NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2018
(Currency expressed in United States
Dollars (“US$”), except for number of shares)
(Unaudited)
NOTE
- 1 BASIS OF PRESENTATION
The
accompanying unaudited condensed consolidated financial statements have been prepared by management in accordance with both accounting
principles generally accepted in the United States (“GAAP”), and the instructions to Form 10-Q and Rule 10-01 of Regulation
S-X. Certain information and note disclosures normally included in audited financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to those rules and regulations, although the Company believes
that the disclosures made are adequate to make the information not misleading.
In
the opinion of management, the consolidated balance sheet as of December 31, 2017 which has been derived from audited financial
statements and these unaudited condensed consolidated financial statements reflect all normal and recurring adjustments considered
necessary to state fairly the results for the periods presented. The results for the period ended June 30, 2018 are not necessarily
indicative of the results to be expected for the entire fiscal year ending December 31, 2018 or for any future period.
These
unaudited condensed consolidated financial statements and notes thereto should be read in conjunction with the Management’s
Discussion and the audited financial statements and notes thereto included in the Annual Report on Form 10-K for the year ended
December 31, 2017.
NOTE
- 2 ORGANIZATION AND BUSINESS BACKGROUND
Wunong
Asia Pacific Company Limited (“Asia Pacific” or the “Company” or “we” or “us”
or “PADR”) was incorporated in Nevada on June 23, 2011.
Through
our wholly-owned subsidiary, Million Place, we are presently engaged in the development and management of commercial real estate
assets in cooperation with our joint venture partner, Xiushan Qin in Yulong Pump.
Our
current business activities are governed by a joint venture contract dated May 22, 2014 between Million Place and Xiushan Qin
pursuant to which states that we intend to jointly engage in the manufacture of industrial boilers, the provision of consultancy
services for the design of boiler systems, the manufacture of industrial water pumps and accessories, and the acquisition and
development of real estate. Pursuant to the joint venture contract, Million Place is solely responsible for all operations and
management of the joint venture and has the exclusive authority to enter into agreements on behalf of the joint venture. Million
Place will in turn receive compensation for services it provides to the joint venture and shall be entitled to a 49% share of
profit generated by the joint venture.
In
the meantime, our management has been analyzing the various alternatives available to ensure our survival and to preserve our
shareholder’s investment in our common shares. This analysis has included sourcing additional forms of financing to continue
our business objective of developing and managing Yulong Pump’s Wuchuan and Wulanteqianqi properties, or mergers and/or
acquisitions. At this stage in our operations, we believe either course is acceptable, as our operations have not been profitable
and our future prospects for our business are not good without further financing.
WUNONG ASIA PACIFIC
COMPANY LIMITED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2018
(Currency expressed in United States
Dollars (“US$”), except for number of shares)
(Unaudited)
Description
of subsidiary and associate
Name
|
|
Place of incorporation
and kind of
legal entity
|
|
Principal activities
and place of operation
|
|
Particulars of issued/
registered share
capital
|
|
Effective interest
held
|
|
|
|
|
|
|
|
|
|
|
|
Million Place Investments Limited
|
|
British Virgin Island
|
|
Investment holding
|
|
10,000 ordinary shares at US$1
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Inner Mongolia Yulong Pump Production Company Limited
|
|
The PRC, a limited liability company
|
|
Manufacture of water pump systems
|
|
RMB30,000,000
|
|
|
49
|
%
|
The
Company and its subsidiary are hereinafter referred to as (the “Company”).
NOTE
- 3 GOING CONCERN UNCERTAINTIES
The
accompanying condensed consolidated financial statements have been prepared using the going concern basis of accounting, which
contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.
From
its inception, the Company has suffered from continuous losses with an accumulated deficit of $5,263,119 as of June 30, 2018 and
experienced negative cash flows from operations. The continuation of the Company as a going concern through June 30, 2019 is dependent
upon the continued financial support from its stockholders. Management believes the Company is currently pursuing additional financing
for its operations. However, there is no assurance that the Company will be successful in securing sufficient funds to sustain
the operations.
These
and other factors raise substantial doubt about the Company’s ability to continue as a going concern. These condensed consolidated
financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification
of assets and liabilities that may result in the Company not being able to continue as a going concern.
NOTE
- 4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The
accompanying condensed consolidated financial statements reflect the application of certain significant accounting policies as
described in this note and elsewhere in the accompanying condensed consolidated financial statements and notes.
These
accompanying condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles
in the United States of America (“US GAAP”).
In
preparing these condensed consolidated financial statements, management makes estimates and assumptions that affect the reported
amounts of assets and liabilities in the balance sheets and revenues and expenses during the periods reported. Actual results
may differ from these estimates.
The
condensed consolidated financial statements include the accounts of Asia Pacific and its wholly-owned subsidiary which represent
substantially all of the Company’s consolidated assets and liabilities. All significant inter-company accounts and transactions
were eliminated in consolidation.
WUNONG ASIA PACIFIC
COMPANY LIMITED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2018
(Currency expressed in United States
Dollars (“US$”), except for number of shares)
(Unaudited)
|
●
|
Investment
in an associate
|
The
Company, through Million Place, has a 49% interest in Yulong Pump, a pump and boiler production company in Inner Mongolia since
December 1, 2012. We use the equity method to account for investments in Yulong Pump; accordingly, our results of operations include
the Company’s proportionate share of the net income or loss of Yulong Pump. Our judgment regarding the level of influence
over each equity method investment includes considering key factors such as our ownership interest, representation on the board
of directors, participation in policy-making decisions and material intercompany transactions. Since the investment loss exceeded
the carrying amount of an investment accounted for the equity method, the investment is reduced to zero as of June 30, 2018. The
Company will resume applying the equity method only after its share of that net income equals the share of net losses not recognized
during the period the equity method was suspended.
No
further investment loss from Yulong Pump was made for the three and six months ended June 30, 2018.
The
provision for income taxes is determined in accordance with the provisions of ASC Topic 740, “Income Taxes” (“ASC
740”). Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable
to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis.
Deferred tax assets and liabilities are measured using enacted income tax rates expected to apply to taxable income in the years
in which those temporary differences are expected to be recovered or settled. Any effect on deferred tax assets and liabilities
of a change in tax rates is recognized in income in the period that includes the enactment date.
ASC
740 prescribes a comprehensive model for how companies should recognize, measure, present, and disclose in their financial statements
uncertain tax positions taken or expected to be taken on a tax return. Under ASC 740, tax positions must initially be recognized
in the financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities.
Such tax positions must initially and subsequently be measured as the largest amount of tax benefit that has a greater than 50%
likelihood of being realized upon ultimate settlement with the tax authority assuming full knowledge of the position and relevant
facts.
For
the three and six months ended June 30, 2018 and 2017, the Company did not have any interest and penalties associated with tax
positions. As of June 30, 2018, the Company did not have any significant unrecognized uncertain tax positions.
The
Company calculates net loss per share in accordance with ASC Topic 260, “
Earnings per Share.
” Basic loss per
share is computed by dividing the net income by the weighted-average number of common shares outstanding during the period. Diluted
loss per share is computed similar to basic loss per share except that the denominator is increased to include the number of additional
common shares that would have been outstanding if the potential common stock equivalents had been issued and if the additional
common shares were dilutive.
There
were no potentially outstanding dilutive shares for the three and six months ended June 30, 2018 and 2017.
The
Company follows subtopic 850-10 of the FASB Accounting Standards Codification for the identification of related parties and disclosure
of related party transactions.
Pursuant
to section 850-10-20 the related parties include a) affiliates of the Company; b) entities for which investments in their
equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of section
825–10–15, to be accounted for by the equity method by the investing entity; c) trusts for the benefit of employees,
such as pension and Income-sharing trusts that are managed by or under the trusteeship of management; d) principal owners of the
Company; e) management of the Company; f) other parties with which the Company may deal if one party controls or can
significantly influence the management or operating policies of the other to an extent that one of the transacting parties might
be prevented from fully pursuing its own separate interests; and g) other parties that can significantly influence the management
or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can
significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing
its own separate interests.
WUNONG ASIA PACIFIC
COMPANY LIMITED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2018
(Currency expressed in United States
Dollars (“US$”), except for number of shares)
(Unaudited)
The
financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense
allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated
in the preparation of consolidated or combined financial statements is not required in those statements. The disclosures shall
include: a) the nature of the relationship(s) involved; b) a description of the transactions, including transactions to which
no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other
information deemed necessary to an understanding of the effects of the transactions on the financial statements; c) the dollar
amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the
method of establishing the terms from that used in the preceding period; and d) amount due from or to related parties as
of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.
|
●
|
Commitments
and contingencies
|
The
Company follows subtopic 450-20 of the FASB Accounting Standards Codification to report accounting for contingencies. Certain
conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company but which will
only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and
such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that
are pending against the Company or un-asserted claims that may result in such proceedings, the Company evaluates the perceived
merits of any legal proceedings or un-asserted claims as well as the perceived merits of the amount of relief sought or expected
to be sought therein.
If
the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability
can be estimated, then the estimated liability would be accrued in the Company’s financial statements. If the assessment
indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be
estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material,
would be disclosed.
Loss
contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would
be disclosed. Management does not believe, based upon information available at this time, that these matters will have a material
adverse effect on the Company’s consolidated financial position, results of operations or cash flows. However, there is
no assurance that such matters will not materially and adversely affect the Company’s business, financial position, and
results of operations or cash flows.
|
●
|
Fair
value of financial instruments
|
The
Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial
instruments and has adopted paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”)
to measure the fair value of its financial instruments. Paragraph 820-10-35-37 of the FASB Accounting Standards Codification establishes
a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value
measurements. To increase consistency and comparability in fair value measurements and related disclosures, paragraph 820-10-35-37
of the FASB Accounting Standards Codification establishes a fair value hierarchy which prioritizes the inputs to valuation techniques
used to measure fair value into three (3) broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted)
in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three (3) levels of
fair value hierarchy defined by paragraph 820-10-35-37 of the FASB Accounting Standards Codification are described below:
Level
1
|
Quoted
market prices available in active markets for identical assets or liabilities as of the reporting date.
|
|
|
Level
2
|
Pricing
inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable
as of the reporting date.
|
|
|
Level
3
|
Pricing
inputs that are generally observable inputs and not corroborated by market data.
|
WUNONG ASIA PACIFIC
COMPANY LIMITED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2018
(Currency expressed in United States
Dollars (“US$”), except for number of shares)
(Unaudited)
Financial
assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or
similar techniques and at least one significant model assumption or input is unobservable.
The
fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities
and the lowest priority to unobservable inputs. If the inputs used to measure the financial assets and liabilities fall within
more than one level described above, the categorization is based on the lowest level input that is significant to the fair value
measurement of the instrument.
The
carrying amounts of the Company’s financial assets and liabilities, such as cash and accounts payable and accrued expenses,
approximate their fair values because of the short maturity of these instruments.
Transactions
involving related parties cannot be presumed to be carried out on an arm's-length basis, as the requisite conditions of competitive,
free-market dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the
related party transactions were consummated on terms equivalent to those that prevail in arm's-length transactions unless such
representations can be substantiated.
|
●
|
Recent
accounting pronouncements
|
The
Company has reviewed all recently issued, but not yet effective, accounting pronouncements and does not believe the future adoption
of any such pronouncements may be expected to cause a material impact on its financial condition or the results of its operations.
NOTE
- 5 STOCKHOLDERS’ DEFICIT
As
of June 30, 2018 and December 31, 2017, the Company had a total of 39,300,000 shares of its common stock issued and outstanding,
respectively.
NOTE
- 6 INCOME TAXES
The
Company generated an operating loss for the three and six months ended June 30, 2018 and 2017 and did not record income tax expense.
United
States of America
Asia
Pacific is registered in the State of Nevada and is subject to United States of America tax law. No provision for income taxes
have been made as Asia Pacific has generated no taxable income for the periods presented. The Company’s policy is to recognize
accrued interest and penalties related to unrecognized tax benefits in its income tax provision. The Company has not accrued or
paid interest or penalties which were not material to its results of operations for the period presented.
As
of June 30, 2018, the Company incurred $5,261,556 of cumulative net operating losses which can be carried forward to offset future
taxable income. The net operating loss carryforwards begin to expire in 2038, if unutilized. The Company has provided for a full
valuation allowance against the deferred tax assets of $1,104,927 on the expected future tax benefits from the net operating loss
carryforwards as the management believes it is more likely than not that these assets will not be realized in the future.
During
the six months ended June 30, 2018, the valuation allowance increased by $16,585, primarily relating to net operating loss carryforwards
from the local tax regime.
WUNONG ASIA PACIFIC
COMPANY LIMITED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2018
(Currency expressed in United States
Dollars (“US$”), except for number of shares)
(Unaudited)
NOTE
- 7 RELATED PARTY TRANSACTIONS
As
of June 30, 2018, amounts due to related parties amounted $1,344,304. These payables are for providing management services to
the Company controlled by John Gong, the CEO and a shareholder, which are unsecured, interest-free and have no fixed terms of
repayment.
As
of June 30, 2018, advances from the Company’s chairman, chief executive officer and director, John Gong, amounted to $88,526.
The advances are payments made by John Gong to cover expenses related to its operations. The advance is non-interest bearing,
and payable on demand.
NOTE
- 8 COMMITMENTS AND CONTINGENCIES
As
of June 30, 2018, there were no commitments and contingencies involved.
NOTE
- 9 SUBSEQUENT EVENTS
In
accordance with ASC Topic 855, “
Subsequent Events
”, which establishes general standards of accounting for and
disclosure of events that occur after the balance sheet date but before financial statements are issued, the Company has evaluated
all events or transactions that occurred after June 30, 2018 up through the date was the Company issued the audited consolidated
financial statements. During the period, the Company did not have any material recognizable subsequent events.
On
July 12, 2018, the Company filed a certificate of amendment to its articles of incorporation with the Nevada Secretary of State
to change its name to “Wunong Asia Pacific Company Limited”.