financial Condition and
Quantitative and Qualitative Disclosures about Market Risk....................20
Changes in and Disagreements with Accountants on
Business .....................................................................21
Property .....................................................................34
Legal Proceedings ............................................................34
Management.. .................................................................35
Executive Compensation .......................................................37
Certain Relationships and Related Transactions ...............................40
Security Ownership of Certain Beneficial Owners and Management ...............41
Description of Capital Stock .................................................43
Selling Stockholders .........................................................45
Plan of Distribution .........................................................50
Experts ......................................................................50

PART II
Indemnification of Directors and Officers ....................................51
Recent Sales of Unregistered Securities ......................................52
Additional Information .......................................................53
Index to Financial Statements ................................................F
Exhibits Table................................................................EX

<PAGE>

You should rely only on the information contained in this document or to
which we have referred you. We have not authorized anyone to provide you with
information that is different. This document may only be used where it is legal
to sell these securities. The information in this document may only be accurate
on the date of this document.

Until , 2000 (25 days after the commencement of this offering), all dealers
that effect transactions in these securities, whether or not participating in
this offering, may be required to deliver a prospectus. This is in addition to
the obligation of dealers to deliver a prospectus when acting as underwriters
and with respect to their unsold allotments or subscriptions.

PROSPECTUS SUMMARY

This summary highlights information that we present more fully in the rest
of this prospectus. You should read the entire prospectus carefully.

<PAGE>

PART I. INFORMATION REQUIRED IN PROSPECTUS

CathayOnline Inc.

CathayOnline Inc. is an integrated Internet company serving the global
Chinese community, with a primary focus on the People's Republic of China. We
launched our Internet initiatives in China in the Spring of 1999. To date, we
made significant inroads in developing our Internet infrastructure in China
while focusing on recruiting quality personnel, raising capital and developing
strong regional and local partners and global strategic relationships. Through
the leadership of our management team, our focus on execution of our business
plan, our attention to the market's needs, our local partnerships and strategic
acquisitions, joint ventures as well as alliances with leading global
corporations, we have established a solid foundation in China.

We focus on these lines of business:

o Internet connectivity and value-added Internet technology services in
Sichuan Province, Beijing, and Guangdong Province, China; and

o Internet communication services including Web-based e-mail, advanced
messaging services, Fax over Internet (FoIP) and Voice over Internet
(VoIP).

Our goal is to become a major Internet service and solutions
provider in China. We are pursuing this goal by developing recognition of our
brands, expanding our Internet connectivity and communications services to our
registered and potential customer base across China's major urban markets,
continuing to pursue strategic acquisitions and alliances, and acquiring
experienced and quality management and support teams.

Our network consists of the following branded Internet properties:

o CathayOnline.com, our flagship corporate Web site;

o TorchMail.com, our e-mail and advanced messaging service; and

o Guoxun.net and Torchnet.com, our Internet services partners in the Sichuan

Province and currently expanding into Beijing and Guangdong Province.

Through these established brand names, we intend to offer customers
Internet services and communications, other value-added Web-based commercial
services, business-to-business (B2B) tools and a variety of communication tools.

We currently provide Internet services in Sichuan, one of China's most
populated provinces with approximately 85 million residents. The technology
center for our Sichuan operations is located in Chengdu (Sichuan's capital), a
central hub for business and technology in southwestern China. In May 2000, we
took possession of office space for our China operations in the nation's
capital, Beijing, which represents a major step forward in the expansion of our
branded Internet services network and advanced e-mail services into China's
urban markets.

CathayOnline Inc. was incorporated on September 20, 1995 under the name
Kyocera Management, Ltd. under the laws of Nevada. During the early year 1999,
we commenced our Internet services business. In April 1999, we changed our
company name to CathayOnline Inc. On January 18, 2000, we entered into an
Acquisition Agreement and Plan of Merger with Lazzara Financial Asset Recovery,
Inc., an inactive Nevada corporation. We elected to succeed to Lazzara's
reporting requirements under the Exchange Act, as permitted by Section 12g-3(b)
thereof, and as a result became a reporting company under the Exchange Act on
January 18, 2000. Our principle executive offices are located at 437 Madison
Avenue, 33rd Floor, New York, New York 10022 and our telephone number is (212)
888 6822.

As used in this prospectus, the words "we," "us," and "our" and
"CathayOnline" refer to CathayOnline Inc. and its subsidiaries unless the
context requires otherwise.

The Offering

This prospectus covers up to 24,608,736 shares of CathayOnline Inc. common
stock to be sold by selling stockholders identified in this prospectus. This
number represents 80.5% of our issued and outstanding common stock as of
September 30, 2000.

(The Reminder of This Page Is Intentionally Left Blank)

RISK FACTORS

This offering involves a high degree of risk. You should carefully consider
the following risks relating to our business and our common stock, together with
the other information described elsewhere in this prospectus. If any of the
following risks actually occur, our business, results of operations and
financial condition could be materially affected, the trading price of our
common stock could decline, and you might lose all or part of your investment.

IT IS DIFFICULT TO EVALUATE OUR BUSINESS AND PROSPECTS BECAUSE WE HAVE A
LIMITED OPERATING HISTORY. We began exploring the possibility of entering into
the Internet business in China in January 1999 and reached an agreement with
Sichuan Guo Xun in September 1999 to render the consulting services described in
the agreement between us. Accordingly, we have had only a very limited operating
history upon which to evaluate our business and prospects. As a young company,
we face risks and uncertainties relating to our ability to successfully
implement our business plan. Being a company in its early stage of development
and doing business in the new and rapidly evolving markets in China, we may
encounter great difficulties and incur substantial expenses in:

- building a subscriber base for the Internet services offered by
Sichuan Guo Xun or to be offered by Beijing CathayOnline;

- successfully marketing our Web-based e-mail and advanced messaging
services; and

- promptly addressing the challenges faced by early stage companies
which do not have an experience or performance base upon which to
draw.

If we do not successfully address these risks and uncertainties, our
business, operating results and financial condition will be materially adversely
affected.

WE HAVE A HISTORY OF LOSSES, WE EXPECT TO LOSE MONEY IN THE FUTURE AND WE
MAY NOT ACHIEVE OR SUSTAIN PROFITABILITY. We have not generated any meaningful
revenues from our current business operations, and our operating costs have
exceeded our revenues for all quarters during which we have been engaged in the
Internet services and Web-base e-mail businesses. We expect to continue to lose
money at least through the end of fiscal year 2001. We incurred net losses from
operations of approximately $1.66 million for the fiscal year ended June 30,
2000. We may never generate revenues sufficient to offset expenses and we may
never become profitable. We have historically funded our operations by selling
stock and not by generating income from our business.

WE REQUIRE ADDITIONAL FUNDS TO IMPLEMENT OUR CURRENT PLANS AND FINANCE
FUTURE GROWTH. Our business model assumes that we will be able to raise
substantial additional funds to implement the full range of products and
services we plan to offer. We will seek to obtain additional funds through sales
of equity and/or debt securities, or other external financing in order to fund
our current operations and to achieve our business plan. We cannot be sure that
any additional capital resources will be available to us, or, if available, will
be on terms that will be acceptable to us. Any additional equity financing will
dilute the equity interests of existing security holders. If adequate funds are
not available or are not available on acceptable terms, our ability to execute
our business plan and our business could be materially and adversely affected.

OUR MANAGEMENT HAS LIMITED EXPERIENCE OPERATING A PUBLIC COMPANY. No member
of our current management team has ever operated a public company. We must
develop the skills and knowledge required to operate effectively as a public
company, and there can be no assurance that we will be able to do so. If we are
not successful in developing these skills or do not retain individuals who have
significant experience operating a public company, we may never be able to
implement all or any portion of our business plan and our business could be
materially and adversely affected.

WE MAY FACE RISKS ASSOCIATED WITH POTENTIAL ACQUISITIONS, INVESTMENTS,
STRATEGIC PARTNERSHIPS OR OTHER VENTURES. As part of our long-term growth
strategy, we may seek to acquire or make investments in complementary
businesses, technologies, services or products or enter into strategic
relationships with parties who can provide access to those assets. We may not be
able to identify or complete such transactions. Moreover, acquisitions often
involve a number of special risks such as difficulty integrating acquired
operations, products, services and personnel; inability to retain acquired
subscribers; inability to successfully incorporate acquired technology and
rights into our service offerings and maintain uniform standards, controls,
procedures, and policies; inability to retain the key personnel of the acquired
company; failure by the acquired business to achieve the revenues and earnings
we anticipated; and liability for contingent and other liabilities, not
previously disclosed to us, of the companies that we acquire. We may not be able
to successfully overcome problems encountered in connection with potential
future acquisitions. These difficulties could disrupt our ongoing business,
distract our management and employees and increase our expenses. Furthermore, we
may have to incur indebtedness or issue equity securities to pay for any future
acquisitions.

IF WE FAIL TO EFFECTIVELY MANAGE OUR GROWTH, OUR BUSINESS WILL SUFFER. If
the Internet and Web-based e-mail and messaging services become as widely used
in China as we expect and as estimates suggest and our business grows
correspondingly, this rapid growth will place a significant strain on our
managerial, operational, financial and information systems resources. To
accommodate any significant increase in our size and manage our growth, we must
implement and improve these systems and attract, train, manage and retain
qualified employees. These demands will require us to add new management
personnel and develop new expertise. If we fail to successfully manage our
growth, our ability to maintain and increase our subscriber base will be
impaired and our business will suffer.

WE RELY ON THIRD PARTIES TO PROVIDE SOFTWARE AND HARDWARE TO KEEP PACE WITH
TECHNOLOGICAL CHANGE AND EVOLVING INDUSTRY STANDARDS AND REMAIN COMPETITIVE.
Both the Internet services market and Web-based e-mail and advanced messaging
market are characterized by rapidly changing technology, evolving industry
standards, changes in subscriber needs and frequent new services and product
introductions. No assurance can be given that our software providers will
develop or offer to us new products and services to enhance our Web-based e-mail
and advanced messaging services. In addition, we depend on certain suppliers of
hardware and software components to build Sichuan Guo Xun's ISP business. We
acquire a majority of our networking service components, including terminal
servers and high-performance routers, from only a few companies, including Cisco
Systems, Sun Microsystems and Hewlett Packard, all of which are located in the
United States. We have experienced and may in the future experience delays in
delivery of new modems, terminal servers and other equipment. If delays are
severe, all of Sichuan Guo Xun's incoming modem lines may become full during
peak times, resulting in busy signals for subscribers who are trying to connect
to Sichuan Guo Xun. We have lost and may in the future lose customers as a
result.

ANY DECLINE IN OUR SUBSCRIBER RETENTION LEVELS WILL ADVERSELY AFFECT US.
Our new subscriber acquisition costs, both with respect to the Internet access
Services provided by Sichuan Guo Xun and the Web-based e-mail and advanced
messaging services that we will provide, will be substantial relative to the
monthly fees we expect to charge. Accordingly, our long-term success largely
depends on our retention of existing members. While we have invested and will
continue to invest significant resources in our infrastructure and technical and
member support capabilities, it is relatively easy for Internet users and
Web-based e-mail and advanced messaging customers to switch to competing
providers. We have lost a substantial number of subscribers in Chengdu. Any
significant loss of members will substantially decrease our expected revenue and
cause our business to suffer.

WE MAY BE SUBJECT TO LIABILITY AND OUR REPUTATION MAY SUFFER BECAUSE OF
SPAMMING, LOST OR MISDIRECTED MESSAGES OR OTHER PROBLEMS. Even to the extent
these claims do not result in liability, we could incur significant costs in
investigating or defending against these claims, or in implementing measures to
reduce our exposure to such liability. These types of claims may also hurt our
reputation which is crucial to our business.

DISRUPTIONS CAUSED BY SYSTEM FAILURES COULD HAVE AN ADVERSE EFFECT ON OUR
BUSINESS. We expect to derive the vast majority of our revenues for the
foreseeable future from our relationship with Sichuan Guo Xun, which provides
Internet access services to residents of Sichuan Province, China, and the
Web-based e-mail and advanced messaging services provided to our subscribers.
These services are provided over telecommunications lines leased from China's
national telecommunications monopolies such as China Telecom and China Unicom,
upon which we are dependent for physical repair and maintenance of the leased
lines. We have no or little control over how the Chinese telephone companies
conduct their business and cannot cause any of these entities to take steps
necessary to protect our interests, such as creating back-up systems to which we
could turn in the event of an interruption in service.

SICHUAN GUO XUN'S NETWORKS ARE SUBJECT TO SECURITY RISKS AND INAPPROPRIATE
USE BY INTERNET USERS THAT COULD INTERRUPT OUR SERVICES. The future success of
our business will depend on the security of the third-party networks. Despite
implementation of security measures, we remain vulnerable to computer viruses,
sabotage, break-ins and similar disruptive problems caused by subscribers or
other Internet users. Any breach of Sichuan Guo Xun's network security or other
inappropriate use of the network through which we conduct our businesses, such
as the sending of excessive volumes of unsolicited bulk e-mail or "spam," could
lead to interruptions, delays, or cessation of services to our subscribers. Our
subscribers, in turn, could terminate their membership or assert claims against
us. Third parties could also potentially jeopardize the security of confidential
information stored in the computer systems of Sichuan Guo Xun or our
subscribers' computer systems by their inappropriate use of the Internet (e.g.,
"cracking" or "hacking"), which could cause losses to our subscribers or us or
deter potential customers from subscribing to our services. Although we intend
to continue to implement security measures with respect to Sichuan Guo Xun,
"hackers" have circumvented measures taken by other ISPs in the past, and these
hackers may be able to circumvent the security measures in the future. To fix
problems caused by computer viruses or other inappropriate uses or security
breaches, we may have to interrupt, delay, or cease service to our subscribers.

OUR SERVICES AND REPUTATION MAY BE ADVERSELY AFFECTED BY SOFTWARE DEFECTS.
Our services depend on complex software developed by third parties. Software
often contains defects, particularly when first introduced or when new versions
are released. These defects could cause service interruptions that damage our
reputation, increase our service costs, cause us to lose revenue, delay market
acceptance or divert our development resources, any of which could materially
adversely affect our business, operating results and financial condition.

IF WE ARE UNABLE TO RETAIN KEY EXECUTIVES OR HIRE NEW QUALIFIED PERSONNEL,
OUR BUSINESS WILL BE ADVERSELY AFFECTED. Our success greatly depends on our
ability to attract and retain key technical, sales, marketing, information
systems, and financial and executive personnel. We are especially dependent on
the continued services of our senior management team, particularly Brian Ransom,
our President, and Owen Li, our General Manager of Chinese operations. We have
entered into employment agreements with each of Mr. Ransom and Mr. Li. However,
these agreements are terminable by us and each of these employees. All other
members of our senior management team can terminate their employment at any
time. If we fail to attract, hire or retain the necessary personnel, or if we
lose the services of any member of our senior management team, our business
could be adversely affected.

WE MUST ESTABLISH, MAINTAIN AND STRENGTHEN OUR BRANDS TO REMAIN
COMPETITIVE. To be successful, we believe that we must establish and maintain
our brands. We must succeed in our marketing efforts, provide high-quality
services and increase our user base to build our brand awareness. If consumers,
Web portals, businesses or advertisers do not perceive our services to be of
high quality, or if users reject our new services, the value of our brands would
be diluted. If we are unable to establish and maintain our brands, our business,
operating results and financial condition would be materially adversely
affected.

WE MUST COMPETE SUCCESSFULLY WITH OUR COMPETITORS IN ORDER TO MAINTAIN OUR
BUSINESS. Both the ISP industry and Web-based e-mail and advanced messaging
industries in the geographic areas where we do business are highly competitive.
The ISP industry in China is dominated nationally and in each province by
government-owned ISPs. These entities are significantly larger and possess
greater financial and personnel resources than do Sichuan Guo Xun or us.
Furthermore, these ISPs have access to inexpensive telecommunications lines and
can charge significantly lower prices than Sichuan Guo Xun. In order to be
competitive with and overcome the inherent advantages possessed by these
entities, we will have to offer higher quality Internet access services by
decreasing the subscriber-to-line ratio and providing faster and more reliable
services. In addition, if the Chinese government relaxes constraints on
licensing and other impediments to entering the provincial ISP market, we can
expect many new entrants into the market, both Western and Asian, most of which
will have substantially greater resources than we have at our disposal. We can
offer no assurance that we will be able to compete successfully against public
or private ISPs now existing or which may enter the market in the future. It's
also expected additional companies will offer Web-based e-mail and advanced
messaging services in China to avail themselves of the enormous potential which
exists. Many of the entities which we expect would enter the market are
substantially larger and have greater financial, technical and personnel
resources than we do. There can be no assurance that we will be able to compete
successfully against any of our competitors in the Web-based e-mail and advanced
messaging industry.

WE MUST DEVOTE SIGNIFICANT MANAGERIAL, TECHNICAL AND FINANCIAL RESOURCES TO
OUR STRATEGIC RELATIONSHIP WITH SICHUAN GUO XUN AND THIS RELATIONSHIP MAY NOT
PROVE TO BE PROFITABLE. Our strategic relationship with Sichuan Guo Xun requires
that we devote significant managerial, technical and financial resources to this
relationship. Our agreement with Sichuan Guo Xun requires us to support its
operations by contributing hardware and software to our Chinese subsidiary
(Sichuan CathayOnline), which will require a substantial capital contribution.
We have invested significant resources in our Chinese subsidiary to enable it to
purchase additional hardware and other capital equipment used in the provision
of Internet access services and to provide service and support in order to
achieve our expansion and growth objectives, and we expect to provide
substantial additional capital in the future. If we are unable to provide this
additional capital to purchase hardware and software on a timely basis, Sichuan
Guo Xun may terminate our relationship. We may fail to generate sufficient
revenues from these operations to offset the expenses and resources we devote to
developing, maintaining and enhancing such services. This relationship may also
divert our resources and our management's time and attention from our other
services, including our e-mail and advanced messaging services. These risks and
uncertainties could result in material adverse effects upon our business,
operating results and financial condition.

SICHUAN GUO XUN IS DEPENDENT ON NATIONAL TELECOMMUNICATIONS CARRIERS FOR
CONNECTIONS AND IS SUBJECT TO THEIR LINE CHARGES. Sichuan Guo Xun relies on
traditional telecommunications carriers to transmit its traffic over local and
long distance networks, both with respect to dial-up service for its subscriber
base as well as for line charges which connect it to China's Internet backbone.
Specifically, it relies on the Chinese telephone monopolies such as China
Telecom and China Unicom. The benefits of competition and alternative sources of
supply are not present in these markets. These entities can set rates and
charges for Sichuan Guo Xun's lines while competing only against themselves.
Although line rates and charges have been reduced since the break-up of China
Telecom into several government owned telecommunications carriers, there can be
no assurance that line rates will continue to decrease or that rates will not
increase in the future. Sichuan Guo Xun will have to pay the line rates charged
by these entities to continue in business. Although we have been assured that
additional lines are available, these entities may deny or delay the allocation
of leased lines to Sichuan Guo Xun for no reason. Any drastic increase in the
rates charged by the telecommunications monopolies for access lines or any
failure to obtain additional lines will adversely affect our business and
potentially slow our growth. In addition, these networks may experience
disruptions and capacity constraints that are not easily remedied. Sichuan Guo
Xun has no means of replacing these services.

IF SICHUAN GUO XUN DOES NOT SUCCEED IN DEVELOPING SUFFICIENT NETWORK
CAPACITY, IT MAY LOSE CUSTOMERS. The success of Sichuan Guo Xun will depend, in
part, on the capacity, reliability and security of its network. Sichuan Guo
Xun's network includes computers, servers, routers, modems and other related
hardware and software. While Sichuan Guo Xun has not experienced network
capacity constraints to date, such constraints (e.g., the ability to obtain
additional dial-up telephone numbers and telecommunications lines by which
subscribers access Sichuan Guo Xun) may occur in the future, if Sichuan Guo Xun
grows as we anticipate. These capacity constraints may result in slowdowns,
delays or inaccessibility when subscribers try to use a particular service. Poor
network performance could cause subscribers to terminate their membership with
us. To reduce the probability of such problems, we will be required to expand
and improve Sichuan Guo Xun's network. Such expansion and improvement will be
very costly and time consuming. We may not have sufficient funds or otherwise be
able to expand or adapt Sichuan Guo Xun's network to meet additional demand or
changing subscriber requirements on a timely basis or at a commercially
reasonable cost.

BECAUSE SICHUAN GUO XUN LACKS FULL BACK-UP OF ITS COMPUTER SYSTEMS, A
SYSTEMS FAILURE COULD PREVENT IT FROM OPERATING ITS BUSINESS. Sichuan Guo Xun
relies on the Internet and, accordingly, upon the continuous reliable and secure
operation of its Internet servers, hardware, software and infrastructure, such
as leased lines from telecommunications service providers operated by the
government of China. While Sichuan Guo Xun does have limited back-up capability,
it does not have full redundancy of all of its computer and telecommunications
systems. As a result, failure of key primary or back-up systems to operate
properly could lead to a loss of customers and damage Sichuan Guo Xun's
reputation. We are working to increase the extent of the redundancy of Sichuan
Guo Xun's systems to lessen the effects of any system failure, but we cannot
make any assurance that existing back-up systems or those implemented in the
future will be sufficient to avoid the problems which may result from a failure
of existing systems.

OUR BUSINESS DEPENDS ON CONTINUED GROWTH OF THE INTERNET IN CHINA. Although
we believe that computer and Internet usage and the popularity of Web-based
e-mail and advanced messaging services in China will continue to grow, we cannot
be certain that this growth will continue or that it will continue in its
present form. The growth of computer usage and the Internet in China is
constrained by the cost of computers and other Internet access devices to
Chinese people relative to their annual income and current technology
infrastructure. No assurance can be given that computers or other Internet
access devices will be offered at prices within the budget of the average
Chinese consumer or that the technological infrastructure will be enhanced. If
Internet usage declines in China or evolves away from our business, our growth
will slow or stop and our financial results will suffer.

RECENTLY ENACTED CHINESE LAWS RELATING TO THE ABILITY OF COMPANIES ENGAGED
IN INTERNET ACTIVITIES IN CHINA TO TRADE PUBLICLY COULD NEGATIVELY IMPACT OUR
BUSINESS. New rules adopted by the Chinese government which have not yet been
formally announced provide that companies (whether organized in China or
overseas) engaged in Internet activities in China would be required to secure
approval from Chinese authorities to list their shares in the overseas markets,
including the United States. We may be required to obtain approval of the
Chinese government to undertake an offering of our securities or for seeking a
listing on the NASDAQ market. We can provide no assurance that we will be
successful in obtaining the approval of the Chinese government to any offering
of securities we may wish to undertake or to the listing of our securities on
the NASDAQ Stock Market or other exchange. If we cannot obtain Chinese
government's approval to such offering or listing, we may have to forego
opportunities in this potentially lucrative field which could materially
adversely effect our future results of operations.

INCREASED GOVERNMENT REGULATION IN CHINA MAY INCREASE OUR COST OF DOING
BUSINESS OR CAUSE US TO CHANGE THE WAY WE CONDUCT OUR BUSINESS. Any new
legislation or regulation adopted by the Chinese government regarding the
Internet, or the uncertainty relating to the application of existing laws and
regulations to the Internet, could materially adversely affect our business,
operating results and financial condition. Legislation could impair the growth
of the Internet and decrease the acceptance of the Internet as a communications
and commercial medium. This could decrease the demand for our services, increase
our cost of doing business or otherwise have a material adverse effect on our
business, financial condition and operating results. Further, the growth and
development of the Internet messaging market may prompt calls for more stringent
consumer protection laws that may impose additional burdens on companies
conducting business online. These laws may impose additional burdens on our
business. For example, because we rely on the collection and use of personal
data from our users for targeted advertisements, any laws or regulations that
restrict our ability to collect or use such information may harm us. Hong Kong
has enacted laws or adopted regulations that prevent Internet companies or Web
portals from selling any information collected from users.

WE MAY BE SUBJECT TO CRIMINAL PENALTIES, INCLUDING REVOCATION OF OUR
LICENSE TO DO BUSINESS IN CHINA IF WE ARE SUBJECT TO CLAIMS BASED ON THE NATURE
AND CONTENT OF MATERIALS TRANSMITTED THROUGH OUR WEB-BASED E-MAIL AND MESSAGING
SERVICES. Online content restrictions in China are extremely broad and cover
many areas (e.g., national security, state secrets, infringement on State,
social or collective interests, or the legal rights and interests of citizens)
and prohibit the transmission of indecent or obscene information and content.
While we are unaware of any enforcement of these laws by the Chinese government
in connection with the content of e-mail and online messages, the Chinese
government could successfully use these laws to terminate operations of
Web-based e-mail and messaging providers licensed to operate in China. As a
provider of Web-based e-mail and messaging services, we may be subject to legal
claims based on the nature and content of the materials transmitted by e-mail.
We do not and cannot screen all of the content generated by our users and we
could be exposed to liability with respect to this content.

REGULATION OF THE INTERNET AND INFORMATION INDUSTRY IN CHINA MAY ADVERSELY
AFFECT OUR BUSINESS. The Chinese government has enacted regulations governing
the provision of ISP services, Internet access and the distribution of news and
other information. The Chinese government regulates access to the Internet by
imposing strict licensing requirements and requiring ISPs in China to use the
government operated international inbound and outbound Internet backbones (the
telephone lines which connect China's domestic Internet network with the
international Internet network). Sichuan Guo Xun has been issued the license
required to offer Internet access services in the Province of Sichuan. There can
be no assurance that Sichuan Guo Xun will retain its license. The Ministry of
Information Industry 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. In
addition, the Chinese legal system is a civil law system in which decided legal
cases have little precedential value. As a result, in many cases 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, including the promulgation of new laws, changes to
existing laws or the interpretation or enforcement thereof, or the preemption 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
China at its sole discretion. Web sites that are or have been blocked in China
include many major news-related Web sites such as www.cnn.com, www.latimes.com,
www.nytimes.com and www.appledaily.com.hk. The Chinese government also has
expressed its intention to closely control possible new areas of business
presented by the Internet, such as Internet telephony. We cannot provide
assurance that we will be able to obtain any necessary license required in the
future or that future changes in Chinese government policies affecting the
provision of ISP services, information services, including the provision of
online services, will not impose additional regulatory requirements on us or our
strategic partner, intensify competition in the Chinese information industry or
otherwise have a material adverse effect on our business, financial condition
and results of operations.

THERE ARE ECONOMIC RISKS ASSOCIATED WITH DOING BUSINESS IN CHINA. The
Chinese economy has experienced significant growth in the past decade, but such
growth has been uneven across geographic and economic sectors and has recently
been slowing. There can be no assurance that such growth will not continue to
decrease or that any slow down will not have a negative effect on our business.
The Chinese economy is also experiencing deflation which may continue in the
future. The current economic situation may adversely affect our profitability
over time as expenditures for advertisements may decrease due to the results of
slowing domestic demand and deflation. In addition, the international financial
markets in which the securities of the Chinese government, agencies and private
entities are traded also have experienced significant price fluctuations upon
speculation that the Chinese government may devalue the Renminbi which could
increase our costs relative to our revenues from China.

CHANGES IN CHINA'S POLITICAL AND ECONOMIC POLICIES COULD HARM OUR BUSINESS.
The economy of China 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 that the economic reform and
macroeconomic measures adopted by the Chinese government have had a positive
effect on the economic development of China, we cannot predict the future
directions 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 economic structure, level of government involvement in the
economy, level of development, level of capital investment, control of foreign
exchange, inflation rates, methods of allocating resources, and balance of
payments position. 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.

RESTRICTIONS ON CURRENCY EXCHANGE MAY LIMIT OUR ABILITY TO UTILIZE
OUR REVENUES EFFECTIVELY. We expect to derive a significant portion of revenues
in the form of Renminbi. Although Chinese governmental policies were introduced
in 1996 to allow greater convertibility of the Renminbi, significant
restrictions still remain. We can provide no assurance that the Chinese
regulatory authorities will not impose greater restrictions on the
convertibility of the Renminbi. Any future restrictions on currency exchanges
may limit our ability to utilize revenue generated in Renminbi to fund our
business activities outside China.

A CHANGE IN CURRENCY EXCHANGE RATES COULD INCREASE OUR COSTS RELATIVE TO
OUR REVENUES. We expect to generate a significant portion of our revenues in
Renminbi and to incur a significant portion of our expenses and liabilities in
Renminbi and U.S.dollars. As a result, we are subject to the effects of exchange
rate fluctuations with respect to any of these currencies. We have not entered
into agreements or purchase instruments to hedge our exchange rate risks
although we may do so in the future.

THE UNCERTAINTY OF THE ENFORCEABILITY OF OUR CONTRACTUAL RIGHTS MAY
HAVE A SERIOUS ADVERSE IMPACT ON OUR BUSINESS. The legal system in China is
still at a developmental stage. There are uncertainties in terms of the
predictability and transparency of its laws and regulations. The judicial system
is relatively young. As a result, our contractual rights in China are subject to
these uncertainties. We may have serious disruptions and suffer significant
losses in terms of business opportunities and operations if our contractual
rights cannot be fully enforced.

INTERNET COMPANIES HAVE BEEN PARTICULARLY SUSCEPTIBLE TO FLUCTUATIONS IN
STOCK MARKET PRICES. The stock market in general has recently experienced
extreme price and volume fluctuations. The market prices of technology
companies, particularly Internet-related companies, have experienced
fluctuations unrelated or disproportionate to the operating performance of those
companies. These broad market fluctuations could depress the market price of our
common stock.

Recently, when the market price of a stock has been volatile, holders of
that stock have often instituted securities class action litigation against the
company that issued the stock. If that were to happen to us, we could incur
substantial costs defending the lawsuit. The lawsuit also could divert the time
and attention of our management team. Both could have a negative impact on our
financial performance.

FUTURE SALES OF OUR COMMON STOCK MAY DEPRESS OUR STOCK PRICE. Sales of a
substantial number of shares of our common stock in the public market could
cause a reduction in the market price of our common stock. We had 30,584,201
common shares issued and outstanding as of September 30, 2000, which include the
shares not covered by this prospectus. In addition, 45,641,221 warrants were
outstanding as of September 30, 2000. Moreover, we may issue additional shares
in acquisitions and may grant additional stock options to our employees,
officers, directors and consultants.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus, including the sections entitled "Prospectus Summary,"
"Risk Factors," "Management's Discussion and Analysis of Financial Condition and
Result of Operations" and "Business," contains forward-looking statements. These
statements relate to future events or our future financial performance, and
involve know and unknown risks, uncertainties and other factors that may cause
our actual results, levels of activity, performance or achievements to be
materially different from any future results, levels of activity, performance or
achievements expressed or implied by these forward-looking statements. These
risks and other factors include those listed under "Risk Factors" and elsewhere
in this prospectus. In some cases, you can identify forward-looking statements
by terminology such as "may," "will," "should," "expects," "intends," "plans,"
"anticipates," "believes," "estimates," "predicts," "potential," "continue" or
the negative of these terms or other comparable terminology. Although we believe
that the expectations reflected in the forward-looking statements are
reasonable, we cannot guarantee future results, levels of activity, performance
or achievement.

USE OF PROCEEDS

All net proceeds from the sale of the common shares by the selling
shareholders will go to the selling shareholders who offer and sell their
shares. We will not receive any proceeds from the sale of the common shares by
the selling shareholders. However, we will receive proceeds of the exercise of
warrants held by selling stockholders that pay the exercise price in cash. We
expect to use the proceeds of any such sales as working capital for general
corporate purposes, including strategic acquisitions and investment.

DIVIDEND POLICY

We have never declared or paid any cash dividends on our common stock. We
anticipate that any earnings will be retained for development and expansion of
our business and we do not anticipate paying any cash dividends in the near
future. Our board of directors has sole discretion to pay cash dividends based
on our financial condition, results of operation, capital requirements,
contractual obligations and other relevant factors.

PRICE RANGE OF COMMON STOCK
AND DETERMINATION OF OFFERING PRICE

Since our initial public offering, our common stock has traded on The
Nasdaq OTC Bulletin Board under the symbol "CAOL.OB" On September 29, 2000, the
closing bid price per share of our common stock was $0.1875. The following table
sets forth the quarterly high and low price and closing prices (in U.S. dollars)
for our common stock for the period August 26, 1998 through the first quarter of
fiscal year ended June 30, 2001:

For the quarter ended ................. High Low Close
--------------------------------------- ----- ----- -----
August 26 through September 30, 1998 .. UNPRICED
December 31, 1998 ..................... $ 1.50 $ 1.50 $ 1.50
March 31, 1999 ........................ $ 0.50 $ .50 $ 0.50
June 30, 1999 ......................... $ 0.66 $ 0.56 $ 0.61
September 30, 1999 .................... $ 0.63 $ 0.56 $ 0.61
December 31, 1999 ..................... $ 1.63 $ 1.30 $ 1.34
March 30, 2000 ........................ $ 1.44 $ 1.31 $ 1.31
June 30, 2000 ......................... $ 0.47 $ 0.39 $ 0.44
September 29, 2000 .................... $ 0.20 $ 0.19 $ 0.19

Source: http://chart.yahoo.com/d?s=caol.ob

The foregoing data represents prices between dealers and does not include
retail mark-ups, mark-downs or commissions, nor does such data represent actual
transactions or adjustments for stock-splits or dividends.

The offering price is primarily determined as the average high and low
price of common shares as of September 29, 2000.

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<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA

The consolidated statement of income data set forth below with respect to
the years ended June 30, 2000, 1999 and 1998, the three months ended September
30, 2000 and September 30, 1999 and the consolidated balance sheet data at June
30, 2000, 1999 and September 30, 2000 are derived from and are qualified by
reference to the audited and unaudited consolidated financial statements
included elsewhere in this registration statement. The consolidated statement of
income data for the years ended June 30, 1997 and 1996 and the consolidated
balance sheet data at June 30, 1999, and 1996 are derived from audited
consolidated financial statements of the Company not included herein. The data
presented below are qualified by reference to Consolidated Financial Statements
included elsewhere in this filing and should be read in conjunction with such
financial statements and related notes thereto and "Management's Discussion and
Analysis of Financial Condition and Results of Operations"
<TABLE>
<CAPTION>

Unaudited
Three months ended Years Ended June 30,
September 30,
---------------------------------------------------------------------------------

2000 1999 2000 1999 1998(1) 1997(1) 1996(1)
---------------------------------------------------------------------------------
Income Statement
Data:
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales $ 156,188 $ - $ - $ - $ - $ - $ -
Operating loss (1,824,381) (101,773) (4,876,905) (322,038) (2,353) (640) (507)
Other income, net (2,604) (1,325,000) 3,212,540 - - -
---------------------------------------------------------------------------------

Net loss $ (1,826,995) $(1,426,773) $(1,664,365) $(322,038) $(2,353) $(640) $(507)
=================================================================================
Per share Data:
Net loss $ (0.06) $ (0.10) $ (0.08) $ (0.06) $ - $ - $ -
=================================================================================
Weighted average
shares outstanding 30,070,451 14,473,048 20,176,167 5,748,248 2,500,200 1,099,956 1,099,956

</TABLE>

Unaudited
September June 30,
30,
-------------------------------------------------------

2000 2000 1999 1998(1) 1997(1) 1996(1)
-------------------------------------------------------
Balance Sheet
Data:
Working Capital $(1,120,821) $ 59,906 $ 92,176 $ - $ - $ -
Total assets $13,383,713 $10,124,153 $380,064 $ - $2,053 $2,693
Long-term debt $ - $ - $ - $ - $ - $ -
Shareholders $11,300,278 $ 8,967,763 $300,338 $ - $2,053 $2,693
equity

(1) The Company was dormant from September 25, 1995 to January 8, 1998.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the
Consolidated Financial Statements and Notes thereto appearing elsewhere in this
Form S-1.

OVERVIEW

We are a Nevada corporation incorporated in September 1995. In December
1998, we reorganized CathayOnline in order to take advantage of the meteoric
growth of the Internet sector in the People's Republic of China. We launched a
plan to provide consulting and management services to Internet service providers
in China, as well as Web-based e-mail and advanced messaging services, and
integration of Internet services with other forms of communication.

Our initial operating activities consisted primarily of identifying
opportunities, negotiating Letter of Understanding with potential partners,
developing the operations, recruiting personnel, raising capital and purchasing
operating assets. During the period from June through December 1999, we
finalized a number of agreements including an agreement to acquire TorchMail.com
which subsequently became a wholly-owned subsidiary of the Company with the
business objectives to market a Chinese language version of Web-based e-mail and
advanced messaging services to the Chinese speaking markets. By December 1999,
we had established a wholly-owned subsidiary, Sichuan CathayOnline Technologies
Co. Ltd., launched a co-branded Web site with register.com, under which our
TorchMail.com subsidiary will sell primary level domains, and indirectly
acquired interests in ten lottery kiosks in Guangzhou, China. (These were
written off in order to concentrate our resources on the potentially more
lucrative Internet service market.) From January 2000 through March 2000, the
Company's operating activities consisted primarily of continuing to identify
opportunities, negotiating Letters of Understanding with potential partners
identified in our search, planning and developing operations, planning corporate
restructuring, recruiting personnel, raising capital and purchasing operating
assets. In March of 2000 we finalized a number of arrangements, including the
appoint of Mr. Ken Levy as a Director of the Company, the appointment of Mr.
Keli Wu as Chairman of the Beijing operations, the launch of the co-branded Web
site with register.com.

By June of 2000 we had announced the acquisition of a controlling interest
in CMD Capital Limited, the parent company of ChinaNet Publishing Co. Ltd., the
closing of a $6.82 million financing, and finished the construction of our
state-of-the-art Internet facility in Sichuan Province. We appointed Mr. David
Ng as Director of Corporate Finance and Special Projects, and signed an
agreement with Sichuan Famous Brand Product Enterprises to act as its exclusive
business-to-business marketer for its Web site and products online. We also
signed a co-operation agreement with the Second Institution of the Aerospace
Machine & Electronic Group to provide Internet services to their subscriber base
of 70,000 users. Through the sale of our interest in CMD Capital Limited, we
obtained a strategic alliance with CathayOne Inc., which we will anticipate will
greatly enhance our ability to secure customers in the Chinese internet arena.

After the end of fiscal 2000, we appointed Mr. Glenn Ohlhauser as our Chief
Financial Officer. We also commenced the marketing of our Personal Intelligent
Messaging services and announced the opening of a new representative office in
the city of Chongqing, an autonomous city-state situated in Sichuan Province.
Chongqing is China's largest city with over 33 million residents, and the
fastest growing city for Internet use and the chief financial and industrial hub
in southwestern China.

We will need to raise money to fully take advantage of these opportunities;
but we believe that the combination of China and the Internet creates one of the
greatest opportunities ever for visionaries. We are well positioned to
aggressively seize our market position, acquire new customers and increase our
market share. Additionally, the combined effects of increased industry
deregulation coupled with a growing demand for Internet services, products and
applications, and China's pending entry to WTO are expected to create exciting
investment opportunities in China.

Currently, our principal office is in New York. We maintain a technical and
administrative office in Vancouver, Canada. Our operational offices are located
in Chengdu and Beijing, China. We also maintain a representative office in
Jiangmen, China.

SICHUAN ISP PROJECT

On August 10, 1999, we organized, in accordance with the laws of China, a
wholly-owned subsidiary, Sichuan CathayOnline Technologies Co. Ltd. ("Sichuan
CathayOnline"), which operates in the City of Chengdu. On September 9, 1999,
Sichuan CathayOnline entered into a management and consultancy service agreement
with Sichuan Guo Xun Xin Xi Chan Ye You Xian Gong Si ("Sichuan Guo Xun"), a
local ISP in Sichuan Province licensed by the Sichuan Administrative Bureau for
Posts and Telecommunications for an initial term from September 8, 1999 to March
23, 2003. Pursuant to this agreement, Sichuan CathayOnline and Guo Xun work
jointly in providing Internet services and Sichuan CathayOnline is entitled to
90% of the profit generated from such services.

In May 2000, we announced the signing of an agreement with Sichuan Famous
Brand Product Enterprises to act as its exclusive business-to-business marketer
for its Web site and products online. We, in conjunction with Sichuan Guo Xun,
developed the Web site for Sichuan Famous Brands, which represents and contains
the equivalent of Sichuan Province's "Fortune 100". The main function of the
site, which contains more than 300 brand name enterprises, is to promote the
provincial economy by marketing products in the international market and to
expand sales of the products in the Chinese market via the Internet. The Web
site was designed to build a solid foundation for Sichuan Famous Brands and to
expand its role in e-business and e-commerce.

BEIJING ISP PROJECT

On April 27, 2000, we announced a cooperation agreement with the Second
Institution of the Aerospace Machine & Electronic Group ("AMEG") to provide
Internet services for the region of Beijing, the capital city of China. AMEG's
current scope of business includes telephone communications, computer network
communications, cable television networks and fiber-optic cable networks. It is
our intention, under the cooperation agreement, to be able to build out the
infrastructure so that we can provide full Internet service to AMEG's existing
user base which AMEG intends to expand.

TORCHMAIL.COM, INC.

We intend to seek out and train strategically located sales teams to
promote TorchMail's Web-based professional advanced messaging services in China.

In March 2000, the Company announced a partnership agreement to supply
co-branded Web-based e-mail services with the National Library of China, which
is the largest library in Asia and a national general repository of
publications. Under the agreement TorchMail will provide the National Library
with web messaging services.

TorchMail intents to expand its international member base by adding
additional international partners and by providing new features to the services
offered. We are also exploring business opportunities and partnerships in other
market segments including the wireless market and education related markets. We
will also continue to seek to acquire strategic businesses and technology that
will help us serve these markets.

MARKET STRATEGY

According to the statistics compiled by the China Internet Network
Information Center ("CNNIC") in 1999, the three most important factors
considered by Internet users when choosing an ISP are connection speed, service
quality and price. Our strategy is to aggressively ensure that all three of
these factors are delivered to our customers. We will provide more bandwidth for
Internet upstream connection, linking our system to both ChinaNet and Unicom and
making sure that if traffic on one side is congested, users' traffic can be
routed through another carrier. For customer quality, we provide 24-hour
service.

While our prices will be competitive with other providers, we will offer
value-added Internet services such as Internet Fax/Phone, systems integration,
on-site training, full customer support and other advanced Web features.
Additionally, we will hold seminars, on-site training at our customer's office,
offer the "Electronic Mall" for use by advertisers, provide trial accounts, have
dedicated lines and have virtual Web and domain names. We believe that we will
be able to stand out among our competitors and that our customers will be
completely satisfied with this full-service solution.

Our long-term objective is to become the communications portal for our
members on the Web by combining e-mail, fax, voicemail, calendars, address books
and related tools into one fully integrated service. We plan to expand our
international member base by adding additional international partners, and by
providing new features such as e-mail language translation. We are also
exploring business opportunities and partnerships in other market segments such
as the wireless market and schools. We may also continue to seek to acquire
additional strategic businesses and technology that will help us to better serve
these markets.

GROWTH OF THE BUSINESS

As we become more fully established in Chengdu, we will quickly expand
services in other cities within China. As our Internet connectivity network
expands to cover a greater number of major urban markets, we will continue to
focus upon building a scalable network platform and forming strategic business
and technology partnerships. Under this strategy, we expect to achieve rapid
growth and to quickly become the leading brand name within our respective
markets.

We anticipate that, by first quarter of 2001, we will have commenced
services in Beijing and Guangdong Province.

RESULTS OF OPERATIONS

During the period from September 20, 1995 to January 6, 1998, we did not
engage in any operations and were considered dormant. On January 6, 1998, we
obtained a Certificate of Renewal from the State of Nevada. As of June 30, 2000,
the Company was still in the development stage and, as of June 30, 2000, has
only recently commenced planned principal operations.

Since inception, we have incurred significant losses and, as of June 30,
2000, had an accumulated deficit of approximately $1.99 million. It is our
intention to invest heavily to expand network infrastructure and expand sales
and marketing. We expect to incur substantial operating losses in the
foreseeable future.

With the rapidly evolving nature of the technology industry, potential for
political uncertainty and our limited operating history, we believe that any
period to period comparisons of our revenues and operating results are not
meaningful and should not be relied upon as an indication of future performance.
As of June 30, 2000 the Company had approximately 80 employees, in comparison
with three full time employees in just fifteen months earlier. CathayOnline does
not believe that its historical growth rates for revenues, expenses, capital
investments or personnel are indicative of future results.

INCOME TAXES

No provision for federal and state incomes taxes has been recorded as we
have incurred net operating losses from inception through June 30, 2000. As of
June 30, 2000, we had approximately $1,990,000 of federal and state net
operation loss carryforwards available to offset future taxable income which
expire in varying amounts beginning in 2015. Under the Tax Reform Act of 1986,
the amounts of and benefits from net operating loss carryforwards may be
impaired or limited in certain circumstances. Because there is significant doubt
as to whether we will realize any benefit from this deferred tax asset, we have
established a full valuation allowance as of June 30, 2000.

INFLATION AND REGULATION

Our operations have not been, and in the near term are not expected to be,
materially affected by inflation or changing prices. We will encounter
competition from a variety of firms selling Internet services in our market
area. Many of these firms have long-standing customer relationships and are
well-staffed and well financed. We believe that competition in the Internet
industry is based on competitive pricing, although the ability, reputation and
support of a marketing network is also significant. We do not believe that any
recently enacted or presently pending proposed legislation will have a material
adverse effect on its results of operations.

LIQUIDITY AND CAPITAL RESOURCES

Since inception, we have funded our operations from the net proceeds from
the sale of common stock and other securities convertible into common stock. For
the fiscal year ended June 30, 1999, cash provided by financing activities was
approximately $482,026. For the fiscal year ended June 30, 2000, cash provided
by financing activities was approximately $6,457,389.

As of September 30, 2000, we have no long-term debt.

Our current cash balances will not be sufficient to meet our working
capital and capital expenditure requirements for the next twelve months. It is
anticipated that with the further expansion of the operations we will incur
negative cash flows, therefore requiring us to seek additional financings to
support the growth in operations, both on a short-term and long-term basis. We
expect to acquire or invest in businesses, products, services and technologies
that complement or augment our service offerings and customer base. We currently
are engaged in discussions with a number of companies regarding strategic
acquisitions or investments. Although these discussions are ongoing, no
definitive agreements have been signed and there can be no assurance that any of
these discussions will result in actual acquisitions. It is anticipated that
some of the acquisitions will be paid for by issuing additional common stock and
this could dilute our shareholders. In addition, there may be the requirement to
amortize significant amounts of goodwill and other intangible assets in
connection with future acquisitions, which would materially increase the
Company's operating expenses. In addition, we may seek to raise funds by
offering debt or equity to the public. Thereafter, we may need to raise
additional funds in order to meet funding requirements of a more rapid expansion
plan, potential acquisitions, development of new or enhanced products or
services, in response to competitive pressures or to acquire technologies or
complimentary products or businesses.

There is no guarantee that we will be able to raise the funds that we need.
In addition, as of September 30, 2000, we have issued and outstanding 30,584,201
shares of common stock and warrants to purchase 45,641,221 shares of common
stock, while we are currently authorized to issue only up to 50,000,000 shares
of common stock. The board of directors have passed a resolution to increase the
number of authorized common shares and to issue preferred stock. These proposals
will subject to the shareholders' approval on Company's annual general meeting
which is scheduled to be held on November 29, 2000. Unless these proposals to
amend our Articles of Incorporation are approved by shareholder meeting, we may
not have sufficient authorized but unissued shares to permit us to offer
additional common stock to potential investors.

If we cannot obtain outside financing, we will consider scaling back our
expansion plans for TorchMail's and Sichuan Guo Xun's operations, and
re-evaluate certain potential acquisitions and, instead, rely upon internally
generated cash flow. Resources that would have been allocated to a more
aggressive expansion plan would then be diverted towards a broad based
advertising campaign to build upon the subscriber bases permitting an internally
financed growth.

Net of depreciation, our investment in property and equipment was
$1,592,419 as of June 30, 2000. In comparison, our investment in property and
equipment, net of depreciation, was nominal as of June 30, 1999. Installation of
infrastructure equipment in Chengdu, purchases of furniture and equipment for
new employees, and leasehold improvements related to office expansions accounted
for this increase. It is expected that our investments in property and equipment
will continue to grow as we seek to increase capacity and services.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are not exposed to a material level of market risks due to changes in
interest rates. We do not have outstanding debt instruments and we do not
maintain a portfolio of interest-sensitive debt instruments.

We expect to derive a significant portion of revenues in the form of
Renminbi and, therefore, may be exposed to significant foreign currency risks in
the future. During the fiscal year ended June 30, 2000, and the first quarter of
the fiscal year ended June 30, 2001, we did not engage in hedging activities to
mitigate the impact of changes in foreign exchange rates. We may in the future
use foreign currency forward exchange contracts as a vehicle for hedging
purposes.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE NONE

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<PAGE>
BUSINESS

GENERAL

We are an integrated Internet company serving the global Chinese community,
with a primary focus on the People's Republic of China. We launched our Internet
initiatives in China in the Spring of 1999. To date, we made significant inroads
in developing our Internet infrastructure in China while focusing on recruiting
quality personnel, raising capital and developing strong regional and local
partners and global strategic relationships. Through the leadership of our
management team, our focus on execution of our business plan, our attention to
the market's needs, our local partnerships and strategic acquisitions, joint
ventures as well as alliances with leading global corporations, we have
established a solid foundation in China.

We focus on these lines of business:

o Internet connectivity and value-added Internet technology services in
Sichuan Province, Beijing, and Guangdong Province, China; and

o Internet communication services including Web-based e-mail, advanced
messaging services, Fax over Internet (FoIP) and Voice over Internet
(VoIP).

Our goal is to become a major Internet service and solutions provider in
China. We are pursuing this goal by developing recognition of our brands,
expanding our Internet connectivity and communications services to our
registered and potential customer base across China's major urban markets,
continuing to pursue strategic acquisitions and alliances, and acquiring
experienced and quality management and support teams.

Our network consists of the following branded Internet properties:

o CathayOnline.com, our flagship corporate Web site;

o TorchMail.com, our e-mail and advanced messaging service; and

o Guoxun.net and Torchnet.com, our Internet services partners in the Sichuan
Province and currently expanding into Beijing and Guangdong Province.

Summarized below are the milestones we achieved during the fiscal year
ended June 30, 2000.

- July 1999: We acquired TorchMail.com, Inc.

- August 1999: We established Sichuan CathayOnline Technologies Co. Ltd. to
provide Internet services.

- August 1999: Sichuan CathayOnline expanded its offices and Internet
services to markets in Chengdu, China.

- November 1999: We entered into an agreement with Register.com to provide
domain name registration services.

- December 1999: We launched a Chinese version of TorchMail.com.

- February 2000: Mr. Keli Wu of ChinaOnline joined Beijing operations as
Chairman of Beijing CathayOnline Technologies Co. Ltd.

- March 2000: TorchMail.com signed an agreement with the National Library of
China to provide e-mail and advanced messaging services.

- April 2000: We entered into a joint venture with CMD Capital Limited to
create PRCinvest.com, a financial news Internet content portal being
developed with China Investment Journal.

- April 2000: We completed a private placement of our shares which raised
$6.8 million (before financing costs).

- April 2000: We announced the signing of a cooperation agreement with the
Second Institution of the Aerospace Machine & Electronic Group to provide
Internet services in Beijing.

- May 2000: We completed phase one of upgrade of the Internet services
facilities in Chengdu, China.

- May 2000: We entered into a cooperation agreement with Wuyi University of
Jiangmen to expand Internet services to Guangdong Province.

- May 2000: Beijing CathayOnline took possession of its Beijing offices to
serve as our headquarters in China and began to set up its technology site
for Internet services.

- June 2000: We sold our interest in CMD Capital Limited and developed a
strategic alliance with Premier Brands Inc. (now known as CathayOne Inc.)

THE INTERNET MARKET IN CHINA

The Internet has become an important global medium that enables millions Of
people to obtain and share information and conduct business electronically. In
China, improvements in technological infrastructure, the increase in access to
personal computers and a rapid increase of online Chinese language contents is
driving the growth of the Internet. The number of Web sites hosted in China has
grown from 3,700 in 1994 to 27,289 in 2000.

The number of people using the Internet in China, the world's most populous
nation, has increased more than 30 fold in just five years. According to "The
Internet in China", a study published in June 1999 by the Strategis Group and
BDA China, China is the fastest-growing Internet market in Asia. The study
estimated that, by the end of 1999, more than 6.7 million people in China had
Internet access, a number projected to grow to 33 million or more by 2003. Some
forecasts project up to 100 million users by 2010, at which time China would
surpass the United States as the country with the most Internet users. A recent
study by a U.S.-based research company, The Yankee Group, predicts that China
will have more Internet users than any other Asia-Pacific nation by 2001, with
about 40 million people online; and by 2005, China should surpass the United
States in having the most Internet users in the world. In addition, the Chinese
market for personal computers is expected to become the largest in the world
with personal computer sales anticipated to exceed those in the United States
this year.

ChinaNet, the first commercial Internet Services Provider (ISP) in China,
was established in June 1995 in Beijing to provide Internet dial-up service.
Within one year, its user-base increased from zero to 50,000 even though the
average subscription fee per subscriber was 20 times higher than that in North
America.

Access to the Internet in China is accomplished primarily through the
government owned infrastructure. China's Internet is primarily made up of five
largely separate national networks. Until March 1997, these networks had
virtually no interconnectivity - all inter-network traffic had to be routed via
the United States.

Over the last several years, due to China's central and provincial
governments' policies and initiatives to construct and modernize the
telecommunications industry and information distribution system, licenses have
been granted to private organizations to provide Internet-access services. In
October 1999, an estimated 150 private ISPs operated in China. Access services
in China are generally limited to dial-up modem access. Dial-up modem access,
unlike dedicated high-speed connections, requires a user's computer to dial a
number which connects the user to a network owned and maintained by the ISP. The
majority of commercial users access the network via dial-up accounts that
support speeds of up to 33.6K. All ISPs in China rely on the national
telecommunications companies, such as China Telecom and China Unicom, to provide
Internet access lines and to maintain local telecommunications lines.

According to the July 2000 report of China Internet Network Information
Center ("CNNIC"), a department of the Chinese Academy of Sciences, 88% of
Internet users cited e-mail as their favorite Internet service. According to a
1999 survey by Greenfield Online, 59% of online users now prefer sending an
e-mail to making a phone call. A United States Embassy report on the Internet in
China indicates that over 9% of information carried by Internet circuits in
China are devoted to e-mail.

The Chinese government has already invested over $28 billion on more than
100,000 kilometers of optical fiber that now links 85% of the country. The
China-U.S. Cable Network project, valued at $1.2 billion, will be the first
direct fiber-optic link between China and the United States and is expected to
be completed shortly.

CNNIC's latest report provides the following data for July, 2000:

- Total computers connected to the net: 6,500,000
- Total direct connections: 1,010,000
- Total dial-up connections: 5,490,000
- Total estimated dial-up users: 11,760,000
- Total estimated leased line users: 2,580,000
- Total estimated users with both leased line and dial-up: 2,560,000
- Total Internet users: 16,900,000

The Ministry of Information Industry of China is encouraging Chinese
language Web presence for electronic resources, ranging from search engines to
weather services. The Chinese government has also initiated a series of projects
that will employ state-of-the-art technology in areas such as education,
agricultural planning, healthcare and finance.

BUSINESS AND REVENUE MODEL

Our business model consists of basic, high demand Internet utility Services
as well as a multitude of value-added Internet services and solutions targeting
large groups of Internet users from mid-size to large corporations, government
agencies and universities in urban areas in China. We are organized into three
service divisions which plans to generate revenues through fees by offering the
following services:

Connectivity: User fees for connection to the Internet.

Communications: User fees for providing outsourced e-mail and other
advanced communications products.

Value-added Internet Services: Fees for providing Web and data hosting
services.

CONNECTIVITY

We are committed to providing reliable connectivity to Internet
users. Through an exclusive Management and Consultancy Service Agreement with
Sichuan Guo Xun Xin Xi Chan Ye You Xian Gong Si ("Sichuan Guo Xun"), a local
Internet service provider, Sichuan CathayOnline provides a full range of
Internet connectivity services to the Sichuan market under the Sichuan Guo Xun
brand. In consideration of the services we render to Sichuan Guo Xun, we are
entitled to receive a fee equal to 90% of the net profits generated from Sichuan
Guo Xun's operations. The agreement with Sichuan Guo Xun extends through March
2003 and will be automatically renewed for a period equal to the renewed term of
the license.

At October 31, 1999, under the Sichuan Guo Xun brand, Sichuan CathayOnline
served approximately 2,500 subscribers (including trial accounts). Because of
infrastructure and technical delays, we were unable to collect service fees nor
retain a substantial number of these subscribers.

COMMUNICATIONS

We recently announced the launch of a state-of-the-art messaging service,
the Personal Intelligent Messaging (PIM) service. This service gives users one
single number, which will be their contact number for all services ranging from
telephone calls to faxes to e-mails. The PIM service will be marketed through
our partner in Chengdu, Sichuan GuoXun. It is the only messaging service of its
kind available in China.

For phone messages, PIM users would give the service up to four numbers At
which they would like to be reached. The service takes the incoming call, and
attempts to reach the user at each number in the order the user specifies. If
the user does not answer at any of the numbers, the service prompts the caller
to leave a voicemail message. The system can be configured into home, office, or
remote profiles, or for time of day, and try to reach him where he is most
likely to be found. The PIM number can also accept digital information, and send
it to the user's fax, pager, or computer. (Callers are prompted to enter one key
to choose between phone, pager, fax, and e-mail.). This messaging system is
highly sophisticated, and should give Sichuan Guo Xun's clients a means of
enhancing, as well as simplifying, their business and personal calls. We expect
that premium services such as these may assist Sichuan GuoXun to add more
clients to its subscriber base.

TorchMail.com, Inc. ("TorchMail"), our wholly-owned subsidiary, provides
e-mail and advanced messaging services on the Internet for consumers, businesses
and Web portals in China. We acquired TorchMail in July 1999 for an initial
payment of 2,500,000 shares of our common stock plus cash of $10,000. (Brian
Ransom, our president, subsequently purchased such shares from the holder of
such shares.) Further payments possibly may have to be made for the acquisition
of TorchMail. Upon the resale of 360,000 mailboxes created within a Customer
Account through use of TorchMail's services by a user or "Seats", we will issue
an additional 2,500,000 shares; upon the resale of 500,000 Seats, we will issue
an additional 1,250,000 shares; and upon the resale of 750,000 Seats, we will
issue an additional 1,250,000 shares.

TorchMail's services are being designed to provide high level scalability,
reliability, and accessibility. TorchMail, when fully developed, will provide
our Internet connectivity customers with a full range of consumer services and
our other subsidiaries with a full range Web portal and business services
including:

Consumer Services Web Portal and Business
Services

Chinese language capabilities Chinese language capabilities
Permanent e-mail addresses Anytime, anywhere easy access
to e-mail

Anytime, anywhere access to e-mail Compatibility with existing
e-mail systems

Robust set of basic e-mail features Specialized applications

Optional advanced functionality Rapid deployment and reduced
costs Customized "look and
feel"

Account privacy and security Scalability to accommodate
growth

Reliability and security

Sophisticated customer service
and support

Consumer Market Services

TorchMail's consumer market communications services segment was launched In
August 1999 with the objective of becoming a major independent Web-based e-mail
service focused on the Chinese speaking community on the Internet. In the
consumer market, TorchMail expects to generate revenues from advertising and
related sales, including direct marketing and e-commerce promotion. Revenues are
also expected to be generated from subscription services, such as a service that
allows members to purchase increased storage capacity for their e-mails. In
addition, TorchMail anticipates generating revenue by offering fee-based premium
services such as virus scanning, e-mail forwarding and message notification.

TorchMail's strategy is to offer free e-mail services to individual
consumers which will allow TorchMail to quickly build a large user base and to
establish its brand name and reputation for providing quality service. Users of
TorchMail's Web-based e-mail and messaging services receive a permanent e-mail
address of their choice with a "torchmail.com" domain name (e.g.
[email protected]). Users can send or retrieve e-mail through TorchMail Web
site (www.torchmail.com) from any computer connected to the Internet with a
standard Web browser. Since TorchMail's system is Web-based, users do not need
to download or install special software to access the service.

Commercial Services

TorchMail offers a range of e-mail and fax services to businesses and is
expected to derive revenue from site license charges, monthly fees, and usage
charges. TorchMail connects existing e-mail systems to the Internet, monitors
Internet e-mails for viruses or specific content and hosts and manages e-mail
systems. Many corporate customers have implemented in-house e-mail systems that
require hardware, software and technical and administrative resources. TorchMail
sells commercial messaging services on a turnkey basis with a complete customer
service package, including both account management and technical support. The
business customers may select from a wide range of products and services that
are priced based upon the service package selected. TorchMail also provides
customers with broadcast fax, production fax and desktop fax services via the
Internet.

TorchMail's Web strategy is to develop strong regional partnerships In
various geographic areas, aligning the TorchMail brand with both major business
portals and consumer-oriented portals. Additional revenues for TorchMail may be
derived from fee-based premium services and selling advertising in select
situations. TorchMail will share a portion of the advertising and premium
service revenues with its partners.

TorchMail recently announced a partnership agreement to supply co-branded
Web-based e-mail services with the National Library of China, the largest
library in Asia and a national general repository of publications. The National
Library also provides services for the central government priority readers in
research, educational and production institutions throughout China, as well as
the general population. The National Library communicates with an estimated
4,000 libraries in China and 1,000 other libraries worldwide. With approximately
1 million hits per day, more than 200,000 publications available for viewing
online, and more than 49 million pages of information, the National Library's
Web site has been awarded "The Best Site under the category of Culture,
Entertainment and Sports" issued by the China Internet Competition Committee in
January 2000. Under the agreement, TorchMail will provide the National Library
with Web messaging services and will co-manage the National Library's e-mail Web
site.

TorchMail also offers its customers domain name registration Services
through a strategic partnership with Register.com. Customers can registerdomains
across 29 domain name extensions, including ".com", ".net", ".org", ".co.uk"
(UK) and ".co.nz" (New Zealand) and can access all of Register.com's
registration services such as multiple domain registration and transfers for
bulk registrations, one step registrations and on-line domain management tools.

IP PHONE (VoIP)

We are positioned to acquire a portion of the IP phone market in China.
Telephone users and telephony sets in China have experienced among the highest
growth rates in the world. In 1996, China had just 55 million telephone users
but, two years later, had more than 125 million users. The telephony market is
currently dominated by China Telecom. The recently formed China Unicom was
established to create competition. Since telephony networks are very capital
intensive, the competition generated by Unicom did not bring down phone rates
for users. Long-distance rates are still very high. Currently, the charge for an
international call to North America is approximately $1.80 per minute, while a
call from North America into China could cost as low as $0.30 per minute.

We have established a VoIP (Voice over Internet Protocol) gateway with High
quality equipment which we will initially market to our large corporate clients
in China. In the long term, reasonably priced services will also be offered to
individual users via a prepaid phone card system.

VALUE-ADDED SERVICES

Sichuan CathayOnline provides Sichuan Guo Xun the following value-added
consulting and management services: strategic planning, designing and
implementing computer networking, managing data processing operations,
developing and implementing computer and electronic communications and a full
range of administrative services.

In addition to providing consulting services with respect to technical
issues, management and administrative services to ISPs, CathayOnline provides
Web site consulting and development services. The Company was engaged to upgrade
the Sichuan Famous Brand Product Web site (http://www.scmp.gov.cn). This Web
site is the home to many well-known Chinese corporations with brand name
products and has been endorsed by the Government of Sichuan Province. The
updated Web site was re-launched in May, 2000 and currently has over 300
enterprises publishing their product materials online. The next phase of
development for Sichuan Famous Brand Product will be to leverage its content and
traffic as a platform for e-commerce with a mix of business-to-business and
business-to-consumers users. The site will allow detailed search and ordering of
the brand-named products and extend the market reach of these products within
China and worldwide. We expect to derive revenue from annual registration fees
and fees for Web site development paid by these Chinese corporations.

GEOGRAPHICAL MARKETS

We have targeted geographical markets in China which offer the best
investment potential based on economic and demographic profiles which support a
growing demand for Internet access, content and online services. Our primary
focuses are the regions of Sichuan, Beijing and Guangdong, with future expansion
into other areas.

Chengdu,Sichuan Sichuan Province Beijing Guangdong

<S> <C> <C> <C> <C>
Population (2000) 10.04 Million(MM) 84.93MM 12.46MM 71.2MM

Gross Domestic Product
(GDP) (1999)(Renminbi) RMB119 Billion(B) RMB371B RMB217B RMB846B

Foreign Direct Investment N/A $2.74B $12.71B $86.91B
cumulative as of end of 1999
(U.S dollars)

Internet Users (July 2000) N/A 556,150 3,163,680 2,166,580

</TABLE>

Sichuan Province and Chengdu

The Province of Sichuan is situated in the western section of China and is
bordered on the south and west by the Yangtze River. It is one of the largest
province in China and has 85 million residents. GDP, which was approximately RMB
371 billion in 1999, ranks tenth among China's provinces. Sichuan Province also
has numerous universities, high-tech businesses and companies in heavy industry,
which are the primary users of the Internet in China.

Chengdu, the capital city of Sichuan Province, is the most important
hi-tech hub in the southwestern region of China. It is also an important
political, economic, and cultural center, and holds a strategic position in
China's economic development plan. In 1999, the city's GDP grew 10.25% from 1998
to RMB 119 billion (US $14.5 billion). The population of Chengdu is
approximately 10 million and there are more than 20 universities with over
150,000 full-time students within the city.

The Internet development in Chengdu, Sichuan began at the end of 1995. The
Sichuan Scientific Information Institute established the first ISP. Now, there
are approximately 200,000 Internet users in the area (more than 95% of them are
individual subscribers). This number is expected to grow exponentially.

We believe that we are well positioned to offer our Internet access service
to the approximately3.44 million fixed line telephone subscribers and the
546,000 mobile telephone subscribers in Sichuan. We have developed a
growth-oriented marketing planfor Chengdu focusing on governmental
organizations, local foreign-owned corporations, major universities, research
institutes, and individuals. We believe that the small number of ISPs operating
in Sichuan, its demographic profile, and the technological and physical
infrastructure in the area, including telephone lines, are all positive factors
which will permit our subscriber base to grow significantly over the next
several years.

Beijing

As the national capital of China, Beijing is characterized as a highly
urban and affluent city. Beijing attracts large numbers of foreign visitors and
investors who contribute to this prosperity. The residents of Beijing place
great importance on education. As a result, Beijing's citizens have the lowest
illiteracy rate and highest percentage of college graduates in China. Beijing is
the only region in China where the service sector is a major contributor to the
economy. This sector, which includes financial services, computer services, real
estate services and media, attracts significant foreign investment. The rapid
shift to a service-based economy has resulted in a large concentration of
younger residents in this city, most of whom earn far above average incomes when
compared to the national average. Beijing is currently the "most wired" city in
China and is home to over 21% of China's Internet market.

We have entered into a cooperation agreement with the Second Institution of
the Aerospace Machine & Electronic Group ("AMEG"), to provide Internet services
for the region of Beijing. AMEG's current scope of business includes telephone
communications, computer network communications, cable television networks, and
fiber-optic cable networks. We will leverage AMEG's market penetration to
develop and expand a diverse customer base in this region.

Guangdong

Guangdong is China's fifth most populous province but has the largest
economy of all the provinces. Guangdong has continued to experience a rise in
urbanization in the past few years and has had increases in foreign investment
and trade, which can be attributed to Guangdong's proximity to Hong Kong.This
province receives approximately 28% of all foreign direct investment coming into
China. The residents of Guangdong recognize the need for education in order to
succeed in China's new economy and place an emphasis on educational
achievements. The region's economic growth has lead to increased levels of
personal income which has resulted in a growth of computer ownership as well as
Internet usage in Guangdong.

As with the other target markets, we will focus our efforts on the local
and foreign owned corporations and educational institutions, as well as
individuals.

COMPETITION

The Internet market in China is new and rapidly evolving. Competition is
intense and is expected to increase significantly in the future because barriers
to entry in our market are not insurmountable. While the Chinese government
tightly controls ISP licenses in Chengdu and throughout China, the Chinese
government has granted and will continue to grant licenses to competitors that
intend to enter our market. Currently, our competitors include China Telecom,
China Unicom and China Gitong Telecom.

A number of existing or new Internet service providers, including those
controlled or sponsored by Chinese government entities, may have competitive
advantages over us in terms of brand recognition, financial and technical
resources, and better access to capital needed to develop and expand their
infrastructure and technical capabilities.

However, we believe we have some competitive advantages over our
competitors. Our strong development team, advanced technology and strategic
partnerships provide us with the ability to provide reliable, consistent service
and support that surpass our competition in China.

Our existing competitors may in the future achieve greater market
acceptance and gain additional market share. It is also possible that new
competitors may emerge and acquire significant market share. We believe the
rapid increase in China's online population will draw more attention from these
multinational players to the Chinese Internet market.

STRATEGIC ALLIANCE WITH CATHAYONE INC.

On June 30, 2000, we sold CMD Capital Limited ("CMD") to Premier Brands
Inc. (now known as CathayOne Inc. or "CathayOne") in consideration for 1,750,000
of shares of common stock of Premier Brands. Through this transaction, we
received approximately 6% equity interest in CathayOne, enabling the two
companies to develop a strong strategic alliance.

CMD is the owner of PRCInvest.com, a bilingual financial portal to be
launched that will provide users with up-to-the-second financial information as
well as advanced services such as on-line stock trading. We estimated that a
significant amount of capital would be needed to fully develop this content
portal. We believe that this sale will relieve us from capital requirements
needed for such development. By significantly reducing our projected
expenditures for content development, we are able to focus our financial and
managerial resources on developing our Internet connectivity and communication
services. As a result of the sale of our interest in CMD, we are no longer
focusing on developing our own Internet content sites.

We may assist CathayOne in the implementation of a broad array of services,
including Web hosting, Web development and strategic planning.

EMPLOYEES

We presently have a team of approximately 80 employees. The cultural
diversity of the team allows CathayOnline to function effectively in a
multilingual, multicultural business environment in Asia and the United States.
Our emphasis on maintaining a strong local presence in the markets in which we
operate allows us to better understand market needs, to stay close to customers
and to maintain strong strategic business relationships.

GOVERNMENT REGULATIONS

In order to take advantage of the tremendous flow of information, the
Chinese government is encouraging foreign investment and assistance in
developing its telecommunications and technology infrastructure. We are in a
select position to achieve a major role in the development of China's
telecommunication technology.

Internet services are treated as value-added information/telecommunications
services, which are subject to telecommunications regulations. The
telecommunications regulations explicitly state that foreign companies or
nationals are allowed to be involved in equipment manufacturing, system
installation, and management consultation. Foreign companies have and will
continue to have an active role in system integrating and equipped sales.
However, foreign companies or nationals are not permitted to directly own or
operate basic and value-added information/telecommunication services including
Internet content provider (ICP) and ISP.

Foreign corporations have in the past worked around these prohibitions by
forming a joint venture with the functioning operation of another Chinese
business entity. Many foreign companies have already adopted the joint venture
approach in the cellular and paging services markets. Foreign corporations, such
as Prodigy, have created a joint venture with China North Industries Corp.
Group, and there are dozens of smaller companies from North America that have
followed this approach.

With respect to foreign investments in Internet services, many foreign
companies entered into strategic alliance with Chinese ICPs or ISPs. The Chinese
regulations prohibit any foreign investments in ICPs or ISPs. However, foreign
companies are permitted to provide technology services or management consultancy
services to Chinese ICPs and ISPs. Foreign companies are also entitled to
receive payments from those ICPs and ISPs for the provision of such technology
and/or management consultancy services. This policy has provided foreign
companies a practical way to gain entry into China Internet services business
without undue regulatory risks.

In August 2000, LycosAsia, a foreign invested company, successfully
obtained an ICP license in Shanghai. It has been regarded by some IT business
and legal professionals as a positive signal that China will allow foreign
investments in ICPs.

On May 24, 2000, the United States House of Representatives voted to grant
China Permanent Normal Trade Relation (PNTR) status, a prelude to full
membership in the World Trade Organization ("WTO"). Recently, the U.S. Senate
also voted in favor of granting PNTR status to China. The PNTR and China's
pending entry into the WTO bodes well for China businesses and companies doing
business in China, particularly companies like us who have created strong
economic ties within China prior to its entry into the WTO.

WTO membership for China is expected to stimulate spending on China's
Internet and telecommunications infrastructure. China's current commitment to
developing its telecommunications and technology infrastructure contemplates
opening up the telecommunications sector to foreign direct investment and to
businesses providing telecommunication services of all types. China has agreed
to eliminate foreign equity restrictions and has agreed to accede to the Basic
Telecommunications & Financial Services Agreement while "grand fathering"
current market access for all U.S. service providers. This is expected to
benefit existing U.S. service providers in China.

By virtue of the Basic Telecommunication & Financial Service Agreement,
China will become a member of the Basic Telecommunications Agreement(BTA).
Chinese government also promises the following after its entry into WTO:

o China will phase out all geographic restrictions for (i) paging and
value-added services in two years; (ii) mobile/cellular in five years
and (iii) domestic wire line services in six years. China's key
telecommunication services corridors in Beijing, Shanghai, and Guangzhou,
which represents approximately 75% of all domestic traffic, will open
immediately on accession to the WTO in all telecommunications services.

o China will allow up to 49% foreign investment in all telecommunication
services industry, and will allow up to 50% foreign ownership for value
added services in two years and paging services in three years.
Currently, China allows no foreign investment in telecommunications
services industry.

o China will allow up to 25% foreign investment in Chinese Internet
service providers, and the percentage will increase to 49% after three
years. Foreign investors are allowed to have 30% shareholdings in
Chinese ICP and other value-added services in Beijing, Shanghai and
Guangzhou. This percentage will increase to 50% after two years and the
geographic restrictions will be eliminated.

We believe that we are well positioned to seize the opportunity offered by
China's entry into the WTO and to expand our role and involvement in Chinese
telecommunications and Internet participation. Our management team has been
working within China for many years and has developed relationships in China
which will prove to be of immeasurable financial value to the Company in the
years ahead.

CORPORATE HISTORY

We were incorporated in the State of Nevada on September 20, 1995 under the
name Kyocera Management, Ltd. We were initially incorporated to allow for the
issuance of up to 25,000 shares of no par value common stock. On January 5,
1998, we amended our Articles of Incorporation to allow for the issuance of up
to 50,000,000 shares of $0.001 par value common stock.

We were inactive from our inception through December 1998. In December
1998, we sold 5,785,500 shares of our common stock to a group of individuals,
including members of our current Board of Directors, in consideration of $57,850
in cash and services rendered. The members of the then Board of Directors
resigned and appointed Mr. Brian Ransom, our current President, as a Director.
We subsequently commenced our Internet services business. In April 1999, we
changed our company name to CathayOnline Inc.

On January 18, 2000, we entered into an Acquisition Agreement and Plan of
Merger whereby we acquired all of the outstanding shares of Lazzara Financial
Asset Recovery, Inc., an inactive Nevada corporation ("Lazzara"), in exchange
for 25,000 shares of our common stock. In connection with the merger, we also
incurred professional fees of $250,000 in cash and 225,000 shares issued for
services rendered. We are the surviving entity in the merger. Lazzara was
registered under the Securities Exchange Act of 1934 (the "Exchange Act") and
was required to file reports under the Exchange Act. We elected to succeed to
Lazzara's reporting requirements under the Exchange Act, as permitted by Section
12g-3(b) thereof, and as a result became a reporting company under the Exchange
Act on January 18, 2000. Accordingly, we now are required to file reports with
the Securities and Exchange Commission under the Exchange Act commencing upon
the filing of the Current Report on Form 8-K filed on January 18, 2000. As a
consequence of the merger and our election to succeed to Lazzara's reporting
requirements under the Exchange Act, our common stock remained eligible for
trading and continues to trade on the Over-the-Counter Electronic Bulletin
Board.

BUSINESS PLAN FOR THE REMAINDER OF FISCAL YEAR

Our business plan for the remainder of fiscal year ending June 30, 2001
will mainly focus on running our business projects as discussed in this chapter
in a full scale. We may continue to develop our strategic alliance through
acquisition or entering various agreements with different entities on ongoing
basis. We will focus on corporate financing to meet the capital requirements for
these existing and upcoming projects.

PROPERTY

We maintain our principal executive office at 437 Madison Avenue, 33rd
Floor, New York, New York 10022 where we lease approximately 2,500 square feet
of office space at a cost of $13,260 per month through June 30, 2005.

We lease approximately 4,200 square feet of office space at 543 Granville
Street, Vancouver, British Columbia, Canada. We have leased this space for a
term of five years through April 2005 at a monthly rent of approximately $6,818.

Our Sichuan operations are run from a 12,100 square foot office located in
the City of Chengdu, Sichuan Province. We have leased this space through August
2004 at a monthly rent of approximately $7,300.

We also entered into an agreement to lease approximately 3,300 square feet
of office space at No. 6, Ritian Road, Chao Yang District, Beijing for a period
of two years at a monthly rent of $6,311 and took possession of this space on
May 1, 2000. We have the right to extend the lease for five one-year periods on
terms to be agreed upon by the parties prior to each extension.

We lease an apartment in New York primarily for the Company's business
purpose. The Company is considering to terminate the lease.

We believe that our offices in New York and Vancouver are sufficient for
our present and future needs. Should additional space be required, we believe
that additional space is available in each of these geographic areas at
competitive prices. If our business grows as we anticipate, we expect to require
additional office space in Chengdu, Beijing and Guangdong. We are confident that
sufficient additional office space is available in the respective areas on
commercially competitive terms.

LEGAL PROCEEDINGS

The Company currently is not involved in any litigation the outcome of
which would have a material adverse effect on the Company's financial position,
results of operations and net cash flow.

MANAGEMENT

Each member of our board of directors serves for a one-year term and
until their successors are elected and qualified. Our executive officers and
directors are as follows:

Name Age Position
--------------- ---- ------------------------------------------

Brian W ....... 39 Chairman of the Board, President and Chief
Ransom ........ Executive Officer

Peter Lau...... 47 Director
Glenn Ohlhauser 47 Chief Financial Officer, Secretary and
Treasurer

Owen Li........ 37 Director, President of CathayOnline Inc's
ISP Operations In China
Yuning Wang.... 40 Vice President, China Operations
Kenneth Levy... 54 Director
Jack Chin...... 61 Director Nominee

Brian Ransom has more than 18 years experience in the fields of
international banking, manufacturing, and financial services. Among numerous
other accomplishments, he has been responsible for foreign exchange and interest
rate risk control management, management of a US$1.5 billion loan portfolio, and
the management of a currency-trading portfolio. He has held positions on the
boards of two Canadian mutual fund companies, an international fiduciary, as
well as the boards of software and manufacturing firms. Mr. Ransom has consulted
and successfully negotiated for a number of major North American manufacturing
companies pursuing manufacturing presences in Europe.

Mr. Lau's career includes operating as a former principal of a CPA firm in
New York, in addition to working for Deloitte & Touche, CPA. Mr. Lau has more
than 20 years professional experience in the financial market, and has held
numerous positions of prestige for companies operating on Wall Street and in the
Asian markets. Mr. Lau has been the Managing Director of Corporate Finance,
Manager of Special Projects, and Managing Director USA, for American Fronteer
Financial Inc., Heng Fung Capital Inc. and Heng Fung Equities, Inc.

During his relationship with Heng Fung Holdings Company Ltd. (parent
company) he established a US merchant banking and investment banking operation
on Wall Street for a publicly listed Hong Kong merchant banking company. In
addition, Mr. Lau provided corporate financial and advisory services, negotiated
and arranged equity and debt financing, and performed new business development
as the Managing Director of Corporate Finance with Ridgewood Partners Ltd. and
Ridgewood Capital Ltd.

Owen Li holds a M.Sc in Computer Science from the University of British
Columbia, Canada. He has more than 12 years of technical experience in computer
communications, more than 7 years of management experience in the
telecommunications industry, as well as extensive experience as a system
administrator and technical architect. Mr. Li has consulted for the University
of British Columbia, BC Research, the Worker's Compensation Board, and ProNet.
In his capacity as President of the CathayOnline ISP project in China -- the
joint venture partnership of Sichuan CathayOnline Technologies Co. Ltd. and
Sichuan Guo Xun Xin Xi Chan Ye You Xian Gong Si -- Mr. Li specializes in
technology planning and business development in computers and
telecommunications.

Mr. Levy, with broad international experience in investment banking,
marketing, retailing and the Internet, is currently the president of a
development firm specializing in Internet related companies. He has served as a
director of a number of publicly traded companies, and he has been the Senior
Managing Director of a New York investment banking and brokerage firm. In
addition, Mr. Levy's accomplishments include: president of an investment-banking
firm; president and a founder of a firm that invested in and developed
businesses in the Soviet Union; and, president and founder of a 21 store
specialty clothing chain.

Mr. Wang has been with CathayOnline since its inception, and is also the
President of TorchMail.com. He has over 15 years of senior management experience
in sales, marketing, new business development and project management within the
hi-tech, energy, and business consulting industries. For the past 10 years, Mr.
Wang has acted as the founder and president of three China-Foreign joint venture
companies. He brings to the Company a wealth of government relations and
contacts in China. Prior to joining the company, Mr. Wang served as a marketing
manager of Sinochem(China National Chemicals Import and Export Corporation), the
largest trading company in China.

Mr. Chin is now a resident of the United States, but he is a native of
Taisan, in Guangdong Province. He has been involved in the international scene
for over forty years, fostering economic exchanges between the two countries.
From 1975 to 1998, he has been the president of Dai Tong Co, Inc., a real estate
investment and management business, accounting service, and facilitator of joint
venture projects in the United States and China. He has aided over twenty-five
Chinese companies to set up permanent bases to exhibit and sell their products
in the United States; and he has helped many American companies to set up joint
ventures in China, in both high-tech and traditional industries. From 1958 to
1975, Mr. Chin was a general partner and securities analyst at Hwa Hsing
Investors, Inc., and an executive partner at Plans Securities Investment, Inc.,
both NASD listed firms. He was responsible for international business
investment. Mr. Chin is a philanthropist, and has contributed to the building of
schools and hospitals in China.

Mr. Ohlhauser has over 20 years of experience in providing accounting
services to a variety of clients both private and public. Since becoming a
principal in 1993, he had been primarily responsible for providing audit
services to public companies and assisting with companies going public,
including assistance with annual and interim financial reporting, and filings
with regulatory authorities. Mr. Ohlhauser has served on the Members in Public
Practice and Exposure Draft committees of the Institute of Chartered Accountants
of BC. He obtained his bachelor's degree, with a major in commerce, from Simon
Fraser University in 1977.

EXECUTIVE COMPENSATION

The following table summarizes the total compensation of the chief
executive officer and the four other most highly compensated executive officers
of the Company for the fiscal year ended June 30, 2000, as well as the total
compensation paid to each such individual for the Company's two previous years.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE (6)

Annual Compensation
--------------------------------- Long-Term
Compensation Award
-------------------
Name and Principal Other Annual Securities All Other
Position Year Salary Bonus Compensation Underlying Options Compensation

<S> <C> <C> <C> <C> <C> <C>
Brian Ransom 2000 $60,000 - - - $241,500
President1 1999 $25,000 - -
1998 -

Owen Li 2000 $120,000 $60,000 - - $69,000
Director3

Glenn R. Ohlhauser 2000 $5,078 - - - -
Peter Lau 2000 - - $67,500 - $172,500
Yuning Wang 2000 $23,453 - - - $34,500
Vice President,
China Operations

</TABLE>

1. Other compensation to Mr. Ransom includes 175,000 shares of Common Stock
issued to Mr. Ransom in consideration of services rendered, which shares were
valued at $1.38 each.

2. Annual compensation to Mr. Lau includes 27,000 shares of Common Stock
issued to Mr. Lau pursuant to his management agreement, which shares were valued
at an aggregate of $31,500. Other compensation to Mr. Lau, which includes
125,000 of Common Stock issued to Mr. Lau in consideration of services rendered,
which shares were valued at $1.38 each.

3. Owen Li receives $10,000 per month pursuant to his management agreement,
of which $6,500 is paid in cash with the remainder payable in shares with number
of shares calculated at market less 10%. Owen Li was paid $78,000 cash and
issued 46,501 shares and as at June 30, 2000 was owed and additional 8,504
shares under that agreement. Pursuant to the agreement he was issued 120,000
shares at $.50 each, a portion of which will be distributed to other employees.
Other compensation includes an additional 50,000 shares issued to Owen Li for
services rendered, which shares were valued at $1.38 each.

4. Other compensation to Yuning Wang includes 25,000 shares of common
stock, issued in consideration of services rendered which shares were valued at
$1.38 each.

The Company has no bonus, profit sharing, pension or retirement plans.

WARRANTS GRANTED IN FISCAL YEAR

The following table sets forth information concerning the grant of
common stock purchase warrants to the directors and executive officers of the
Company.
<TABLE>
<CAPTION>

Individual Grants
Percent of Potential Realizable Value
Total at Assumed Annual Rates of
Warrants Stock Price Appreciation
Number of Granted to for Warrant Term (2)
Securities Employees Exercise Expiration
Underlying in Fiscal Price
Warrants year
Name Granted (#) Year (%) ($/Shares)(1) Date 5% 10%
---- ----------- --------- ------------- ---- -- ---

<S> <C> <C> <C> <C> <C> <C> <C>
Brian W. Ransom 15,000,000 68.3% $0.33 10/26/02 $900,000 $1,950,00
Glenn R. Ohlhauser 0 0% N/A N/A N/A N/A
Peter S. Lau 1,500,000 6.8% $0.33 10/26/02 $90,000 $195,000
Owen L. Li 1,500,000 6.8 % $0.33 10/26/02 $90,000 $195,000
Yuning Wang 1,500,000 6.8% $0.33 10/26/02 $90,000 $195,000
</TABLE>

(1) Common stock purchase warrants were granted at an exercise price equal to
the fair market value of the Common Stock based on the closing bid price for the
Common Stock as reported on the Nasdaq Bulletin Board on the date of the grant.

(2) The dollar amounts under these columns are the result of calculations at the
5% and 10% rates required by applicable regulations of the Securities and
Exchange Commission and, therefore, are not intended to forecast possible future
appreciation, if any, of the stock price. Assumes all warrants are exercised at
the end of their respective terms. Actual gains, if any, on stock warrant
exercises depend on the future performance of the Common Stock and overall
market conditions. The amounts reflected in this table may not be achieved.

OPTION EXERCISES AND
FISCAL YEAR-END OPTION VALUES

The following table sets forth information concerning the exercise of
common stock purchase warrants during fiscal year ended June 30, 2000 by the
directors and executive officers and their options outstanding at fiscal
year-end.
<TABLE>
<CAPTION>

Shares Value Number of Securities Value of Unexercised In-The
Acquired on Realized Underlying Unexercised Money Warrants at Fiscal Year
Warrants at Fiscal Year End End (2)
Name Exercise (1) Exercisable Unexercisable Exercisable Unexercisable
---- -------- --- ----------- ------------- ----------- -------------

<S> <C> <C> <C> <C> <C> <C>
Brian W. Ransom 0 $0 15,000,000 0 $1,612,500 $0
Peter S. Lau 0 $0 1,500,000 0 $161,250 $0
Owen L. Li 0 $0 1,500,000 0 $161,250 $0
Yuning Wang 0 $0 1,500,000 0 $161,250 $0
</TABLE>

(1) "Value Realized" represents the fair value of the underlying securities on
the exercise date, minus the exercise price of such warrants.

(2) Amounts equal the closing price of the Common Stock on June 30, 2000
($0.4375 per share), less the warrant exercise price, multiplied by the number
of shares exercisable or unexercisable.

(The Remainder of This Page Is Intentionally Left Blank)

<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

During the year ended June 30, 2000, the Company borrowed an aggregate of
$790,000 from Lothian Bancorp Ltd.,a private company controlled by Bruce Ransom,
the brother of Brian Ransom, President of the Company. The Company has repaid
this loan including interest of $13,857.

On June 30, 2000, the Company sold its interest in CMD Capital Limited
("CMD") to Premier Brands Inc. ("Premier Brands") in consideration for 1,750,000
of shares of common stock of Premier Brands. Through this transaction, the
Company received an equity interest in Premier Brands, enabling the two
companies to develop a strategic alliance. The Company will assist Premier
Brands in the implementation of a broad array of financial content and other
portals for the Chinese speaking market. Mr. Peter Lau, a director of the
Company, is the Chief Executive Officer and a director of Premier Brands and was
the Chief Financial Officer of the Company at the time of the transaction. Mr.
Brian Ransom, President of the Company, also is a director of Premier Brands.

Brian Ransom, a director of the Company, was paid $60,000 by the Company
pursuant to an employment agreement and was issued 175,000 shares of Common
Stock at $1.38 per share for services rendered.

Peter Lau, a director of the Company, was paid $36,000 by the Company and
issued 27,000 shares of Common Stock valued at $31,500 pursuant to a consulting
agreement. An additional 125,000 shares were issued to him at $1.38 per share
for other services rendered.

Owen Li, a director of the Company, was paid $78,000 and issued 32,284
shares of Common Stock pursuant for a management services agreement. Under the
same agreement, the director was issued 120,000 shares of Common Stock at $0.50
per share, which are to be distributed to other employees. An additional 50,000
shares of Common Stock at $1.38 per share were issued to him for other services
rendered.

During the fiscal year ended June 30, 2000, the Company paid consulting
fees of approximately $156,750 to Lothian Bancorp Ltd. Lothian Bancorp Ltd is a
private company controlled by Mr. Bruce Ransom the brother of the Company's
president. Subsequent to June 30, 2000, the Company leased an apartment which
Mr. Bruce Ransom currently uses as personal residence.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table presents certain information regarding the
Company's Common Stock beneficially owned by each director, the Chief Executive
Officer, the four other most highly compensated executive officers of the
Company for the fiscal year ended September 30, 2000, each person who is known
to own beneficially more than five percent (5%) of the issued and outstanding
Common Stock, and all directors and executive officers of the Company as a group
as of September 30, 2000:
<TABLE>
<CAPTION>

Title of Class Name and Address of Amount of Percent of Outstanding
_____________ Beneficial Owner Beneficial Ownership Shares of Class Owned *

<S> <C> <C> <C>
Brian W. Ransom1 15,182,000 20%
Common shares, par 1108 -543 Granville Street,
value $0.001 Vancouver, BC, V6C 1X8

Common shares, par Owen L. Li2 1,716,501 2.3%
value $0.001 10831 Anahim Dr.
Richmond, BC, V7A 3C6

Common shares, par Peter S. Lau3 1,652,000 2.2%
value $0.001 437 Madison Ave. 33rd
New York, NY 10022

Common shares, par Yuning Wang4 1,525,000 2%
value $0.001 1108-543 Granville Street,
Vancouver, BC V6C 1X8

Common shares, par Kenneth M. Levy 7,000 -
value $0.001 437 Madison Ave. 33rd
New York, NY 10022

Common shares, par Glenn R. Ohlhauser5 -
value $0.001 1108-543 Granville Street
Vancouver, BC, V6C 1X8

Common shares, par Global Tech Holding 6 5,700,000 7.5%
value $0.001 8-31, Tower 1, Millenioum
Global Tech City, 388 Kuan Tong, Hong
Holding Kong

Common shares, par All officers and directors 20,282,501 26.7%
value $0.001 as a group (6 persons)7
</TABLE>

* Comprise 30,584,201 common shares outstanding as of September 30, 2000,
and 45,641,221 common shares issuable upon exercise of 45,641,221 warrants
outstanding as of September 30, 2000.

1. Includes 15,000,000 shares issuable upon the exercise of common stock
purchase warrants granted to Mr. Ransom on October 26, 1999 as partial
compensation for the services he renders as President. The 15,000,000 warrants
are exercisable for a period of three years commencing on the date of grant at
an exercise price of $0.33 per share. Ten million of these warrants are held by
a corporation all of the shares of which will be held in a trust of which Mr.
Ransom is the sole beneficiary. The shares of Common Stock underlying the
15,000,000 warrants are not yet registered under the Securities Act of 1933, as
amended (the "Securities Act").

2. Includes 1,500,000 shares issuable upon the exercise of common stock
purchase warrants granted to Mr. Li on October 26, 1999 as compensation for
services rendered to the Company. The warrants are exercisable for a period of
three years commencing on the date of grant at an exercise price of $0.33 per
share. The shares of Common Stock underlying these warrants are not yet
registered under the Securities Act.

3. Includes 1,500,000 shares issuable upon the exercise of common stock
purchase warrants granted to Mr. Lau on October 26, 1999 as compensation for
services rendered to the Company. The warrants are exercisable for a period of
three years commencing on the date of grant at an exercise price of $0.33 per
share. The shares of Common Stock underlying these warrants are not yet
registered under the Securities Act.

4. Includes 1,500,00 shares issuable upon the exercise of common stock
purchase warrants granted to Mr. Wang on October 26, 1999 as compensation for
services rendered to the company. The warrants are exercisable for a period of
three years commencing on the date of grant at an exercise price of $0.33 per
share. The shares of Common Stock underlying these warrants are not yet
registered under the Securities Act.

5. Pursuant to Mr. Ohlhauser's employment agreement, the Company was to
issue to him 50,000 shares (issued subsequent to September 30, 2000) and granted
him common stock purchase warrants entitling him to purchase 150,000 shares. The
warrants are exercisable for a period of three years commencing on the date of
grant at an exercise price of $1.00 per share. The shares of Common Stock
underlying these warrants are not yet registered under the Securities Act.

6. Includes 2,850,000 shares issuable upon the exercise of common stock
purchase warrants attached to shares issued under a private placement. The
warrants are exercisable for a period expiring two years after the common stock
is registered under the Securities Act at an exercise price of $0.77 per share.
The shares of Common Stock underlying these warrants are not yet registered
under the Securities Act.

7. Figure includes only the first six individuals named in the table and
assumes exercise of all convertible securities held by these individuals.

DESCRIPTION OF CAPITAL STOCK

General

Under our amended certificated of incorporation, we are authorized to issue
up to fifty million (50,000,000) shares of common stock, $.001 par value per
share. As of September 30, 2000, 30,584,201 shares of common stock were issued
and outstanding, 45,641,221 warrants for common shares are outstanding. We have
no preferred stock outstanding. All of the outstanding capital stock is and will
be, fully paid and non-assessable. To date, we have not declared any dividends.
No fix rate of dividend has been determined.

Common Stock

Voting Rights. Holders of common stock are entitled to one vote per share.
All actions submitted to a vote of stockholders are voted on by holders of
common stock voting together as a single class. Holders of common stock are not
entitled to cumulative voting in the election of directors.

Dividend Rights. Subject to preferences that may be applicable to
outstanding preferred stock, if any, holders of common stock are entitled to
receive ratably such dividends as may be declared by the CathayOnline board of
directors our of funds legally available for that purpose.

Right to Receive Liquidation Distribution. In the event of liquidation of
our company, all holders of common stock will participate on an equal basis with
each other in our net assets available for distribution after payment of our
liabilities and payment of any liquidation preferences in favor of outstanding
shares of preferred stock, if there are any.

No Preemptive or Similar Rights. Holders of common stock are not entitled
to preemptive rights or conversion rights and the common stock is not subject to
redemption.

The Board has passed a resolution to increase the number of common shares
from fifty million (50,000,000) to one hundred million (100,000,000) subject to
shareholders' approval.

The Board has also passed a resolution to reincorporate the Company in the
state of Delaware subject to shareholders' approval. All shareholders' rights
will not be affected by the reincorporation if it is approved by shareholders.

Our common stock is listed on the Nasdaq OTC Bulletin Board under the
symbol "CAOL.OB" The transfer agent and registrar for our common stock is
Signature Stock Transfer, Inc., 14675 Midway Road, Suite 221, Addison, Texas
75001.

Preferred Stock

The Board has passed a resolution to issue up to ten million (10,000,000)
shares of preferred stock in one or more series. This resolution is subject to
the shareholders' approval. Currently, we have no preferred stock or options to
purchase preferred stock .

Certain Effect of Authorized but Unissued Stock

We have shares of common stock available for future issuance under the
discretion of the board of directors without approval from stockholders. These
additional shares may be issued for a variety of corporate purposes, including,
but not limited to, future public offering to raised additional capital,
facilitate corporate acquisitions or payable as a dividend on the capital stock.

The existence of unissued and unreserved common stock and preferred stock
may enable our board of directors to issue shares to our current management, to
persons helping our company, or to issue preferred stock with discourage an
attempt to gain control of us by means of tender offer, merger, proxy contest or
otherwise, thereby protecting the continuity of our management.

Options and Warrants

As of September 30, 2000, 45,641,221 warrants for shares were outstanding.
The Board may authorize an additional warrants for issuance to key employees and
advisors to provide incentive for their business efforts. Terms of these options
will be determined at the discretion of management, but we anticipate that
vesting will be tied to performance targets.

The following table shows warrants outstanding (in addition to options
granted to employees and advisors) as of September 30, 2000 and are presently
exercisable for shares of common stock.

Number of
Shares Exercise
Purchasable Price Exercisable Period
--------- ----- ------------------------------------------------------
300,000 $ 0.25 Mar./09/99 - Mar./09/02
500,000 $ 0.25 Mar./31/99 - Mar./31/02
500,000 $ 0.25 Sept./01/00 - Sept./01/03
700,000 $ 0.60 Apr./29/99 - Apr./29/01
1,990,000 $ 0.35 June/24/99 - June/24/01
9,751,407 $ 0.77 Three years after resale or registration of
shares whichever is first
2,000,000 $ 1.00 June/01/00 - June/01/02
85,714 $ 0.70 June/or - June/or/03
2,389,100 $ 0.70 Apr./29/99 - Apr./29/01
415,000 $ 0.25 May/27/99 - May/27/02
800,000 $ 3.00 June/01/00 - June/01/02
1,000,000 $ 1.60 June/01/00 - June/01/00
1,000,000 $ 1.10 June/01/00 June/01/02

Holders of options and warrants do not have any of the rights or privileges
of our stockholders, including voting rights, prior to exercise of the options
and warrants.

SELLING STOCKHOLDERS

24,608,736 common shares registered for resale which include common shares
issuable upon exercise of warrants of selling stockholders under this prospectus
constitute 80.5% of our issued and outstanding common shares as of September 30,
2000. The number of shares we are registering is based in part on our good faith
estimate of the maximum number of shares stockholders may resell to purchasers
and to or through underwriters, dealers or agents.

Selling Stockholders

24,608,736 shares are being registered and may be offered for sale from
time to time during the period the registration statement remains effective, by
or for the accounts of the selling stockholders described in the table below.
The selling stockholders currently hold unregistered shares of our common stock
and/or warrants for the purchase of common stock. The shares of common stock
being offered by the selling stockholders were acquired from us in private
placement transactions, or for services rendered to our company, or pursuant to
warrants issued in private placement transactions. Certain of the shares of
common stock being registered for resale will be issued upon exercise of
warrants issued in connection with private placement transactions.

Based on information provided to us by each selling stockholder, the
following table shows, as of September 30, 2000:

o The name of the selling stockholder;

o The number of shares the selling stockholders beneficially owns
before this offering based on our common stock outstanding on
September 30, 2000;

o How many shares of common stock the selling stockholder may
resell under this prospectus; and

Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or investment
power with respect to securities. Except as indicated, we believe each person
possesses sole voting and investment power with respect to all of the shares of
common stock owned by such person, subject to community property laws where
applicable. In computing the number of shares beneficially owned by a person and
the percentage ownership of that person, shares of common stock subject to
options or warrants held by that person that are currently exercisable or
exercisable within 60 days are deemed outstanding.

The following table shows the names of principle stockholders and the
shares of common stock beneficially owned by each stockholder before offering
under this prospectus.

Shares (or
Percentage) to
Shares of Common Stock be Owned After
Beneficially Owned Before the Completion
Name Offering Under this Prospectus Shares to be Offered of the Offering
---------------- (1) ---------------------- ----------------
---------------------------------

<S> <C> <C> <C>
ABN Amro Bank 462,000 (2) 462,000 0
AJ Reynolds 150,000 (2) 150,000 0
Albert Sapiane 300,000 (2) 300,000 0
American Stock Transfer & 6,032 (2) 6,032 0
Trust Co./ George Karfunkle
Anthony & Valerie Gentile 3,016 (2) 3,016 0
Anthony Taylor 150,000 (2) 150,000 0
Arthur Rauch 1,508 (2) 1,508 0
Aton Ventures 459,958 (2) 459,958 0
BD Hedley 150,000 (2) 150,000 0
Bank Von Graffenreid 400,000 (2) 400,000 0
Barry McDonald 150,000 (2) 150,000 0
Bermudiana Holdings 150,000 (2) 150,000 0
Brent Zanini 3,016 (2) 3,016 0
Brian Burns 6,032 (2) 6,032 0
Bruce Macnaughton Trust 6,032 (2) 6,032 0
Bruce Meyers 1,088,104 (2) 1,088,104 0
Burt C. Faure 1,508 (2) 1,508 0
C.L.F.S., Ltd. 1,508 (2) 1,508 0
Carol N. Wyett 888 (2) 888 0
CET Flexitech 150,000 (2) 150,000 0
Chameleon Karma 150,000 (2) 150,000 0
Charles Potter 1,508 (2) 1,508 0
Chesthill Associated 2,942,856 (3) 2,942,856 0
Christopher Evans 150,000 (2) 150,000 0
Christopher Wyett 888 (2) 888 0
D & S Neilsen 300,000 (2) 300,000 0
David Baron 3,016 (2) 3,016 0
David Burr 3,016 (2) 3,016 0
David Kershaw 150,000 (2) 75,000 0
Dean Gestal 1,810 (2) 1,810 0
Delaware Charter Guarantee &
Trust F/B/O Stillman, Andy IRA 6,032 (2) 6,032 0
Delaware Charter Guarantee &
Trust F/B/O Dean Gestel 4,222 (2) 4,222 0
Delaware Charter Guarantee &
Trust F/B/O Barry Yeske 1,508 (2) 1,508 0
Denis Nayden 6,032 (2) 6,032 0
Douglas & Beverly Furring 1,508 (2) 1,508 0
Douglas Colbert 1,508 (2) 1,508 0
Douglas Friedenberg 1,508 (2) 1,508 0
Edward Burkhardt 6,032 (2) 6,032 0
Elliot Lang 6,032 (2) 6,032 0
Enid Jones 150,000 (2) 75,000 0
Eugene Applebaum 888 (2) 888 0
FIT Invest Trust 160,000 (2) 80,000 0
Frederick E. Von Stange 604 (2) 604 0
Frederick J. Bailey 4,524 (2) 4,524 0
Gary Duncan 3,016 (2) 3,016 0
George Jordan (Dr.) 3,016 (2) 3,016 0
Gerald Holmes 6,032 (2) 6,032 0
Global Tech Holdings 5,700,000 (2) 5,700,000 0
Graham Leeke 150,000 (2) 150,000 0
Harlan Smith 1,508 (2) 1,508 0
Horacio Gomez/Jose Hasbun 150,000 (2) 150,000 0
Herbert Lerman 3,016 (2) 3,016 0
Horacio Gomez/Miguel Garcia 150,000 (2) 150,000 0
IE Properties 150,000 (2) 150,000 0
Imtiaz Raana Khan 200,000 (2) 200,000 0
Itzchak Bieterman 150,000 (2) 150,000 0
James P. Gierczyk 1,508 (2) 1,508 0
James T. Guida 6,032 (2) 6,032 0
Jeffrey Orenstein 305,864 (2) 305,864 0
Jerry Peterson 3,016 (2) 3,016 0
John Acierno JR. 3,016 (2) 3,016 0
John Friede 3,016 (2) 3,016 0
John Gimbel 6,032 (2) 6,032 0
Joseph Giamanco 9,050 (2) 9,050 0
Joyce Nelson 4,524 (2) 4,524 0
Lea Adar 3,016 (2) 3,016 0
Lebanon Valley Auto Racing 3,016 (2) 3,016 0
Lee Vosburgh 1,508 (2) 1,508 0
Lisa S. Applebaum 888 (2) 888 0
Louis Phillip Privitere 3,016 (2) 3,016 0
MA Schrimpton 150,000 (2) 150,000 0
Mark & Amy Schlosser 1,508 (2) 1,508 0
Mark P. Greenstein 1,508 (2) 1,508 0
Mark Smith 150,000 (2) 150,000 0
Marsha Rosenberg 50,000 (2) 50,000 0
Martin Cooper 3,016 (2) 3,016 0
Mauro Falschi 150,000 (2) 150,000 0
Melvyn I. Weiss 6,032 (2) 6,032 0
Janssen Meyers Securities 6,350 (2) 6,350 0
Corp.
Metcalf Properties 60,000 (2) 60,000 0
Michael Bates 3,016 (2) 3,016 0
Michel Marcel Ciceron 300,000 (2) 300,000 0
Nathan E. Nachlas 1,508 (2) 1,508 0
Novak Burnbaum Crystal LLP 20,408 (2) 20,408 0
Oflam Enterprises 285,714 (2) 285,714 0
Omnitek, Inc 6,032 (2) 6,032 0
Pamela A. Wyett 888 (2) 888 0
Pascal Doran 150,000 (2) 150,000 0
Phillip Rosett (Dr.) 1,508 (2) 1,508 0
PK Wood 600,000 (2) 600,000 0
Randalea Investments, Inc 6,032 (2) 6,032 0
Rayek Saleh 150,000 (2) 150,000 0
Richard Davimos Trust 3,016 (2) 3,016 0
Richard Haughwout 6,032 (2) 6,032 0
Ridgewood Group
International Ltd. 20,408 (2) 20,408 0
Roan Capital Partners L.P. 242,698 (2) 242,698 0
Roan/Meyers Associates L.P. 1,803,114 (5) 1,738,114 0
Robert Baucers 3,016 (2) 3,016 0
Robert & Linda Schmier 1,508 (2) 1,508 0
Robert B. Gay 3,016 (2) 3,016 0
Robert Eramo 1,508 (2) 1,508 0
Robert Grossman 566 (2) 566 0
Robert Johnson 6,032 (2) 6,032 0
Robert Maxon 3,016 (2) 3,016 0
Roberts Davimos 3,016 (2) 3,016 0
Roger Figden 150,000 (2) 150,000 0
Ross H. Patrich 296 (2) 296 0
RT Collett 150,000 (2) 150,000 0
Rush & Co. 120,000 (2) 120,000 0
S & P Hanley 150,000 (2) 150,000 0
Sefton Hanley 150,000 (2) 150,000 0
Shuhaiber Hamdan 150,000 (2) 150,000 0
Simon Walker 150,000 (2) 150,000 0
Steve Harington 150,000 (2) 150,000 0
Stockgain Asset Management 300,000 (2) 300,000 0
Sylvia Potter 1,508 (2) 1,508 0
Techmarkers Manchester Ltd. 150,000 (2) 150,000 0
Thames Investment Services,
Inc 3,016 (2) 3,016 0
Tim Doran 305,864 (2) 305,864 0
Todd A. Wyett 1,300 (2) 1,300 0
Umberto Fadini 150,000 (2) 150,000 0
Union Cathay Dev. 2,850,000 (2) 2,850,000 0
Vincent Puma 755,864 (2) 0
William Kolb Jr. 6,032 (2) 6,032 0
William Rouhana Jr. 1,206 (2) 1,206 0

Total 24,608,736 24,608,736 0
========== ========== =
</TABLE>

1. Assume that sale of all shares selling stockholders may sell under this
prospectus, and also assume that warrant holders exercise their warrants
for shares of common stock.

2. Half are shares of common stock issuable upon exercise of immediately
exercisable warrants. One share and one warrant is purchased as a unit by
the shareholders under the private placement subscription.

3. Consists of 1,514,285 shares of common stock issuable upon exercise of
immediately exercisable warrants.

4. Consists of 208,849 shares of common stock issuable upon exercise of
immediately exercisable warrants.

5. Consists of 934,057 shares of common stock issuable upon exercise of
immediately exercisable warrants.

The selling stockholders have not held any positions or offices or had
material relationships with us or any of our affiliates within the past three
years other than as a result of the ownership of our common stock (with
exception to Janssen Meyers Securities Corp.). Warrants were granted to Janssen
Meyers Securities Corp. for services rendered by it as Company's underwriter. We
may amend or supplement this prospectus from time to time to update the
disclosure.

PLAN OF DISTRIBUTION

We will not receive any proceeds from the sale of common shares by selling
stockholders. Selling stockholders may sell the securities being offered
pursuant to this prospectus directly to purchasers, to or through underwriters,
through dealers or agents, or through a combination of such methods.

We will receive proceeds of the exercise of warrants held by selling
stockholders that pay the exercise price in cash. These proceeds will be used by
the Company for the purposes as described in "Use of Proceeds."

LEGAL MATTERS

The validity of the shares of common stock issued in this offering will be
passed upon for us by the law firm of Schulte Roth & Zabel LLP, 900 Third
Avenue, New York, New York 10022. No attorney at Schulte Roth & Zabel LLP
beneficially owns any shares of our common stock.

EXPERTS

Our audited financial statements as of June 30, 1999 and 2000, and for each
of the three years in the period ended June 30, 1998, 1999 and 2000, and
unaudited financial statements as of September 30, 2000 have been included in
this prospectus and in the Registration Statement filed with the Securities and
Exchange Commission in reliance upon the report of Robison, Hill & Co.,
independent certified public accountants, upon its authority as experts in
accounting and auditing. Robison, Hill & Co.'s report on the financial
statements can be found at the end of this prospectus and in the Registration
Statement.

(The Remainder of This Page Is Intentionally Left Blank)

<PAGE>

PART II. INFORMATION NOT REQUIRED IN PROSPECTUS

INDEMNIFICATION OF DIRECTORS AND OFFICERS

The Nevada Revised Statutes authorizes Nevada corporations to indemnify any
person who is or was a director, officer, employee or agent of the corporation,
or is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation or other enterprises, against expenses
in actions, suits or proceedings whether civil, criminal, administrative or
investigative e, as such expenses were incurred in connection with such a
proceeding, including any appeal thereof, if the person acted in good faith and
in a manner he reasonably believed to be in, or not opposed to, the best
interests of the corporation. To be eligible for indemnity with respect to any
criminal action or proceeding, the person must have had no reasonable cause to
believe his conduct was unlawful.

The Nevada law imposed certain limitations on indemnification and
advancement of expenses. Authorization is required for discretionary
indemnification in certain circumstances. Either the board of director or
shareholders may determine whether such indemnification and advancement of
expenses can be made, except such indemnification and advancement is ordered by
a court or pursuant to the articles of incorporation, the bylaws or an
indemnification agreement between the corporation and directors or officers.

The indemnification authorized under Nevada law is not exclusive and is in
addition to any other rights granted to officers and directors under the
articles of incorporation or bylaws of the corporation or any agreement between
officers and directors and the corporation. Under Nevada law, the articles of
incorporation, bylaws or an agreement may provide that the corporation must pay
indemnification and advancement of the final disposition of the action, suit or
proceedings upon receipt of an undertaking by or on behalf of the director or
officer to repay the amount if it is ultimately determined that he or she is not
entitled to be indemnified by the corporation.

The Articles of Incorporation, in accordance with Nevada law, limit the
personal liability of directors or officers of the CathayOnline for breaches of
fiduciary duty other than for acts or omissions which involve intentional
misconduct, fraud or knowing violations of law and for distribution of dividends
in violation of Nevada law. As a result, stockholders may be unable to recover
monetary damages against directors for actions taken by them which constitute
negligence or gross negligence or which are in violation of their fiduciary
duties, although injunctive or other equitable relief may be available.

Neither the Articles nor By-laws of CathayOnline currently provides for the
mandatory advancement of expenses of directors and officers. We have not signed
any indemnification agreement with any director or officers. Currently, we are
contemplating such agreements and are seeking director and officer's insurance
coverage.

RECENT SALES OF UNREGISTERED SECURITIES

During the fiscal year ended June 30, 2000, the Company issued 2,500,000
shares pursuant to Regulation S under the Securities Act of 1993, as amended
(the "Securities Act"). The shares were issued for the acquisition of TorchMail
at $0.53 per share.

During the fiscal year ended June 30, 2000, the Company issued 2,500,000
shares pursuant to Regulation S under the Securities Act. The shares were issued
for cash and at $0.375 per share.

During the fiscal year ended June 30, 2000, the Company issued 213,793
shares pursuant to Regulation S under the Securities Act. The shares were issued
for a cashless exercise of warrants at $0.35 per share.

During the fiscal year ended June 30, 2000, the Company issued 100,000
shares pursuant to Regulation S under the Securities Act. The shares were issued
for cash on the exercise of warrants at $0.35 per share.

During the fiscal year ended June 30, 2000, the Company issued 250,000
shares pursuant to Rule 701 under the Securities Act of 1933, as amended. The
shares were issued for the acquisition and merger of Lazzara Financial Asset
Recovery Inc. at $1.38 per share.

In March and April 2000, the Company issued 775,000 shares of common stock,
valued at $1.38, as part of the purchase price for a controlling interest in CMD
Capital Limited, a Hong Kong enterprise. The transaction was a private placement
and exempt from registration pursuant to Rule 701 under the Securities Act of
1933, as amended.

In April, 2000, the Company completed a private placement of 9,751,470
Units at $.70 per Unit, consisting of one share of common stock and one
redeemable common stock purchase warrants. The transaction was a private
placement and exempt from registration pursuant to Regulation S under the
Securities Act of 1933, as amended.

During the fiscal year ended June 30, 2000, the Company issued 1,136,301
shares pursuant to Regulation S, Rule 701 and Rule 144 promulgated by the United
States Securities and Exchange Commission. The shares were issued for services
at the market value of the shares at prices from $0.38 to $1.75 per shares.

During the three months ended September 30, 2000, the Company issued
150,000 shares at $0.40 each pursuant to Regulation S under the Securities Act
of 1993, as amended (the "Securities Act"). The shares were issued for the
acquisition of an additional interest in a Sino Foreign joint venture held by
the Company's wholly owned subsidiary Torchmail.com Inc.

During the three months ended September 30, 2000, the Company issued
1,455,000 shares pursuant to Regulation S, Rule 701 and Rule 144 promulgated by
the United States Securities and Exchange Commission. The shares were issued for
services at the market value of the shares at prices from $0.40 to $0.50 per
shares.

During the three months ended September 30, 2000 the Company granted
warrants for the acquisition of up to 150,000 shares at $1.00 each up to May 1,
2003, 2,500,000 shares at $0.40 each up to September 1, 2002 and 500,000 shares
at $0.25 each up to September 1, 2003.

ADDITIONAL INFORMATION

We have filed with the Securities and Exchange Commission annual, quarterly
and special reports, proxy statements, and a Registration Statement (of which
this prospectus is a part) under the Securities Act of 1933, as amended,
relating to the common stock we are offering. This prospectus does not contain
all the information that is in the Registration Statement. Portions of the
Registration Statement have been omitted as allowed by the rules and regulations
of the Securities and Exchange Commission. Statements in this prospectus that
summarize documents are not necessarily complete, and in each case you should
refer to the copy of the document filed as an exhibit to the Registration
Statement.

For further information regarding our company and our common stock, please
see the Registration Statement and its exhibits and schedules. You may examine
the Registration Statement free of charge at the public reference facilities
maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the regional offices of the Commission at
Suite 1400, 500 West Madison Street, Chicago, Illinois 60661 and 7 World Trade
Center, Thirteenth Floor, New York, New York 10048. Copies of the Registration
Statement may also be obtained from the public reference facilities of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, or by calling the
Commission at 1-800-SEC-0330, at prescribed rates. In addition, the Registration
Statement and other public filings can be obtained from the Commission's Web
site at http://www.sec.gov. We intend to furnish our stockholders written annual
reports containing audited financial statements certified by an independent
public accounting firm.

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of New York, State of New
York, on November , 2000.

CATHAYONLINE INC.
-----------------------------
(Registrant)

/s/ Brian W. Ransom, Chairman
-------------------------------
By (Signature and Title)

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/ Brian W. Ransom Chairman of the Board, November 22, 2000
President and Chief
Executive Officer

/s/ Glenn R. Ohlhauser Chief Financial Officer November 22, 2000

/s/ Peter S. Lau Director November 22, 2000

/s/ Owen L. Li Director November 22, 2000

/s/ Kenneth M. Levy Director November 22, 2000

<PAGE>

INDEX TO FINANCIAL STATEMENTS

Page

Independent Auditor's Report...............................................F - 1

Consolidated Balance Sheets
September 30, 2000, (Unaudited),June 30, 2000 and June 30, 1999............F - 2

Consolidated Statements of Operations for the
Three months ended September 30, 2000 and 1999 (Unaudited) and
for the years ended June 30, 2000, 1999 and 1998...........................F - 4

Consolidated Statement of Stockholders' Equity
Since September 20, 1995 (Inception) to September 30, 2000.................F - 6

Consolidated Statements of Cash Flows for the
Three months ended September 30, 2000 and 1999 (Unaudited) and
For the year ended June 30, 2000, 1999 and 1999............................F - 8

Notes to Consolidated Financial Statements...............................,F - 11

<PAGE>

INDEPENDENT AUDITOR'S REPORT

CATHAYONLINE, INC. AND SUBSIDIARIES
(A Development Stage Company)

We have audited the accompanying consolidated balance sheets of
CathayOnline, Inc. and subsidiaries (a development stage company) as of June 30,
2000 and 1999, and the related consolidated statements of operations, and cash
flows for the three years ended June 30, 2000, 1999 and 1998, and the
consolidated statement of stockholders' equity since September 20, 1995
(inception) to June 30, 2000. 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 audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide 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 CathayOnline, Inc.
and subsidiaries (a development stage company) as of June 30, 2000 and 1999, and
the results of its operations and its cash flows for the three years ended June
30, 2000, 1999 and 1998, in conformity with generally accepted accounting
principles.

Respectfully submitted

/s/ Robison, Hill & Co.
----------------------------
Certified Public Accountants

Salt Lake City, Utah
September 27, 2000

F-1
<PAGE>

CATHAYONLINE, INC. AND SUBSIDIARIES
(A Development Stage Company)
BALANCE SHEETS
.........

Unaudited
September 30, June 30, June 30,
2000 2000 1999
------------ ------------ ---------
ASSETS
Current Assets:
Cash & Cash Equivalents ........... $ 140,480 $ 786,290 $ 164,982
Restricted Cash ................... 82,497 82,497 6,920
Accounts receivable ............... 156,188 -- --
Advances .......................... 415,608 22,122 --
Prepaid expenses & Deposits ....... 167,841 325,387 --
------------ ------------ ---------

Total Current Assets ............ 962,614 1,216,296 171,902
------------ ------------ ---------

Fixed Assets:
Office Equipment .................. 155,670 133,753 3,680
Computer Equipment ................ 1,383,438 1,381,304 --
Furniture & Fixtures .............. 156,425 168,563 --
Leasehold Improvements ............ 268,246 229,925 --
------------ ------------ ---------
1,963,779 1,913,545 3,680
Less Accumulated Depreciation ........ (418,099) (321,126) (64)
------------ ------------ ---------

Net Fixed Assets ................ 1,545,680 1,592,419 3,616
------------ ------------ ---------

Other Assets:
Intangible Assets ................. 144,943 84,962 --
Condominium ....................... 230,476 230,476 --
Available-for-sale Investments .... 10,500,000 7,000,000 --
Investments in Subsidiaries ....... -- -- 204,546
------------ ------------ ---------

Total Other Assets .............. 10,875,419 7,315,438 204,546
------------ ------------ ---------

Total Assets: ........................ $ 13,383,713 $ 10,124,153 $ 380,064
============ ============ =========

F-2
<PAGE>
CATHAYONLINE, INC. AND SUBSIDIARIES
(A Development Stage Company)
BALANCE SHEETS
(Continued)

Unaudited
September 30, June 30, June 30,
2000 2000 1999
------------ ------------ ------------
<S> <C> <C> <C>
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable & Accrued Expenses . $ 1,618,435 $ 1,156,390 $ 79,726
Loans Payable ....................... 465,000 -- --
------------ ------------ ------------

Total Liabilities ................. 2,083,435 1,156,390 79,726
------------ ------------ ------------

Stockholders' Equity:
Common Stock, Par value $.001
Authorized 50,000,000 shares,
Issued 30,584,201, 28,979,201, and
11,752,700 shares ................ 30,584 28,979 11,753
Paid-In Capital ..................... 11,995,332 11,337,437 1,043,373
Stock Subscribed Receivable ......... (408,750) (408,750) (429,250)
Accumulated Unrealized Gains/Losses
On Investments ................... 3,500,000 -- --
Deficit Accumulated During the
Development Stage .................. (3,816,888) (1,989,903) (325,538)
------------ ------------ ------------

Total Stockholders' Equity ........ 11,300,278 8,967,763 300,338
------------ ------------ ------------

Total Liabilities and
Stockholders' Equity ............ $ 13,383,713 $ 10,124,153 $ 380,064
============ ============ ============
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-3

<PAGE>

CATHAYONLINE, INC. AND SUBSIDIARIES
(A Development Stage Company)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Cumulative
since
inception
of
Unaudited development
Three months ended September 30, Years ended June 30
------------------------ ----------------------------------
2000 1999 2000 1999 1998 stage
----------- ---------- ---------- ---------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
Revenues: ....................... $ 156,188 $ -- -- -- -- $ 156,188

Cost of revenues ................ 28,413 28,413
----------- ---------- ---------- ---------- -------- -----------
Gross margin .................... 127,775 -- -- -- -- 127,775
Expenses:
General & Administrative ..... 1,952,156 101,773 4,876,905 322,038 2,353 7,154,599
----------- ---------- ---------- ---------- -------- -----------

Net Operating Loss ......... (1,824,381) (101,773) (4,876,905) (322,038) (2,353) (7,026,824)
----------- ---------- ---------- ---------- -------- -----------

Other Income (Expense)
Interest, Net ................ (2,604) -- (1,791) -- -- (4,395)
Gain on Sale of Assets ....... -- -- 5,238,394 -- -- 5,238,394
Loss on Abandonment of Assets -- -- (94,063) -- -- (94,063)
Loss on Write Down of Goodwill -- (1,325,000) (1,930,000) -- -- (1,930,000)
----------- ---------- ---------- ---------- -------- -----------

Net Other Income (Expense) . (2,604) (1,325,000) 3,212,540 -- -- 3,209,936
----------- ---------- ---------- ---------- -------- -----------

Net Loss Before Taxes ...... (1,826,985) (1,426,773) (1,664,365) (322,038) (2,353) (3,816,888)
Income Taxes .................... -- -- -- -- -- --
</TABLE>

F-4
<PAGE>

CATHAYONLINE, INC. AND SUBSIDIARIES
(A Development Stage Company)
STATEMENTS OF OPERATIONS
(continued)

<TABLE>
<CAPTION>
Cumulative
since
inception
of
Unaudited development
Three months ended September 30, Years ended June 30,
------------------------ ---------------------------------
2000 1999 2000 1999 1998 stage
----------- ---------- ----------- --------- -------

<S> <C> <C> <C> <C> <C> <C>
Net Loss ................ $(1,826,985) $(1,426,773) $(1,664,365) $(322,038) $(2,353) $(3,816,888)
=========== =========== =========== ========= ======= ===========

Basic & Diluted loss per share $ (0.06) $ (0.10) $ (0.08) $ (0.06) $ --
=========== =========== =========== ========= =======

</TABLE>

The accompanying notes are an integral part of these financial statements

F-5
<PAGE>

CATHAYONLINE, INC. AND SUBSIDIARIES
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
SINCE SEPTEMBER 20, 1995 (INCEPTION) TO SEPTEMBER 30, 2000

<TABLE>
<CAPTION>
Accumulated Deficit
Unrealized Accumulated
Gains (Loss) During
Stock on Compre- Development
Common Stock Paid-In Subscribed hensive
Shares Par Value Capital Receivable Investments Income Stage
--------- ------- ------- -------- ------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
Issuance of Stock at formation to
incorporators for services rendered .......... 9,999 $ 200 $ -- -- $ -- -- $ --
Sale of common stock ......................... 15,000 3,000 -- -- -- -- --
Effect of 44 for 1 stock split 1,074,957 (2,100) 2,100 -- -- -- --
Net Loss for the period
-- -- -- -- -- -- (507)
--------- ------- ------- -------- ------ ------ -------
Balances at June 30, 1996 .................... 1,099,956 1,100 2,100 -- -- -- (507)
Net loss for the year ........................ -- -- -- -- -- -- (640)
--------- ------- ------- -------- ------ ------ -------
Balance at June 30, 1997 ..................... 1,099,956 1,100 2,100 -- -- -- (1,147)
January 5, 1998 Issuance of Stock
for services and payment of
accounts payable 1,539,912 1,540 (1,240) -- -- -- --
Net Loss for the year ........................ -- -- -- -- -- -- (2,353)
--------- ------- ------- -------- ------ ------ -------

Balance at June 30, 1998 ..................... 2,639,868 2,640 860 -- -- -- (3,500)

Cancellation of Officer Shares ............... (1,539,912) (1,540) 1,540 -- -- -- --
Retroactive adjustment for 2.273
to 1 stock split August 27, 1998 .......... 1,400,244 1,400 (1,400) -- -- -- --
--------- ------- ------- -------- ------ ------ -------
Restated balance June 30, 1998 ............... 2,500,200 2,500 1,000 -- -- -- (3,500)

Issuance of stock for cash ................... 5,785,000 5,785 52,065 -- -- -- --
</TABLE>

F-6
<PAGE>

CATHAYONLINE, INC. AND SUBSIDIARIES
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
SINCE SEPTEMBER 20, 1995 (INCEPTION) TO SEPTEMBER 30, 2000
(continued)
<TABLE>
<CAPTION>

Accumulated Deficit
Unrealized Accumulated
Stock Gains (Loss) During
Common Stock Paid-In Subscribed on Comprehensive on
Shares Par Value Capital Receivable Investments Income Stage
---------- ------ ---------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Capital contributed by shareholder ...................... -- -- 2,526 -- -- -- --
Issuance of stock for payment of accounts payable ....... 202,500 203 (203) -- -- -- --
Issuance of stock for payment of accounts payable ....... 475,000 475 118,275 -- -- -- --
Issuance of Stock for cash .............................. 700,000 700 349,300 -- -- -- --
Issuance of Stock for cash ............................. 2,090,000 2,090 520,410 (429,250) -- -- --
Net Loss ................................................ -- -- -- -- -- -- (322,038)
---------- ------ ---------- ------- ------- ------- --------
Balance at June 30, 1999 ................................ 11,752,700 11,753 1,043,373 (429,250) -- -- (325,538)
Issuance of Stock to acquire Torchmail.com Ltd. ......... 2,500,000 2,500 1,322,500 -- -- -- --
Issuance of Stock to acquire Lazzara Financial Asset . 250,000 250 344,750 -- -- -- --
Issuance of Stock to acquire CMD Capital Ltd. ......... 775,000 775 1,068,725 -- -- -- --
Issuance of Stock for cash .............................. 2,500,000 2,500 935,000 (408,750) -- -- --
Issuance of Stock for cash, net of issue costs . 9,751,407 9,752 5,454,637 -- -- -- --
Issuance of Stock on cashless exercise of warrant ....... 213,793 213 74,786 -- -- -- --
Issuance of Stock on exercise of warrants ............... 100,000 100 34,900 -- -- -- --
Issuance of Stock for services .......................... 1,136,301 1,136 1,058,766 -- -- -- --
Collection of Stock subscribed receivable ............... -- -- -- 429,250 -- -- --
Net Loss for the year ................................... -- -- -- -- -- -- (1,664,365)
---------- ------ ---------- ------- ------- ------- --------
Balance at June 30, 2000 ................................ 28,979,201 $28,979 $ 11,337,437 $(408,750) -- -- $(1,989,903)
Issue of stock for services .......................... 1,455,000 1,455 598,045 -- -- -- --
Issue of Stock to acquire Torchnet ................... 150,000 150 59,850 -- -- -- --
Unrealized gain on investments .......................... -- -- -- -- 3,500,000 3,500,000 --
Net loss for the period .............................. -- -- -- -- (1,826,985) (1,826,985)
---------- ------ ---------- ------- ------- ------- --------
Comprehensive IncomeSeptember 30, 2000 (Unaudited) ...... -- -- -- -- -- $1,673,015 --
===========

Balance at September 30, 2000 (Unaudited) ............... $30,584,201 $30,584 11,995,332 $(408,750) $3,500,000 $(3,816,888)
=========== ======= ========== ========= ========== ===========
</TABLE>

F-7
<PAGE>

CATHAYONLINE, INC. AND SUBSIDIARIES
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>

Cumulative
Since
Inception
of
Three months ended September development
30, Years ended June 30, stage
------------------------ ------------------------------
2000 1999 2000 1999 1998
----------- ----------- ---------- -------- ------

CASH FLOWS FROM OPERATING
ACTIVITIES:
<S> <C> <C> <C> <C> <C> <C>
Net Loss .................................... (1,826,985) (1,426,773) (1,664,365) (322,038) (2,353) $(3,816,888)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization ............ 96,973 395 321,062 64 2,053 421,299
Issuance of common stock for expenses .... 599,500 60,000 1,114,339 140,350 300 1,854,489
Gain on Sale of Assets ................... -- -- (5,238,394) -- -- (5,238,394)
Loss on Abandonment of Assets ............ -- -- 94,063 -- -- 94,063
Loss on Write Down of Goodwill ........... -- 1,325,000 1,930,000 -- -- 1,930,000
Change in operating assets and liabilities:
Restricted cash .......................... -- -- (75,577) (6,920) -- (82,497)
Accounts receivable ...................... (156,188) -- (156,188)
Advances ................................. (393,486) (2,500) (22,122) -- -- (415,608)
Prepaid Expenses & Deposits .............. 157,546 (79,666) (325,387) -- -- (167,841)
Accounts Payable & Accrued Expense ....... 462,064 14,414 1,062,844 79,726 -- 1,601,634
---------- --------- ---------- -------- ------ -----------

Net Cash Used in Operating Activities ....... (1,060,576) (109,130) (2,803,537) (108,818) -- (3,975,931)
---------- --------- ---------- -------- ------ -----------
</TABLE>

F-8
<PAGE>

CATHAYONLINE, INC. AND SUBSIDIARIES
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
(continued)
<TABLE>
<CAPTION>

Cumulative
Since
inception
Unaudited of
Three months ended September Years ended June 30, development
30,
------------------ ---------------------------- ---------------
2000 1999 2000 1999 1998 stage
------- -------- ---------- -------- ---- ----------
CASH FLOWS FROM INVESTING
ACTIVITIES:
<S> <C> <C> <C> <C> <C> <C>
Purchase of Equipment ................ (50,234) (8451) (2,234,584) (3,680) -- (2,288,498)
Purchase of Intangible Assets ........ -- -- (60,400) -- -- (60,400)
Cash Payments for CMD ................ -- -- (692,106) -- -- (692,106)
Cash Payment for Goodwill ............ -- -- (250,000) -- -- (250,000)
Investment in Subsidiaries ........... -- (433,441) 204,546 (204,546) -- --
------- -------- ---------- -------- ---- ----------

Net Cash Used in Investing Activities ... (50,234) (441,892) (3,032,544) (208,226) -- (3,291,004)
------- -------- ---------- -------- ---- ----------

ACTIVITIES:
Proceeds from issuance of common stock .. -- 468,750 6,457,389 479,500 -- 6,939,889
Stock subscribed receivable ............. -- 194,875 -- -- -- --
Capital contributed by shareholder ...... -- -- -- 2,526 -- 2,526
Loans payable ........................... 465,000 -- 465,000
------- ------- ---------- -------- ---- ----------
Net Cash Provided by Financing Activities 465,000 663,625 6,457,389 482,026 -- 7,407,122
------- ------- ---------- -------- ---- ----------
</TABLE>

F-9
<PAGE>

CATHAYONLINE, INC. AND SUBSIDIARIES
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
(continued)

<S> <C> <C> <C> <C> <C> <C>
Net (Decrease) Increase in Cash and Cash .......... (645,810) 112,603 621,308 164,982 -- 140,480
Equivalents
Cash and Cash Equivalents at Beginning of ......... 786,290 164,982 164,982 -- -- --
Period
--------- ---------- ---------- ---------- ------ ---------
Cash and Cash Equivalents at End of ............... $ 140,480 $ 277,585 $ 786,290 $164,982 $ -- $ 140,480
Period ========= ========== ========== ========== ====== =========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period
for:
Interest $ 1,680 $ -- $ 26,348 $ -- $ -- $ 28,028
Income Taxes $ -- $ -- $ -- $ -- $ -- $ --
SUPPLEMENTAL DISCLOSURE OF NON-
Common stock issued for Intangible Assets ......... $ 60,000 $ -- $ 20,562 $ -- $ -- $ 80,562
Common stock issued for Subsidiaries .............. $ -- $1,322,000 $2,739,500 $ -- $ -- $2,739,500
Subsidiaries
</TABLE>

The accompanying notes are an integral part of these financial statements.
F-10

<PAGE>

CATHAYONLINE, INC. AND SUBSIDIARIES
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2000, AND 1999
(References to September 30, 2000 are Unaudited)

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

This summary of accounting policies for CathayOnline Inc (formerly Kyocera
Management, Ltd.) is presented to assist in understanding the Company's
financial statements. The accounting policies conform to generally accepted
accounting principles and have been consistently applied in the preparation of
the financial statements. The accompanying unaudited consolidated financial
statements have been prepared in accordance with generally accepted accounting
principles for interim financial information and pursuant to the rules and
regulations of the Securities and Exchange Commission. In the opinion of
management, the unaudited condensed consolidated financial statements contain
all adjustments consisting only of normal recurring accruals considered
necessary to present fairly CathayOnline Inc.'s (the "Company") financial
position at September 30, 2000, the results of operations and cash flows for the
three months ended September 30, 2000. The results for the period ended
September 30, 2000 are not necessarily indicative of the results to be expected
for the entire fiscal year ending June 30, 2001.

Organization and Basis of Presentation

The Company was incorporated under the laws of the State of Nevada on
September 20, 1995 using the name of Kyocera Management, Ltd. The name was
changed to CathayOnline, Inc. on April 14, 1999. The Company ceased all
operating activities during the period from September 20, 1995 to January 6,1998
and was considered dormant. On January 6, 1998, the Company obtained a
Certificate of renewal from the State of Nevada. The Company as of June 30, 2000
and September 30, 2000 is in the development stage, and has not commenced
planned principal operations.

Principles of Consolidation

The consolidated financial statements for June 30, 2000 and the three
months ended September 30, 2000 include the accounts of CathayOnline, Inc. and
the following wholly owned subsidiaries:

* CathayOnline Technologies (Hong Kong) Ltd, a Hong Kong corporation
* CathayOnline (BVI) Ltd, a British Virgin Islands corporation
* Torchmail.com Inc, a Turks & Caicos, BWI corporation
* Sichuan CathayOnline Technologies Co. Ltd, a wholly owned foreign
enterprise corporation, PRC
* CathayOnline, Inc, a Canadian Corporation
* China Lottery (Hong Kong) Limited, a Hong Kong corporation
* Beijing CathayOnline Technologies Co. Ltd, a wholly owned foreign
enterprise, PRC

Nature of Business

Through its subsidiary companies and exclusive partnership and joint
venture arrangements with certain Chinese entities, the Company will be an
Internet Service Provider and provides web based email and advanced messaging
services for the Chinese speaking markets, principally in the areas of Sichuan
province, Beijing and Guangdong. During the year the Company has incurred
expenditures to build its required infrastructure and to complete various
strategic cooperation agreements for access to operating licenses and customer
base.

F-11
<PAGE>

CATHAYONLINE, INC. AND SUBSIDIARIES
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2000, 1999 AND 1998
(References to September 30, 2000 are Unaudited)
Continued)

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
--------------------------------------------------------------------------------

During the year ended June 30, 2000, through its wholly owned subsidiary
CathayOnline Technologies (Hong Kong) Ltd, the company acquired and operated ten
online lottery kiosks in Guangzhou, China. The kiosk and lottery operations were
to be transferred to China Lottery (Hong Kong) Limited (China Lottery) and the
Company had entered into an agreement to sell China Lottery to an unrelated
third party for $150,000. The sale was not completed and the Company abandoned
the lottery operations and during the year ended June 30, 2000, wrote off the
cost of the kiosks.

Cash and Cash Equivalents

For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with a maturity of three months or less
to be cash equivalents to the extent the funds are not being held for investment
purposes.

Marketable Securities

The Company's securities investments that are bought and held principally
for the purpose of selling them in the near term are classified as trading
securities. Trading securities are recorded at fair value on the balance sheet
in current assets, with the change in fair value during the period included in
earnings. Securities investment that the Company has the positive intent and
ability to hold to maturity are classified as held-to-maturity securities and
recorded at amortized cost in investment and other assets. Securities
investments not classified as either held-to-maturity or trading securities are
classified as available-for-sale securities. Available-for-sale-securities are
recorded at fair value as investments and other assets on the balance sheet,
with the change in fair value during the period excluded from earnings and
recorded net of tax as a component of other comprehensive income.

Pervasiveness of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

Translation of Foreign Currency

The Companies functional currencies include U.S. Dollars, Canadian Dollars
and Chinese Renminbi. All balance sheet accounts of foreign operations are
translated into U.S. dollars at the year-end rate of exchange and statement of
operations items are translated at the weighted average exchange rates for the
year. The resulting translation adjustments are made directly to a separate
component of the stockholders' equity. Certain foreign activities are considered
to be an extension of the U.S. operations, and the gain or loss resulting from
re-measuring these transactions into U.S. dollars is included in income. Gains
or losses from other foreign

F-12
<PAGE>

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
--------------------------------------------------------------------------------

currency transactions, such as those resulting from the settlement of foreign
receivables or payables, are included in the Statements of Operations.

Property and Equipment

Property and equipment are stated at cost. Depreciation and amortization is
provided for in amounts sufficient to relate the cost of depreciable assets to
operations over their estimated service lives, principally on a straight-line
basis as follows:

Office Equipment 3-5 years
Computer Equipment 3-5 years
Furniture & Fixtures 5-7 years
Leasehold Improvements 7-10 years

Upon sale or other disposition of property and equipment, the cost and
related accumulated depreciation or amortization are removed from the accounts
and any gain or loss is included in the determination of income or loss.

Expenditures for maintenance and repairs are charged to expense as
incurred. Major overhauls and betterments are capitalized and depreciated over
their useful lives.

Intangible assets are amortized over useful life of 5 to 10 years.

The Company has adopted the Financial Accounting Standards Board SFAS No.,
121, "Accounting for the Impairment of Long-lived Assets." SFAS No. 121
addresses the accounting for (i) impairment of long-lived assets, certain
identified intangibles and goodwill related to assets to be held and used, and
(ii) long-live lived assets and certain identifiable intangibles to be disposed
of. SFAS No. 121 requires that long-lived assets and certain identifiable
intangibles be held and used by an entity be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. If the sum of the expected future cash flows from the
used of the asset and its eventual disposition (un-discounted and without
interest charges) is less than the carrying amount of the asset, an impairment
loss is recognized.

F-13
<PAGE>
CATHAYONLINE, INC. AND SUBSIDIARIES
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2000, 1999 AND 1998
(References to September 30, 2000 are Unaudited)
Continued)

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
--------------------------------------------------------------------------------

Reclassifications

Certain reclassifications have been made in the 1999 financial statements
to conform with the 2000 presentation.

Loss per Share

The reconciliation's of the numerators and denominators of the basic loss
per share computations are as follows:

Per-Share
Income Shares Amount
------ ------ ------
(Numerator) (Denominator)

For the year ended June 30, 1998
Basic Loss per Share
Loss to common shareholders $ (2,353) 2,500,200 $ --
============ ============ ==========

For the year ended June 30, 1999
Basic loss per share
Loss to common shareholders $ (322,038) 5,748,248 $ (0.06)
============ ============ ==========

For the year ended June 30, 2000
Basic Loss per Share
Loss to common shareholders $ (1,664,365) 20,176,167 $ (0.08)
============ ============ ==========

For the three months ended September 30, 2000
(Unaudited)

Basic Loss per Share
Loss to common shareholders $ (1,826,985) 30,070,451 $ (0.06)
============ ============ ==========

For the three months ended September 30, 1999
(Unaudited)
Basic Loss per Share
Loss to common shareholders $ (1,426,773) 14,473,04 $ (0.10)
============ ============ ==========

The effect of outstanding common stock equivalents would be anti-dilutive
for each of the above periods and are thus not considered.

F-14
<PAGE>

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
--------------------------------------------------------------------------------

Concentration of Credit Risk

The Company has no significant off-balance-sheet concentrations of credit
risk such as foreign exchange contracts, options contracts or other foreign
hedging arrangements.

NOTE 2 - INVESTMENT IN MARKETABLE EQUITY SECURITIES

The Company's investments in marketable equity securities are held for an
indefinite period of time and are thus classified as
available-for-sale-securities. Unrealized holding gains on such securities are
added to stockholders' equity. The Company's acquired $7,000,000 in marketable
equity securities on June 30, 2000. As of September 30, 2000, based on the
closing price of these securities, there was an unrealized gain of $3,500,000.
Subsequent to September 30, 2000, the market price of these securities has
declined.

NOTE 3 - ACQUISITION OF SUBSIDIARIES

On July 2, 1999 the Company completed an Acquisition (the "Acquisition") in
which it acquired 100% of the issued and outstanding capital stock of
TorchMail.com Inc., a Turks & Caicos, BWI corporation in exchange for $10,000
and 2,500,000 shares of the Company's $.001 par value common stock, valued at
$0.53 per share comprising approximately 15% of the Company's issued and
outstanding common stock after giving effect to the Acquisition. Further, upon
the resale of 360,000 Seats (defined as a mailbox created within a Customer
Account for use of the Services by a User) the Company will issue an additional
2,500,000 shares, upon the resale of 500,000 Seats the Company will issue
1,250,000 shares and upon the resale of 750,000 Seats the Company will issue
1,250,000 shares. The transaction has been accounted for as a purchase. As at
the date of acquisition, Torchmail had not yet commenced operations and had no
assets or liabilities except for an email reseller agreement. The excess
purchase price paid of $1,335,000 over the net tangible assets acquired was
recorded as goodwill and has been written off. Ownership of Torchmail is held
through the Company's wholly owned subsidiary CathayOnline (BVI) Ltd.

On January 18, 2000 the Company acquired all of the issued and outstanding
shares of Lazzara Financial Asset Recovery Inc. (Lazzara) and executed a merger
agreement with Lazzara. Lazzara was registered under the Securities Exchange Act
of 1934 (the "Exchange Act") and was required to file reports under said
Exchange Act. The Company is the surviving entity under the merger agreement and
elected to succeed Lazzara's reporting requirements. Consideration for the
acquisition was the issue of 25,000 shares of Company valued at $1.38 per share,
paid to the existing shareholders of Lazzara, plus 225,000 shares valued at
$1.38 per share and $250,000 cash paid for services rendered in connection with
the merger. The transaction has been accounted for as a purchase. As at the date
of the acquisition and merger, Lazzara had no operations and no assets or
liabilities. The excess of total consideration paid of $595,000 over the net
tangible assets acquired was recorded as goodwill and has been written off.

F-15

<PAGE>

NOTE 3 - ACQUISITION OF SUBSIDIARIES (CONTINUED)

On April 1, 2000 the Company, through its wholly owned subsidiary,
CathayOnline Technologies (Hong Kong) Ltd, acquired 62.5% of the issued and
outstanding shares of CMD Capital Ltd (CMD), a Hong Kong company. Consideration
is $1,000,000 plus the issue of 2,000,000 shares of the Company to be paid as
follows:

- $500,000 and 1,000,000 shares within 30 days of executing the agreement
- $500,000 and 1,000,000 shares within six months upon
completion of certain transactions pursuant to underlying
agreements of CMD.

The transaction has been accounted for as a purchase. As at the date of
acquisition, CMD's only assets included 70% of the common stock of a Chinese
company, whose assets included 100% ownership of a website. Pursuant to
underlying agreements, CMD is required to provide funding of $3,000,000 for the
Chinese company for continued development of the website. Pursuant to another
underlying agreement CMD is required to provide $2,000,000 to be used to develop
a Hong Kong version of the website. As of June 30, 2000, the Company had paid
$558,600 and had issued 775,000 shares valued at $1,069,500. On June 30, 2000,
the Company sold all of its CMD shares to Cathay Bancorp.com Limited, a wholly
owned subsidiary of CathayOne, Inc. (formerly Premier Brands, Inc.), for an
agreed upon value of $10,500,000 which was paid by the receipt of 1,750,000
shares of CathayOne, Inc. which was valued for accounting purposes at the June
30, 2000 market value of $4.00 per share.

NOTE 4 - INCOME TAXES

As of June 30, 2000, the Company had a net operating loss carryforward for
income tax reporting purposes of approximately $1,990,000 that may be offset
against future taxable income through 2015. Current tax laws limit the amount of
loss available to be offset against future taxable income when a substantial
change in ownership occurs. Therefore, the amount available to offset future
taxable income may be limited. Accordingly, the potential tax benefits of the
loss carryforwards are offset by a valuation allowance of the same amount.

NOTE 5 - DEVELOPMENT STAGE COMPANY

The Company is in the development stage. The activities of the Company as
of June 30, 2000 have consisted primarily of identifying opportunities,
negotiating letters of understanding with potential partners, planning and
developing the operations, recruiting personnel, raising capital, and purchasing
assets. As is common with a development stage company, the Company has not
generated revenues from planned principal operations and has had recurring
losses during its development stage. During the three months ended September 30,
2000, the Company generated revenues. However, though the Company did receive
revenues during these three months, they are not from the Company's principal
operations. The Company still regards itself as a development stage company.

F-16

<PAGE>

NOTE 6 - COMMITMENTS

During the year ended June 30, 2000 the Company entered into an agreement
to lease its Vancouver office for a period ending April 30, 2005 at a monthly
rent cost of $6,818.

Effective July 1, 2000 the Company entered into an agreement to lease its
New York office for a period ending June 30, 2005 at a monthly rent cost of
$13,260.

During the year ended June 30, 2000 the Company entered into an agreement
to lease its Chengdu, Sichuan office for a period ending August 30, 2004 at a
monthly rent cost of $7,300.

During the year ended June 30, 2000 the Company entered into an agreement
to lease its Beijing office for a period ending April 30, 2002 at a monthly rent
cost of $6,311. The agreement contains a right for an annual renewal up to an
additional five years.

Subsequent to June 30, 2000 the Company subleased additional premises in
New York for a period ending December 31, 2001 at a monthly rent cost of $4,750.

It is expected that in the normal course of business, leases that expire
will be renewed or replaced by leases on other properties.

The minimum future lease payments under these leases for the next five
years are:

Year Ended June 30,
----------------------------------
2001 $461,268
2002 420,146
2003 328,536
2004 328,536
2005 248,324
------------------
Total minimum future lease payments $1,786,810
==================

F-17
<PAGE>

NOTE 7 - COMMON STOCK TRANSACTIONS

The Company was initially incorporated to allow for the issuance of up to
25,000 shares of no par value common stock. On January 5, 1998, the Company
approved the amendment of its Articles of Incorporation to allow for the
issuance of up to 50,000,000 shares of $0.001 par value common stock. The
Amended Articles of Incorporation were filed with the State of Nevada on April
20, 1998. All amounts presented in the accompanying financial statements reflect
the effect of this change in the par value of the Company's stock as of the
first day of the first period presented.

On January 5, 1998, the Company's Board of Directors approved a 44 for 1
forward stock split on its issued and outstanding common stock. All issued and
outstanding share and per share amounts in the accompanying financial statements
reflect the effect of this stock split as of the first day of the first period
presented.

At inception, the Company issued approximately 9,999 shares of common stock
(439,956 post split shares) to its officers and directors for services performed
and payments made on the Company's behalf during its formation. This transaction
was valued at approximately $0.02 per share or an aggregate approximate $200.

During 1996, to provide initial working capital, the Company completed a
private placement sale of an aggregate of approximately 15,000 shares of common
stock (660,000 post split shares) at approximately $0.20 per share. These sales
generated approximately $3,000 in proceeds to the Company, which were primarily
used to pay organizational expenses.

On January 5, 1998, prior to the stock split, the Company issued
approximately 34,998 shares of common stock (1,539,912 post split shares) to
officers and directors of the Company for management services rendered to the
Company. This transaction was valued at approximately $300, which approximated
the fair value of the services rendered to the Company. On August 26, 1998 the
Officers surrendered these shares to the Company for cancellation.

On August 27, 1998 the Board of Directors authorized 2.273 to 1 forward
stock split on its issued and outstanding common stock. All references in the
accompanying financial statements to the number of common shares and per-share
amounts for 1998 and 1997 have been restated to reflect the stock split.

During the year ended June 30, 1999 the Company issued 5,785,000 shares
pursuant to Rule 504 of Regulation D promulgated by the United States Securities
and Exchange Commission. 3,625,000 shares were issued for cash at $0.01 per
share and 2,160,000 shares were issued for cash.

During the year ended June 30, 1999 the Company completed a private
placement sale of an aggregate of 202,500 common shares being issued for
payments made on the Company's behalf.

During the year ended June 30, 1999 the Company completed a private
placement sale of an aggregate of 475,000 shares of common stock for payments
made on the Company's behalf.

F-18

<PAGE>

NOTE 7 - COMMON STOCK TRANSACTIONS (Continued)

During the year ended June 30, 1999 the Company issued 700,000 shares at
$0.50 per share and 2,090,000 shares at $0.25 per share pursuant to Regulation S
promulgated by the United States Securities and Exchange Commission. The shares
were issued for cash.

During the year ended June 30, 2000 the Company issued 2,500,000 shares
pursuant to Regulation S promulgated by the United States Securities and
Exchange Commission. The shares were issued for the acquisition of Torchmail.com
Ltd at $0.53 per share.

During the year ended June 30, 2000 the Company issued 213,793 shares
pursuant to Regulation S promulgated by the United States Securities and
Exchange Commission. The shares were issued for a cashless exercise of warrants
at $0.35 per share.

During the year ended June 30, 2000 the Company issued 100,000 shares
pursuant to Regulation S promulgated by the United States Securities and
Exchange Commission. The shares were issued for cash on the exercise of warrants
at $0.35 per share.

During the year ended June 30, 2000 the Company issued 250,000 shares
pursuant to Rule 701 promulgated by the United States Securities and Exchange
Commission. The shares were issued for the acquisition and merger of Lazzara
Financial Asset Recovery Inc. at $1.38 per share.

During the year ended June 30, 2000 the Company issued 775,000 shares
pursuant to Rule 701 promulgated by the United States Securities and Exchange
Commission. The shares were issued for the acquisition of CMD Capital Ltd. at
$1.38 per share.

During the year ended June 30, 2000 the Company issued 9,751,407 shares
pursuant to Regulation S promulgated by the United States Securities and
Exchange Commission. The shares were issued for cash and at $0.70 per share.

During the year ended June 30, 2000 the Company issued 1,136,301 shares
pursuant to Regulation S, Rule 701 and Rule 144 promulgated by the United States
Securities and Exchange Commission. The shares were issued for services at the
market value of the shares at prices from $0.38 to $1.75 per shares.

During the three months ended September 30, 2000 the Company issued
1,455,000 shares pursuant to Regulation S and Rule 144 promulgated by the United
States Securities and Exchange Commission. The shares were issued for services
at the market value of the shares at prices from $0.40 to $0.50 per share.

F-19

<PAGE>

NOTE 7 - COMMON STOCK TRANSACTIONS (Continued)

During the three months ended September 30, 2000 the Company issued 150,000
shares pursuant to Regulation S promulgated by the United States Securities and
Exchange Commission. The shares were issued to acquire an additional interest in
Torchnet, a joint venture entered into by the Company's wholly owned subsidiary,
Torchmail.com Ltd. The shares were issued at $0.40 per share.

NOTE 8 - STOCK OPTIONS AND WARRANTS

Employee and Consultants Warrants: The Company has issued to employees and
consultants (or their designees) in consideration for services rendered warrants
to purchase shares of the Company's common stock. These warrants provide for
cashless exercise by the holders. These warrants are not redeemable. Details of
these warrants are as follows:
<TABLE>
<CAPTION>

Granted Expiry Amount Price Exercised Canceled
------- ------ ------ ----- --------- --------
<S> <C> <C> <C> <C> <C>
March 9, 1999 March 9, 2002 300,000 $0.25 213,793 86,207
March 31, 1999 March 31, 2002 1,000,000 $0.25 475,000 525,006
October 26, 1999 October 26, 2001 21,700,000 $0.33 - -
March 1, 2000 March 1, 2002 25,000 per quarter $1.50 - -
March 15, 2000 March 15, 2002 10,000 per month $1.50 - -
April 1, 2000 April 1, 2002 25,000 per month $1.50 - -
June 1, 2000 June 1, 2003 50,000 $1.00 - -
May 1, 2000 May 1, 2002 20,000 $1.30 - -
June 1, 2000 June 1, 2003 85,714 $0.70 - -
May 27, 1999 May 27, 2002 415,000 $0.25 - -
February 1, 2000 January 31, 2001 10,000 per month $1.00 - -
February 3, 2000 February 3, 2005 2,389,100 $0.70 - -
June 1, 2000 June 1, 2002 2,000,000 $1.00 - -
June 1, 2000 June 1, 2002 1,000,000 $1.10 - -
June 1, 2000 June 1, 2002 1,000,000 $1.60 - -
June 1, 2000 June 1, 2002 800,000 $3.00 - -
September 1, 2000 May 1, 2003 150,000 $1.00 - -
September 1, 2000 September 1, 2002 2,500,000 $0.40 - -
September 1, 2000 September 1, 2003 500,000 $0.25 - -
</TABLE>

During April 1999, the Company issued an aggregate of 700,000 common stock
purchase warrants to seven investors, including 50,000 warrants to our
President. These warrants are exercisable for a period of two years from the
date of issuance at an exercise price of $.60, if exercised during the first
year after issuance, and $.70 if exercised in the second year after issuance.
Theses warrants are not redeemable. As of the date hereof, none of these
warrants have been exercised. During June 1999, the Company issued an aggregate
of

F-20

<PAGE>

NOTE 8 - STOCK OPTIONS AND WARRANTS (CONTINUED)

2,090,000 common stock purchase warrants to thirteen investors. These warrants
are exercisable for a period of two years from the date of issuance at an
exercise price of $0.35 per share. These warrants are not redeemable. As of the
date hereof, 100,000 warrants have been exercised.

During February, March and April of 2000, the Company sold and issued
9,751,407 redeemable Common Stock purchase warrants to purchase a like number of
shares of Common Stock. Each such warrant entitles the holder to purchase one
share of Common Stock, subject to adjustment in the event of any stock dividend,
stock split, subdivision or combination, or any reclassification of the
outstanding shares of Common Stock at any time after issuance until the
expiration of these warrants, a date two years after the date upon which the
underlying shares of Common Stock are registered for resale under the Securities
Act of 1933, at a price of $0.77 per share. We may redeem these warrants at a
price of US $0.10 per warrant commencing one year after the effective date of
the registration statement under the Securities Act of 1933 covering the
underlying Common Stock provided that (i) a registration statement covering the
underlying common stock is then effective and (ii) the average closing bid price
per share of Common Stock for the thirty (30) day period ending five (5) days
prior to the date of the redemption notice of the Warrants is at least $1.05 per
share. The Company also granted an additional 250,000 common stock purchase
warrants, having the same terms as noted above, in consideration for bridge
financing provided prior to the completion of a private placement.

All options and warrants have been granted at exercise prices greater than the
market value on the date of granting. All options vest 100% at date of grant.

2000 1999 1998
----------- ---------- ------------
<S> <C> <C> <C>
Options outstanding, beginning of year ................ 3,893,793 -- --
Granted ............................................. 38,537,428 4,505,000 --
Canceled ............................................ -- (611,207) --
Exercised ........................................... (100,000) -- --
----------- ---------- ------------

Options and warrants outstanding, end of year ......... 42,331,221 3,893,793 --
=========== ========== ============

Price for options and warrants outstanding, end of year $0.25 - $3.00 $0.25 - 0.70

Options and warrants granted during the three months .. 3,310,000 --
ended September 30, 2000

September

Option and warrant price granted subsequent to year end $0.25 - $1.00 $0.33 - .847

</TABLE>
F-21

<PAGE>

NOTE 9 - RELATED PARTY TRANSACTIONS

During the year ended June 30, 2000 a director of the company was paid
$60,000 pursuant to an employment agreement and was issued 175,000 shares at
$1.38 per share for services rendered.

During the year ended June 30, 2000 a director of the Company was paid
$36,000 and issued 27,000 shares valued at $31,500 pursuant to a consulting
agreement. An additional 125,000 shares were issued at $1.38 per share for other
services rendered.

During the year ended June 30, 2000 a director of the Company was paid
$78,000 and issued 32,284 shares pursuant for a management services agreement.
An additional 120,000 shares at $0.50 and 50,000 shares at $1.38 per share were
issued for other services rendered.

As discussed in note 3, the Company sold a subsidiary to another public
company having directors in common.

During the year ended June 30, 2000, a private company controlled by a
relative of a director, was paid $156,750 for consulting services. During the
year this private company loaned the Company $790,000 which was repaid. The
repayment included interest of $13,857. Subsequent to June 30, 2000 as
additional consideration for the loan, the Company granted the private company
warrants to acquire up to 500,000 shares at $0.25 per share exercisable up to
September 1, 2003. This relative of a director also occupies premises, which
were leased by the Company subsequent to June 30, 2000 at a monthly rent cost of
$4,750.

During the three months ended September 30, 2000, transactions with directors
and officers were as follows:

- Salaries of $30,000 pursuant to an employment agreement.
- Salaries of $15,180 plus the issue of 50,000 shares. The
shares were valued at their market value of $17,200 and issued
after September 30, 2000.
- Salaries of $30,000 pursuant to a management agreement. An amount
of $10,500 included in accounts payable is to be paid by the issue
of 37,923 shares.
- Consulting fees of $12,000 plus 9,000 shares valued at $2,814. The
shares have not yet been issued.

During the three months ended September 30, 2000, a private company
controlled by a relative of a director incurred consulting fees of $14,000.
During the three months ended September 30, 2000, this private company loaned
the Company $465,000. The amount, plus additional amounts received after
September 30, 2000 bear interest at 12% per annum. During the three months ended
September 30, 2000, the Company also paid $8,550 in rent for an apartment
occupied by the relative.

During the three months ended September 30, 2000 the Company had
revenues of $156,888 from another public company having directors in common. As
at September 30, 2000, $156,888 in accounts receivable and $364,707 in advances
were due from this company.

NOTE 10 - SUBSEQUENT EVENTS

Subsequent to September 30, 2000 the Company issued 50,000 shares for
accrued salaries of $17,200 included in accrued expenses at September 30, 2000.

F-22
<PAGE>

EXHIBITS

The following Exhibits are incorporated herein by reference or are filed
with this report as indicated below.

INDEX TO EXHIBITS

EXHIBIT
NO. DESCRIPTION
------- -------------------------

2.1 Share Purchase Agreement dated as of June 30, 2000 among CathayOnline
Technologies (Hong Kong) Limited, SNet Communications (HK) Limited,
Ting Kan Non, CMD Capital Limited, CathayBancorp.com, Limited and
Premier Brands, Inc. (Filed as Exhibit 2.1 to the Company's 10-K report
dated October 2, 2000 and incorporated herein by reference)

3.1 Articles of Incorporation of CathayOnline Inc. (Filed as Exhibit 3.1 to
Amendment No. 1 to the Company's Current Report on Form 8-K dated
January 18, 2000 and incorporated herein by reference.)

3.2 Amended and Restated By-Laws of CathayOnline Inc. (Filed as Exhibit 3.2
to the Company's 10-K report dated October 2, 2000 and incorporated
herein by reference)

4.1 Specimen Form of Common Stock Certificate. (Filed as Exhibit 4.1 to
Amendment No. 1 to the Company's Current Report on Form 8-K dated
January 18, 2000 and incorporated herein by reference.)

4.2 Form of Warrant issued to Employees and Consultants. (Filed as Exhibit
4.2 to Amendment No. 1 to the Company's Current Report on Form 8-K
dated January 18, 2000 and incorporated herein by reference.)

4.3 Form of Warrant issued in April 1999 Offering. (Filed as Exhibit 4.3 to
Amendment No. 1 to the Company's Current Report on Form 8-K dated
January 18, 2000 and incorporated herein by reference.)

4.4 Form of Warrant issued in June 1999 Offering. (Filed as Exhibit 4.4 to
Amendment No. 1 to the Company's Current Report on Form 8-K dated
January 18, 2000 and incorporated herein by reference.)

4.5 Form of Warrant Issued in Regulation S Offering. (Filed as Exhibit 4.5
to Amendment No. 1 to the Company's Current Report on Form 8-K dated
January 18, 2000 and incorporated herein by reference.)

10.1 Management and Consultancy Service Agreement with Sichuan Guo Xun XinXi
Chan Ye You Xian Gong Si. (Filed as Exhibit 10.1 to Amendment No. 1 to
the Company's Current Report on Form 8-K dated January 18, 2000 and
incorporated herein by reference.)

10.2 Agreement to Acquire TorchMail.com Inc. (Filed as Exhibit 10.2 to
Amendment No. 1 to the Company's Current Report on Form 8-K dated
January 18, 2000 and incorporated herein by reference.)

10.3 Employment Agreement between CathayOnline Inc. and Brian Ransom. (Filed
as Exhibit 10.6 to Amendment No. 1 to the Company's Current Report on
Form 8-K dated January 18, 2000 and incorporated herein by reference.)

10.4 Management Agreement with Owen Li. (Filed as Exhibit 10.7 to Amendment
No. 1 to the Company's Current Report on Form 8-K dated January 18,
2000 and incorporated herein by reference.)

10.5 Consulting Agreement with Peter Lau. (Filed as Exhibit 10.8 to
Amendment No. 1 to the Company's Current Report on Form 8-K dated
January 18, 2000 and incorporated herein by reference.)

10.6 Co-Branded Site Services Agreement dated as of October 27, 1999 between
register.com, inc. and TorchMail.com, Inc. (Filed As Exhibit 10.11 to
Amendment No. 1 to the Company's Current Report on Form 8-K dated
January 18, 2000 and incorporated herein by reference.)

10.7 Lease Agreement with Sichuan Dongfu Group Company. (Filed as Exhibit
10.12 to Amendment No. 1 to the Company's Current Report on Form 8-K
dated January 18, 2000 and incorporated herein by reference.)

10.8 Lease Agreement with Beijing Tongkai Development Co., Ltd. for Office
Space in Beijing, China. (Filed as Exhibit 10.14 to Amendment No. 1 to
the Company's Current Report on Form 8-K dated January 18, 2000 and
incorporated herein by reference.)

10.9 Cooperation Agreement dated as of May 11, 2000 among Wuyi University of
Jiangmen, CathayOnline Technologies (Hong Kong) Limited, and Sichuan
Guo Xun Xin Xi Chan Ye You Xian Gong Xi (Filed as Exhibit 10.9 to the
Company's 10-K report dated October 2, 2000 and incorporated herein by
reference)

10.10 Cooperation Agreement with the Second Institution of the Aerospace
Machine & Electronic Group (Filed as Exhibit 10.10 to the Company's
10-K report dated October 2, 2000 and incorporated herein by reference)

10.11 Cooperation Agreement dated February 16, 2000 between TorchMail.com,
Inc. and Digital Technology Co. Ltd. of National Library of China
(Filed as Exhibit 10.11 to the Company's 10-K report dated October 2,
2000 and incorporated herein by reference)

21.1 List of Subsidiaries (1)

23.1 Letter of Consent of Independent Auditor (2)

23.2 Letter of Consent of Independent Counsel (2)

-----------------------
(1) Filed with this report

(2) To be filed by amendments