Item 2. Management’s
Discussion and Analysis of Financial Condition and Result of Operations
FORWARD-LOOKING STATEMENTS
This quarterly report contains
forward-looking statements. These statements relate to future events or our future financial performance. In some cases, you can
identify forward-looking statements by terminology such as “could”, “may”, “will”, “should”,
“expect”, “plan”, “anticipate”, “believe”, “estimate”, “predict”,
“potential” or the negative of these terms or other comparable terminology. These statements are only predictions and
involve known and unknown risks, uncertainties and other factors that may cause our or our industry’s 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.
Although we believe that the
expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity,
performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not
intend to update any of the forward-looking statements to conform these statements to actual results.
Our financial statements are
stated in United States Dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles.
In this quarterly report, unless
otherwise specified, all dollar amounts are expressed in United States dollars and all references to “common shares”
refer to the common shares in our capital stock.
As used in this quarterly report,
the terms “we”, “us”, “our” and “our company” mean UAN Power Corp., and our subsidiaries
UAN Lee Agricultural Technology Holding Limited, a Hong Kong company, and UAN Sheng Agricultural Technology Development Limited
Company, a People’s Republic of China company, unless otherwise indicated.
Overview
Our company was incorporated
in the State of Nevada on May 8, 2009. We completed a reincorporation of our company in Delaware under the name UAN Power Corp.
on November 14, 2011.
Our company was originally organized
to seek opportunities to manage income producing commercial and residential real estate properties in Florida and the southeastern
region of the United States.
On May 23, 2011, our company
and our principal shareholders, including David Dreslin, our former president, chief financial officer and treasurer, entered into
a stock purchase agreement resulting in a change in control of our company. Pursuant to that agreement, Wan-Fang Liu, Yuan-Hao
Chang and Pei-Chi Yang purchased an aggregate of 77,775,000 outstanding shares of our company’s common stock, par value $0.00001,
from those principal shareholders for an aggregate purchase price of $200,000. On May 23, 2011, we entered into a further agreement
with Wan-Fang Liu, pursuant to which 48,275,000 shares of the common stock purchased by Ms. Liu were immediately returned to our
company in consideration of the payment of $1.00. These shares were subsequently sold in a private placement for a purchase price
of $0.01 per share and aggregate gross proceeds of $482,750 on July 25, 2011.
Immediately prior to the completion
of the stock purchase and cancellation described above, Mr. Dreslin, who owned 59,925,000 shares, or approximately 77% of the common
stock of our company, was the largest shareholder of our company. Upon completion of these transactions, Ms. Liu owned 27,500,000
shares, or approximately 91.7% of the common stock, and became the largest shareholder of our company.
Concurrent with the change of
control of our company that occurred on May 23, 2011, we abandoned our real estate business plan in order to seek the acquisition
of an operating business by merger, share exchange, asset acquisition or other business combination.
In August 2011, we entered into
a technology license and technology transfer agreement, under which we licensed the rights to develop, manufacture, market, sell
and import products which incorporate or rely upon certain “Triops” technologies and processes in Taiwan, the People’s
Republic of China, the United States, Japan and Korea, in exchange for a one-time licensing fee of $100,000. Triops are prehistoric
creatures also known as dinosaur shrimp that are brought to life by adding water to eggs that are in suspended animation. In connection
with the license, we also entered into a tenancy agreement under which we leased space in Taiwan for a two-year period. The tenancy
agreement requires rental payments of approximately $5,000 per month. In addition, we provided the landlord with a deposit of $13,800
upon the execution of the lease.
In September 2011, we entered
into a sales agency agreement related to the Triops technology and purchased $99,850 of leasehold improvements associated with
the tenancy agreement described above.
In December 2011, we established
a Taiwan branch of UAN Power Corp.
On May 16, 2012, we entered into
a joint venture agreement with Mr. Yuan-Hao Chang, a shareholder of our company, under which we intended to develop, own and operate
an agricultural business in the People’s Republic of China. We intend to rely on Mr. Chang’s experience and knowledge
in organic fertilizers and farming to plant and grow various fruits in China, and to harvest and sell the produced crops and goods
for a profit.
On May 31, 2012, we entered into
a term promissory note with certain shareholders and/or directors of our company for the principal sum of $350,000 with a maturity
date of May 31, 2017. The note may be paid in full or in part at the option of our company at any time prior to the maturity date
without penalty, with interest accrued as at the date of prepayment. The note bears interest at 4% per annum and shall be computed
on the basis of a year of 360 days for the number of days actually elapsed.
On July 2, 2012, UAN Sheng (Fujian)
Agricultural Technology Development Limited Company (“UAN Sheng”), a company established by the board of directors
of our company, entered into a renting agreement with Jianyang City Construction Supervision Team Masha (“Jianyang Construction”)
whereby Jianyang Construction agreed to lease a business location (gross area of 170.661 m
2
) to UAN Sheng for a term
of six years. The store location is Room 204, No. 2 Building, 342 West Marsha Street, Culture Plaza Masha Town, Jianyang City.
The monthly rent for the location is RMB¥26000 which must be paid on a quarterly basis, pursuant to the terms of the renting
agreement.
Effective July 3, 2012, our subsidiary,
UAN Sheng, and UAN Lee Agricultural Technology Holding Limited, entered into a partnership agreement with Jianyang City Jinxiong
Agricultural and Forestry Professional Cooperative (“Jinxiong”) to develop technology in the Greater China Region for
the cultivation of tropical peach trees in Masha Town, Taiwan and to promote tropical peaches as the region’s major agricultural
product (the “Proposition”).
Pursuant to the terms of the
Proposition, UAN Sheng will provide tree species and personnel to undertake the anticipated tree cultivation. The property, provided
by Jinxiong, consists of 300 acres of agricultural land located in Liutian Village, Masha Town, Jianyan City, Fujian Province.
UAN Sheng will acquire 70% of the Proposition’s earnings and Jinxiong will acquire the remaining 30% of the Proposition’s
earnings, after tax deductions. In addition, the taxes allocated on the Proposition will be distributed pro-rated to the interests
of each party, where UAN Sheng will be responsible for 70% of the taxes due and Jinxiong will be responsible for the remaining
30% of the taxes due. Furthermore, both parties will each acquire 50% of the government agricultural subsidiary.
On July 7, 2012, UAN Sheng entered
into a transfer agreement with Guifang Chen, whereby Guifang Chen agreed to transfer a factory building and land use rights on
a property in the city of Jianyang. Guifang Chen shall transfer to UAN Sheng the use and rights of 7.53 acres of land located in
Liangdong Village, Shuishang Xian, Masha Town, Jianyang City and all current factory equipment, effective July 9, 2012 and until
December 31, 2046. Guifang Chen was compensated an aggregate of RMB¥650,000 by UAN Sheng, which includes a deposit of RMB¥200,000
to be paid upon execution of the transfer agreement. The balance was paid in one payment in July, 2012. As per the terms of the
transfer agreement, UAN Sheng will be responsible for the all taxes and fees related to the transfer.
In conjunction with the partnership
agreement, on October 18, 2012, UAN Sheng entered into a concession agreement with Lin Changbin, wherein UAN Sheng agreed to lease
from Lin Changbin the rights to a property of 300 acres, containing approximately 8,800 pear trees, in Erlian Shan of Zhuzhou Village,
from October 18, 2012 to December 31, 2025. Pursuant to the terms of the concession agreement, UAN Sheng is to pay a sapling fee
of an aggregate of RMB¥500,000 to Lin Changbin which included a deposit of RMB¥100,000 paid immediately upon signing of
the concession agreement. The balance was paid in one payment in October, 2012.
In November 2012, we discontinued
our limited business operations in Taiwan where we had entered into a technology licensing and transfer agreement to obtain the
rights to develop, manufacture, market, sell and import products which incorporate or rely upon certain “Triops” technologies
and processes in Taiwan, the People’s Republic of China, the United States, Japan and Korea. Concurrent with the discontinuation
of our business operations in Taiwan, we liquidated all assets related to that business. In accordance with the applicable accounting
guidance for the ceased operations, the results of the Taiwan business are presented as discontinued operations and, as such, have
been excluded from both continuing operations and segment results for all periods presented in this quarterly report.
On
May 31, 2012, we entered into promissory note agreements to borrow $350,000 from Wan-Fang Liu, Wen-Cheng Huang, and Tsu-Yung Hsu
who are shareholders and/or directors of our company, collectively the “Holders” for operational and possible investment
opportunities. The maturity date of the notes is May 31, 2017 which bear interest at 4% per annum.
On
December 1, 2012, our company and the Holders entered into an amendment agreement to amend the original promissory notes dated
May 31, 2012 above, to add an automatic conversion clause to the terms of the notes.
On
December 1, 2012, we entered into a convertible note agreement with Yuan-Hao (Michael) Chang, a shareholder of our company, for
the outstanding amounts of HKD 1,222,726 ($157,682) which he advanced to our company as capital investment in a joint venture to
develop, own, and operate an agricultural business in China, PRC. The maturity of this note is December 1, 2017 and bears interest
at 4% per annum.
On December 31, 2012, we entered
into a global amendment to the term promissory notes dated May 31, 2012, with each of the note holders. The amendment provides
for the conversion of the aggregate outstanding principal and all unpaid accrued interest due under the notes into a number of
units of common shares of our company equal to the aggregate outstanding principal and unpaid accrued interest, divided by $0.02.
The
aggregate outstanding principal and all unpaid accrued interest due under the convertible notes above shall be automatically converted
in to a number of units of common stock of our company equal to the aggregate outstanding principal and unpaid accrued interested
due under the notes one year from issuance date, divided by $0.02, subject to appropriate adjustment in the event of any unit distribution,
unit reverse split, combination, reclassification or other similar recapitalization affecting such units. The outstanding principal
and all unpaid accrued interest due has not been converted as of March 31, 2014.
Interest
expenses incurred on the notes for the nine months ended March 31, 2014 and 2013 was $15,432 and $12,603, respectively. Interest
payable on the notes at March 31, 2014 was $34,076.
As of the date of this report,
our company, through our 66% owned subsidiary, UAN Sheng Agricultural Technology Development Limited Company, is focused on the
development of our tropical peach agriculture business in China. Our management is also seeking and assessing other opportunities
to create shareholder value on an ongoing basis, whether by acquisition, joint-venture, business combination or otherwise.
As at the date of this report,
we have nominal operations, no foreseeable prospect of revenue, and remain in the development stage. There is substantial doubt
about our ability to continue as a going concern because we will be required to obtain additional capital to continue our operations.
If adequate capital cannot be obtained on a timely basis and on satisfactory terms, our operations will be materially negatively
impacted. There can be no assurance that we will be able to raise additional capital, on terms favorable to us or at all.
Results of Operations
For the three and nine month periods ended March
31, 2014 and March 31, 2013
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
March 31,
|
|
March 31,
|
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
Revenue
|
|
$
|
Nil
|
|
|
$
|
Nil
|
|
|
$
|
Nil
|
|
|
$
|
Nil
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses
|
|
$
|
64,803
|
|
|
$
|
101,707
|
|
|
$
|
238,441
|
|
|
$
|
345,931
|
|
Other Income (Expenses):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Expense
|
|
$
|
(5,287
|
)
|
|
$
|
(5,036
|
)
|
|
$
|
(15,432
|
)
|
|
$
|
(12,459
|
)
|
Other Income
|
|
$
|
16
|
|
|
$
|
Nil
|
|
|
$
|
10,664
|
|
|
$
|
Nil
|
|
Exchange Loss
|
|
$
|
(7
|
)
|
|
$
|
(5
|
)
|
|
$
|
(4,654
|
)
|
|
$
|
(3,475
|
)
|
Government Subsidy
|
|
$
|
Nil
|
|
|
$
|
12
|
|
|
$
|
Nil
|
|
|
$
|
7,937
|
|
Loss (Income) from discontinued operations, net of tax
|
|
$
|
Nil
|
|
|
$
|
(247
|
)
|
|
$
|
Nil
|
|
|
$
|
135,964
|
|
Net Income (Loss)
|
|
$
|
(70,081
|
)
|
|
$
|
(106,489
|
)
|
|
$
|
(247,863
|
)
|
|
$
|
(489,892
|
)
|
Our revenues were $Nil
for
the three-month period ended March 31, 2014 and 2013 and $Nil
for the nine-month period ended March 31, 2014 and 2013. We
discontinued our operation in Taiwan in November 2012.
Cost of sales was $Nil for the
three-month ended March 31, 2014 and 2013 and $Nil
for the nine-month ended March 31, 2014 and 2013.
Expenses
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2014
|
|
|
2013
|
|
|
2014
|
|
|
2013
|
|
Consulting fees – Related party
|
|
$
|
13,500
|
|
|
$
|
10,000
|
|
|
$
|
34,000
|
|
|
$
|
34,500
|
|
Professional fees
|
|
$
|
12.273
|
|
|
$
|
8,105
|
|
|
$
|
36,729
|
|
|
$
|
55,270
|
|
General and administrative expenses
|
|
$
|
39,030
|
|
|
$
|
83,601
|
|
|
$
|
167,712
|
|
|
$
|
256,161
|
|
Operating expenses for three
month period ended March 31, 2014 decreased by $36,904 or approximately 36% compared to the comparative period in 2013 primarily
as a result of effective management cost cutting strategy. Our company commenced operations of our agricultural business in China
in July 2012.
Operating expenses for nine month
period ended March 31, 2014 decreased by $107,490 or approximately 31% compared to the comparative period in 2013 primarily as
a result of effective management cost cutting strategy.
The significant portion of general
and administrative expenses incurred were wages and benefits of $13,958, rent expense of $2,706, travel and transportation expense
of $4,807, and legal and professional fees of $12,272 for the three months ended March 31, 2014; as compared to wages and benefits
of $27,463, rent expense of $12,998, travel and transportation of $14,741, and legal & professional fees of $12,272 for the
three months ended March 31, 2013.
The significant portion of general
and administrative expenses incurred were wages and benefits of $56,845, rent expense of $20,164, travel and transportation expense
of $41,976, and legal and professional fees of $36,729 for the nine months ended March 31, 2014; as compared to wages and benefits
of $98.886, rent expense of $16,159, travel and transportation expense of $61,259, and legal and professional fees of $55,270 for
the nine months ended March 31, 2013.
Liquidity and Capital Resources
Working Capital
|
|
At
|
|
At
|
|
|
March 31,
|
|
June 30,
|
|
|
2014
|
|
2013
|
Current Assets
|
|
$
|
616,760
|
|
|
$
|
522,646
|
|
Current Liabilities
|
|
$
|
960,501
|
|
|
$
|
426,356
|
|
Working Capital (Deficit)
|
|
$
|
(343,741
|
)
|
|
$
|
96,290
|
|
Cash Flows
|
|
Nine Months Ended
|
|
|
March 31,
|
|
|
2014
|
|
2013
|
Net Cash used in Operating Activities
|
|
$
|
(356,885
|
)
|
|
$
|
(637,427
|
)
|
Net Cash provided by (used in) Investing Activities
|
|
$
|
(166,487
|
)
|
|
$
|
52,159
|
|
Net Cash provided by Financing Activities
|
|
$
|
578,688
|
|
|
$
|
644,960
|
|
Net Increase (Decrease) In Cash
|
|
$
|
(2,082
|
)
|
|
$
|
52,873
|
|
As of March 31, 2014, we had
a cash balance of $15,992 as compared to $18,316 as of June 30, 2013.
Our working deficit as of March
31, 2014 was $343,741 compared to our working capital of $96,290 at June 30, 2013.
Our total assets as of March
31, 2014 were $931,909, compared to $841,437 at June 30, 2013. The significant increase in our assets resulted from commencing
our initial operations under the joint venture agreement, which resulted from the increase in inventory of $100,032.
Our total liabilities at March
31, 2014 were $1,468,126 compared to $934,047 at June 30, 2013. The increase resulted primarily from increase in amounts due to
related parties of $553,740 and other current liabilities of $15,817.
As a result, our net cash used
in operating activities was $356,885 and $637,427 for the nine months ended March 31, 2014 and 2013, respectively.
Our net cash provided by investing
activities decreased for the nine months ended March 31, 2014 as compared to the same period in March 31, 2013. The net cash used
in investing activities for the nine months ended March 31, 2014 was $166,487 and net cash provided by investing activities was
$52,159 for the nine months ended March 31, 2013.
The net cash used in investing
activities for the nine months ended March 31, 2014 resulted from acquisition of fixed assets and acquisition of non-controlling
interest. Our company acquired fixed assets of $156,441 and land use rights of $111,296 for the nine months ended March 31, 2013
for the commencement of our joint venture in China.
Our net cash provided by financing
activities decreased for the nine months ended March 31, 2014 as compared to the same period in March 31, 2013. The net cash provided
by financing activities for the nine months ended March 31, 2014 was $578,688 and net cash provided by investing activities was
$644,960 for the nine months ended March 31, 2013.
The net cash provided by financing
activities for the nine months ended March 31, 2014 resulted from advances from related parties and affiliated companies and contribution
from non-controlling interest. Our company received advances from related parties and affiliated companies of $332,130 and capital
contribution by non-controlling interest of $312,830 for the nine months ended March 31, 2013 for the commencement of our joint
venture in China
Limited Operating History
We have an extremely limited
operating history and have generated no significant independent financial history. Our business plan changed significantly in May
2011, and we have not demonstrated that we will be able to execute that plan.
Future financing may not be available
to us on acceptable terms or at all. If financing is not available or is not available on satisfactory terms, we may be unable
to continue our operations. Any equity financing that may be available will result in dilution of the interests of our existing
shareholders.
Plan of Operations
In May 2011, we commenced limited
operations under our current business model of identifying one or more businesses to merge with or acquire. As described above,
in August 2011, we entered into a technology license and technology transfer agreement, under which we licensed the rights to develop,
manufacture, market, sell and import products which incorporate or rely upon certain “Triops” technologies and processes
in Taiwan, the People’s Republic of China, the United States, Japan and Korea. We began our initial operations using this
license in August 2011.
In November 2012, we ceased our
limited business operations and disposed the assets in Taiwan where we had entered into a technology licensing and transfer agreement
to obtain the rights to develop, manufacture, market, sell and import products which incorporate or rely upon certain “Triops”
technologies and processes in Taiwan, the People’s Republic of China, the United States, Japan and Korea.
On May 16, 2012, we entered into
a joint venture agreement with Mr. Yuan-Hao Chang, a shareholder of our company, under which we intend to develop, own and operate
an agricultural business in China, PRC. We intend to rely on Mr. Chang’s experience and knowledge in organic fertilizers
and farming to plant and grow various fruits in China, and to harvest and sell the produced crops and goods for a profit. We commenced
initial operations in July 2012.
We will evaluate our performance
over the next twelve months of operations as we attempt to emerge from the development stage. We have a limited operating budget
and must maintain tight expense controls. However, we will need to obtain additional financing to effectively implement our business
plan. If we do not obtain additional financing, we will continue to operate on a reduced budget until such time as more capital
can be raised or we may be forced to curtail or discontinue operations. In addition, we are actively pursuing a new business opportunity
that would require additional funding over the next twelve months. There can be no assurance that we will be able to raise additional
capital, on terms favorable to us or at all.
We will require additional funds
to fund our budgeted expenses over the next 12 months. These funds may be raised through equity financing, debt financing, or other
sources, which may result in further dilution in the equity ownership of our shares. There is still no assurance that we will be
able to maintain operations at a level sufficient for an investor to obtain a return on his investment in our common stock. Further,
we may continue to be unprofitable. We need to raise additional funds in the immediate future in order to proceed with our budgeted
expenses.
Specifically, we estimate our
operating expenses and working capital requirements for the next 12 months to be as follows:
|
|
Estimated
Completion
Date
|
|
Estimated
Expenses
($)
|
Consulting fees
|
|
12 months
|
|
60,000
|
Professional fees
|
|
12 months
|
|
75,000
|
Salaries and benefits
|
|
12 months
|
|
150,000
|
Other general and administrative expenses
|
|
12 months
|
|
150,000
|
Total
|
|
|
|
435,000
|
Critical Accounting Policies
Interim Financial Statements
The accompanying unaudited consolidated
financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission and should
be read in conjunction with our company’s audited financial statements and footnotes thereto for the year ended June 30,
2013, included in our company’s Form 10-K filed on October 15, 2013. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America
have been omitted pursuant to such rules and regulations. However, our company believes that the disclosures are adequate to make
the information presented not misleading. The financial statements reflect all adjustments (consisting primarily of normal recurring
adjustments) that are, in the opinion of management necessary for a fair presentation of our company’s financial position
and results of operations. The operating results for the three and nine months ended March 31, 2014 are not necessarily indicative
of the results to be expected for any other interim period of a future year.
Basis of Presentation
Our
company has prepared the accompanying consolidated financial statements in conformity with accounting principles generally accepted
in the United States of America.
The
consolidated financial statements include the accounts of our company and our subsidiaries. Significant inter-company transactions
have been eliminated in consolidation.
Use of Estimates
The preparation of financial
statements in conformity with accounting principles generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
Discontinued Operations
In November 2012, our company
ceased its Taiwan’s business operations. The consolidated financial statements have been recast to present the Taiwan’s
business operation as discontinued operations as described in “Note 12 - Discontinued Operations.” Unless noted otherwise,
discussion in the Notes to consolidated financial statements pertain to continuing operations.
Reclassification
Certain amounts in the prior
period financial statements have been reclassified to conform to the current period presentation. These reclassifications had no
effect on reported net income or losses.
Cash and Cash Equivalents
Cash and cash equivalents are
all highly liquid instruments purchased with a maturity of three months or less to the extent the funds are not being held for
investment purposes.
Concentrations of Credit Risk
Our company's operations are
carried out in China. Accordingly, our company's business, financial condition and results of operations may be influenced by the
political, economic and legal environment in China, and by the general state of the China's economy. Our company's operations in
China are subject to specific considerations and significant risks not typically associated with companies in North America. Our
company's results may be adversely affected by changes in governmental policies with respect to laws and regulations, anti-inflationary
measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things.
Financial instruments which potentially
subject our company to concentrations of credit risk consist principally of cash. All of our company’s cash is maintained
with state-owned banks within China of which no deposits are covered by insurance. Our company has not experienced any losses in
such accounts and believes it is not exposed to any risks on its cash in bank accounts.
Revenue Recognition
Our company is a development
stage company as such has realized no product and or directly related expenses.
Our company entered into a joint
venture agreement to develop, own and operate an agricultural business in China, PRC. Our company does not expect to generate any
significant revenues over the next twelve months.
Inventory
Our company recognizes all direct
and indirect costs of growing crops in accordance to ASC 905-330-25 "Agriculture Inventory Recognition". ASC 905-330-25
requires all direct and indirect costs of growing crops to accumulate as inventory until the time of harvest. Some crop costs such
as soil preparation, which are incurred before planting are deferred and allocated until harvest. Growing crops consist of crop
land lease, crops for growing crops, seeds and seeding plants costs, and production fees paid to growers. Inventories are stated
at the lower of cost or market determined on a weighted average basis.
Fixed Assets
Fixed assets are recorded at
cost and are depreciated or amortized using the straight-line method over the estimated useful lives of the assets:
|
Machinery and Equipment
|
10 years
|
|
Electronic Equipment
|
3 years
|
|
Office Furniture and Others
|
5 years
|
Land Use Rights
Land use rights are recorded
at cost and amortized over the shorter of the estimated useful life or the expected useful life of the land use rights for thirty-four
years and six months.
Appropriation to Statutory
Reserve
Pursuant to the laws applicable
to the China, PRC, entities must make appropriations from after-tax profit to the non-distributable “statutory surplus reserve
fund”. Subject to certain cumulative limits, the “statutory surplus reserve fund” requires annual appropriations
of 10% of after-tax profits until the aggregated appropriations reach 50% of the registered capital (as determined under accounting
principles generally accepted in the PRC (“PRC GAAP”) at each year-end). For foreign invested enterprises and joint
ventures in China, PRC, annual appropriations should be made to the “reserve fund”. For foreign invested enterprises,
the annual appropriation for the “reserve fund” cannot be less than 10% of after-tax profits until the aggregated appropriations
reach 50% of the registered capital (as determined under PRC GAAP at each year-end). Our company did not make any appropriations
to the reserve funds mentioned above due to lack of profits after tax in PRC since commencement of operations.
Advertising Costs
Our company’s policy regarding
advertising is to expense advertising when incurred.
Income Taxes
Our company provides for income
taxes under ASC 740, “Accounting for Income Taxes.” ASC 740 requires the use of an asset and liability approach in
accounting for income taxes. Deferred tax assets and liabilities are recorded based on the differences between the financial statement
and tax bases of assets and liabilities and the tax rates in effect when these differences are expected to reverse.
Impairment of Long-Lived Assets
Our company continually monitors
events and changes in circumstances that could indicate carrying amounts of long-lived assets may not be recoverable. When such
events or changes in circumstances are present, our company assesses the recoverability of long-lived assets by determining whether
the carrying value of such assets will be recovered through undiscounted expected future cash flows. If the total of the future
cash flows is less than the carrying amount of those assets, our company recognizes an impairment loss based on the excess of the
carrying amount over the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or
the fair value less costs to sell.
Stock-based Compensation
Our company records stock-based
compensation in accordance with ASC 718 (formerly SFAS No. 123R, “Share Based Payments”), using the fair value method.
All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted
for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more
reliably measurable. Equity instruments issued to employees and the cost of the services received as consideration are measured
and recognized based on the fair value of the equity instruments issued.
Fair Value of Financial Instruments
The standard for “Disclosures
about Fair Value of Financial Instruments,” defines financial instruments and requires fair value disclosures of those financial
instruments. Our company adopts the standard “Fair Value Measurements,” which defines fair value, establishes a three-level
valuation hierarchy for disclosures of fair value measurement and enhances disclosures requirements for fair value measures. Current
assets and current liabilities qualified as financial instruments and management believes their carrying amounts are a reasonable
estimate of fair value because of the short period of time between the origination of such instruments and their expected realization
and if applicable, their current interest rate is equivalent to interest rates currently available. The three levels are defined
as follows:
|
·
|
Level 1 ─ inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
|
|
·
|
Level 2 ─ inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the assets or liability, either directly or indirectly, for substantially the full term of the financial instruments.
|
|
·
|
Level 3 ─ inputs to the valuation methodology are unobservable and significant to the fair value.
|
As of the balance sheet date,
the estimated fair values of the financial instruments were not materially different from their carrying values as presented due
to the short maturities of these instruments and that the interest rates on the borrowings approximate those that would have been
available for loans of similar remaining maturity and risk profile at respective period-ends. Determining which category an asset
or liability falls within the hierarchy requires significant judgment. Our company evaluates the hierarchy disclosures each quarter.
Segment Reporting and Geographic
Information
Our company reports operations
under one business segments-Agriculture.
Geographic Information as of
March 31, 2014 and for the three and nine months ended March 31, 2014 and 2013 as follows:
For the three months ended March 31, 2014
|
|
|
|
|
|
|
|
|
|
|
|
United States
of America
|
|
|
Hong Kong,
PRC
|
|
|
China,
PRC
|
|
Revenues
|
|
$
|
Nil
|
|
|
$
|
Nil
|
|
|
$
|
Nil
|
|
Expenses
|
|
|
(105,457
|
)
|
|
|
(1,703
|
)
|
|
|
(140,651
|
)
|
Net Income/(Loss)
|
|
$
|
(105,457
|
)
|
|
$
|
(1,703
|
)
|
|
$
|
(140,651
|
)
|
For the nine months ended March 31, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
of America
|
|
|
|
Hong Kong,
PRC
|
|
|
|
China,
PRC
|
|
Revenues
|
|
$
|
Nil
|
|
|
$
|
Nil
|
|
|
$
|
Nil
|
|
Expenses
|
|
|
(145,940
|
)
|
|
|
(233
|
)
|
|
$
|
(207,756
|
)
|
Net Income/(Loss)
|
|
$
|
(145,940
|
)
|
|
|
(233
|
)
|
|
$
|
(207,756
|
)
|
As of March 31, 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
of America
|
|
|
|
Hong Kong,
PRC
|
|
|
|
China,
PRC
|
|
Assets
|
|
$
|
348,611
|
|
|
$
|
1,058,380
|
|
|
$
|
922,044
|
|
Liabilities
|
|
|
617,035
|
|
|
|
750,416
|
|
|
|
100,677
|
|
Net Assets
|
|
$
|
(268,424
|
)
|
|
$
|
307,964
|
|
|
$
|
821,367
|
|
Foreign Currency Translation
The functional currency of UAN Power operations in
United States is U.S. Dollar (“USD”).
The functional currency of UAN Power’s discontinued
operations in Taiwan is New Taiwan Dollar (“TWD”).
The functional currency of UAN
Lee’s operations in Hong Kong is Hong Kong Dollar (“HKD”).
The functional currency of UAN
Sheng’s operations in China, PRC is Chinese Yuan Renminbi (“RMB”).
Transactions denominated in foreign
currencies are translated into U.S. dollars at the exchange rate in effect on the date of the transactions. Exchange gains or losses
on transactions are included in earnings.
The financial statements of our
company are translated into U.S. dollars in accordance with the standard, “Foreign Currency Translation,” codified
in ASC 830, using rates of exchange at the end of the period for assets and liabilities, and average rates of exchange for the
period for revenues, costs, and expenses and historical rates for equity. Translation adjustments resulting from the process of
translating the local currency combining financial statements into U.S. dollars are included in determining comprehensive income.
At March 31, 2014, the cumulative
translation adjustment was $(28,460). For the nine months ended March 31, 2014 and 2013, net other comprehensive loss was $55,078
and $6,061, respectively.
The exchange rates used to translate
TWD amounts into USD at (1USD=TWD) as follows:
|
|
Balance Sheet
Date Rate
|
|
Average
Rate
|
June 30, 2013
|
|
29.93
|
|
28.88
|
March 31, 2014
|
|
30.44
|
|
|
The exchange rates used to translate HKD amounts into
USD at (1USD=HKD) as follows:
|
|
Balance Sheet
Date Rate
|
|
Average
Rate
|
June 30, 2013
|
|
7.76
|
|
7.76
|
March 31, 2014
|
|
7.76
|
|
7.76
|
The exchange rates used to translate RMB amounts into
USD at (1USD=RMB) as follows:
|
|
Balance Sheet
Date Rate
|
|
Average
Rate
|
June 30, 2013
|
|
6.17
|
|
6.28
|
March 31, 2014
|
|
6.16
|
|
6.14
|
Comprehensive Income
Our company adopted FASB Accounting
Standards Codification 220, “Comprehensive Income,” which establishes standards for reporting and presentation of comprehensive
income (loss) and its components in a full set of general-purpose financial statements. Our company has chosen to report comprehensive
income (loss) in the statements of income and comprehensive income. Comprehensive income (loss) is comprised of net income and
all changes to stockholders’ equity except those due to investments by owners and distributions to owners.
Basic (Loss) per Common Share
Basic (loss) per share is calculated
by dividing our company’s net loss applicable to common shareholders by the weighted average number of common shares during
the period. Diluted earnings per share is calculated by dividing our company’s net income available to common shareholders
by the diluted weighted average number of shares outstanding during the year. The diluted weighted average number of shares outstanding
is the basic weighted number of shares adjusted for any potentially dilutive debt or equity. There are common stock equivalents
outstanding as of March 31, 2014 and 2013, respectively; however, if present, a separate computation of diluted loss per share
would not have been presented, as these common stock equivalents would have been anti-dilutive due to our company’s net loss.
|
For the Three Months
|
|
For the Nine Months Ended
|
|
|
|
March 31,
2014
|
|
|
March 31,
2013
|
|
|
March 31,
2014
|
|
|
March 31,
2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss attributable to Uan Power Corp.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
$
|
(76,606
|
)
|
|
$
|
(81,819
|
)
|
|
$
|
(233,798
|
)
|
|
$
|
(283,291
|
)
|
Discontinued operations
|
|
$
|
Nil
|
|
|
$
|
247
|
|
|
$
|
Nil
|
|
|
$
|
(135,964
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Shares, basic and diluted
|
|
|
78,273,000
|
|
|
|
78,273,000
|
|
|
|
78,273,000
|
|
|
|
78,273,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (Loss) per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
$
|
(0.001
|
)
|
|
$
|
(0.001
|
)
|
|
$
|
(0.003
|
)
|
|
$
|
(0.004
|
)
|
Discontinued operations
|
|
$
|
Nil
|
|
|
$
|
Nil
|
|
|
$
|
Nil
|
|
|
$
|
(0.002
|
)
|
Recently Issued Accounting Pronouncements
In July 2013, the FASB issued
ASU 2013-11, “Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or
a Tax Credit Carryforward Exists.” This standard requires that an unrecognized tax benefits, or a portion of an unrecognized
tax benefit be presented on a reduction to a deferred tax asset for an NOL carryforward, a similar tax loss, or a tax credit carryforward
with certain exceptions to this rule. If certain exception condition exists, an entity should present an unrecognized tax benefit
in the financial statements as a liability and should not net the unrecognized tax benefit with a deferred tax asset. This standard
is effective for fiscal years and interim periods within those years beginning after December 15, 2013. Our company does not expect
the adoption of the new provisions to have a material impact on our financial condition or results of operations.
In March 2013, the FASB issued
ASU No. 2013-05, Foreign Currency Matters. This standard provides additional guidance with respect to the reclassification into
income of the cumulative translation adjustment (CTA) recorded in accumulated other comprehensive income associated with a foreign
entity of a parent company. The ASU differentiates between transactions occurring within a foreign entity and transactions/events
affecting an investment in a foreign entity. For transactions within a foreign entity, the full CTA associated with the foreign
entity would be reclassified into income only when the sale of a subsidiary or group of net assets within the foreign entity represents
the substantially complete liquidation of that foreign entity. For transactions/events affecting an investment in a foreign entity
(for example, control or ownership of shares in a foreign entity), the full CTA associated with the foreign entity would be reclassified
into income only if the parent no longer has a controlling interest in that foreign entity as a result of the transaction/event.
In addition, acquisitions of a foreign entity completed in stages will trigger release of the CTA associated with an equity method
investment in that entity at the point a controlling interest in the foreign entity is obtained. This ASU is effective prospectively
beginning January 1, 2014, with early adoption permitted. This ASU would impact our company’s consolidated results of operations
and financial condition only in the instance of an event/transaction as described above.
In February 2013, the FASB issued
ASU No. 2013-02, Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income.
Under this standard, an entity is required to provide information about the amounts reclassified out of accumulated other comprehensive
income (“AOCI”) by component. In addition, an entity is required to present, either on the face of the financial statements
or in the notes, significant amounts reclassified out of AOCI by the respective line items of net income, but only if the amount
reclassified is required to be reclassified in its entirety in the same reporting period. For amounts that are not required to
be reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures that provide additional
details about those amounts. ASU 2013-02 does not change the current requirements for reporting net income or other comprehensive
income in the financial statements. For our company, this ASU is effective beginning January 1, 2013, and interim periods within
those annual periods. The adoption of this standard is not expected to have an impact on our company’s financial results
or disclosures.
Our company believes that there
were no other accounting standards recently issued that had or are expected to have a material impact on our financial position
or results of operations.
Off-Balance Sheet Arrangements
We have no significant off-balance
sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in
our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that
are material to our stockholders.